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 _________September 02, 1995_____
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 October 13, 1995_
Common stock, $.20 par value 5,926,053
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1
Consolidated Statements of Income
13 Weeks ended Sept. 2, 1995 and Aug 22, 1994 3
Consolidated Statements of Income
39 Weeks ended Sept. 2, 1995 and Aug 22, 1994 4
Consolidated Balance Sheets (Asset Section)
Sept. 2, 1995 and December 3, 1994 5
Consolidated Balance Sheets (Liability Section)
Sept. 2, 1995 and December 3, 1994 6
Consolidated Statements of Stockholders Equity
39 Weeks ended Sept. 2, 1995 7
Consolidated Statements of Cash Flows
39 Weeks ended Sept. 2, 1995 and Aug 22, 1994 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis
and Financial Condition and
Results of Operations 12
PART II - OTHER INFORMATION
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
(2)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 WKS. ENDED
---------------------------
SEP. 2, 1995 AUG. 27, 1994
-----------------------------
(Unaudited) (Unaudited)
Net sales $44,879,000 $47,595,000
Cost of goods sold 38,485,000 38,328,000
------------- -------------
Gross profit 6,394,000 9,267,000
Selling, general and administrative expenses 4,589,000 4,248,000
------------- -------------
Operating income 1,805,000 5,019,000
------------- -------------
Other income (expense):
Interest and dividend income 1,009,000 826,000
Interest expense (19,000) (36,000)
Net gain (loss) on investment securities 24,000 (128,000)
------------- -------------
Total other income 1,014,000 662,000
------------- -------------
Income before taxes 2,819,000 5,681,000
Income taxes 900,000 1,840,000
------------- -------------
Net Income $1,919,000 $3,841,000
============= =============
Earnings per share of common stock and $0.32 $0.62
common stock equivalents
Weighted average number of shares of common
stock and common stock equivalents 5,974,898 6,196,414
See notes to consolidated financial statements.
(3)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 39 WKS. ENDED
--------------------------
SEP. 2, 1995 AUG. 27, 1994
-----------------------------
(Unaudited) (Unaudited)
Net sales 134,630,000 137,912,000
Cost of goods sold 113,955,000 111,315,000
------------- -------------
Gross profit 20,675,000 26,597,000
Selling, general and administrative expenses 13,115,000 12,835,000
------------- -------------
Operating income 7,560,000 13,762,000
------------- -------------
Other income (expense):
Interest and dividend income 2,695,000 2,486,000
Interest expense (110,000) (90,000)
Net gain (loss) on investment securities 491,000 (631,000)
------------- -------------
Total other income 3,076,000 1,765,000
------------- -------------
Income before taxes 10,636,000 15,527,000
Income taxes 3,600,000 5,290,000
------------- -------------
Net Income $7,036,000 $10,237,000
============= =============
Earnings per share of common stock and $1.17 $1.65
common stock equivalents
Weighted average number of shares of common
stock and common stock equivalents 5,999,040 6,201,637
See notes to consolidated financial statements.
(4)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
-------------
AS OF
-----------------------------
SEP. 2, 1995 DEC. 3, 1994
-------------- --------------
(Unaudited)
Current assets:
Cash and cash equivalents (Note 2) $6,697,000 $11,143,000
Investment securities available-for-sale (Note 3) 51,525,000 6,181,000
Investment securities held-to-maturity (Note 3) 0 12,604,000
Accounts receivable-net of allowance of
$1,220,000 and $950,000 for doubtful
accounts 30,652,000 32,590,000
Inventories (Note 4) 29,313,000 29,994,000
Deferred income taxes 59,000 274,000
Other current assets 2,100,000 2,355,000
------------- --------------
Total current assets 120,346,000 95,141,000
------------- --------------
Investment securities held-to-maturity,
due after one year (Note 3) 0 33,873,000
Property, plant and equipment - at cost 102,926,000 99,008,000
Less: Accumulated depreciation 71,440,000 67,076,000
-------------- --------------
31,486,000 31,932,000
Other assets 2,510,000 2,187,000
------------- --------------
$154,342,000 $163,133,000
============= ==============
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
-----------------------------
SEP. 2, 1995 DEC. 3, 1994
-----------------------------
(Unaudited)
Current liabilities:
Accounts payable $9,076,000 $14,289,000
Corporate income and other taxes 1,220,000 2,014,000
Payable to broker (purchase of treasury stock) 0 3,798,000
Accrued payroll and related expenses 3,243,000 4,787,000
Dividends payable 1,037,000 963,000
Other current liabilities 410,000 412,000
------------- --------------
Total current liabilities 14,986,000 26,263,000
------------- --------------
Obligations under capital leases - net of
current maturities 691,000 731,000
Other noncurrent liabilities 1,939,000 1,469,000
Deferred income taxes 5,281,000 5,137,000
------------- --------------
Total liabilities 22,897,000 33,600,000
------------- --------------
Stockholders' equity 131,445,000 129,533,000
------------- --------------
$154,342,000 $163,133,000
============= ==============
See notes to consolidated financial statements.
(6)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 39 WEEKS ENDED SEPTEMBER 2, 1995
<TABLE>
<CAPTION>
Common Stock * Net Unearned Treasury Stock
------------- Additional Loan to Unrealized Restricted ---------------------
Number of Paid-in Retained Employee Stock Holding Stock Number of
Total Shares Amount Capital Earnings Ownership PlanGain(loss)Compensation Shares Cost
------ -------------------------------- ------------ ------------- ------------------------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
Dec.3,1994 $129,533,000 6,493,494 $1,298,000 $5,214,000 $147,154,000 ($9,487,000)($314,000) ($552,000)(474,704)($13,780,000)
Net income $7,036,000 7,036,000
Cash dividends,
$.51 per share ($3,053,000) (3,053,000)
Exercise of
stock options $766,000 45,800 9,000 757,000
Purchase of
treasury stock ($4,315,000) (138,023) (4,315,000)
Compensation under
restricted stock
plan $243,000 243,000
Payment of loan
from ESOP $790,000 790,000
Net unrealized
holding gain
on investment
securities
available-
for-sale,
net of taxes $445,000 445,000
--------------------------------------------------------------------------------------------------------------------
Balance at
Sept. 2,1995 $131,445,000 6,539,294 $1,307,000 $5,971,000 $151,137,000 ($8,697,000) $131,000 ($309,000)(612,727)($18,095,000)
(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>
See notes to consolidated financial statements.
(7)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 39 WKS ENDED
---------------------------
SEP. 2, 1995 AUG. 27, 1994
------------- -------------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net Income $7,036,000 $10,237,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Provision for doubtful accounts 300,000 200,000
Depreciation and amortization 4,364,000 4,128,000
Deferred income taxes 58,000 373,000
(Gain) loss on investment securities (491,000) 631,000
Compensation under restricted stock plan 243,000 236,000
Decrease (increase) in:
Accounts receivable 1,638,000 3,178,000
Inventories 681,000 (1,992,000)
Other current assets 255,000 230,000
Other assets (323,000) (220,000)
Increase (decrease) in:
Accounts payable (5,213,000) (3,238,000)
Accruals and other liabilities (1,836,000) (2,511,000)
------------ -------------
Net cash provided by
operating activities 6,712,000 11,252,000
------------ -------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment (3,918,000) (5,723,000)
Proceeds from sales of investment securities 7,265,000 2,794,000
Acquisition of investment securities (4,894,000) (5,645,000)
------------ -------------
Net cash used in
investing activities (1,547,000) (8,574,000)
------------ -------------
FINANCING ACTIVITIES:
Purchase of treasury stock (8,113,000) (1,371,000)
Payment of loan from employee stock ownership plan 790,000 790,000
Dividends paid (3,053,000) (5,965,000)
Exercise of stock options 765,000 230,000
------------ -------------
Net cash used in financing
activities (9,611,000) (6,316,000)
------------ -------------
Decrease in cash and cash
equivalents (4,446,000) (3,638,000)
Cash and cash equivalents,
at beginning of year 11,143,000 10,348,000
------------ -------------
Cash and cash equivalents,
at end of period $6,697,000 $6,710,000
===========================
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 September 2, 1995 are not necessarily
indicative of the results that may be expected for the entire year ended
December 2, 1995. The balance sheet at December 3, 1994 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 December 3, 1994.
2. Cash and cash equivalents consist of the following (in thousands):
Sept. 2, 1995 Dec. 3, 1994
------------- ----------------
(Unaudited)
Cash $462 $1,490
Tax-free short-term
debt instruments 6,235 9,653
-------- --------
$6,697 $11,143
======== ========
3. Investment Securities:
Due to certain changes in management's investment philosophy during the
quarter ended June 3, 1995, the Company has transferred investment securities
from the held-to-maturity to the available-for-sale category. The effect of
this change was to increase stockholders' equity by $167,000, representing the
net unrealized holding gain on these securities, net of taxes at the date of
the change.
(9)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Investment Securities (Continued):
At September 2, 1995 and December 3, 1994, investment securities
available-for-sale consist of the following (in thousands):
Gross Gross
Unrealized Unrealized
Holding Holding Fair
Sept. 2, 1995(Unaudited) Cost Gain Loss Value
- ------------------------ ---- ---------- ---------- -----
Equities $1,785 $95 ($254) $1,626
U.S. Government Securities $55 $55
Corporate Bonds 4,663 49 (93) 4,619
Tax exempt obligations 44,804 496 (75) 45,225
------- ----- ----- -------
$51,307 $640 ($422) $51,525
======= ===== ===== =======
Net Unrealized
December 3, 1994 Cost Holding Loss Fair Value
- ---------------- ------ ------------ ----------
Equities $6,709 ($528) $6,181
====== ====== ======
At December 3, 1994, the carrying value and estimated fair values of
investment securities held-to-maturity were as follows (in thousands):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
------ ---------- ------- ------
U.S. Government Securities $69 $0 $0 $69
Corporate Bonds 5,800 8 (346) 5,462
Tax exempt obligations 40,608 18 (617) 40,009
------- ----- ----- -------
$46,477 $26 ($963) 45,540
======= ===== ===== =======
(10)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
September 2, 1995 December 3, 1994
----------------- ----------------
(Unaudited)
Raw Materials $10,666,000 $12,817,000
Work in process 9,152,000 7,908,000
Finished goods 9,495,000 9,269,000
------------ ------------
Total $29,313,000 $29,994,000
============ ============
Approximate percentage of
inventories valued
under LIFO valuation 65% 66%
========= =========
Excess of FIFO valuation
over LIFO valuation $7,710,000 $7,010,000
=========== ===========
5. Stockholders' Equity:
Employee Stock Ownership Plan:
The fourth of 15 equal annual principal installments of $790,000 plus
interest at prime was paid by the ESOP to the Company on August 1, 1995. The
balance on the ESOP indebtedness of $8,697,000 is reflected as a reduction of
the Company's Stockholders' Equity in the consolidated balance sheet.
(11)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Third Quarter
1995 Compared to 1994
Net sales for the third quarter of 1995 were $44,879,000 as
compared to $47,595,000 in 1994, a decrease of 5.7%. Except for
sales of leisurewear products, which experienced strong customer
demand, general textile business conditions continued at a
sluggish pace during the quarter as a result of weak apparel
sales at the retail level.
For the nine months period ended September 2, 1995, net
sales were $134,630,000, a decline of $3,282,000, or 2.4%. The
decline reflected an industry wide slowdown in demand for knit
fabrics as a result of weak consumer purchasing of apparel at the
national retail level as well as highly competitive market
conditions.
Gross profit for the quarter declined to 14.2% from 19.5%
last year. A less favorable product mix, increases in raw
material prices, and highly competitive market conditions have
all exerted downward pressures on profit margins. Plant
operations were adversely impacted by both the current product
mix as well as below normal seasonal operating rates at
manufacturing facilities. In addition, because of higher unit
inventory costs resulting from raw material price increases, LIFO
inventory reserves for the three months rose by $400,000 as
compared to an increase of $100,000 in 1994.
Gross profit percentages for the nine months period were
15.4% as compared to 19.3% in 1994. Increases in the costs of
raw materials (primarily fiber prices), reduced operating
schedules at manufacturing plants as well as a less profitable
mix exerted unfavorable pressures on profit margins. Competitive
market conditions have delayed the pass-through of these higher
costs to customers. Furthermore, higher unit material costs
resulted in an increase in LIFO inventory reserves during the
nine months (and a corresponding charge to earnings) of $700,000
as compared to an increase in the 1994 period of $300,000.
Selling, general and administrative expenses in the current
quarter increased by $341,000, or 8.0%, and as a percentage of
sales to 10.2% from 8.9%. The increase relates to lower sales
volume as well as to the fixed- cost nature of payroll and
related expenses.
Interest and dividend income increased by 22.2% in the
quarter to $1,009,000 as against $826,000, as higher comparative
returns more than offset lower average available investment
balances.
The Company had realized gains from the sale of marketable
securities in the quarter of $24,000 as compared to losses of
$128,000 in 1994. For the nine months, the Company reported
realized gains of $491,000 as against losses of $631,000 (mainly
unrealized) in the similar 1994 period.
As a result of these aforementioned factors, quarterly net
income declined to $1,919,000, or 4.3% of sales, from $3,841,000,
or 8.1% of sales. Earnings per share, which are based upon the
weighted average number of shares outstanding (5,974,898 vs.
6,196,414), were $0.32 as compared to $0.62. There was no stock
option related dilution in either comparative quarter.
(12)
<PAGE>
Liquidity and Capital Resources
The Company's principal source of funds is expected to be
cash flow generated from operations. Net cash provided by
operating activities for the 39 weeks ended September 2, 1995,
amounted to $6,712,000 whereas such activities provided cash of
$11,252,000 in the comparative 1994 period. Of this decrease,
$1,975,000 related to a comparative decline in accounts payable
and $3,201,000 to lower net income.
Capital expenditures for the nine months were $3,918,000 as
against $5,723,000 in the 1994 comparable period. The Company
purchased additional high speed knitting machines to increase
manufacturing efficiencies and reduce unit costs and also
installed energy conservation related equipment in its production
facilities.
During the first nine months of fiscal 1995, the Company
repurchased 138,023 shares of its Common Stock at a cost of
$4,315,000 (an average price of $31.26). 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.
The Company declared a regular quarterly dividend of $0.175
per share (up from $0.16 per share per quarter last year),
payable October 23, 1995, to stockholders of record as of
September 1, 1995.
Stockholders' equity was $131,445,000, or $22.18 per share,
from $129,533,000, or $21.52 per share, at the previous year-end
December 3, 1994.
Management believes that the current financial position of
the Company is 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
penetration and existing management are met.
(13)
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 5. Other Information
-----------------
On September 21, 1995, the Board accepted the resignation of
Mr. Donald Shack as a Director of the Company and elected Mr. Richard Marlin a
director to fill this vacancy until the next annual meeting of stockholders.
Mr. Marlin is an attorney and a partner in Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel, a law firm located in New York City.
Item 6. Exhibits and Reports on Form 8-K
-------------------
(a) Exhibits: No exhibits are filed herewith except for Exhibit 27
which is filed with EDGAR filing only.
Exhibit Description of Exhibit
----- --------------
3.1 Restated Certificate of Incorporation incorporated
by reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended November 27, 1993 (the "1993 10-K").
3.2 Amended and Restated By-laws of the Registrant,
incorporated by reference to Exhibit 3.2 to the
1993 10-K.
3.3 Certificate of Amendment of Restated Certificate of
Incorporation incorporated by reference to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 3, 1994.
4.1 Specimen of Common Stock Certificate, incorporated
by reference to Exhibit 4-A to Registration
Statement No. 2-30163, filed November 4, 1968.
4.2 Rights Agreement dated as of June 6, 1990 between
the Registrant and Manufacturers Hanover Trust
Company, as Rights Agent, which includes as Exhibit
A the form of Rights Certificate and Exhibit B the
Summary of Rights to purchase Common Stock,
incorporated by reference to Exhibit 4.2 to the
1993 10-K.
4.3 Amendment to the Rights Agreement between the
Registrant and Manufacturers Hanover Trust Company,
dated as of May 24,1991, incorporated by reference
to Exhibit 4.3 to the 1993 10-K.
27 Financial Data Schedule pursuant to Article 5 of
Regulation S-X filed with EDGAR filing only.
b) Reports on Form 8-K: The Registrant did not file any Current
Reports on Form 8-K during the quarter ending September 02, 1995.
(14)
<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: Oct. 13,1995 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
(15)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-02-1995
<PERIOD-END> SEP-02-1995
<CASH> 6,697
<SECURITIES> 51,525
<RECEIVABLES> 31,872
<ALLOWANCES> 1,220
<INVENTORY> 29,313
<CURRENT-ASSETS> 120,346
<PP&E> 102,926
<DEPRECIATION> 71,440
<TOTAL-ASSETS> 154,342
<CURRENT-LIABILITIES> 14,986
<BONDS> 691
<COMMON> 1,307
0
0
<OTHER-SE> 130,138
<TOTAL-LIABILITY-AND-EQUITY> 154,342
<SALES> 134,630
<TOTAL-REVENUES> 134,630
<CGS> 113,955
<TOTAL-COSTS> 113,955
<OTHER-EXPENSES> 13,115
<LOSS-PROVISION> 300
<INTEREST-EXPENSE> 110
<INCOME-PRETAX> 10,636
<INCOME-TAX> 3,600
<INCOME-CONTINUING> 7,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,036
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>
