SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED December 3, 1995 COMMISSION FILE NUMBER 1-5960
CONCORD FABRICS INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-5673758
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
1359 Broadway, New York, New York 10018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 760-0300
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes X No .
2,115,656 shares of Registrant's Class A Common Stock, par value $.50
per share and 1,509,451 shares of Registrant's Class B Common Stock, par
value $.50 per share were outstanding as of December 29, 1995.
1 of 13 <PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 3, 1995
INDEX Page Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Operations -
Thirteen Weeks Ended December 3, 1995
(Unaudited) and November 27, 1994 (Unaudited) 3
Consolidated Balance Sheets - December 3,
1995 (Unaudited), and September 3, 1995 (Derived
from Audited Financial Statements) and
November 27, 1994 (Unaudited) 4-5
Consolidated Statements of Cash Flows -
Thirteen Weeks Ended December 3, 1995
(Unaudited) and November 27, 1994 (Unaudited) 6
Notes to Consolidated Financial Statements
(Unaudited) 7-10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signature Page 13
2 of 13
<PAGE>
Item 1. Financial Statements
--------------------
CONCORD FABRICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Note A)
For the Thirteen Weeks Ended
----------------------------
December 3, November 27,
1995 1994
------------ ------------
Net Sales ................................. $34,311,100 $48,510,294
----------- -----------
Cost of Sales ............................. 25,215,137 38,038,273
Merchandising Expenses .................... 2,421,815 2,605,726
Selling and Shipping Expenses ............. 3,060,228 3,307,503
General and Administrative Expenses ....... 2,869,888 3,463,150
Interest Expense (Net) .................... 473,536 513,252
----------- -----------
Total ............................... $34,040,604 $47,927,904
----------- -----------
Earnings before income taxes .............. 270,496 582,390
Income tax provision ...................... 137,000 242,000
----------- -----------
Net Earnings .............................. $ 133,496 $ 340,390
=========== ===========
Net Earnings per Common Share ............. $.04 $.09
=========== ===========
Number of shares used in computing
earnings per Common Share .............. 3,624,224 3,602,562
=========== ===========
Dividend per Common Share ................. NONE NONE
=========== ===========
The attached notes are made a part hereof.
3 of 13
<PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Note A)
September 3,
1995
(Derived from
December 3, Audited November 27,
1995 Financial 1994
A S S E T S (Unaudited) Statements) (Unaudited)
- ----------- ------------ ------------ ------------
Current Assets:
Cash .......................... $ 1,175,902 $ 2,362,119 $ 1,048,079
Temporary cash investments (at cost
which approximates market) 1,000,000 -0- 500,000
Income tax refund receivable .. 1,867,000 2,051,000 -0-
Accounts receivable (less
estimated doubtful accounts
of $1,435,000 on December 3,
1995, $1,225,000 on September 3,
1995, and $2,490,000 on
November 27, 1994) ......... 26,759,881 27,909,706 36,211,703
Inventories (Note B) .......... 26,199,925 24,071,426 34,325,747
Prepaid expenses and other
current assets .............. 1,692,555 2,352,403 2,204,603
Deferred income taxes ......... 2,138,000 2,172,000 1,669,000
----------- ----------- -----------
Total Current Assets .......... $60,833,263 $60,918,654 $75,959,132
Property, plant and equipment
(at cost, less depreciation
and amortization of
$5,431,198 on December 3,
1995, $5,101,597 on September 3,
1995, and $6,512,092 on
November 27, 1994) ............ 8,258,109 8,153,913 9,668,485
Property and plant leased to others 2,155,492 2,193,532 2,307,652
Property, plant, & equipment held for sale -
at estimated disposal value 3,000,000 3,000,000 -0-
Other assets ..................... 2,143,028 2,379,826 1,529,872
----------- ----------- -----------
T O T A L .................. $76,389,892 $76,645,925 $89,465,141
=========== =========== ===========
The attached notes are made a part hereof.
4 of 13 <PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Note A)
September 3,
1995
(Derived from
December 3, Audited November 27,
1995 Financial 1994
L I A B I L I T I E S (Unaudited) Statements) (Unaudited)
- --------------------- ------------ ------------ ------------
Current Liabilities:
Notes payable - banks
(Note C) ................... $ 2,000,000 $ 2,000,000 $18,000,000
Accounts payable .............. 10,218,306 8,923,439 12,072,774
Accrued expenses and taxes .... 3,543,543 5,370,075 6,966,674
Income taxes payable .......... 97,000 -0- 50,296
------------ ------------ ------------
Total Current Liabilities ..... $15,858,849 $16,293,514 $37,089,744
Notes payable - insurance
company (Note D) .............. 20,000,000 20,000,000 9,000,000
Deferred income taxes ............ 214,000 214,000 -0-
Other liabilities ................ 376,090 361,090 311,685
------------ ------------ -----------
Total Liabilities ............. $36,448,939 $36,868,604 $46,401,429
Commitments and contingencies ------------ ------------ ------------
(Note E)
S T O C K H O L D E R S ' E Q U I T Y
Common stock: (Notes F & G)
Class A - $.50 par value
authorized 4,000,000 shares,
issued 2,115,656 shares at
December 3, 1995, 2,105,611
shares September 3, 1995
and 2,093,111 shares at
November 27, 1994. ......... 1,057,828 1,052,805 1,046,555
Class B - $.50 par value
authorized 4,000,000 shares,
issued 1,509,451 shares at
December 3, 1995, 1,509,451
shares at September 3, 1995
and 1,509,451 shares at
November 27, 1994. ......... 754,726 754,726 754,726
Additional paid-in capital ....... 9,087,998 9,062,885 9,031,635
Retained earnings ................ 29,040,401 28,906,905 32,230,796
----------- ----------- -----------
Total Stockholders' Equity .... $39,940,953 $39,777,321 $43,063,712
----------- ----------- -----------
T O T A L .................. $76,389,892 $76,645,925 $89,465,141
=========== =========== ===========
The attached notes are made a part hereof.
5 of 13<PAGE>
<TABLE>
CONCORD FABRICS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION> (Note A)
For the Thirteen Weeks Ended
---------------------------------
December 3, November 27,
1995 1994
------------ ------------
Cash flows from operating activities:
<S> <C> <C>
Net earnings .................................... $ 133,496 $ 340,390
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization ............. 367,641 448,274
Deferred income tax ....................... 34,000 179,000
Provision for doubtful accounts ........... 210,000 315,000
Changes in assets:
Decrease (increase) in:
Accounts receivable ................. 939,825 (1,527,541)
Inventories ......................... (2,128,499) (3,241,187)
Income tax refunds receivable ....... 184,000 -0-
Prepaid expenses and other
current assets .................... 659,848 352,326
Other assets ........................ 236,798 (1,379)
Changes in liabilities:
Increase (decrease) in:
Accounts payable .................... 1,294,867 (3,118,009)
Accrued expenses and taxes .......... (1,826,532) (45,136)
Income taxes payable ................ 97,000 (942,341)
Other liabilities ................... 15,000 9,732
------------ ------------
Net cash provided by (used in) operating
activities: .................................. 217,444 (7,230,871)
------------ ------------
Cash flows from investing activity:
Purchases of property, plant, and equipment ..... (433,797) (1,198,432)
------------ ------------
Cash flows from financing activities:
Increase in notes payable - bank ................ -0- 8,400,000
Sale of common stock (stock option exercised) ... 30,136 -0-
------------ -----------
Net cash provided by financing activities: ...... 30,136 8,400,000
NET (DECREASE) IN CASH AND CASH EQUIVALENTS ........ (186,217) (29,303)
------------ ------------
Cash and cash equivalents - beginning of period .... 2,362,119 1,577,382
------------ ------------
CASH AND CASH EQUIVALENTS - END OF PERIOD .......... $ 2,175,902 $ 1,548,079
============ ============
The attached notes are made a part hereof.
</TABLE> 6 of 13 <PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
NOTES TO FORM 10-Q
AS AT DECEMBER 3, 1995
(Unaudited)
Note A
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair representation have been included. Operating results for the thirteen
weeks ended December 3, 1995 are not necessarily indicative of the results that
may be expected for the fiscal year ending September 1, 1996. These statements
should be read in conjunction with the financial statements and notes thereto
included in Registrant's annual report to shareholders and Form 10-K for the
fiscal year ended September 3, 1995.
Note B - Inventories:
Inventories are summarized by categories as follows:
December 3, September 3, November 27,
1995 1995 1994
------------ ----------- ------------
Finished goods......... $12,630,977 $12,160,524 $17,476,648
Work-in-process........ 4,000,689 3,253,096 5,660,189
Greige goods and yarn.. 9,568,259 8,657,806 11,188,910
------------ ----------- ------------
Total............... $26,199,925 $24,071,426 $34,325,747
============ =========== ============
The foregoing inventory amounts at December 3, 1995 and November 27, 1994 were
determined from perpetual inventory records maintained by Registrant.
Note C - Notes Payable - Banks:
At December 3, 1995, Registrant had total unused bank lines of credit
aggregating $18,000,000; bank debt was $2,000,000. Amounts borrowed are
generally due in 30 to 90 days. The line of credit arrangements are informal
and cancellable at the banks' option. Registrant is generally expected to
maintain average annual compensating bank balances in consideration of its
average annual bank borrowings. Registrant believes it has been in substantial
compliance with its arrangements and that withdrawal of bank balances is not
legally restricted. The average interest rate on amounts outstanding at
December 3, 1995 was 8.75%.
A subsidiary of the Registrant had approximately $2,400,000 of letters
of credit outstanding at December 3, 1995 for merchandise scheduled for future
delivery.
7 of 13<PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
NOTES TO FORM 10-Q
AS AT DECEMBER 3, 1995
(Unaudited)
Continued
Note D - Notes Payable - Insurance Company:
On November 30, 1994, the Registrant obtained a $20,000,000 loan from John
Hancock Mutual Life Insurance Company. This unsecured loan bears interest at
9.31% a per annum and is repayable in seven equal annual installments commencing
on November 30, 1998. A portion of the loan proceeds was used to repay the
$9,000,000 loan outstanding to the Prudential Insurance Company of America and a
prepayment penalty of $495,000 associated therewith.
The new loan agreement requires maintenance of certain financial ratios and
maintenance of tangible net worth of approximately $36,000,000. The agreement
also prohibits the pledging of assets and restricts dividends and redemptions of
capital stock to $3,000,000 plus 50% of net earnings subsequent to August 28,
1994; the cumulative amount available for such payments aggregated approximately
$2,092,000 at December 3, 1995.
Note E - Purchase Commitments:
At December 3, 1995, Registrant had outstanding commitments to purchase greige
goods aggregating $3,800,000. At November 27, 1994 outstanding purchase
commitments were approximately $13,200,000.
Note F - Common Stock:
The Class A and Class B shares principally differ as follows:
(1) The Class A shares have a 15% dividend preference and a 10% liquidation
preference with respect to the Class B shares.
(2) Holders of Class A shares are entitled to one vote a share whereas holders
of Class B shares are entitled to ten votes a share.
(3) Holders of Class A shares voting as a separate class are entitled to elect
25% of Registrant's directors and holders of Class A shares and Class B shares
voting together are entitled to elect the remaining directors.
8 of 13 <PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
NOTES TO FORM 10-Q
AS AT DECEMBER 3, 1995
(Unaudited)
Continued
(4) Class B shares are convertible into Class A shares on the basis of one
share of Class A shares for each share of Class B shares; Class A shares have
no conversion rights.
Note G - Stock Options:
Pursuant to an Incentive Program adopted on January 10, 1989, awards (as
defined) may be granted to key employees of the Registrant up to a maximum of
500,000 shares of the Registrant's Class A common stock.
On January 10, 1989, options to purchase an aggregate of 150,000 shares of the
Registrant's Class A common stock at $3 a share (fair market value at such date)
was granted to three employees. The options are exercisable in four annual
installments commencing January 10, 1994 and expire ten years from the date of
grant.
Option activity for the thirteen weeks ended December 3, 1995 is summarized as
follows:
Options Outstanding
-------------------
Shares Available Number of
for Grant Shares Amount
Balance - September 3, 1995 .. 350,000 100,000 $300,000
Thirteen Weeks ended
December 3, 1995:
Cancelled ................. -0- (2,455)* (7,365)
Exercised ................. -0- (10,045)* (30,135)
------- -------- ---------
Balance - December 3, 1995 ... 350,000 87,500 $262,500
======= ======== =========
* Exercised and cancelled by an employee who retired.
9 of 13 <PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
NOTES TO FORM 10-Q
AS AT DECEMBER 3, 1995
(Unaudited)
Note H - Earnings Per Share:
Earnings per share are computed by dividing net earnings by common shares
outstanding and common stock equivalents. Outstanding options did not have a
material dilutive effect on earnings per share for the thirteen week periods
ended December 3, 1995 and November 27, 1994.
Note I - Chino, California Facility:
In February 1994, the Registrant leased the land and building at the Chino
California facility for a five year period at an annual net rental of $297,000;
the lessee was also granted the option to purchase the land and building during
the lease period for $2,900,000.
Note J - Property, Plant and Equipment Held for Sale:
In the fourth quarter of fiscal 1995 Registrant decided to dispose of its
Washington, Georgia dyeing and finishing plant and has been actively searching
for a buyer; manufacturing operations ceased October 6, 1995. Registrant
provided for estimated expenses during the disposition period in its fiscal year
ended September 3, 1995 and estimates that the net proceeds of sale will
approximate the facility's depreciated cost.
10 of 13 <PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
DECEMBER 3, 1995
Item 2..........MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
OPERATIONS - Thirteen Weeks Ended December 3, 1995 Compared With Thirteen Weeks
Ended November 27, 1994.
Fabric sales decreased by 29.3% principally due to a decrease in yardage sold.
Gross profit margin increased from 21.6% in fiscal 1995 to 26.5% in fiscal 1996
primarily due to better performance at Registrant's Milledgeville, Georgia plant
and the discontinuance of operations of the inefficient Washington, Georgia
facility.
Selling and shipping expenses declined by 7.5% as a result of the decrease in
Registrant's sales. The decrease was less than the actual sales decrease
because some of Registrant's selling expenses do not vary with sales but
represent sales management costs which are more fixed in nature.
General and administrative expenses declined by 17.1% as a result of a decline
in Registrant's 1) provision for doubtful accounts as there were no significant
customer failures in the current period in contrast with the first fiscal
quarter 1995 experience, 2) consulting fees associated with systems programming,
and 3) cost savings attributed to the shut-down of the Washington plant.
Earnings before income taxes for the thirteen weeks of fiscal 1996 were $270,000
compared with $582,000 for the thirteen weeks of fiscal 1995. Net earnings were
$133,000 for 1996 and $340,000 for 1995.
LIQUIDITY AND CAPITAL RESOURCES
During the thirteen weeks ended of fiscal 1996, Registrant's operations provided
$217,000 cash. $434,000 was used to acquire machinery and equipment. Cash
decreased by $186,000 during the period. Working capital increased by $296,000
for the thirteen weeks ended December 3, 1995. Registrant expects its lines of
credit and cash flow from operations to be adequate to finance operations and
meet its cash requirements for fiscal 1996.
11 of 13 <PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
FORM 10-Q
PART II
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) No report on Form 8-K was filed by
Registrant during the thirteen
weeks ended December 3, 1995.
12 of 13
<PAGE>
CONCORD FABRICS INC. AND SUBSIDIARIES
-------------------------------------
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONCORD FABRICS INC.
---------------------------------
Registrant
Date: January 5, 1996 By /s/ Earl Kramer
Earl Kramer
President and Chief Executive
Officer
Date: January 5, 1996 By /s/ Martin Wolfson
Martin Wolfson
Senior Vice President-Treasurer
Chief Financial Officer
13 of 13<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FIRST QUARTER AND THIRTEEN WEEKS ENDED FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO IT.
</LEGEND>
<CIK> 0000023249
<NAME> CONCORD FABRICS INC.
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-01-1996 SEP-03-1995
<PERIOD-START> SEP-04-1995 AUG-29-1994
<PERIOD-END> DEC-03-1995 NOV-27-1994
<EXCHANGE-RATE> 1 1
<CASH> 2,175,902 1,548,079
<SECURITIES> 0 0
<RECEIVABLES> 26,759,881 36,211,703
<ALLOWANCES> 0 0
<INVENTORY> 26,199,925 34,325,747
<CURRENT-ASSETS> 60,833,263 75,959,132
<PP&E> 13,413,601 11,976,137
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 76,389,892 89,465,141
<CURRENT-LIABILITIES> 15,858,849 37,089,744
<BONDS> 0 0
<COMMON> 1,812,554 1,801,281
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 76,389,892 89,465,141
<SALES> 34,311,100 48,510,294
<TOTAL-REVENUES> 34,311,100 48,510,294
<CGS> 25,215,137 38,038,273
<TOTAL-COSTS> 34,040,604 47,927,904
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 473,536 513,252
<INCOME-PRETAX> 270,496 582,390
<INCOME-TAX> 137,000 242,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 133,496 340,390
<EPS-PRIMARY> .04 .09
<EPS-DILUTED> 0. 0.
</TABLE>
