UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20459
FORM 10-Q
(Mark one)
[X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended April 2, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6150
ALBA-WALDENSIAN, INC.
(Exact name of registrant as specified in its Charter)
Delaware 56-0359780
(State or other jurisdiction (I.R.S.Employer Identification No.)
of incorporation or organization)
P.O. Box 100, Valdese, N.C. 28690
(Address of principal executive offices)
(Zip Code)
(704) 874-2191
Registrant's telephone number, including area code
NONE
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether 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
APPLICABLE ONLY TO CORPORATE USERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date.
As of April 2, 1995, the number of common shares outstanding was
1,864,403.
<PAGE>
ALBA-WALDENSIAN, INC. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 1-2
April 2, 1995 and December 31, 1994
Condensed Consolidated Statements of Current 3
and Retained Earnings for the Three Month
Periods Ended April 2, 1995 and April 3, 1994
Condensed Consolidated Statements of Cash 4-5
Flows for the Three Month Periods Ended
April 2, 1995 and April 3, 1994
Notes to Condensed Consolidated Financial 6-8
Statements
Item 2. Management's Discussion and Analysis of 9-11
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALBA-WALDENSIAN, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
April 2, December 31,
1995 1994 (1)
ASSETS (Unaudited)
CURRENT ASSETS:
Cash $ 66,885 $ 103,952
Accounts receivable,net 10,492,569 7,426,654
Refundable income taxes, net 127,394 127,394
Notes receivable 16,085 30,080
Inventories:
Materials 4,202,850 3,377,562
Work-in-process 6,522,184 5,945,246
Finished goods 7,713,294 7,941,372
Total inventories,net 18,438,328 17,264,180
Prepaid expenses and other 424,207 151,236
Deferred income taxes 298,010 298,010
Total Current Assets 29,863,478 25,401,506
PROPERTY AND EQUIPMENT 29,987,483 27,102,310
LESS ACCUMULATED DEPRECIATION (15,971,719) (15,497,062)
Property, Plant and
Equipment, Net 14,015,824 11,605,248
OTHER ASSETS:
Goodwill(Note 2) 9,062,794 0
Notes receivable 79,125 77,995
Trademarks and patents 313,761 324,654
Cash value-life insurance 317,171 320,325
Total Other Assets 9,772,851 722,974
TOTAL ASSETS $53,652,153 $37,729,728
(1) The balance sheet at December 31, 1994 has been taken from
the audited consolidated financial statements at that date.
See notes to consolidated condensed financial statements.
1
<PAGE>
ALBA-WALDENSIAN, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
April 2, December 31,
1995 1994(1)
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term borrowings and lines of credit(Note 3) $1,229,815 $ 1,178,062
Current maturities of long-term debt(Note 4) 3,300,000 500,000
Current maturities of capital lease obligations 111,004 113,526
Accounts payable 3,008,156 2,587,875
Accrued liabilities:
Labor and profit-sharing 784,957 689,983
Property and payroll taxes 267,243 102,939
Group health claims - estimated 201,807 150,000
Other 419,636 213,060
Income taxes payable 5,212 0
Total Current Liabilities 9,327,830 5,535,445
LONG-TERM DEBT (Note 4) 13,075,000 1,000,000
CAPITAL LEASE OBLIGATIONS 29,430 58,069
DEFERRED COMPENSATION 391,479 344,391
DEFERRED INCOME TAXES 1,698,369 1,698,369
Total Liabilities 24,522,108 8,636,274
COMMITMENTS AND CONTINGENCIES(Notes 2,3, and 4)
STOCKHOLDERS' EQUITY:
Common stock - authorized
3,000,000 shares, $2.50 par
value; issued: 1,886,580 shares
in 1995 and 1994; outstanding:
1,864,403 and 1,863,153 shares
in 1995 and 1994, respectively 4,716,450 4,716,450
Additional paid-in capital 9,182,158 9,182,158
Retained earnings 15,389,448 15,361,763
Total 29,288,056 29,260,571
Less treasury stock - at cost
(22,177 and 23,427 shares in
1995 and 1994, respectively) (158,011) (166,917)
Total Stockholders' Equity 29,130,045 29,093,454
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $53,652,153 $37,729,728
</TABLE>
(1) The balance sheet at December 31, 1994 has been taken from
the audited consolidated financial statements at that date.
See notes to consolidated condensed financial statements.
2
<PAGE>
ALBA-WALDENSIAN,INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Current
And Retained Earnings
(Unaudited)
Three Month Period Ended
April 2, April 3,
1995 1994
CURRENT EARNINGS:
Net sales $14,378,264 $13,394,884
Cost of sales 11,263,569 10,160,965
Gross margin 3,114,695 3,233,919
Selling, general and
administrative expenses 2,957,876 2,617,774
Operating income 156,819 616,145
Interest expense (130,442) (115,096)
Interest income 2,876 13,632
Other 8,703 26,922
Total other income (expense) (118,863) (74,542)
Income before income taxes 37,956 541,603
Provision for income taxes 12,146 200,390
Net income $ 25,810 $ 341,210
Weighted average number of shares
of common stock outstanding 1,863,384 1,839,389
Net income per common share $ .01 $ .19
RETAINED EARNINGS:
Balance at beginning of period $15,361,763 $13,426,272
Net income 25,810 341,210
Exercise of stock options 1,875 (3,028)
Balance at end of period $15,389,448 $13,764,454
See notes to consolidated condensed financial statements.
3
<PAGE>
ALBA-WALDENSIAN, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Month Periods Ended
April 2, April 3,
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 25,810 $ 341,210
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 485,550 469,491
Provision for bad debts, net of recoveries 29,250 57,850
Gain on sale of property (3,155)
Provision for inventory obsolescence 195,000 81,000
Changes in operating assets and
liabilities providing (using) cash:
Accounts receivable (1,138,886) (1,162,786)
Refundable income taxes 0 76,133
Inventories 153,963 (381,204)
Prepaid expenses and other (269,817) (24,163)
Accounts payable 420,281 (131,651)
Accrued and other liabilities 200,733 317,009
Income taxes payable 5,212 105,873
Deferred compensation 47,088 (25,596)
Net cash provided by (used in) operating activities 154,184 (360,989)
INVESTING ACTIVITIES:
Capital expenditures (154,403) (163,721)
Payment for purchase of Balfour Healthcare (14,956,086) 0
Proceeds from sale of property 0 0
Proceeds from notes receivable 12,865 17,120
Net cash used in investing activities (15,097,624) (146,601)
FINANCING ACTIVITIES:
Net borrowings (payments) under line
of credit agreements 51,753 (50,000)
Issuance of long term debt 15,000,000 0
Principal payments on notes and leases (156,161) (41,570)
Cash proceeds from exercise of stock options 10,781 34,406
Net cash provided by (used in) financing activities 14,906,373 (57,164)
NET INCREASE ( DECREASE) IN CASH (37,067) (564,754)
CASH AT BEGINNING OF PERIOD 103,952 960,516
CASH AT END OF PERIOD $ 66,885 $ 395,762
</TABLE>
4
<PAGE>
ALBA-WALDENSIAN, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Three Month Period Ended
April 2, April 3,
1995 1994
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $134,385 $ 84,651
Income Taxes $ 6,880 $ 18,377
See notes to consolidated condensed financial statements.
5
<PAGE>
ALBA-WALDENSIAN, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statement
For the Three Month Periods Ending April 2, 1995 and April 3, 1994
(Unaudited)
1. UNAUDITED FINANCIAL INFORMATION
In the opinion of the Company, the accompanying unaudited
Consolidated Condensed Financial Statements contain all
adjustments necessary to present fairly the financial position
as of April 2, 1995 and the results of operations for the three
months periods ended April 2, 1995 and April 3, 1994. The
financial statements are presented as permitted by the
instructions to Form 10-Q and Article 10 of regulation S-X. The
accounting policies followed by the company are set forth in the
Company's Annual Report on Form 10-K which is incorporated by
reference.
The results of operations for the three month periods ended
April 2, 1995 are not necessarily indicative of the results to
be expected for the full year. These unaudited financial
statements should be read in conjunction with the Company's most
recent audited financial statements.
The three month period for 1995 began January 1, 1995 and
ended April 2, 1995. The three month period for 1994 began
January 1, 1994 and ended April 1, 1994.
2. ACQUISITION
On March 6, 1995, the company acquired the Balfour Healthcare
Division of Kayser-Roth Corporation. The acquisition consisted
of the following , subject to post-closing adjustments:
Fair value of assets acquired:
Accounts Receivable 1,956,279
Fixed Assets 2,730,830
Inventory 1,523,111
Goodwill 9,062,794
Total assets acquired 15,273,014
Cash paid 14,956,085
Liabilities assumed 316,929
The acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to
assets acquired based on their estimated fair values and maybe
subject to furthur adjustment. The total cost in excess of
estimated fair value(goodwill of $9,062,794) will be amortized
on a straight line basis over 15 years. The Company financed
100% of the acquisition with a variable long term loan
agreement(Note 4).
The results of operation of the Balfour Healthcare Division are
included in the accompanying financial statements since the date
of acquisition.
6
<PAGE>
The following unaudited pro forma summary presents the
information as if the acquisition had occurred at the beginning
of 1995 and 1994, after giving effect of certain adjustments,
including amortization of goodwill and interest expense from
debt issued to fund the acquisition and related income tax
effects. The total interest expense included in this pro forma
is $197,000 in 1994 and $267,000 in 1995. Goodwill amortization
is $151,000.This pro forma is provided for information purposes
only. It is based on historical information and does not
necessarily reflect the actual results that would have occurred
nor is it necessarily indicative of future results of operations.
Three Month Period Ending April 2, 1995 April 3, 1994
(Amounts in thousands of dollars, except per share data)
Net Sales $ 17,033.3 $ 16,947.9
Net Income 83.5 371.7
Earnings per common share $ .05 $ .21
3. SHORT TERM BORROWINGS AND LINES OF CREDIT
On March 6, 1995, the Company restructured its short term line
of credit to $5,000,000. This line of credit was used to
purchase the Baxter Healthcare P.A.S.r business in November,
1994 for $2,040,000 and to support existing working capital
needs. In addition this provides a sublimit of $1,000,000 to
support import letters of credit. Interest is accrued at the
LIBOR rate plus 1 3/4%. The amount outstanding at April 2, 1995,
and December 31, 1994 was $1,229,815 and $1,178,062,
respectively.
4. LONG TERM DEBT
Long term debt is comprised of:
April 2 December 31
1995 1994
Note Payable-Equipment Loan(a) $ 1,375,000 $1,500,000
Note Payable-Balfour Purchase(b) 15,000,000 -
Total 16,375,000 1,500,000
Less:Current Maturities 3,300,000 500,000
Total Long Term Debt $ 13,075,000 $ 1,000,000
(a) Pursuant to a fixed rate term loan agreement dated February
12, 1993, this $2,000,000 note was used to purchase new
equipment. Interest accrues at 6.3% fixed rate and principal
payments are made quarterly.
(b) Pursuant to variable loan rate term loan agreement dated
March 6, 1995, this $15,000,000 note was used to purchase the
Balfour Healthcare Division from Kayser-Roth Corporation.
Interest accrues at the rate of LIBOR plus 2%. Principal
payments will be made quarterly beginning June 30, 1995. The
note is collateralized by all assets of the company.
7
<PAGE>
This loan agreement contains various loan restrictive
covenants, as defined, which include maintaining a minimum
tangible net worth, a minimum cash flow and leverage ratio and a
limit on capital spending. The agreement also maintains that any
cash dividends paid will not cause default of any loan covenant
as a result of paying those dividends.
The annual principal maturites of the long term debt at April
2, 1995 are as follows:
1995 $ 1,762,500
1996 2,350,000
1997 2,350,000
1998 2,350,000
1999 2,350,000
2000 5,212,500
Total $ 16,375,000
5. EARNINGS PER SHARE
Net income per common share is calculated on the weighted
average number of shares of common stock outstanding during the
period. The effect of dilutive common stock equivalents is
immaterial.
6. LICENSE AGREEMENTS
The Company has a licensing agreement with Coats Viyella
International, UK, in which it pays a 5% royalty on all sales of product
under the Byford Apparel label that is not produced by Coats Viyella.
The Company also has an agreement with Ray Shaw, which pays a 5% royalty
on all product sold under the BBWr label.
In connection with the purchase of Balfour Health Products, the
Company pays Ms. Ada Shapiro a royalty of 5% of sales up to
$1,000,000, 2.5% of sales from $1,000,000 to $2,000,000, and
1.5% of sales over $2,000,000 on two styles of diabetic socks
produced by Balfour Health Products.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The company has a strong financial position with excellent
liquidity. On April 2, 1995, the company had a working capital
ratio of 3.20 to 1 and working capital of $20,535,648. This
ratio was down from 4.85 to 1 at April 3, 1994 primarily due to
the short term borrowings associated with the acquisition of
the P.A.Sr business in November, 1994 and current maturities of
long -term debt associated with the acquisitions Balfour Health
Products in March, 1995.
Liquidity needs are primarily related to capital expenditures
and increased levels of accounts receivable due to the Company's
growth. These needs are adequately being met through available
working capital, and are supplemented by a short-term line of
credit of $5,000,000, to cover fluctuations , as well as a
$2,000,000 equipment term loan. In addition, the Company
issued $15,000,000 of long-term debt on March 6, 1995 to
purchase the assets of Balfour Health Products which consisted
of accounts receivable, building and equipment, inventory, and
goodwill.
Results of Operations
Three Month Periods Ended April 2, 1995, and April 3, 1994
Net sales by division for the first quarter of 1995 compared to
the first quarter of 1994 are set forth in the following table.
<TABLE>
<CAPTION>
Three Month Period Ended
April 2 April 3 Inc./ % Inc.
1995 1994 (Dec.) (Dec.)
<S> <C> <C> <C> <C>
Consumer Products $6,678,677 $7,563,558 $(884,881) (11.7)%
Health Products 4,522,389 3,796,162 726,277 19.1 %
Alba Direct 430,245 961,501 531,256 (55.3)%
Byford 1,158,671 1,073,663 85,008 7.9 %
AWI Retail 3,110 0 3,110 100.0 %
Sub-total 2,793,092 13,394,884 (601,793) ( 4.5)%
Balfour Health 1,585,172 0 1,585,172 100.0 %
Total $ 14,378,263 $13,394,884 983,379 7.4 %
</TABLE>
The net sales increase of $983,379 as shown in the table above
was attributed to the increase in sales of the Health Products,
and Byford Divisions in addition to the newly acquired Balfour
Health Products business. The weakness in Consumer Products
began in the fourth quarter of 1994 as major customers
experienced overstock positions in retail inventory. This
weakness has continued through the first quarter of 1995 as
retailers continue to shrink their inventories. The decline in
Alba Direct sales is attributed to the termination of two of its
seven Japanese distributors.
9
<PAGE>
Gross profits decreased for the first quarter of 1995, as
compared to the first quarter of 1994 by $24,302 or .7%. The
newly acquired Balfour business contributed $290,000 to gross
profit and the Health Products Division gross profits increased
29.9% compared to 1994. Although the Health products gross
profit increased, the decrease in Consumer Products and Alba
Direct due to their decline in sales, more than offset that
increase.
Selling, General, and Administrative expenses(as a percentage
of sales) increased from 19.6% in the first quarter of 1994 to
21.7% in the first quarter of 1995. The increase was primarily
due to the lower sales for the quarter exclusive of the Balfour
acquisition, additional selling expense for the additional
P.A.Sr and Balfour business, an increase in selling expense at
the Byford division, and the addition of some contract
programmers in the MIS department.
Operating Income decreased by $459,326 or 75% as compared to
the first quarter of 1994. The decrease was a result of the
decrease in sales exclusive of the Balfour acquisition, the
lower gross margin in the Consumer and Alba Direct Divisions,
and the increase in Selling, General & Administrative expenses.
Net non-operating income /expense aggregated expense of
$118,863 for the first quarter of 1995, as compared to an
expense of $74,542 in the first quarter of 1994. The major
differences was an increase in interest expenses for the
$15,000,000 of long term debt obtained to finance the Balfour
purchase.
As a result of the foregoing Net income after taxes for the
first quarter of 1995 decreased $315, 400 or 92.4% from the
first quarter of 1994.
Other Discussion
The company plans to relocate its Valdese, NC health products
manufacturing operations into the Balfour facility in Rockwood,
TN. Currently the Valdese health products are being manufactured
in three facilities in the Valdese area. This will enable the
company to reduce the cost and lower the inventories of the
health care operations. It is anticipated that capital
expenditures of approximately $800,000 will be made for
machinery to improve efficiency and renovation of the Rockwood,
TN facility to accommodate this Valdese production. It is
expected that cash required for capital expenditures will be
provided by operations and supplemented by the Company's short
term line of credit.
This relocation of health product operations will also enable
the Company to reorganize its Consumer Products operation in the
Valdese area and bring back in house approximately $1,700,000 of
manufacturing that has been outsourced. The Company believes
that this reorganization will also reduce cost and decrease
inventories in the Consumer Products operation.
10
<PAGE>
Items as a percentage of sales are reflected in the following
table:
Three Month Periods Ended
April 2, April 3,
1995 1994
Net sales 100.0% 100.0%
Cost of sales 78.3% 75.8%
Gross margin 21.7% 24.2%
Selling, general and
administrative expenses 20.6% 19.6%
Operating income 1.1% 4.6%
Other income (expense), net (0.9%) ( 0.6%)
Income before income taxes .2% 4.0%
Provision for income taxes .1% 1.5%
Net Income .1% 2.5%
PART II. OTHER INFORMATION
Items 1,2,3,4, and 5 are inapplicable and have been omitted.
Item 6. Exhibits and Reports on FORM 8-K
a. Exhibits
11. Computation of earnings per share
27. Financial Data Schedule(filed in electronic format only)
b. Form 8-K
The registrant filed a current report on Form 8-K regarding
the acquisition of the Balfour Health Products Division of
Kayser-Roth Corporation on March 20, 1995. No financial
statements or pro-forma financial information was filed with
such Form 8-K but such statements and financial information will
be filed as an amendment to the form no later than May 19, 1995.
11
<PAGE>
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 there unto duly authorized.
ALBA-WALDENSIAN, INC. AND SUBSIDIARIES
Date:_________ ______________________________________
Thomas I. Nail
Chief Financial Officer and
Principal Accounting Officer
12
<PAGE>
<PAGE>
EXHIBIT 11
ALBA-WALDENSIAN, INC. AND SUBSIDIARIES
Calculation of Primary and Fully Dilutive Earnings Per Share
(unaudited)
Three Month Period Ended
April 2, April 3,
1995 1994
Primary Earning Per Share
Weighted average number of common
shares outstanding 1,863,384 1,839,389
Net Income(Loss) $ 25,810 $ 341,210
Primary Earning Per Share $ .01 $ .19
Fully Dilutive Earning Per Share
Weighted average number of common
shares outstanding 1,863,384 1,839,389
Common Stock Equivalents(Options) 22,144 38,857
1,885,528 1,878,246
Net Income(Loss) $ 25,810 $ 341,210
Fully dilutive Earnings Per Share $ .01 $ .18
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-02-1995
<CASH> 66,885
<SECURITIES> 0
<RECEIVABLES> 10,492,569
<ALLOWANCES> 0
<INVENTORY> 18,438,328
<CURRENT-ASSETS> 29,963,478
<PP&E> 29,987,483
<DEPRECIATION> 15,971,719
<TOTAL-ASSETS> 53,652,153
<CURRENT-LIABILITIES> 9,327,830
<BONDS> 0
<COMMON> 4,716,450
0
0
<OTHER-SE> 24,413,595
<TOTAL-LIABILITY-AND-EQUITY> 53,652,153
<SALES> 14,378,264
<TOTAL-REVENUES> 14,389,843
<CGS> 11,263,569
<TOTAL-COSTS> 14,221,445
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130,442
<INCOME-PRETAX> 37,956
<INCOME-TAX> 12,146
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,810
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
