<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 3, 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 (I.R.S. Employer
of incorporation or organization) Identification No.)
200 Madison Avenue, New York, NY 10016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-592-2700
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange on
Title of each class which registered
------------------- ------------------------
<S> <C>
Common Stock, $.20 par value American Stock Exchange, Inc.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
Share Purchase Rights
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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
The aggregate market value at February 28, 1995 of shares of the
registrant's Common Stock, $.20 par value (based upon the closing price per
share of such stock on the Composite Tape for issues listed on the American
Stock Exchange), held by non-affiliates of the registrant was approximately
$138,581,000. Solely for the purposes of this calculation, shares held by
directors and executive officers of the registrant have been excluded. Such
exclusion should not be deemed a determination or an admission by the registrant
that such individuals are, in fact, affiliates of the registrant.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: At February 28,
1995, there were outstanding 6,014,119 shares of Common Stock, $.20 par value.
Documents Incorporated by Reference: Certain portions of the registrant's
definitive proxy statement to be filed not later than April 3, 1995 pursuant to
Regulation 14A are incorporated by reference in Items 10 through 13 of Part III
of this Annual Report on Form 10-K.
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FAB INDUSTRIES, INC.
INDEX TO FORM 10-K
<TABLE>
<CAPTION>
Item Number Page
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<S> <C>
PART I 1
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of Security-Holders . . . . . . . . . . . . . . . . . . . . . . . . 5
PART II 7
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . 7
Item 6. Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . 9
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART III 13
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART IV 14
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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PART I
ITEM 1. BUSINESS.
Fab Industries, Inc. and its subsidiaries (collectively, the "Registrant")
are engaged in the business of manufacturing and marketing warp knit textile
fabrics, raschel laces, circular knits, novelty knits, and polyurethane coated
bonded fabrics. In addition, the Registrant produces comforters, sheets,
blankets and other bedding products. The Registrant's products are generally
non-branded. The Registrant was incorporated under the laws of the State of
Delaware on April 21, 1966 and is a successor by merger to previously existing
businesses.
The Registrant's textile operations consist primarily of knitting and
finishing synthetic yarns on tricot and raschel warp knitting machines and
synthetic and natural yarns on circular double and single knit machines.
Products in which the Registrant's textile fabrics are used include a broad line
of ready to wear and intimate apparel for men, women and children; children's
sleepwear; activewear; recreational apparel; home furnishing applications;
over-the-counter fabrics sold to major fabric specialty chain stores; industrial
fabrics; and upholstery fabrics for the residential and contract markets.
The Registrant also utilizes its own textile fabrics in its Salisbury,
North Carolina manufacturing facility to produce flannel and satin sheets, as
well as blankets, comforters and other bedding products which the Registrant
sells to chain stores, department stores, specialty stores, catalogue and mail
order concerns, and domestic and foreign airlines. The Registrant also sells to
the institutional health-care markets.
The Registrant's Raval Lace Division manufactures raschel lace products for
sale to manufacturers of women's lingerie and women's and children's apparel.
There are also sales in the ribbon and craft, and home furnishings trades. In
addition, the Raval Lace Division produces over-the-counter lace fabrics for
sale to retailers.
Through its Raval Designer Lace Division, the Registrant produces a more
intricately designed lace on the Registrant's state-of-the-art, high-bar
electronic machinery. The Designer Lace products are used in women's better
designer lingerie, bridal wear, dresses, blouses and sportswear. In addition,
both lace divisions have been responding to an increased market demand for lycra
and helenca stretch laces for use in the intimate apparel and sportswear areas.
The Registrant's subsidiary, Gem Urethane Corporation, produces a line of
polyurethane coated fabrics and a variety of flame, adhesive and ultrasonically
bonded items. Products in which the Registrant's polyurethane fabrics are used
include shoes, luggage, apparel, accessories, women's handbags, belts, health
care, industrial and automotive products.
The Registrant engages in research and product development activities which
are directed to the creation of new fabrics and styles to meet the continually
changing demands of its customers. Direct expenditures in this area aggregated
$3,659,000 in 1992,
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$3,824,000 in 1993 and $4,347,000 in 1994. Through these efforts, the Registrant
has developed a full line of proprietary knitted fabrics for sale to
manufacturers of men's, women's and children's apparel, both domestically and in
foreign markets. Similarly, the Registrant has also developed a full line of
proprietary sheets and blankets, including specialty blankets for airlines.
While the Registrant utilizes various trademarks and trade names in
connection with the promotion and sale of its products, it does not believe that
the loss or expiration of any such trademark or trade name would have a material
adverse effect on its operations.
The Registrant's products are marketed primarily by its full-time sales
personnel, although the Registrant also utilizes the services of independent
representatives located throughout much of the United States and abroad.
Advertisements in various media, frequently in cooperation with producers of
yarn utilized by the Registrant, are also employed as a marketing tool.
Historically, the Registrant's business reflects minor seasonal variation.
Somewhat higher sales are recorded in the second and third fiscal quarters as a
result of purchases by customers in anticipation of Fall and Holiday apparel
sales. The fourth and first fiscal quarter sales tend to be lower as they are
derived from apparel customer orders limited to those needed to replenish
smaller inventory requirements after Fall and Holiday sales and prior to
customer reorders for Spring and Summer fabrications.
The Registrant does not deem information relating to backlog of firm orders
to be material, as goods subject to such orders are shipped within a relatively
short time, usually two-to-ten weeks, depending on the availability of yarn and
other raw materials. On average, orders are filled within six weeks.
For the fiscal year ended December 3, 1994, the Registrant's aggregate
sales to companies under the common control of Sara Lee Corporation accounted
for approximately 10% of the Registrant's net sales. The receivables from this
group of customers represent approximately 11% of the Registrant's December 3,
1994 accounts receivable balance. The Registrant's export sales are not
material.
SUPPLIES OF RAW MATERIALS
The Registrant has not experienced difficulties in obtaining sufficient
chemicals, dyes and other raw materials and supplies required to maintain full
production; nor has it experienced difficulties in obtaining sufficient yarns.
The Registrant is not dependent upon any single source of supply and alternative
sources are available for most of the raw materials necessary to conduct its
business.
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INVENTORIES
The Registrant is required to maintain adequate inventories of yarns and
other raw materials to insure an uninterrupted production flow. Greige and
finished goods must be maintained as inventory to meet varying customer demand
and delivery requirements. Credit terms available to customers normally exceed
credit terms extended by suppliers of raw materials, requiring the Registrant to
maintain adequate working capital.
COMPETITION
The Registrant is engaged in a highly competitive business which is based
largely upon product quality, service and price and upon general consumer demand
for the finished goods in which the Registrant's products are utilized. The
Registrant believes that there are in excess of 20 other manufacturers for its
products. The Registrant believes that it is one of the major warp and circular
knit, raschel lace and urethane product manufacturers in the United States. The
proportion of imported textile goods sold in the United States has increased
substantially in the past few years, and has had an adverse impact on
domestically manufactured textile products and the number of domestic
manufacturers of such products. The Registrant's strong financial position and
increased capacity (the result of significant expenditures for production
equipment) have enabled it to capture a larger share of the now smaller domestic
textile market.
EMPLOYEES
The Registrant's employees who number approximately 1,800 are not
represented by unions. The Registrant considers relations with its employees to
be satisfactory.
ITEM 2. PROPERTIES.
The Registrant's manufacturing operations are conducted in facilities owned
by the Registrant in Lincolnton, Maiden, Cherryville and Salisbury, which are
all in North Carolina, and in facilities leased by the Registrant in Amsterdam,
New York. All of the Registrant's facilitates are generally utilized on a
full-time five to six day-a-week basis.
Knitting, dyeing-finishing and printing operations are conducted at the
Registrant's Lincolnton facility. These include warp and raschel knitting,
various types of dyeing, framing, lace separating, sueding, shearing, napping,
calendaring and heat- transfer printing. Dyeing-finishing operations are also
conducted at the Cherryville facility. The Lincolnton and Cherryville facilities
also process and serve as warehouses for greige goods, manufactured and shipped
from the Registrant's Amsterdam and Maiden plants.
At the Maiden plant facility, the Registrant conducts a variety of
manufacturing operations, including warping for the tricot and lace machines and
single and double knitting of fabrics. The Salisbury facility is the site of the
Registrant's consumer products and institutional products manufacturing, retail
and over-the-counter operations. The Registrant's Amsterdam facilities are
devoted to tricot warping and tricot knitting operations, as well as
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lace separating and warehousing. Approximately 106,000 square feet in one of the
Registrant's Amsterdam plants is utilized for the production of urethane coated
fabrics and laminating operations.
The following table sets forth in summary fashion the location of each of
the Registrant's manufacturing facilities, its principal use, approximate floor
space, and, where leased, the lease expiration date. No facility owned by the
Registrant is subject to any encumbrance.
<TABLE>
<CAPTION>
Approximate Lease
Location Principal Use Floor Space Expiration Date
-------- ------------- ----------- ---------------
<S> <C> <C> <C>
Lincolnton, Dyeing and Finishing, 630,550 sq.ft. (1)
North Raschel and Tricot Warp
Carolina Knitting, Printing and
Warehouse
Lincolnton, Warehouse 55,000 sq.ft. (1)
North
Carolina
Maiden, Warping, Circular Single 224,013 sq.ft. (1)
North and Double Knitting and
Carolina Warehouse
Salisbury, Manufacturing Finished 125,000 sq.ft. (1)
North Consumer Products and
Carolina Retail Over-the-Counter
Fabric
Amsterdam, Polyurethane Coating 106,000 sq.ft. 12/31/99(2)
New York Manufacturing Operations
and Bonding and Laminating
Amsterdam, Warping, Tricot Knitting, 367,000 sq.ft. 12/31/06(2)
New York Lace Separating and
Warehouse
Cherryville, North Dyeing and Finishing 197,000 sq.ft. (1)
Carolina
New York, Executive Offices and 33,000 sq.ft. 4/30/01
New York Showroom Facilities
</TABLE>
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(1) Owned by the Registrant.
(2) Capitalized building lease - See note 5 of Notes to Consolidated Financial
Statements.
All of the Registrant's facilities are constructed of brick, steel or
concrete and are considered by the Registrant to be adequate and in good
operating condition and repair.
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ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Registrant or
any of its subsidiaries is a party or of which any of their respective
properties are the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not Applicable
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning executive
officers of the Registrant.
<TABLE>
<CAPTION>
Name Age Positions and offices
---- --- ---------------------
<S> <C> <C>
Samson Bitensky . . . . . . . . . . 75 Chairman of the Board of Directors,
President and Chief Executive Officer
Howard Soren . . . . . . . . . . . 64 Chief Financial Officer, Vice President-
Finance and Treasurer
Stanley August . . . . . . . . . . 63 Vice President
Steven Myers . . . . . . . . . . . 46 Vice President
Sherman S. Lawrence . . . . . . . . 76 Secretary and Director
</TABLE>
Each of the Registrant's executive officers serves at the pleasure of the
Board of Directors and until his or her successor is duly elected and qualifies.
SAMSON BITENSKY was among the founders of the Registrant in 1966 and has
served as Chairman of the Board of Directors and Chief Executive Officer of the
Registrant since such time. Mr. Bitensky has also served as President of the
Registrant since 1970.
HOWARD SOREN is a Certified Public Accountant and an attorney. He has been
employed by the Registrant since 1972 and has served as its Chief Financial
Officer, Vice President-Finance and Treasurer since that time.
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STANLEY AUGUST has been employed by the Registrant since 1980 and
previously served as General Sales Manager of its Circular Knit Division and as
Vice President - Sales. Mr. August has served as Vice President - Fabric
Operations from 1987 until March 30, 1992 and as Vice President since March 30,
1992.
STEVEN MYERS, an attorney, has been employed by the Registrant in various
senior administrative and managerial capacities for in excess of five years. He
served as Vice President - Sales for more than five years prior to May 1988 and
has served as Vice President since that time.
SHERMAN S. LAWRENCE has served as a Director of the Registrant since its
inception in 1966 and as Secretary since 1968. Mr. Lawrence has been an attorney
for in excess of the past five years and also serves as co-counsel to the
Registrant.
Mr. Myers is the son-in-law of Mr. Bitensky.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Registrant's Common Stock is traded on the American Stock Exchange,
Inc. (ticker symbol - FIT). The table below sets forth the high and low sales
prices of the Common Stock during the past two fiscal years.
<TABLE>
<CAPTION>
Fiscal 1994
-----------
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36 $ 33 3/8
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36 1/8 $ 33 7/8
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34 7/8 $ 31 7/8
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32 3/4 $ 30 3/8
Fiscal 1993
-----------
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33 3/4 $ 29 5/8
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33 $ 29 1/2
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34 1/4 $ 29 3/4
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36 3/4 $ 33 7/8
</TABLE>
At February 28, 1995, there were approximately 684 holders of record of
Common Stock. In November, 1993, the Board of Directors declared an annual
dividend of $.64 per share payable December 17, 1993. Additionally, in November,
1993, the Board of Directors determined that the Company would pay quarterly
dividends for fiscal year 1994 at the rate of $.16 per share per quarter. The
quarterly dividends of $.16 per share were declared on March 18, 1994, June 16,
1994, August 18, 1994 and November 28, 1994. The payment of further cash
dividends will be at the discretion of the Board of Directors and will depend
upon, among other things, earnings, capital requirements and the financial
condition of the Registrant.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
<TABLE>
<CAPTION>
As at or for the fiscal year ended
-----------------------------------------------------------------------
December 3, November 27, November 28, November 30, December 1,
1994(3) 1993 1992 1991 1990
------- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net Sales $ 189,753 $ 189,586 $ 189,288 $ 185,560 $ 167,866
Income before taxes
on income 22,428 25,531 25,767 23,088 15,838
Net income 15,093 17,006 16,917 15,488 10,938
Earnings per
share (1) $ 2.44 $ 2.75 $ 2.65 $ 2.52 $ 1.68
Total assets $ 163,133 $ 157,499 $ 138,952 $ 140,119 $ 123,868
Long-term debt 731 779 822 862 902
Stockholders' equity 129,533 124,326 109,172 109,450 98,858
Book value per
share (1) (2) $ 21.52 $ 19.98 $ 18.01 $ 17.70 $ 15.86
Cash dividends
per share (1) $ .64 $ .64 $ .50 $ .50 $ .40
Weighted average
number of shares
outstanding (1) 6,189,831 6,181,186 6,390,706 6,141,495 6,527,630
</TABLE>
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(1) Adjusted to give effect to a two-for-one stock split to holders of records
as of May 24, 1991.
(2) Computed by dividing stockholders' equity by the number of shares
outstanding at year-end.
(3) Fifty-three weeks.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
1994 Compared to 1993
Net sales for the 1994 fiscal year were $189,753,000 as compared to
$189,586,000 in 1993. An increase of 11.2% in fourth quarter shipments offset
the cumulative nine months sales decline that existed at August 27, 1994.
Mid-year customer demand, which had been adversely affected by postponement of
scheduled deliveries by several large customers as well as weak consumer
purchasing at the retail level, strengthened in the final quarter of 1994, which
also contained an extra week. Improved comparative shipments also continued into
December and January of the fiscal year 1995.
Gross profit margins declined from 20.4% in 1993 to 19.7% in 1994,
primarily as a result of a less profitable product mix. Plant operations were
also adversely impacted by the changed product mix as operating rates at certain
related manufacturing facilities declined from year-ago levels. The effect of
changes in LIFO inventory reserves for the year was negligible.
Selling, general and administrative expenses, as a percentage of sales,
increased from 8.9% in the prior year to 9.4% as dollar expenditures rose 5.3%
on similar volume. The increase relates primarily to higher consulting fees as
well as sales associated expenses.
Other income decreased by $917,000 to $2,809,000. Although interest and
dividend income increased by 10% to $3,410,000 (mainly as a result of larger
balances available for investment), losses on marketable securities were
realized in the amount of $473,000 as compared to a gain of $738,000 in 1993. A
series of increases in interest rates by the Federal Reserve Board as well as
expectations by financial markets of continued rising rates resulted in declines
in the market value of portions of the Registrant's investment portfolio.
Notwithstanding a slight increase in the Federal statutory income tax rate
for fiscal 1994, the overall effective income tax rate declined to 32.7% as
against 33.4% last year. An increase in tax-exempt interest income accounted for
the decline.
As a result of these aforementioned factors, net income declined by 11.2%,
to $15,093,000 from $17,006,000 in 1993. Earnings per share, which are based
upon the average number of shares outstanding during the year, were $2.44 in
1994 as compared to $2.75 in 1993. There was no stock option related dilution in
either year.
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Fourth Quarter 1994 as Compared to Fourth Quarter 1993
As noted above, sales for the 14 week 1994 fourth quarter increased by
11.2% to $51,841,000 from $46,610,000 a year ago. The increase was entirely
represented by additional units shipped in the period as customer demand
improved in most segments of the Registrant's business.
Although gross profit as a percentage of sales declined from 21.5% in the
1993 comparative quarter to 20.8% (as a result of a less favorable product mix),
gross profit in dollars increased by $767,000, or 7.7%, as a result of higher
sales volume.
Net income for the quarter was $4,856,000, or $ .79 per share, as compared
to $4,729,000, or $ .76 per share last year.
1993 Compared to 1992
Net sales for the fiscal year ended November 27, 1993 were $189,586,000 as
compared to $189,288,000 in 1992. Improved customer bookings and shipments
during the last three months of the year more than offset the cumulative nine
months sales decline that existed through August 1993. Less units were shipped
in the 1993 fiscal year but a better product mix and higher average unit prices
resulted in approximately equivalent sales volume in both periods. Customer
bookings into the new fiscal 1994 first quarter continue to reflect a strong
comparative sales trend.
Profit margins were 20.4% in 1993 as against 20.6% in the prior period. In
1992, gross profit was benefited by a reduction in LIFO inventory reserves of
$894,000 as compared to a reduction of $52,000 in the current year. Higher
comparative volume in the Lace, Recreation and Fab Craft Divisions were
accompanied by strong profit margins. This helped offset lower profit margins in
other areas of the Registrant's product lines during the first nine months of
the fiscal year.
Selling, general and administrative expenses remained relatively constant,
in both years as a percentage of sales, as well as in total dollar expenditures.
Higher sales related salaries and commissions and an increase in the provision
for bad debts were offset by reductions in administrative salaries and expenses.
Other income rose by 15.6%, or $503,000 in 1993. Interest and dividend
income increased by $246,000 as larger balances available for investment more
than offset lower rates of return. In addition, gains on marketable securities
rose to $738,000 as compared to $494,000 as the Registrant's investment
portfolio benefited by a general interest rate decline during the year.
Despite an increase in statutory Federal income tax rates in 1993, the
overall effective tax rate for 1993 declined to 33.4% versus 34.4% last year.
Lower effective state income tax rates as well as increased tax-advantaged
investment income accounted for most of the decline.
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As a result of these aforementioned factors, net income rose slightly to
$17,006,000, or 9.0% of sales, as compared to $16,917,000, or 8.8%.
In 1992, the computation of earnings-per-share was affected by a stock
option related dilution of 238,246 shares which was equivalent to $.10 for that
year. Earnings per share for the year after such dilution was $2.65 as compared
to $2.75 in 1993 when such stock option related dilution was not significant.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's principal source of funds continues to be cash flow
generated from operations (primarily net income). Cash provided by operating
activities in 1994 was $18,587,000 as compared to $18,485,000 and $27,358,000 in
the two prior years. Cash, short term investments, investments
available-for-sale and investments held-to-maturity amounted to $63,801,000 as
at December 3, 1994, compared to $62,688,000 at the end of last year.
Capital expenditures for the current year increased 49% to $7,365,000
against $4,942,000 in 1993. The Registrant purchased additional dyeing and
finishing equipment for its two finishing plants, computerized control systems
for dyeing and design and high speed knitting equipment in order to service
expanded marketing activities.
During the year, the Registrant repurchased 221,843 shares of its Common
Stock at an average price of $31.66 per share, for a total outlay of $7,023,000,
of which $3,798,000 was paid subsequent to year-end. Subsequent to year-end, the
Registrant repurchased an additional 26,671 shares at an average price of $31.30
per share. The Registrant 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 year, the Registrant commenced the payment of dividends on a
quarterly basis. Total dividends paid amounted to $ .64 for the year.
Stockholders equity rose to $129,533,000, or $21.52 book value per share,
from $124,326,000, or $19.98 per share, at the previous year-end.
Management believes that the current financial position of the Registrant
is more than adequate to internally fund any future expenditures to maintain,
modernize and expand its manufacturing facilities, pay dividends and make
acquisitions for textile- related businesses if criteria relating to
indebtedness, market expansion and existing management are met.
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RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement 115 in May 1993,
Accounting for Certain Investments in Debt and Equity Securities ("Statement
115"). Statement 115 addresses accounting and reporting for investments in
equity securities that have readily determinable fair values and for all
investments in debt securities. Investments in such securities are to be
classified as either held-to-maturity, trading or available-for-sale. Statement
115 was adopted by the Registrant in the fourth quarter of the fiscal year ended
December 3, 1994. Adoption of Statement 115 did not have a material effect on
the Registrant's financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages F-1 and S-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See Part I, Item 4. "Executive Officers of the Registrant." Other
information required by this item is incorporated by reference from the
Registrant's definitive proxy statement to be filed not later than April 3,
1995 pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended ("Regulation 14A").
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference from
the Registrant's definitive proxy statement to be filed not later than April 3,
1995 pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference from
the Registrant's definitive proxy statement to be filed not later than April 3,
1995 pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference from
the Registrant's definitive proxy statement to be filed not later than April 3,
1995 pursuant to Regulation 14A.
13
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements: See the Index to Consolidated Financial
Statements at page F-2.
(2) Financial Statement Schedules: See the Index to Financial
Statements Schedules at page S-2.
(3) Exhibits.
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
------- ----------------------
<S> <C> <C>
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, incorporated by reference to
Exhibit 3.2 to the 1993 10-K.
*3.3 - Certificate of Amendment of Restated Certificate of
Incorporation.
4.1 - Specimen of Common Stock Certificate, incorporated by reference
to Exhibit 4-A to Registration Statement No. 2-30163, filed on
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 as
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.
10.1 - 1987 Stock Option Plan of the Registrant, incorporated by
reference to Exhibit 10.1 to the 1993 10-K.
</TABLE>
14
<PAGE> 17
<TABLE>
<S> <C> <C>
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.
</TABLE>
15
<PAGE> 18
<TABLE>
<S> <C> <C>
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 dated 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.
</TABLE>
16
<PAGE> 19
<TABLE>
<S> <C> <C>
10.24 - Registrant's Employee Stock Ownership Plan effective as of Nov.
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.
*21 - Subsidiaries of the Registrant.
*23 - Consent of BDO/Seidman.
**27 - Financial Data Schedule pursuant to Article 5 of Regulation S-X
filed with EDGAR version only.
</TABLE>
__________________________
* Filed herewith
** Filed with EDGAR version only
(b) Reports on Form 8-K: None
17
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FAB INDUSTRIES, INC.
(Registrant)
By: /s/ Samson Bitensky
------------------------------------------
Samson Bitensky
Chairman of the Board, Chief Executive Officer
and President
March 2, 1995
-------------
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE CAPACITY IN WHICH SIGNED
--------- ---- ------------------------
<S> <C> <C>
/s/ Samson Bitensky March 2, 1995 Chairman of the Board, Chief Executive
- --------------------------------- Officer, President and Director (Principal
Samson Bitensky Executive Officer)
/s/ Howard Soren March 2, 1995 Vice President - Finance, Treasurer and
- --------------------------------- Principal Financial Officer
Howard Soren
/s/ David A. Miller March 2, 1995 Controller and Chief Accounting Officer
- ---------------------------------
David A. Miller
/s/ Sherman S. Lawrence March 2, 1995 Secretary and Director
- ---------------------------------
Sherman S. Lawrence
Director
- ---------------------------------
Lawrence Bober
/s/ Donald D. Shack March 2, 1995 Director
- ---------------------------------
Donald D. Shack
/s/ Louis Feil March 2, 1995 Director
- ---------------------------------
Louis Feil
/s/ Oscar Kunreuther March 2, 1995 Director
- ---------------------------------
Oscar Kunreuther
</TABLE>
18
<PAGE> 21
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
- -------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL
STATEMENTS FORM 10-K ITEM 8
YEARS ENDED DECEMBER 3, 1994,
NOVEMBER 27, 1993 AND NOVEMBER 28, 1992
F-1
<PAGE> 22
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONTENTS
- -------------------------------------------------------------------------------
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets F-4 - F-5
Statements of income F-6
Statements of stockholders' equity F-7 - F-9
Statements of cash flows F-10
SUMMARY OF ACCOUNTING POLICIES F-11 - F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-14 - F-28
</TABLE>
F-2
<PAGE> 23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Fab Industries, Inc.
New York, New York
We have audited the consolidated balance sheets of Fab Industries, Inc. and
subsidiaries as of December 3, 1994 and November 27, 1993 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 3, 1994. We have also audited
the schedule listed in the index on page S-2. These consolidated financial
statements and schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and schedule
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements and schedule. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements and schedule.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Fab Industries,
Inc. and subsidiaries as of December 3, 1994 and November 27, 1993, and the
results of their operations and their cash flows for each of the three years in
the period ended December 3, 1994 in conformity with generally accepted
accounting principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
BDO SEIDMAN
New York, New York
February 7, 1995
F-3
<PAGE> 24
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 3, November 27,
1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents (Note 1) $11,143,000 $10,348,000
Investment securities (Note 2) - 52,340,000
Investment securities available-for-sale (Note 2) 6,181,000 -
Investment securities held-to-maturity (Note 2) 12,604,000 -
Accounts receivable, net of allowance of $950,000 and
$1,600,000 for doubtful accounts (Note 13) 32,590,000 35,683,000
Inventories (Note 3) 29,994,000 24,322,000
Deferred income taxes (Note 9) 274,000 483,000
Other current assets 2,355,000 2,318,000
- -------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 95,141,000 125,494,000
INVESTMENT SECURITIES HELD-TO-MATURITY, DUE AFTER ONE YEAR
(NOTE 2) 33,873,000 -
PROPERTY, PLANT AND EQUIPMENT - net (Note 4) 31,932,000 29,993,000
OTHER ASSETS 2,187,000 2,012,000
- -------------------------------------------------------------------------------------------------
$163,133,000 $157,499,000
=================================================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-4
<PAGE> 25
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 3, November 27,
1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable $14,289,000 $13,512,000
Corporate income and other taxes 2,014,000 2,830,000
Payable to broker (purchase of treasury stock) 3,798,000 -
Accrued payroll and related expenses 4,787,000 5,321,000
Dividends payable 963,000 3,983,000
Other current liabilities 412,000 512,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 26,263,000 26,158,000
OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT MATURITIES
(NOTE 5) 731,000 779,000
OTHER NONCURRENT LIABILITIES 1,469,000 1,078,000
DEFERRED INCOME TAXES (NOTE 9) 5,137,000 5,158,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 33,600,000 33,173,000
- ----------------------------------------------------------------------------------------------------------------
COMMITMENTS (NOTES 8 AND 10)
- ----------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (NOTES 2, 6, 7, 8, 9 AND 10):
Preferred stock, $1 par value - shares authorized 2,000,000;
none issued - -
Common stock, $.20 par value - shares authorized 15,000,000;
issued 6,493,494 and 6,477,694 1,298,000 1,295,000
Additional paid-in capital 5,214,000 4,931,000
Retained earnings 147,154,000 135,994,000
- ----------------------------------------------------------------------------------------------------------------
153,666,000 142,220,000
Less:
Loan to employee stock ownership plan (9,487,000) (10,277,000)
Net unrealized holding loss on investment securities available-
for-sale, net of taxes of $214,000 (314,000) -
Unearned restricted stock compensation (552,000) (832,000)
Cost of common stock held in treasury - 474,704 and 253,861
shares (13,780,000) (6,785,000)
- ----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 129,533,000 124,326,000
- ----------------------------------------------------------------------------------------------------------------
$163,133,000 $157,499,000
================================================================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-5
<PAGE> 26
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 3, November 27, November 28,
Year ended 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES (NOTE 13) $189,753,000 $189,586,000 $189,288,000
COST OF GOODS SOLD 152,372,000 150,906,000 150,343,000
- -----------------------------------------------------------------------------------------------------------------
GROSS PROFIT 37,381,000 38,680,000 38,945,000
SELLING, SHIPPING AND ADMINISTRATIVE EXPENSES 17,762,000 16,875,000 16,401,000
- -----------------------------------------------------------------------------------------------------------------
OPERATING INCOME 19,619,000 21,805,000 22,544,000
- -----------------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSES):
Interest and dividend income (Note 12) 3,410,000 3,099,000 2,853,000
Interest expense (128,000) (111,000) (124,000)
Net gain (loss) on investment securities (Note 2) (473,000) 738,000 494,000
- -----------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME 2,809,000 3,726,000 3,223,000
- -----------------------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES 22,428,000 25,531,000 25,767,000
TAXES ON INCOME (NOTE 9) 7,335,000 8,525,000 8,850,000
- -----------------------------------------------------------------------------------------------------------------
NET INCOME $15,093,000 $17,006,000 $16,917,000
=================================================================================================================
EARNINGS PER SHARE $2.44 $2.75 $2.65
=================================================================================================================
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING (NOTE 7) 6,189,831 6,181,186 6,390,706
=================================================================================================================
CASH DIVIDENDS DECLARED PER SHARE (NOTE 11) $.64 $.64 $.50
=================================================================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-6
<PAGE> 27
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common stock
-------------------------
Loan to
employee
Additional stock
Number of paid-in Retained ownership
Total shares Amount capital earnings plan
------------- --------- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 30,
1991 $109,450,000 6,217,494 $1,244,000 $970,000 $109,112,000 $ -
Net income - fiscal
1992 16,917,000 - - - 16,917,000 -
Cash dividends, $.50
per share (3,058,000) - - - (3,058,000) -
Exercise of stock
options 195,000 13,900 2,000 193,000 - -
Purchase of treasury
stock (3,577,000) - - - - -
Compensation under
restricted stock
plan (Note 6) 312,000 - - - - -
Loan to Employee
Stock Ownership
Plan (ESOP)
(Note 8) (11,857,000) - - - - (11,857,000)
Payment of loan from
ESOP (Note 8) 790,000 - - - - 790,000
- ---------------------------------------------------------------------------------------------------------------------------
Balance, November 28,
1992 $109,172,000 6,231,394 $1,246,000 $1,163,000 $122,971,000 $(11,067,000)
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Treasury stock
---------------------------
Unearned
restricted
stock Number of
compensation shares Cost
------------- --------- ------------
<S> <C> <C> <C>
Balance, November 30,
1991 $(1,456,000) (33,682) $ (420,000)
Net income - fiscal
1992 - - -
Cash dividends, $.50
per share - - -
Exercise of stock
options - - -
Purchase of treasury
stock - (136,010) (3,577,000)
Compensation under
restricted stock
plan (Note 6) 312,000 - -
Loan to Employee
Stock Ownership
Plan (ESOP)
(Note 8) - - -
Payment of loan from
ESOP (Note 8) - - -
- --------------------------------------------------------------------------
Balance, November 28,
1992 $(1,144,000) (169,692) $(3,997,000)
==========================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-7
<PAGE> 28
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common stock
-------------------------
Loan to
employee
Additional stock
Number of paid-in Retained ownership
Total shares Amount capital earnings plan
------------- --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 28,
1992 $109,172,000 6,231,394 $1,246,000 $1,163,000 $122,971,000 $(11,067,000)
Net income - fiscal
1993 17,006,000 - - - 17,006,000 -
Cash dividends, $.64
per share (3,983,000) - - - (3,983,000) -
Exercise of stock
options 3,817,000 246,300 49,000 3,768,000 - -
Purchase of treasury
stock (2,788,000) - - - - -
Compensation under
restricted stock
plan (Note 6) 312,000 - - - - -
Payment of loan from
ESOP (Note 8) 790,000 - - - - 790,000
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, November 27,
1993 $124,326,000 6,477,694 $1,295,000 $4,931,000 $135,994,000 $(10,277,000)
===================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Treasury stock
---------------------------
Unearned
restricted
stock Number of
compensation shares Cost
------------- --------- ------------
<S> <C> <C> <C>
Balance, November 28,
1992 $(1,144,000) (169,692) $(3,997,000)
Net income - fiscal
1993 - - -
Cash dividends, $.64
per share - - -
Exercise of stock
options - - -
Purchase of treasury
stock - (84,169) (2,788,000)
Compensation under
restricted stock
plan (Note 6) 312,000 - -
Payment of loan from
ESOP (Note 8) - - -
- -------------------------------------------------------------------------
Balance, November 27,
1993 $(832,000) (253,861) $(6,785,000)
=========================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-8
<PAGE> 29
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common stock
-------------------------
Loan to
employee
Additional stock
Number of paid-in Retained ownership
Total shares Amount capital earnings plan
------------- --------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 27,
1993 $124,326,000 6,477,694 $1,295,000 $4,931,000 $135,994,000 $(10,277,000)
Net income - fiscal
1994 15,093,000 - - - 15,093,000 -
Cash dividends, $.64
per share (3,933,000) - - - (3,933,000) -
Exercise of stock
options 279,000 15,800 3,000 276,000 - -
Purchase of treasury
stock (7,023,000) - - - - -
Compensation under
restricted stock
plan (Note 6) 315,000 - - - - -
Payment of loan from
ESOP (Note 8) 790,000 - - - - 790,000
Issuance of treasury
stock under
restricted stock
plan - - - 7,000 - -
Net unrealized
holding loss on
investment
securities
available-for-
sale, net of taxes (314,000) - - - - -
- -------------------------------------------------------------------------------------------------------------------------------
Balance, December 3,
1994 $129,533,000 6,493,494 $1,298,000 $5,214,000 $147,154,000 $ (9,487,000)
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Treasury stock
------------------------------
Net Unearned
unrealized restricted
holding stock Number of
gain (loss) compensation shares Cost
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance, November 27,
1993 $ - $(832,000) (253,861) $ (6,785,000)
Net income - fiscal
1994 - - - -
Cash dividends, $.64
per share - - - -
Exercise of stock
options - - - -
Purchase of treasury
stock - - (221,843) (7,023,000)
Compensation under
restricted stock
plan (Note 6) - 315,000 - -
Payment of loan from
ESOP (Note 8) - - - -
Issuance of treasury
stock under
restricted stock
plan - (35,000) 1,000 28,000
Net unrealized
holding loss on
investment
securities
available-for-
sale, net of taxes (314,000) - - -
- ----------------------------------------------------------------------------------------------
Balance, December 3,
1994 $(314,000) $(552,000) 474,704 $(13,780,000)
==============================================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-9
<PAGE> 30
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 11)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 3, November 27, November 28,
Year ended 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,093,000 $ 17,006,000 $ 16,917,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for doubtful accounts 300,000 600,000 400,000
Depreciation and amortization 5,425,000 5,366,000 5,089,000
Deferred income taxes 402,000 (696,000) 187,000
Compensation under restricted stock plan 315,000 312,000 312,000
Net (gain) loss on investment securities 473,000 (738,000) (494,000)
Decrease (increase) in:
Accounts receivable 2,793,000 (5,928,000) 5,790,000
Inventories (5,672,000) 128,000 778,000
Other current assets (37,000) (624,000) (182,000)
Other assets (175,000) (547,000) (407,000)
Increase (decrease) in:
Accounts payable 777,000 2,330,000 861,000
Accruals and other liabilities (1,107,000) 1,276,000 (1,893,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 18,587,000 18,485,000 27,358,000
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (7,365,000) (4,942,000) (6,631,000)
Proceeds from sales of investment securities 7,110,000 4,760,000 11,097,000
Acquisition of investment securities (8,429,000) (26,057,000) (10,708,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (8,683,000) (26,239,000) (6,242,000)
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (3,225,000) (2,788,000) (3,577,000)
Loan to employee stock ownership plan - - (11,857,000)
Principal repayment on loan to employee stock
ownership plan 790,000 790,000 790,000
Dividends (6,953,000) (3,983,000) (3,058,000)
Exercise of stock options 279,000 3,817,000 195,000
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (9,109,000) (2,164,000) (17,507,000)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 795,000 (9,918,000) 3,609,000
CASH AND CASH EQUIVALENTS, beginning of year 10,348,000 20,266,000 16,657,000
- ---------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year $11,143,000 $ 10,348,000 $ 20,266,000
=================================================================================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-10
<PAGE> 31
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
BUSINESS
Fab Industries, Inc. (the "Company") is a major manufacturer of knitted textile
fabrics, laces and finished home products as well as polyurethane coated
fabrics. Sales of textile products comprised substantially all of the Company's
sales in 1994, 1993 and 1992, and such sales were primarily made to United
States customers. Accordingly, the Company considers itself to be operating in a
single segment business.
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned. Significant intercompany
transactions and balances have been eliminated.
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to November 30.
Fiscal 1994 had fifty-three weeks, and fiscal 1993 and 1992 had fifty-two weeks.
CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents, investment
securities, and trade receivables. The Company places its cash and cash
equivalents with high credit quality financial institutions. By policy, the
Company limits the amount of credit exposure to any one financial institution
and determines that, with respect to investment securities, each custodian
maintains appropriate insurance coverage to protect the Company's investment
portfolio. Concentrations of credit risk with respect to trade receivables are
limited due to the diverse group of manufacturers, wholesalers and retailers to
whom the Company sells (see Note 13). The Company reviews a customer's credit
history before extending credit. The Company has established an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends and other information.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three months or less
to be cash equivalents.
F-11
<PAGE> 32
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
INVESTMENTS
Effective as of the fourth quarter of fiscal 1994, the Company adopted Statement
of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities". SFAS 115 addresses accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. Investments in such
securities are to be classified as either held-to-maturity, trading, or
available-for-sale. The Company currently does not have trading securities.
Investment securities classified as held-to-maturity are those securities which
the Company has the intent and the ability to hold to maturity. These securities
are carried at cost adjusted for amortization of premium and accretion of
discount. Premium is amortized and discount is accreted on the straight-line
basis, which approximates the level-yield method over the maturity period of the
related securities. Investment securities classified as available-for-sale are
carried at fair value with unrealized holding gains and losses, net of any tax
effect, recorded as a separate component of stockholders' equity.
Gains and losses on sales of investment securities are computed using the
specific identification method.
The cumulative effect of adopting SFAS 115 was not material.
INVENTORIES
Inventories are valued at the lower of cost or market. For a majority of the
inventories, cost is determined by the last-in, first-out (LIFO) method with the
balance being determined by the first-in, first-out (FIFO) method, which
approximates replacement cost (see Note 3).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed using
principally the straight-line method. The range of estimated useful lives is 15
to 33 years for buildings and building improvements, 4 to 10 years for machinery
and equipment, 10 years for leasehold improvements and 5 years for trucks (see
Note 4).
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to expenses in the year incurred and
amounted to $4,347,000, $3,824,000 and $3,659,000 in 1994, 1993 and 1992,
respectively.
F-12
<PAGE> 33
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
TAXES ON INCOME
The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS
109),"Accounting for Income Taxes". Provision is made for deferred income taxes
which result from various temporary differences, mainly relating to the use of
accelerated depreciation for tax purposes (see Note 9).
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.
REVENUE
RECOGNITION
The Company recognizes substantially all of its revenues upon shipment of the
related goods. Allowances for estimated returns are provided when sales are
recorded.
RECLASSIFICATION
Certain 1993 and 1992 balances were reclassified to conform with the 1994
presentation.
F-13
<PAGE> 34
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. CASH AND CASH
EQUIVALENTS
Cash and cash equivalents consist of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
- ---------------------------------------------------------------------------------------
Cash $ 1,490 $ 1,951
U.S. Treasury obligations - 397
Tax-free short-term debt instruments 9,653 8,000
- ---------------------------------------------------------------------------------------
$11,143 $10,348
=======================================================================================
</TABLE>
2. INVESTMENT SECURITIES
At November 27, 1993, which was prior to the adoption of SFAS 115,
investment securities were carried at the lower of cost or market, as
follows (in thousands):
<TABLE>
<CAPTION>
LOWER OF COST
COST MARKET OR MARKET
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equities $11,270 $11,173 $11,173
U.S. Treasury
obligations 232 234 232
Tax-exempt
obligations 32,791 33,244 32,791
Corporate Bonds 8,144 8,221 8,144
- --------------------------------------------------------------------------------------
$52,437 $52,872 $52,340
======================================================================================
</TABLE>
At December 3, 1994, investment securities available-for-sale consists of the
following:
<TABLE>
<CAPTION>
NET UNREALIZED
COST HOLDING LOSS FAIR VALUE
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
Equities $6,709,000 $528,000 $6,181,000
==================================================================================
</TABLE>
F-14
<PAGE> 35
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
At December 3, 1994, the carrying value and estimated fair values of investment
securities held-to-maturity are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAIN LOSS FAIR VALUE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT
SECURITIES $ 69 $ - $ - $ 69
CORPORATE BONDS 5,800 8 (346) 5,462
TAX EXEMPT OBLIGATIONS 40,608 18 (617) 40,009
- --------------------------------------------------------------------------------------------
$46,477 $26 $(963) $45,540
============================================================================================
</TABLE>
The carrying values and approximate fair values of investment securities
held-to-maturity, at December 3, 1994, by contractual maturity are as shown
below:
<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
DUE IN ONE YEAR OR LESS $12,604 $12,596
DUE AFTER ONE YEAR THROUGH FIVE YEARS 26,485 25,998
DUE AFTER FIVE YEARS THROUGH TEN YEARS 7,388 6,946
- --------------------------------------------------------------------------------------
$46,477 $45,540
======================================================================================
</TABLE>
F-15
<PAGE> 36
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Gross realized gains and gross realized losses in 1994 on sales of investment
securities were:
<TABLE>
<S> <C>
GROSS REALIZED GAINS $ 640
GROSS REALIZED LOSSES (1,113)
- -----------------------------------------------------------------------
NET REALIZED LOSS $ (473)
=======================================================================
</TABLE>
3. INVENTORIES
Inventories consist of the following (in thousands, except for percentages):
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Raw materials $12,817 $ 7,601 $ 8,389
Work-in process 7,908 8,965 7,668
Finished goods 9,269 7,756 8,393
- ---------------------------------------------------------------------------------------
$29,994 $24,322 $24,450
=======================================================================================
Approximate percentage of
inventories valued under LIFO
method 66% 63% 60%
=======================================================================================
Excess of FIFO valuation over $ 7,010 $ 6,912 $ 6,964
LIFO valuation
=======================================================================================
</TABLE>
F-16
<PAGE> 37
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Owned by the Company:
Land and improvements $ 673 $ 647
Buildings and improvements 12,362 12,105
Machinery and equipment 81,561 74,512
Trucks and automobiles 1,498 1,498
Office equipment 656 624
Leasehold improvements 808 808
- -------------------------------------------------------------------------------------
97,558 90,194
Property under capital leases:
Land 18 18
Buildings and improvements 1,432 1,432
- -------------------------------------------------------------------------------------
99,008 91,644
Less: Accumulated depreciation and
amortization 67,076 61,651
- -------------------------------------------------------------------------------------
$31,932 $29,993
=====================================================================================
</TABLE>
F-17
<PAGE> 38
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
5. OBLIGATIONS UNDER CAPITAL LEASES
Obligations under capital leases consist of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Obligations under capital leases through 2006
payable in monthly installments of $11
including interest at 10% per annum $ 759 $ 807
Less: Current maturities (included with other
current liabilities) 28 28
- -------------------------------------------------------------------------------------
$ 731 $ 779
=====================================================================================
</TABLE>
Aggregate installments on obligations under capital leases maturing after one
year are as follows:
<TABLE>
<CAPTION>
Fiscal year ending (In thousands)
- --------------------------------------------------------------------------
<S> <C>
1996 $ 55
1997 61
1998 67
1999 73
2000 79
Thereafter 396
- --------------------------------------------------------------------------
$731
==========================================================================
</TABLE>
F-18
<PAGE> 39
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
6. STOCK COMPENSATION PLANS
STOCK OPTION PLAN
Under the Company's 1987 stock option plan, the Company may grant to key
employees either nonqualified or incentive stock options to purchase up to a
maximum of 650,000 shares of common stock at the fair market value at the date
of the grant.
During fiscal 1994, options covering 10,000 shares were granted; no options
were granted in fiscal 1993 or 1992. During fiscal 1994, 1993 and 1992 options
covering 15,800, 246,300 and 13,900 shares, respectively, were exercised and
during the same period options for 13,400, 1,700 and 4,800 shares were
cancelled.
As of the end of fiscal 1994 and 1993, respectively, the Company had
outstanding incentive stock options for the purchase of 187,400 and 206,600
shares; 167,000 and 163,600 shares were still available for future grants. The
exercise prices range from $15.44 to $33.88 per share, expiring at various
dates from 1995 to 2003.
RESTRICTED STOCK PLAN
During 1991, the Company approved a restricted stock plan which awarded 60,000
shares of common stock previously held in its treasury to key employees. Shares
are awarded in the name of the employee, who has all rights of a shareholder,
subject to certain restrictions or forfeiture. Vesting occurs over a five-year
period from the date the shares were awarded. Dividends associated with the
shares will be held by the Company and will vest over the same five-year period.
The shares were recorded at their quoted market value at the date of grant of
$26 per share, or $1,560,000. The compensation element related to the awarding
of such shares is recognized ratably over the five-year restriction period.
During 1994, an additional 1,000 shares were awarded to a key employee, under
terms similar to those described above.
F-19
<PAGE> 40
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Compensation expense related to the above restricted shares for fiscal 1994,
1993 and 1992 was $315,000, $312,000 and $312,000, respectively.
7. STOCKHOLDER RIGHTS PLAN
During 1990, the Company's Board of Directors adopted a Stockholder Rights Plan
("Rights Plan"). The Rights Plan was subsequently amended in May 1991, following
a 2 for 1 stock split. In connection with the Rights Plan, as amended, the
Company declared a dividend of one-half share purchase right (a "Right") on each
of its common shares. Each Right entitles the holders to buy from the Company
one-half of a common share for every share owned at an exercise price of $60 per
share. The Rights have a term of ten years and can only become exercisable upon
Board of Directors' approval if a person or group acquires 20% of more of the
Company's common shares, or announces that it intends to commence a tender offer
which would result in the ownership of 30% or more of the common shares as
defined in the Rights Plan. Until they become exercisable, the Rights will be
evidenced by the Common Stock certificates and will be transferred only with
such certificates. The Company is entitled to redeem the Rights at $.01 per
Right at any time prior to the Rights' becoming exercisable. Upon an acquisition
or similar transaction, the Rights will become exercisable at a 50% discount for
Common Shares of an acquiring person. The Rights attach to all of the Company's
common shares outstanding as of June 6, 1990, or subsequently issued, and expire
on June 6, 2000.
F-20
<PAGE> 41
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. BENEFIT PLANS
PROFIT SHARING PLANS
A qualified plan, which covers the majority of salaried employees, provides for
discretionary contributions up to a maximum of 15% of eligible salaries. The
distribution of the contribution to the Plan's participants is based upon their
annual base compensation. Contributions for 1994, 1993 and 1992 were $538,000,
$633,000 and $591,000, respectively.
The Company established in 1990 a nonqualified, defined contribution retirement
plan for key employees who are ineligible for the salaried employees qualified
profit sharing plan. Contributions for 1994, 1993 and 1992 were $156,000,
$189,000 and $192,000, respectively.
PENSION PLAN
The Company's defined benefit plan covers all eligible hourly production
employees. The benefits are based on years of service. Contributions are
intended to provide not only for benefits attributed to service to date but
also for those expected to be earned in the future.
The net periodic pension cost of the defined benefit plan for 1994, 1993 and
1992 is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 182 $ 152 $ 144
Interest cost on projected benefit
obligation 148 136 135
Actual return on plan assets 213 (200) (509)
Net amortization and deferral (525) (58) 311
- ----------------------------------------------------------------------------------------
Net periodic pension cost $ 18 $ 30 $ 81
========================================================================================
</TABLE>
F-21
<PAGE> 42
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following table presents a reconciliation of the funded status of the Plan
for 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligations including
vested benefits of ($1,533) and ($1,915) $(1,826) $(2,233)
====================================================================================
Projected benefit obligation for service
rendered to date (1,826) (2,233)
Plans assets at fair value, primarily listed
stocks 2,702 3,180
- ------------------------------------------------------------------------------------
Projected plan assets in excess of benefit
obligation 876 947
Unrecognized net gain from past
experience different from that assumed
and effects of changes in assumptions (799) (824)
Unrecognized net asset at transition being
recognized over 11 years (112) (140)
- ------------------------------------------------------------------------------------
Accrued pension costs included in other $ (35) $ (17)
current liabilities
====================================================================================
</TABLE>
The average discount rate and the expected rate of return on assets for both
fiscal 1994 and fiscal 1993 were 7.0% and 8.0%, respectively.
F-22
<PAGE> 43
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EMPLOYEE STOCK OWNERSHIP PLAN
On November 25, 1991, the Company established an Employee Stock Ownership Plan
(ESOP) which covers all full time employees who have completed one year of
service. On December 18, 1991, the ESOP purchased 340,000 shares of common stock
from the Chairman of the Board/President of the Company for $34.875 per share,
which represented 5.5% of the Company's then outstanding common stock. The ESOP
was funded by the Company, pursuant to a loan pledge agreement dated December
18, 1991 for $11,857,000. The loan is payable by the ESOP to the Company from
contributions to be made in fifteen equal annual principal installments plus
interest at the prime rate. Employee rights to the common shares vest over a
seven-year period and are payable at retirement, death, disability or
termination of employment.
Annual principal installments of $790,000 plus interest at prime were paid by
the ESOP to the Company on August 2, 1994, August 2, 1993 and August 3, 1992.
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.
ESOP contributions are recorded for financial reporting purposes as the ESOP
shares become allocable to the Plan participants. All ESOP shares are considered
outstanding in the determination of earnings per share.
The portion of the common stock dividends declared relating to ESOP shares
totaled $216,000, $217,000 and $170,000 for fiscal 1994, 1993 and 1992,
respectively. Of these amounts, $50,000, $33,000 and $12,000 for 1994, 1993 and
1992, respectively, related to allocated shares and $166,000, $184,000 and
$158,000 for 1994, 1993 and 1992, respectively, related to unallocated shares.
The dividends related to the unallocated shares are being applied towards the
$790,000 annual principal installments referred to above.
F-23
<PAGE> 44
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The net charge to earnings is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Contribution to ESOP $1,332 $1,252 $1,332
Less: Interest income on loan
to ESOP 708 646 700
- -------------------------------------------------------------------------------------
Net charge to earnings $ 624 $ 606 $ 632
=====================================================================================
</TABLE>
The contribution to the ESOP is allocated between costs of goods sold and
operating expenses; the interest income is included in interest and dividend
income.
9. INCOME TAXES
Provisions for Federal, state and local income taxes consist of the following
components (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $6,104 $8,279 $7,419
State and local 829 1,037 1,244
- -----------------------------------------------------------------------------------------
6,933 9,316 8,663
Deferred:
Federal and state 402 (791) 187
- -----------------------------------------------------------------------------------------
$7,335 $8,525 $8,850
=========================================================================================
</TABLE>
F-24
<PAGE> 45
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The net deferred tax liability at December 3, 1994 and November 27, 1993 consist
of the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C>
LONG-TERM PORTION:
Gross deferred tax liability (asset) for:
Excess depreciation for tax purposes $5,728 $5,909
Future tax deductions for employee
benefit plans (596) (780)
Other 5 29
- ------------------------------------------------------------------------------------
Net long-term liability $5,137 $5,158
- ------------------------------------------------------------------------------------
CURRENT PORTION:
Gross deferred tax liability (asset) for:
Allowance for doubtful accounts (175) (483)
Net unrealized holding loss on investment
securities available-for-sale, credited to
stockholders' equity (214) -
Other 115 -
- ------------------------------------------------------------------------------------
Net current asset (274) (483)
- ------------------------------------------------------------------------------------
Net deferred tax liability $4,863 $4,675
====================================================================================
</TABLE>
F-25
<PAGE> 46
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
The difference between the Company's effective tax rate and Federal statutory
tax rate arises from the following:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------
(% of pretax income)
<S> <C> <C> <C>
Federal tax expense at statutory
rate 35.0% 34.9% 34.0%
State and local income taxes, net
of Federal benefit 2.7 2.6 3.2
Tax-free interest income and
dividends received deduction (3.3) (2.6) (1.8)
Other (1.7) (1.5) (1.1)
- ----------------------------------------------------------------------------------------
Effective tax rate 32.7% 33.4% 34.3%
========================================================================================
</TABLE>
10. COMMITMENTS
a) Stock Repurchase
In March 1993, the Company entered into a five year agreement with the Chairman
of the Board of Directors and President ("Chairman"). The agreement provides
that, in the event of the Chairman's death, his estate has the option to sell,
and the Company the obligation to purchase certain stock owned by the Chairman.
The amount of stock subject to purchase is equal to the lesser of $7 million or
10% of the book value of the Company at the end of the year immediately
following his death, plus the $3 million proceeds from insurance on his life for
which the Company is the beneficiary.
b) Lease
The Company leases its New York City offices and showrooms until 2001, at
minimum annual rentals of $487,000 until April 1996 and $520,000 thereafter
until April 2001 plus escalation and other costs. The Company has the option to
cancel the lease effective April 1996.
Rental expense for operating leases in 1994, 1993 and 1992 aggregated $662,000,
$644,000 and $665,000, respectively.
F-26
<PAGE> 47
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
11. STATEMENT OF CASH FLOWS
Cash outlays for corporate income taxes and interest are as follows (in
thousands):
<TABLE>
<CAPTION>
Corporate
Income taxes Interest
- ---------------------------------------------------------------
<S> <C> <C>
1994 $7,865 $128
1993 8,346 111
1992 9,118 124
</TABLE>
Non-cash investing and financing activities:
In 1994, a net unrealized holding loss of $528,000, less related income taxes of
$214,000, on investment securities available-for-sale, was recorded as a
reduction of stockholders' equity.
As of December 3, 1994, treasury stock costing $3,798,000 had been purchased for
which the broker was not paid until fiscal 1995.
Other:
As a result of a change in the dividend policy from annual to quarterly
dividends, dividends paid were $6,953,000 for fiscal 1994 as compared to
$3,983,000 for fiscal 1993.
12. INTEREST AND DIVIDEND INCOME
Interest and dividend income for the past three years were as follows (in
thousands):
<TABLE>
<CAPTION>
Interest Dividend
income income Total
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
1994 $3,112 $298 $3,410
1993 2,848 251 3,099
1992 2,577 276 2,853
</TABLE>
F-27
<PAGE> 48
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
13. MAJOR CUSTOMER
For each of the years ended December 3, 1994 and November 27, 1993, sales to a
group of customers affiliated through common control accounted for approximately
10% of net sales. The receivables from this group of customers represented
approximately 11% and 14% of the December 3, 1994 and November 27, 1993 accounts
receivable balances, respectively. No single customer or group of customers
affiliated through common control accounted for a significant amount of the
Company's sales in 1992.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly earnings were as follows (in thousands except for earnings per share):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL 1994:
NET SALES $40,584 $49,733 $47,595 $51,841 $189,753
COST OF
GOODS SOLD 32,909 40,078 38,328 41,057 152,372
NET INCOME 2,624 3,772 3,841 4,856 15,093
EARNINGS
PER SHARE $.42 $.61 $.62 $.79 $2.44
FISCAL 1993:
NET SALES $38,572 $52,434 $51,970 $46,610 $189,586
COST OF
GOODS SOLD 32,219 41,546 40,548 36,593 150,906
NET INCOME 2,271 4,692 5,314 4,729 17,006
EARNINGS PER
SHARE $.37 $.76 $.86 $.76 $2.75
</TABLE>
F-28
<PAGE> 49
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
FINANCIAL STATEMENTS SCHEDULE
FORM 10-K ITEM 14
YEAR ENDED DECEMBER 3, 1994
<PAGE> 50
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
================================================================================
FINANCIAL STATEMENTS SCHEDULE
FORM 10-K ITEM 14
YEAR ENDED DECEMBER 3, 1994
S-1
<PAGE> 51
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
Contents
================================================================================
SCHEDULE:
II. Valuation and qualifying accounts S-3
<PAGE> 52
SCHEDULE II
FAB INDUSTRIES, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
================================================================================
<TABLE>
<CAPTION>
Col A. Col B. Col C Col D. Col E.
- ------------------------------------------------------------------------------------------------------------------------------------
Additions
---------------------------------------
(1) (2)
Balance at Charged to costs Charged to Balance at end
Description beginning of year and expenses other accounts Deductions of year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 3, 1994:
Allowance for doubtful accounts $1,600 $300(i) $(950)(ii) $ 950
====================================================================================================================================
Year ended November 27, 1993:
Allowance for doubtful accounts $1,400 $600(i) $(400)(ii) $1,600
====================================================================================================================================
Year ended November 28, 1992:
Allowance for doubtful accounts $1,200 $400(i) $(200)(ii) $1,400
====================================================================================================================================
</TABLE>
(i) Current year's provision.
(ii) Accounts receivable written-off, net of recoveries.
S-3
<PAGE> 53
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
- ------- ----------------------
<S> <C>
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, incorporated by
reference to Exhibit 3.2 to the 1993 10-K.
*3.3 - Certificate of Amendment of Restated Certificate of
Incorporation.
4.1 - Specimen of Common Stock Certificate, incorporated by
reference to Exhibit 4-A to Registration Statement No. 2-
30163, filed on 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 as 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.
10.1 - 1987 Stock Option Plan of the Registrant, incorporated
by reference to Exhibit 10.1 to 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.
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
Exhibit Description of Exhibit Page
- ------- ---------------------- ----
<S> <C> <C>
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 10.14 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.
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
Exhibit Description of Exhibit Page
- ------- ---------------------- ----
<S> <C> <C>
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.
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 Nov. 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.
*21 - Subsidiaries of the Registrant.
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
Exhibit Description of Exhibit Page
- ------- ---------------------- ----
<S> <C> <C>
*23 - Consent of BDO/Seidman.
**27 - Financial Data Schedule pursuant to Article 5 of
Regulation S-X filed with EDGAR version only.
</TABLE>
- --------------------------
* Filed herewith
** Filed with EDGAR version only
<PAGE> 1
Exhibit 3.3
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
OF FAB INDUSTRIES, INC.
--------------------------
Pursuant to Section 242 of
the General Corporation Law
of the State of Delaware
--------------------------
Fab Industries, Inc. (hereinafter the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, DOES HEREBY CERTIFY:
1. The name of the Corporation is FAB INDUSTRIES, INC. and the original
Certificate of Incorporation was filed with the Secretary of State of the State
of Delaware on April 21, 1966.
2. Pursuant to Section 242 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation adopted resolutions setting
forth a proposed amendment of the Restated Certificate of Incorporation of the
Corporation, declaring said amendment to be advisable and calling for a vote to
approve the amendment at the Corporation's annual meeting. The resolution
setting forth a proposed amendment of the Restated Certificate of Incorporation
of the Corporation is as follows:
RESOLVED, that the Restated Certificate of Incorporation of the Corporation
be amended by deleting Article IV in its entirety and substituting in its place
the following:
"Article IV: The total number of shares of stock which the Corporation
shall have authority to issue is 17,000,000, consisting of 15,000,000
shares of Common Stock, each such share having a par value of $.20,
and 2,000,000 shares of Preferred Stock, each such share having a par
value of $1.00."
<PAGE> 3
3. The aforesaid resolution was approved by the Board of Directors of the
Corporation at a meeting of the Board duly held in accordance with the
Corporation's by-laws and the General Corporation Law of the State of Delaware.
4. The aforesaid resolution was approved by the stockholders of the
Corporation by a vote of the majority of the outstanding stock entitled to vote
thereon at the Corporation's Annual Meeting of Stockholders on May 7, 1992 duly
held in accordance with the Corporation's by-laws and Section 222 of the General
Corporation Law of the State of Delaware.
5. The aforesaid resolution was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, the undersigned Corporation has caused this Certificate
of Amendment of Restated Certificate of Incorporation to be signed by its Vice
President this 10th of February, 1995.
FAB INDUSTRIES, INC.
By: /s/ Howard Soren
------------------------
Name: Howard Soren
Title: Vice President
<PAGE> 1
Exhibit 21
<PAGE> 2
Subsidiaries of the Registrant
1. Adirondack Knitting Mills, Inc., a New York corporation.
2. Fab-Lace, Inc., a New York corporation.
3. Fab International Ltd., a Delaware corporation.
4. Gem Urethane Corp., a New York corporation.
5. Lamatronics Industries, Inc., a New York corporation.
6. Mohican Mills, Inc., a New York corporation.
7. Salisbury Manufacturing Corp., a North Carolina corporation.
8. Travis Knits, Inc., a North Carolina corporation.
<PAGE> 1
Exhibit 23
<PAGE> 2
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Fab Industries, Inc.
New York, New York
We hereby consent to the incorporation by reference in the Prospectuses
constituting a part of the Registration Statement on Form S-8 filed June 28,
1993, the Registration Statement on Form S-3 filed January 31, 1992 and the
Registration Statement on Form S-8 filed June 9, 1989 of our report dated
February 7, 1995 relating to the consolidated financial statements and schedule
of Fab Industries, Inc. and subsidiaries appearing in the Company's Annual
Report on Form 10-K for the year ended December 3, 1994.
We also consent to the reference to us under the caption "Experts" in the
Prospectuses forming a part of such Registration Statements.
BDO SEIDMAN
NEW YORK, NEW YORK
February 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT FOR THE FISCAL YEAR ENDED DECEMBER
3, 1994 OF FAB INDUSTRIES, INC., AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-03-1994
<PERIOD-END> DEC-03-1994
<CASH> 11,143
<SECURITIES> 18,785
<RECEIVABLES> 33,540
<ALLOWANCES> 950
<INVENTORY> 29,994
<CURRENT-ASSETS> 95,141
<PP&E> 99,008
<DEPRECIATION> 67,076
<TOTAL-ASSETS> 163,133
<CURRENT-LIABILITIES> 26,263
<BONDS> 731
<COMMON> 1,298
0
0
<OTHER-SE> 128,235
<TOTAL-LIABILITY-AND-EQUITY> 163,133
<SALES> 189,753
<TOTAL-REVENUES> 189,753
<CGS> 152,372
<TOTAL-COSTS> 152,372
<OTHER-EXPENSES> 17,762
<LOSS-PROVISION> 300
<INTEREST-EXPENSE> 128
<INCOME-PRETAX> 22,428
<INCOME-TAX> 7,335
<INCOME-CONTINUING> 15,093
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,093
<EPS-PRIMARY> 2.44
<EPS-DILUTED> 2.44
</TABLE>
