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 _________May 28, 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 July 11, 1994_
Common stock, $.20 par value 6,195,424
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 WKS. ENDED
-----------------------------
MAY 28,1994 MAY 29,1993
-----------------------------
(Unaudited) (Unaudited)
Net sales $49,733,000 $52,434,000
Cost of goods sold 40,078,000 41,546,000
------------- -------------
Gross profit 9,655,000 10,888,000
Selling, general and administrative expenses 4,176,000 4,570,000
------------- -------------
Operating income 5,479,000 6,318,000
------------- -------------
Other income (expense):
Interest and dividend income 798,000 740,000
Interest expense (26,000) (30,000)
Gain (loss) on marketable securities (509,000) 134,000
------------- -------------
263,000 844,000
------------- -------------
Income before taxes 5,742,000 7,162,000
Income taxes 1,970,000 2,470,000
------------- -------------
Net Income $3,772,000 $4,692,000
============= =============
Earnings per share of common stock and $0.61 $0.76
common stock equivalents (Note 2)
Weighted average number of shares of common
stock and common stock equivalents (Note 2) 6,193,772 6,178,125
See notes to consolidated financial statements.
(1)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 26 WKS. ENDED
------------------------------
MAY 28,1994 MAY 29,1993
------------------------------
(Unaudited) (Unaudited)
Net sales $90,317,000 $91,006,000
Cost of goods sold 72,987,000 73,765,000
------------- -------------
Gross profit 17,330,000 17,241,000
Selling, general and administrative expenses 8,587,000 8,390,000
------------- -------------
Operating income 8,743,000 8,851,000
------------- -------------
Other income (expense):
Interest and dividend income 1,660,000 1,495,000
Interest expense (54,000) (52,000)
Gain (loss) on marketable securities (503,000) 339,000
------------- -------------
1,103,000 1,782,000
------------- -------------
Income before taxes 9,846,000 10,633,000
Income taxes 3,450,000 3,670,000
------------- -------------
Net Income $6,396,000 $6,963,000
============= =============
Earnings per share of common stock and $1.03 $1.13
common stock equivalents (Note 2)
Weighted average number of shares of common
stock and common stock equivalents (Note 2) 6,204,248 6,152,182
<f>
See notes to consolidated financial statements.
(2)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
-------------
AS OF
------------------------------
MAY 28,1994 NOV. 27,1993
-------------- --------------
(Unaudited)
Current assets:
Cash and short-term investments (Note 3) $6,441,000 $10,348,000
Marketable securities, at lower
of cost or market 48,638,000 52,340,000
Accounts receivable-net of allowance of
$1,700,000 and $1,600,000 for doubtful
accounts 34,045,000 35,683,000
Inventories (Note 4) 28,281,000 24,322,000
Deferred income taxes 459,000 483,000
Other current assets 2,020,000 2,318,000
------------- --------------
Total current assets 119,884,000 125,494,000
------------- --------------
Property, plant and equipment - at cost 95,749,000 91,644,000
Less: Accumulated depreciation 64,390,000 61,651,000
-------------- --------------
31,359,000 29,993,000
Other assets 2,266,000 2,012,000
------------- --------------
$153,509,000 $157,499,000
============= ==============
<f>
See notes to consolidated financial statements.
(3)
<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
------------------------------
MAY 28,1994 NOV. 27,1993
--------------- --------------
(Unaudited)
Current liabilities:
Accounts payable $11,166,000 $13,512,000
Corporate income and other taxes 2,711,000 2,830,000
Accrued payroll and related expenses 3,280,000 5,321,000
Dividends payable 0 3,983,000
Other current liabilities 406,000 512,000
------------- --------------
Total current liabilities 17,563,000 26,158,000
------------- --------------
Obligations under capital leases - net of
current maturities (Note 5) 755,000 779,000
Other noncurrent liabilities 1,403,000 1,078,000
Deferred income taxes 5,124,000 5,158,000
------------- --------------
Total liabilities 24,845,000 33,173,000
------------- --------------
Stockholders' equity (Note 2) 128,664,000 124,326,000
------------- --------------
$153,509,000 $157,499,000
============= ==============
<f>
See notes to consolidated financial statements.
(4)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 26 WEEKS ENDED MAY 28, 1994
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stock * Unearned Treasury Stock
------------- Additional Restricted Loan to --------------------
Number of Paid-in Retained Stock Employee Stock # 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 6,396,000 6,396,000
Cash Dividends,
$.16 per share (991,000) (991,000)
Exercise of
stock options 141,000 8,000 2,000 139,000
Purchase of
treasury stock (1,365,000) (39,009) (1,365,000)
Compensation under
restricted stock plan 157,000 157,000
Issuance of treasury
stock under
restricted stock plan 7,000 (35,000) 1,000 28,000
------------ ------------------- ---------- ------------ ----------- ------------- -------- ----------
Balance at May 28,1994 $128,664,000 6,485,694 $1,297,000 $5,077,000 $141,399,000 ($710,000) ($10,277,000) (291,870)($8,122,000)
(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.
<f>
See notes to consolidated financial statements.
(5)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 26 WKS ENDED
----------------------------
MAY 28, 1994 MAY 29, 1993
------------- -------------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES: Net Income $6,396,000 $6,963,000
Adjustments to recocile net income
to net cash provided by operating
activities:
Provision for doubtful accounts 100,000 200,000
Depreciation and amortization 2,739,000 2,748,000
Deferred income taxes (10,000) (254,000)
(Gain) Loss on marketable securities 503,000 (339,000)
Compensation under restricted stock plan 157,000 156,000
Decrease (increase) in:
Accounts receivable 1,538,000 (8,964,000)
Inventories (3,959,000) (4,228,000)
Other current assets 298,000 (390,000)
Other assets (254,000) (402,000)
Increase (decrease) in:
Accounts payable (2,346,000) 920,000
Accrued liabilities (2,266,000) (1,128,000)
Other 301,000 346,000
------------ -------------
Net cash provided by (used in)
operating activities 3,197,000 (4,372,000)
------------ -------------
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (4,105,000) (1,189,000)
Proceeds from sales of marketable securities 3,870,000 3,931,000
Acquisitions of marketable securities (671,000) (12,370,000)
------------ -------------
Net cash used in
investing activities (906,000) (9,628,000)
------------ -------------
FINANCING ACTIVITIES:
Purchase of treasury stock (1,365,000) 0
Dividends paid (4,974,000) (3,058,000)
Exercise of stock options 141,000 1,749,000
------------ -------------
Net cash used in financing
activities (6,198,000) (1,309,000)
------------ -------------
(Decrease) in cash and cash
equivalents (3,907,000) (15,309,000)
Cash and short term investments,
at beginning of year 10,348,000 20,266,000
------------ -------------
Cash and short term investments,
at end of period $6,441,000 $4,957,000
<f> ============== =============
See notes to consolidated financial statements.
(6)
<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 general 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 26 weeks
ended May 28, 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 six months ended May 28, 1994 and May 29, 1993, were 6,204,248
and 6,152,182 respectively and for the three months ended May 28, 1994 and
May 29, 1993 were 6,193,772 and 6,178,125 respectively.
Employee Stock Ownership Plan:
The second of 15 equal annual principal installments of $790,500
plus interest at prime was paid by the ESOP to the Company on August 2, 1993.
The balance on the ESOP indebtedness of $10,277,000 is reflected as a
reduction of the Company's Stockholders' Equity in the consolidated balance
sheet.
(7)
<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:
May 28, 1994 Nov. 27, 1993
------------ -----------
(Unaudited)
Cash $541,000 $1,951,000
Tax-free Short Term Investments 5,900,000 8,000,000
U.S. Treasury Obligations 0 397,000
------------ --------------
Cash and Short-Term Investments $6,441,000 $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 determined by the 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.
May 28, 1994 Nov. 27, 1993
------------ -------------
(Unaudited)
Raw Materials $8,565,000 $7,601,000
Work-in-process 10,535,000 8,965,000
Finished goods 9,181,000 7,756,000
------------ -------------
Total $28,281,000 $24,322,000
============ =============
Approximate percentage of
inventories valued
under LIFO valuation 65% 63%
Excess of FIFO valuation
over LIFO valuation $7,112,000 $6,912,000
============ =============
(8)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Obligations under capital leases consist of the following:
May 28, 1994 Nov. 27, 1993
------------ -------------
(Unaudited)
Obligations under capital leases
through 2006 payable in monthly
installments of $10,553 including
interest at 10% per annum. $783,000 $807,000
Less current maturities (included
with other current liabilities) 28,000 28,000
------------ ------------
$755,000 $779,000
============ ============
(9)
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Only Exhibit 27 is 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.
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.
<PAGE>
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 date October 1, 1991 between
the Registrant and Howard Soren, incorporated by reference to Exhibit
10.22 to the 1993 10-K.
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
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote Security-Holders
The Company held its Annual Meeting of stockholders on May 5,
1994. The matters submitted to a vote of the Company's stockholders
were (i) the election of two directors to Class III of the Company's
Board of Directors and (ii) the ratification of the Employment Agreement
dated March 1, 1993 between the Company and Mr. Samson Bitensky.
The Company's stockholders elected Messrs. Samson Bitensky and
Sherman Lawrence to Class III of the Company's Board of Directors.
The Company's stockholders ratified the Employment Agreement
dated March 1, 1993 between the Company and Mr. Samson Bitensky, which
is described in the Company's definitive Proxy Statement which was filed
with Securities and Exchange Commission on March 24, 1994, by a vote of
4,790,334 for, 186,155 against, and 435,962 abstentions.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
Second Quarter
1994 Compared to 1993
- - ---------------------
Net sales for the second fiscal quarter of 1994 were $49,733,000, as
compared to $52,434,000 in the similar 1993 period, a decline of 5.2%.
A substantial portion of this decline is attributable to the
postponement of scheduled deliveries by a major customer because of a
reorganization of its manufacturing facilities. Certain other of the
Company's product lines were adversely affected by weak consumer demand
at the retail level during the period. Recent bookings to date continue
to reflect this trend.
Overall profit margins for the quarter were 19.4% v. 20.8% last year.
Lower operating rates at manufacturing plants (reflecting lower units
shipped) were the major factor for this decline. Adjustments to LIFO
inventory reserves in both comparative quarters were minimal.
Selling, general and administrative expenses,as a percentage of
sales, declined to 8.4% from 8.7% last year as dollar expenditures fell
by $394,000. Reduced expenses related primarily to incentive-based
compensation and sales commissions.
Interest and dividend income increased by $58,000 on a
quarter-to-quarter basis to $798,000. Higher balances available for
investment offset lower average interest rates.
For the period, a loss (mainly unrealized) was incurred of $509,000
on marketable securities as compared to a gain in the same 1993 period
of $134,000. 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
$920,000, or 19.6%, to $3,772,000, or 7.6% of sales as compared to 8.9%
of sales in 1993. Earnings per share were $0.61 as against $0.76. There
was no earnings dilution relative to common stock equivalents in either
comparative quarter.
Liquidity and Capital Resources
- - -------------------------------
The Company's principal source of funds is expected to be cash flow
generated from operations. Cash provided by operating activities for
the twenty-six weeks ended May 28, 1994, increased by $3,197,000 as
compared to a decline of $4,372,000 in 1993. Of this net increase,
approximately $10.5 million arose from a comparative decrease in
accounts receivables, partially attributable to a decline in sales
volume. Working capital rose to $102.3 million from $99.3 million at
the prior fiscal year-end.
Capital expenditures for the six months were $4,105,000 as against
$1,189,000 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-half of its fiscal year, the Company repurchased
39,009 shares of its Common Stock at an average price of $35.00. 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.
Subsequent to quarter-end, a second 1994 quarterly dividend of $0.16
was declared to stockholders of record of June 27, 1994, payable July
22, 1994.
Stockholders' equity rose to $128,664,000, or $20.77 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.
<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: July 12, 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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-03-1994
<PERIOD-END> MAY-28-1994
<CASH> 6,441
<SECURITIES> 48,638
<RECEIVABLES> 35,745
<ALLOWANCES> 1,700
<INVENTORY> 28,281
<CURRENT-ASSETS> 119,884
<PP&E> 95,749
<DEPRECIATION> 64,390
<TOTAL-ASSETS> 153,509
<CURRENT-LIABILITIES> 17,563
<BONDS> 755
<COMMON> 1,297
0
0
<OTHER-SE> 127,367
<TOTAL-LIABILITY-AND-EQUITY> 153,509
<SALES> 90,317
<TOTAL-REVENUES> 90,317
<CGS> 72,987
<TOTAL-COSTS> 72,987
<OTHER-EXPENSES> 8,587
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 9,846
<INCOME-TAX> 3,450
<INCOME-CONTINUING> 6,396
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,396
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
