Form 10-Q Quarterly Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended _________August 27, 1994_____
Commission file number _________________1-5901_______________
_____________________Fab Industries, Inc._________________________
(Exact name of registrant as specified in its charter)
_____________Delaware__________ ______13-2581181_______
(State or other jurisdiction of (I. R. S. Employer)
incorporation or organization) Identification No.)
___200 Madison Avenue, New York, N.Y.____ __10016___
(Address of principal executive offices) (Zip Code)
______________(212) 592-2700_______________________
(Registrant's telephone number, including area code)
________________________N/A_______________________
(Former name, former address and former fiscal year;
if changed since last report)
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__________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
_______CLASS_____________ _Shares Outstanding at Oct 11, 1994_
Common stock, $.20 par value 6,160,440
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1.
Consolidated Statements of Income
13 Weeks ended Aug. 27, 1994 and August 28, 1993 3
Consolidated Statements of Income
39 Weeks ended Aug. 27, 1994 and August 28, 1993 4
Consolidated Balance Sheets (Asset Section)
Aug. 27, 1994 and November 27, 1993 5
Consolidated Balance Sheets (Liability Section)
Aug. 27, 1994 and November 27, 1993 6
Consolidated Statements of Stockholders Equity
39 Weeks ended Aug. 27, 1994 and November 27, 1993 7
Consolidated Statements of Cash Flows
39 Weeks ended Aug. 27, 1994 and August 28, 1993 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 17
(2)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 WKS. ENDED
----------------------------
AUGUST 27,1994 AUGUST 28,1993
----------------------------
(Unaudited) (Unaudited)
Net sales $47,595,000 $51,970,000
Cost of goods sold 38,328,000 40,548,000
------------- -------------
Gross profit 9,267,000 11,422,000
Selling, general and administrative expenses 4,248,000 4,156,000
------------- -------------
Operating income 5,019,000 7,266,000
------------- -------------
Other income (expense):
Interest and dividend income 826,000 782,000
Interest expense (36,000) (30,000)
Gain on marketable securities (128,000) 206,000
------------- -------------
662,000 958,000
------------- -------------
Income before taxes 5,681,000 8,224,000
Income taxes 1,840,000 2,910,000
------------- -------------
Net Income $3,841,000 $5,314,000
============= =============
Earnings per share of common stock and $0.62 $0.86
common stock equivalents (Note 2)
Weighted average number of shares of common
stock and common stock equivalents (Note 2) 6,196,414 6,198,340
See notes to consolidated financial statements.
(3)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 39 WKS. ENDED
------------------------------
AUGUST 27,1994 AUGUST 28,1993
------------------------------
(Unaudited) (Unaudited)
Net sales 137,912,000 142,976,000
Cost of goods sold 111,315,000 114,313,000
------------- -------------
Gross profit 26,597,000 28,663,000
Selling, general and administrative expenses 12,835,000 12,546,000
------------- -------------
Operating income 13,762,000 16,117,000
------------- -------------
Other income (expense):
Interest and dividend income 2,486,000 2,277,000
Interest expense (90,000) (82,000)
Gain (loss) on marketable securities (631,000) 545,000
------------- -------------
1,765,000 2,740,000
------------- -------------
Income before taxes 15,527,000 18,857,000
Income taxes 5,290,000 6,580,000
------------- -------------
Net Income $10,237,000 $12,277,000
============= =============
Earnings per share of common stock and $1.65 $1.99
common stock equivalents (Note 2)
Weighted average number of shares of common
stock and common stock equivalents (Note 2) 6,201,637 6,167,624
See notes to consolidated financial statements.
(4)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
-------------
AS OF
------------------------------
AUGUST 27,1994 NOV. 27,1993
-------------- --------------
(Unaudited)
Current assets:
Cash and short-term investments (Note 3) $6,710,000 $10,348,000
Marketable securities, at lower
of cost or market 54,560,000 52,340,000
Accounts receivable-net of allowance of
$1,800,000 and $1,600,000 for doubtful
accounts 32,305,000 35,683,000
Inventories (Note 4) 26,314,000 24,322,000
Deferred income taxes 447,000 483,000
Other current assets 2,088,000 2,318,000
------------- --------------
Total current assets 122,424,000 125,494,000
------------- --------------
Property, plant and equipment - at cost 97,367,000 91,644,000
Less: Accumulated depreciation 65,779,000 61,651,000
-------------- --------------
31,588,000 29,993,000
Other assets 2,232,000 2,012,000
------------- --------------
$156,244,000 $157,499,000
============= ==============
See notes to consolidated financial statements.
(5)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
L I A B I L I T I E S A N D
--------------------------------
S T O C K H O L D E R S' E Q U I T Y
--------------------------------------
AS OF
------------------------------
AUGUST 27,1994 NOV. 27,1993
--------------- --------------
(Unaudited)
Current liabilities:
Accounts payable $10,274,000 $13,512,000
Corporate income and other taxes 2,233,000 2,830,000
Accrued payroll and related expenses 3,292,000 5,321,000
Dividends payable 988,000 3,983,000
Other current liabilities 245,000 512,000
------------- --------------
Total current liabilities 17,032,000 26,158,000
------------- --------------
Obligations under capital leases - net of
current maturities (Note 5) 743,000 779,000
Other noncurrent liabilities 1,496,000 1,078,000
Deferred income taxes 5,495,000 5,158,000
------------- --------------
Total liabilities 24,766,000 33,173,000
------------- --------------
Stockholders' equity (Note 2) 131,478,000 124,326,000
------------- --------------
$156,244,000 $157,499,000
============= ==============
See notes to consolidated financial statements.
(6)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 39 WEEKS ENDED AUGUST 27, 1994
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stock * Unearned Treasury Stock
------------- Additional Restricted Loan to --------------------
Number of Paid-in Retained Stock Employee StockNumber of
Total Shares Amount Capital Earnings Compensation Ownership Plan Shares Cost
------ -------------------------------- ------------------------ ----------------------- -----------
Balance at 11/27/93 $124,326,000 6,477,694 $1,295,000 $4,931,000 $135,994,000 ($832,000) ($10,277,000) (253,861)($6,785,000)
Net income 10,237,000 0 0 0 10,237,000 0 0 0 0
Cash Dividends,
$.48 per share (2,970,000) 0 0 0 (2,970,000) 0 0 0 0
Exercise of
stock options 230,000 13,200 3,000 227,000 0 0 0 0 0
Purchase of
treasury stock (1,371,000) 0 0 0 0 0 0 (39,193) (1,371,000)
Compensation under
restricted stock plan 236,000 0 0 0 0 236,000 0 0 0
Issuance of treasury
stock under
restricted stock plan 0 0 7,000 0 (35,000) 0 1,000 28,000
Loan payment from ESOP 790,000 0 0 0 0 0 790,000 0 0
------------ ------------------- ---------- ------------ ----------- ------------- -------- ----------
Balance at Aug.27,1994 $131,478,000 6,490,894 $1,298,000 $5,165,000 $143,261,000 ($631,000) ($9,487,000) (292,054)($8,128,000)
(Unaudited) ============ =================== ========== ============ ========= ============ ======== ==========
</TABLE>
* Common stock .20 par value - 15,000,000 shares authorized.
Preferred stock $1.00 par value - 2,000,000 shares authorized, none issued.
See notes to consolidated financial statements.
(7)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WKS ENDED
---------------------------------
AUGUST 27, 1994 AUGUST 28, 1993
---------------- -------------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net Income $10,237,000 $12,277,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for doubtful accounts 200,000 400,000
Depreciation and amortization 4,128,000 4,122,000
Deferred income taxes 373,000 (285,000)
(Gain) Loss on marketable securities 631,000 (545,000)
Compensation under restricted stock plan 236,000 234,000
Decrease (increase) in:
Accounts receivable 3,178,000 (11,614,000)
Inventories (1,992,000) (180,000)
Other current assets 230,000 (648,000)
Other assets (220,000) (424,000)
Increase (decrease) in:
Accounts payable (3,238,000) 368,000
Accrued liabilities (2,893,000) (554,000)
Other 382,000 375,000
--------------- ---------------
Net cash provided by (used in)
operating activities 11,252,000 3,526,000
--------------- ---------------
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (5,723,000) (3,033,000)
Proceeds from sales of marketable securities 2,794,000 4,680,000
Acquisitions of marketable securities (5,645,000) (21,253,000)
--------------- ---------------
Net cash used in
investing activities (8,574,000) (19,606,000)
--------------- ---------------
FINANCING ACTIVITIES:
Purchase of treasury stock (1,371,000) (1,511,000)
Payment of loan from ESOP 790,000 790,000
Dividends paid (5,965,000) (3,058,000)
Exercise of stock options 230,000 2,569,000
--------------- ---------------
Net cash used in financing
activities (6,316,000) (1,210,000)
--------------- ---------------
(Decrease) in cash and cash
equivalents (3,638,000) (17,290,000)
Cash and short term investments,
at beginning of year 10,348,000 20,266,000
--------------- ---------------
Cash and short term investments,
at end of period $6,710,000 $2,976,000
=============== ===============
See notes to consolidated financial statements.
(8)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, they 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 only normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the 39 weeks ended August 27, 1994 are not
necessarily indicative of the results that may be expected for the entire year
ended December 3, 1994. The balance sheet at November 27, 1993 has been derived
from the audited balance sheet at that date. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended November 27, 1993.
2. Stockholders' Equity:
Earnings Per Share:
Earnings per share has been computed by dividing net income by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period. The weighted average number of shares used in
computing earnings per share for the nine months ended August 27, 1994 and
August 28, 1993, were 6,201,637 and 6,167,624 respectively and for the three
months ended August 27, 1994 and August 28, 1993 were 6,196,414 and 6,198,340
respectively.
Employee Stock Ownership Plan:
The third of 15 equal annual principal installments of $790,500 plus
interest at prime was paid by the ESOP to the Company on August 1, 1994. The
balance on the ESOP indebtedness of $9,487,000 is reflected as a reduction of
the Company's Stockholders' Equity in the consolidated balance sheet.
(9)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Cash and short-term investments consist of the following, all of which
have maturities of three months or less:
August 27, 1994 November 27, 1993
---------- -----------
(Unaudited)
Cash $710,000 $1,951,000
Tax-free Short Term Investments 6,000,000 8,000,000
U.S. Treasury Obligations 0 397,000
-------------- --------------
Cash and Short-Term Investments $6,710,000 $10,348,000
-------------- --------------
4. Inventories:
The Company's inventories are valued at the lower of cost or market.
Cost is determined principally by the last-in, first-out (LIFO) method with the
remainder being first-in, first-out (FIFO) method. Because the inventory
valuation under the LIFO method is based upon an annual determination of
inventory levels and costs as of the fiscal year-end, the interim LIFO
calculations are based on management's estimates of expected year-end inventory
levels and costs.
August 27, 1994 November 27, 1993
--------------- -----------------
Raw Materials $8,567,000 $7,601,000
Work-in-process 8,861,000 8,965,000
Finished goods 8,886,000 7,756,000
----------- -----------
Total $26,314,000 $24,322,000
============ ===========
Approximate percentage of
inventories valued
under LIFO valuation 61% 63%
========== =========
Excess of FIFO valuation
over LIFO valuation $7,212,000 $6,912,000
========== ===========
(10)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Obligations under capital leases consist of the following:
August 27,1994 November 27, 1993
---------- ----------
Obligations under capital leases
through 2006 payable in monthly
installments of $10,553 including
interest at 10% per annum. $771,000 $807,000
Less current maturities (included
with other current liabilities) 28,000 28,000
--------- ---------
$743,000 $779,000
========= =========
(11)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Third Quarter
1994 Compared to 1993
Net sales for the third fiscal quarter of 1994 were $47,595,000,
as compared to $51,970,000 in the similar 1993 period, a decline of
8.4%. Weak customer demand for certain of the Company's products which
began earlier in the year continued through the current quarter.
However, scheduled deliveries by customers which had been postponed in
the prior quarter were reconfirmed for shipment in subsequent months.
Furthermore, September 1994 order bookings showed comparative strength
with year ago figures. September shipments were level with September of
last year.
Overall profit margins for the quarter were 19.5% v. 22.0% last
year. Lower sales volume adversely affected both operating rates at
production facilities as well as the overall product mix.
Selling, general and administrative expenses, as a percentage of
sales, increased to 8.9% from 8.0% last year, primarily as a result of
lower sales volume.
Interest and dividend income increased by $44,000 on a quarter-to-
quarter basis to $826,000. Higher balances available for investment
more than offset lower average interest rates.
For the period, a loss (mainly unrealized) was incurred of
$128,000 on marketable securities as compared to a gain in the same 1993
period of $206,000. A series of increases in interest rates by the Federal
Reserve Board as well as expectations by the financial markets of
continued rising long-term rates resulted in declines in the market
value of the Company's investment portfolio.
As a result of these aforementioned factors, net income declined
by $1,473,000, or 27.7%, to $3,841,000, or 8.1% of sales as compared to
10.2% of sales in 1993. Earnings per share were $0.62 as against
$0.86. There was no earnings dilution relative to common stock
equivalents in either comparative quarter.
(12)
<PAGE>
Liquidity and Capital Resources
The Company's principal source of funds continues to be cash
flow generated from operations. Cash provided by operating activities
for the thirty-nine weeks ended August 27, 1994, increased to
$11,252,000 as compared to $3,526,000 in 1993. Of this net increase
in 1994, approximately $3.2 million arose from a decrease in accounts
receivable, which is mainly attributable to a decline in sales volume.
Working capital rose to $105.4 million from $99.3 million at the prior
fiscal year-end.
Capital expenditures for the nine months were $5,723,000 as
against $3,033,000 in 1993. The Company purchased additional dyeing and
finishing equipment for its two finishing plants together with a
computerized control system for dyeing, as well as high speed knitting
equipment in order to service expanded marketing activities.
During the first nine months of its fiscal year, the Company
repurchased 39,193 shares of its Common Stock at an average price of
$34.98. Subsequent to August 27, 1994, the Company repurchased an
additional 41,000 shares at an average price of $31.51. The Company
intends to continue to purchase its shares of Common Stock from
time-to-time as market conditions warrant and price criteria are met.
During the current period, the regular quarterly dividend of $0.16
per share was declared to stockholders of record as of September 19,
1994, payable October 21, 1994.
Stockholders' equity rose to $131,478,000, or $21.21 book value
per share, from $124,326,000, or $19.98 per share, at the previous
year-end November 27, 1993.
Management believes that the current financial position of the
Company is more than adequate to internally fund any future expenditures
to maintain, modernize and expand its manufacturing facilities, pay
dividends and make acquisitions of textile-related businesses if
criteria relating to indebtedness, market expansion and existing
management are met.
(13)
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - No Exhibits are filed herewith
Exhibit Description of Exhibit
10.1 - 1987 Stock Option Plan of the Registrant, incorporated by
reference to Exhibit 10.1 to the Registrant's Annual Report
on form 10-K for the fiscal year ended November 27, 1993
(the "1993 10-K").
10.2 - Employment Agreement dated as of March 1, 1993,
between the Registrant and Samson Bitensky, incorporated
by reference to Exhibit 10.2 to the 1993 10-K.
10.3 - Fab Industries, Inc. Hourly Employees Retirement Plan (the
"Retirement Plan"), incorporated by reference to Exhibit
10.3 to the 1993 10-K.
10.4 - Amendment to the Retirement Plan effective December 11,
1978, incorporated by reference to Exhibit 10.4 to the 1993
10-K.
10.5 - Amendment to the Retirement Plan effective December 1,
1981, incorporated by reference to Exhibit 10.5 to the
1993 10-K.
10.6 - Amendment to the Retirement Plan dated November 21,
1983, incorporated by reference to Exhibit 10.6 to the
1993 10-K.
10.7 - Amendment to the Retirement Plan dated August 29,
1986, incorporated by reference to Exhibit 10.7 to the
1993 10-K.
10.8 - Amendment to the Retirement Plan effective as of
December 1, 1989, incorporated by reference to Exhibit
10.8 to the 1993 10-K.
10.9 - Fab Lace, Inc. Employees Profit Sharing Plan (the
"Profit Sharing Plan"), incorporated by reference to
Exhibit 10.9 to the 1993 10-K.
10.10 - Amendment to the Profit Sharing Plan effective
December 1, 1978, incorporated by reference to Exhibit
10.10 to the 1993 10-K.
10.11 - Amendment dated December 1, 1985 to the Profit
Sharing Plan, incorporated by reference to Exhibit 10.11
to the 1993 10-K.
(14)
<PAGE>
10.12 - Amendment dated February 5, 1987 to the Profit Sharing
Plan, incorporated by reference to Exhibit 10.12 to the
1993 10-K.
10.13 - Amendment dated December 24, 1987 to the Profit Sharing
Plan, incorporated by reference to Exhibit 10.13 to
the 1993 10-K.
10.14 - Amendment dated June 30, 1989 to the Profit Sharing
Plan, incorporated by reference to Exhibit 10.13 to
the 1993 10-K.
10.15 - Amendment dated February 1, 1991 to the Profit Sharing
Plan, incorporated by reference to Exhibit 10.15 to the
1993 10-K.
10.16 - Lease dated as of December 8, 1988 between Glockhurst
Corporation, N. V. and the Registrant, incorporated by
reference to Exhibit 10.16 to the 1993 10-K.
10.17 - Lease Modification Agreement dated April 2, 1991
between Glockhurst Corporation, N. V. and the
Registrant, incorporated by reference to Exhibit 10.17
to the 1993 10-K.
10.18 - Lease dated as of March 1, 1979 between City of
Amsterdam Industrial Development Agency and Gem
Urethane Corp, incorporated by reference to Exhibit
10.18 to the 1993 10-K.
10.19 - Lease dated as of January 1, 1977 between City of
Amsterdam Industrial Development Agency and
Lamatronics Industries, Inc, incorporated by
reference to Exhibit 10.19 to the 1993 10-K.
10.20 - Form of indemnification agreement between the
Registrant and its officers and directors,
incorporated by reference to Exhibit 10.20 to
the 1993 10-K.
10.21 - Restricted Share Agreement dated October 1,
1991 between the Registrant and Steven Myers,
incorporated by reference to Exhibit 10.21
to the 1993 10-K.
10.22 - Restricted Share Agreement dated October 1,
1991 between the Registrant and Howard Soren,
incorporated by reference to Exhibit 10.22
to the 1993 10-K.
(15)
<PAGE>
10.23 - Restricted Share Agreement dated October 1,
1991 between the Registrant and Stanley August,
incorporated by reference to Exhibit 10.23 to
the 1993 10-K.
10.24 - Registrant's Employee Stock Ownership Plan
effective as of November 25, 1991, incorporated
by reference to Exhibit 10.24 to the 1993 10-K.
10.25 - Registrant's Non-Qualified Executive Retirement
Plan dated as of November 30, 1990, incorporated
by reference to Exhibit 10.25 to the 1993 10-K.
27 - Financial Data Schedule pursuant to Article 5 of
Regulation S-X filed with Edgar version only.
(b) Reports on Form 8-K: None
(16)
<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 thereunto duly authorized.
Dated: October 10, 1994 FAB INDUSTRIES, INC.
By:___s/Howard Soren/_______
Howard Soren, Vice
President and Treasurer
By:____s/David A. Miller/______
David A. Miller, Controller
and Chief Accounting Officer
(17)
