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 _____February 26, 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 April 11, 1994_
Common stock, $.20 par value 6,191,826
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 WKS ENDED
---------------------------------
FEBRUARY 26,1994 FEBRUARY 27,1993
---------------- ----------------
(Unaudited) (Unaudited)
Net sales $40,584,000 $38,572,000
Cost of goods sold 32,909,000 32,219,000
------------- -------------
Gross profit 7,675,000 6,353,000
Selling, general and administrative expenses 4,411,000 3,820,000
------------- -------------
Operating income 3,264,000 2,533,000
------------- -------------
Other income (expense):
Interest and dividend income 862,000 755,000
Interest expense (28,000) (22,000)
Gain on marketable securities 6,000 205,000
------------- -------------
840,000 938,000
------------- -------------
Income before taxes 4,104,000 3,471,000
Income taxes 1,480,000 1,200,000
------------- -------------
Net Income $2,624,000 $2,271,000
============= =============
Earnings per share of common stock and $0.42 $0.37
common stock equivalents (Note 2)
Weighted average number of shares of common
stock and common stock equivalents (Note 2) 6,214,724 6,125,950
[FN]
See accompanying Notes To Consolidated Financial Statements.
(1)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
-----------
AS OF
---------------------------------
FEBRUARY 26,1994 NOVEMBER 27,1993
-------------- ----------------
(Unaudited)
Current assets:
Cash and short-term investments (Note 3) $8,823,000 $10,348,000
Marketable securities, at lower
of cost or market 51,335,000 52,340,000
Accounts receivable-net of allowance of
$1,700,000 and $1,600,000 for doubtful
accounts 28,347,000 35,683,000
Inventories (Note 4) 27,670,000 24,322,000
Deferred income taxes 471,000 483,000
Other current assets 2,050,000 2,318,000
------------- ----------------
Total current assets 118,696,000 125,494,000
------------- ----------------
Property, plant and equipment - at cost 92,579,000 91,644,000
Less: Accumulated depreciation 63,000,000 61,651,000
-------------- ----------------
29,579,000 29,993,000
Other assets 2,220,000 2,012,000
------------- ----------------
$150,495,000 $157,499,000
============= ================
[FN]
See accompanying Notes To Consolidated Financial Statements.
(2)
<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
---------------------------------
FEBRUARY 26,1994 NOVEMBER 27,1993
--------------- ----------------
(Unaudited)
Current liabilities:
Accounts payable $11,857,000 $13,512,000
Corporate income and other taxes 2,881,000 2,830,000
Accrued payroll and related expenses 2,070,000 5,321,000
Dividends payable 0 3,983,000
Other current liabilities 282,000 512,000
------------- ----------------
Total current liabilities 17,090,000 26,158,000
------------- ----------------
Obligations under capital leases - net of
current maturities (Note 5) 767,000 779,000
Other noncurrent liabilities 1,330,000 1,078,000
Deferred income taxes 5,141,000 5,158,000
------------- ----------------
Total liabilities 24,328,000 33,173,000
------------- ----------------
Stockholders' equity (Note 2) 126,167,000 124,326,000
------------- ----------------
$150,495,000 $157,499,000
============= ================
[FN]
See Accompanying Notes To Consolidated Financial Statements.
(3)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 13 WEEKS ENDED FEBRUARY 26, 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 Stock Number of
Total Shares Amount Capital Earnings CompensationOwnership 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 2,624,000 2,624,000
Exercise of
stock options 53,000 2,900 1,000 52,000
Purchase of
treasury stock (914,000) (26,369) (914,000)
Compensation under
restricted stock plan 78,000 78,000
------------ --------------------------------------------------------- --------------- ------- -----------
Balance at 2/26/94 $126,167,000 6,480,594 $1,296,000 $4,983,000 $138,618,000 ($754,000) ($10,277,000) (280,230)($7,699,000)
(Unaudited) ============ ========================================================= ============= ========= ===========
* Common stock .20 par value - 15,000,000 shares authorized.
Preferred stock $1.00 par value - 2,000,000 shares authorized, none issued.
</TABLE>
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 13 WEEKS ENDED
-------------------------------
FEBRUARY 26, 1994 FEBRUARY 27, 1993
------------------ -----------------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net Income $2,624,000 $2,271,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Provision for doubtful accounts 100,000 100,000
Depreciation and amortization 1,349,000 1,374,000
Deferred income taxes (5,000) (127,000)
(Gain) on marketable securities (6,000) (205,000)
Compensation under restricted stock plan 78,000 78,000
Decrease (increase) in:
Accounts receivable 7,236,000 1,679,000
Inventories (3,348,000) (2,945,000)
Other current assets 268,000 193,000
Other assets (208,000) (273,000)
Increase (decrease) in:
Accounts payable (1,655,000) 1,242,000
Accrued liabilities (3,430,000) (3,650,000)
Other 240,000 284,000
--------------- -----------------
Net cash provided by
operating activities 3,243,000 21,000
--------------- -----------------
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (935,000) (406,000)
Net proceeds from sales (acquisitions)
of marketable securities 1,011,000 (9,192,000)
--------------- -----------------
Net cash provided by (used by)
investing activities 76,000 (9,598,000)
FINANCING ACTIVITIES:
Purchase of treasury stock (914,000) 0
Payment of (loan to) employee stock ownership plan 0 0
Dividends paid (3,983,000) (3,058,000)
Exercise of stock options 53,000 1,329,000
------------- -----------------
Net cash used in financing
activities (4,844,000) (1,729,000)
------------- -----------------
(Decrease) in cash and cash
equivalents (1,525,000) (11,306,000)
Cash and short term investments,
at beginning of year 10,348,000 20,266,000
------------- -----------------
Cash and short term investments,
at end of period $8,823,000 $8,960,000
============== =================
See notes to consolidated financial statements.
(5)
<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 13
weeks ended February 26, 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 first quarter ended February 26, 1994 and February 27, 1993,
were 6,214,724 and 6,125,950 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.
(6)
<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:
February 26, 1994 November 27, 1993
----------------- ------------------
(Unaudited)
Cash $1,022,000 $1,951,000
Tax-free Short Term Investments 4,403,000 8,000,000
U.S. Treasury Obligations 0 397,000
Preferred Stocks 398,000 0
Corporate Bonds 3,000,000 0
------------ --------------
Cash and Short-Term Investments $8,823,000 $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.
February 26, 1994 November 27, 1993
----------------- -----------------
(Unaudited)
Raw Materials $9,305,000 $7,601,000
Work-in-process 9,204,000 8,965,000
Finished goods 9,161,000 7,756,000
------------ ------------
Total $27,670,000 $24,322,000
============ ============
Approximate percentage of
inventories valued
under LIFO valuation 63% 63%
============ ============
Excess of FIFO valuation
over LIFO valuation $7,012,000 $6,912,000
============ ============
(7)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Obligations under capital leases consist of the following:
February 26, 1994 November 27, 1993
---------- ----------
(Unaudited)
Obligations under capital leases
through 2006 payable in monthly
installments of $10,553 including
interest at 10% per annum. $795,000 $807,000
Less current maturities (included
with other current liabilities) 28,000 28,000
------------ ---------
$767,000 $779,000
============ =========
(8)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
First Quarter
1994 Compared to 1993
- ---------------------
Net sales for the first fiscal quarter of 1994 were
$40,584,000, or 5.2% higher than the comparable 1993 period. The
major portion of this increase represents additional units shipped
with the balance resulting from a more profitable product mix.
Although severe winter conditions adversely affected retail demand
in the final segment of the quarter, customer bookings and
shipments generally continued at the comparatively high level of
the 1993 fourth quarter.
Gross profit rose significantly to 18.9% from 16.5% last
year. An improved product mix with comparatively high seasonal
operating rates at manufacturing plants helped sustain favorable
margins. Adjustments to LIFO inventory reserves in both
comparative quarters were minimal.
Selling, general and administrative expenses increased to
10.9% from 9.9% last year as dollar expenditures rose by $591,000.
The increase relates primarily to comparatively lower
incentive-based sales compensation in 1993 and increased sales
related salaries in the current period.
Interest and dividend income rose by 14.2% in the quarter, or
$107,000 as a result of higher average balances of interest-earning
assets in 1994 compared to last year. Gain on marketable
securities declined from $205,000 in 1993 to $6,000 as the market
value of investments fell as a result of a recent rise in interest
rate levels.
The effective income tax rate for the current quarter was
36.1% as against 34.6% in 1993. The corporate statutory rate
utilized in the initial quarter of 1993 of 34.0% was raised
(retroactively) to 35.0% in August 1993.
As a result of these aforementioned factors, net income rose
to $2,624,000, or 6.5% of sales compared to $2,271,000, or 5.9% of
sales, an increase of 15.5%. Earnings per share were $0.42 as
compared to $0.37. 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 thirteen weeks ended February 26, 1994,
increased to $3,243,000 as compared to $21,000 in 1993. Of this
increase, approximately $5.6 million arose from a comparative
decrease in accounts receivables. Working capital rose to $101.6
million from $99.3 million at the prior fiscal year-end.
Capital expenditures for the three months were $935,000 as
against $406,000 in 1993. The Company purchased additional dyeing
and finishing equipment for its two dyehouses in order to service
expanded marketing activities.
During and subsequent to the first quarter, the Company
repurchased 39,000 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.
<PAGE>
The Company has declared a quarterly dividend of $0.16 per
share, payable April 15, 1994, to stockholders of record as of
March 30, 1994.
Stockholders' equity rose to $126,167,000, or $20.35 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>
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.
10.12 - Amendment dated February 5, 1987 to the Profit
Sharing Plan, incorporated by reference to Exhibit
10.12 to the 1993 10-K.
<PAGE>
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
10.14 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 date October 1, 1991
between the Registrant and Howard Soren, incorpor-
ated 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.
(b) Reports on Form 8-K: None
<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: April 11, 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
