Form 10-Q Quarterly Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
__X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended _________June 3, 1995_____
Commission file number _________________1-5901_______________
_____________________Fab Industries, Inc.________________________
(Exact name of registrant as specified in its charter)
_____________Delaware__________ _____13-2581181_______
(State or other jurisdiction of (I. R. S. Employer)
incorporation or organization) Identification No.)
___200 Madison Avenue, New York, N.Y.____ __10016___
(Address of principal executive offices) (Zip Code)
______________(212) 592-2700_______________________
(Registrant's telephone number, including area code)
________________________N/A_______________________
(Former name, former address and former fiscal year;
if changed since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _______X_____ No__________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
_______CLASS_____________ _Shares Outstanding at July 10, 1995_
Common stock, $.20 par value 6,000,691
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1
Consolidated Statements of Income
13 Weeks ended June 3, 1995 and May 28, 1994 3
Consolidated Statements of Income
26 Weeks ended June 3, 1995 and May 28, 1994 4
Consolidated Balance Sheets (Asset Section)
June 3, 1995 and December 3, 1994 5
Consolidated Balance Sheets (Liability Section)
June 3, 1995 and December 3, 1994 6
Consolidated Statements of Stockholders Equity
26 Weeks ended June 3, 1995 7
Consolidated Statements of Cash Flows
26 Weeks ended June 3, 1995 and May 28, 1994 8
Notes to Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis
and Financial Condition and
Results of Operations 12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote
of Security-holders 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
(2)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 WKS. ENDED
---------------------------
JUNE 3, 1995 MAY 28, 1994
---------------- ----------------
(Unaudited) (Unaudited)
Net sales $48,318,000 $49,733,000
Cost of goods sold 40,146,000 40,078,000
------------- -------------
Gross profit 8,172,000 9,655,000
Selling, general and administrative expenses 4,555,000 4,176,000
------------- -------------
Operating income 3,617,000 5,479,000
------------- -------------
Other income (expense):
Interest and dividend income 737,000 798,000
Interest expense (72,000) (26,000)
Net gain (loss) on investment securities 512,000 (509,000)
------------- -------------
Total other income 1,177,000 263,000
------------- -------------
Income before taxes 4,794,000 5,742,000
Income taxes 1,655,000 1,970,000
------------- -------------
Net Income $3,139,000 $3,772,000
============= =============
Earnings per share of common stock and $0.52 $0.61
common stock equivalents
Weighted average number of shares of common
stock and common stock equivalents 6,019,977 6,193,772
See notes to consolidated financial statements.
(3)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 26 WKS ENDED
----------------------------------
JUNE 3, 1995 MAY 28, 1994
---------------- --------------
(Unaudited) (Unaudited)
Net sales 89,751,000 90,317,000
Cost of goods sold 75,470,000 72,987,000
------------- -------------
Gross profit 14,281,000 17,330,000
Selling, general and administrative expenses 8,526,000 8,587,000
------------- ------------
Operating income 5,755,000 8,743,000
------------- -------------
Other income (expense):
Interest and dividend income 1,686,000 1,660,000
Interest expense (91,000) (54,000)
Net gain (loss) on investment securities 467,000 (503,000)
------------- -------------
Total other income 2,062,000 1,103,000
------------- -------------
Income before taxes 7,817,000 9,846,000
Income taxes 2,700,000 3,450,000
------------- -------------
Net Income $5,117,000 $6,396,000
============= =============
Earnings per share of common stock and $0.85 $1.03
common stock equivalents
Weighted average number of shares of common
stock and common stock equivalents 6,011,110 6,204,248
See notes to consolidated financial statements.
(4)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
-------------
AS OF
----------------------------------
JUNE 3, 1995 DECEMBER 3, 1994
---------------- ----------------
(Unaudited)
Current assets:
Cash and cash equivalents (Note 2) $6,950,000 $11,143,000
Investment securities available-for-sale (Note3)46,717,000 6,181,000
Investment securities held-to-maturity (Note 3) 0 12,604,000
Accounts receivable-net of allowance of
$1,150,000 and $950,000 for doubtful
accounts 33,389,000 32,590,000
Inventories (Note 4) 32,925,000 29,994,000
Deferred income taxes 47,000 274,000
Other current assets 2,145,000 2,355,000
--------------- ----------------
Total current assets 122,173,000 95,141,000
--------------- ---------------
Investment securities held-to-maturity,
due after one year (Note 3) 0 33,873,000
Property, plant and equipment - at cost 101,840,000 99,008,000
Less: Accumulated depreciation 69,985,000 67,076,000
-------------- ----------------
31,855,000 31,932,000
Other assets 2,442,000 2,187,000
--------------- ----------------
$156,470,000 $163,133,000
=============== ================
See notes to consolidated financial statements.
(5)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
L I A B I L I T I E S A N D
--------------------------------
S T O C K H O L D E R S' E Q U I T Y
--------------------------------------
AS OF
----------------------------------
JUNE 3, 1995 DECEMBER 3, 1994
----------------- ----------------
(Unaudited)
Current liabilities:
Accounts payable $10,530,000 $14,289,000
Corporate income and other taxes 1,592,000 2,014,000
Payable to broker (purchase of treasury stock) 0 3,798,000
Accrued payroll and related expenses 2,733,000 4,787,000
Dividends payable 1,054,000 963,000
Other current liabilities 351,000 412,000
--------------- ----------------
Total current liabilities 16,260,000 26,263,000
--------------- ----------------
Obligations under capital leases - net of
current maturities 704,000 731,000
Other noncurrent liabilities 1,837,000 1,469,000
Deferred income taxes 4,847,000 5,137,000
-------------- ----------------
Total liabilities 23,648,000 33,600,000
-------------- ----------------
Stockholders' equity 132,822,000 129,533,000
-------------- ----------------
$156,470,000 $163,133,000
=============== ================
See notes to consolidated financial statements.
(6)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 26 WEEKS ENDED JUNE 3, 1995
<TABLE>
<CAPTION>
Common Stock * Net Unearned Treasury Stock
------------- Additional Loan to Unrealized Restricted ---------------------
Number of Paid-in Retained Employee Stock Holding Stock Number of
Total Shares Amount Capital Earnings Ownership PlanGain(loss)Compensation Shares Cost
------ -------------------------------- ------------ ------------- ------------------------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
Dec.3,1994 $129,533,000 6,493,494 $1,298,000 $5,214,000 $147,154,000 ($9,487,000)($314,000) ($552,000)(474,704)($13,780,000)
Net income 5,117,000 5,117,000
Cash dividends,
$.335 per share (2,016,000) (2,016,000)
Exercise of
stock options 501,000 30,700 6,000 495,000
Purchase of
treasury stock (836,000) (26,699) (836,000)
Compensation under
restricted stock
plan 162,000 162,000
Net unrealized
holding gain
on investment
securities
available-
for-sale,
net of taxes 361,000 361,000
--------------------------------------------------------------------------------------------------------------------
Balance at
June 3,1995 $132,822,000 6,524,194 $1,304,000 $5,709,000 $150,255,000 ($9,487,000) $47,000 ($390,000)(501,403)($14,616,000)
(Unaudited) ====================================================================================================================
* Common stock $0.20 par value - 15,000,000 shares authorized.
Preferred stock $1.00 par value - 2,000,000 shares authorized, none issued.
</TABLE>
See notes to consolidated financial statements.
(7)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 26 WKS ENDED
-----------------------------
JUNE 3, 1995 MAY 28, 1994
-------------- -------------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net Income $5,117,000 $6,396,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Provision for doubtful accounts 200,000 100,000
Depreciation and amortization 2,909,000 2,739,000
Deferred income taxes (308,000) (10,000)
(Gain) loss on investment securities (467,000) 503,000
Compensation under restricted stock plan 162,000 157,000
Decrease (increase) in:
Accounts receivable (999,000) 1,538,000
Inventories (2,931,000) (3,959,000)
Other current assets 210,000 298,000
Other assets (255,000) (254,000)
Increase (decrease) in:
Accounts payable (3,759,000) (2,346,000)
Accruals and other liabilities (2,106,000) (1,965,000)
------------- -------------
Net cash provided by (used in)
operating activities (2,227,000) 3,197,000
------------- -------------
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (2,832,000) (4,105,000)
Proceeds from sales of investment securities 9,922,000 3,870,000
Acquisition of investment securities (2,907,000) (671,000)
------------- -------------
Net cash provided by (used in)
investing activities 4,183,000 (906,000)
------------- -------------
FINANCING ACTIVITIES:
Purchase of treasury stock (4,634,000) (1,365,000)
Dividends paid (2,016,000) (4,974,000)
Exercise of stock options 501,000 141,000
------------- -------------
Net cash used in financing
activities (6,149,000) (6,198,000)
------------- -------------
(Decrease) in cash and cash
equivalents (4,193,000) (3,907,000)
Cash and cash equivalents,
at beginning of year 11,143,000 10,348,000
------------- -------------
Cash and cash equivalents,
at end of period $6,950,000 $6,441,000
============== =============
See notes to consolidated financial statements.
(8)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form
10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the 26 weeks
ended June 3, 1995 are not necessarily indicative of the results that may
be expected for the entire year ended December 2, 1995. The balance sheet
at December 3, 1994 has been derived from the audited balance sheet at that
date. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 3, 1994.
2. Cash and cash equivalents consist of the following (in thousands):
June 3, 1995 December 3, 1994
---------- -----------
(Unaudited)
Cash $714 $1,490
Tax-free short-term debt instruments 6,236 9,653
---------- --------
$6,950 $11,143
========== ========
3. Investment Securities:
Due to certain changes in management's investment philosophy
during the quarter ended June 3, 1995, the Company has transferred
investment securities from the held - to - maturity to the available - for
- - sale category. The effect of this change was to increase stockholders'
equity by $167,000 representing the net unrealized holding gain on these
securities, net of taxes.
(9)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Investment Securities: - Continued
At June 3, 1995 and December 3, 1994, investment securities
available-for-sale consist of the following (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
June 3, 1995(Unaudited) Cost Gain Loss Value
-------------- ---------- ---------- ------- ------
<S> <C> <C> <C> <C>
Equities $1,794 $62 ($261) $1,595
U.S. Government Securities $60 $60
Corporate Bonds 4,375 40 (66) 4,349
Tax exempt obligations 40,409 402 (98) 40,713
-------- ----- ----- -----
$46,638 $504 ($425) $46,717
======== ===== ===== =======
Net Unrealized
December 3, 1994 Cost Holding Loss Fair Value
----------------- ---- --------- -------
Equities $6,709 ($528) $6,181
===== ====== ======
At December 3, 1994, the carrying value and estimated fair values of investment securities
held-to-maturity were as follows (in thousands):
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gain Loss Value
---------- ------------ ---------- ------
U.S. Government Securities $69 $0 $0 $69
Corporate Bonds 5,800 8 (346) 5,462
Tax exempt obligations 40,608 18 (617) 40,009
----- ----- ----- -----
$46,477 $26 ($963) $45,540
======== ===== ===== =====
</TABLE>
(10)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Inventories:
The Company's inventories are valued at the lower of cost or market.
Cost is determined principally by the last-in, first-out (LIFO) method with
the remainder being determined by the first-in, first-out (FIFO) method.
Because the inventory valuation under the LIFO method is based upon an
annual determination of inventory levels and costs as of the fiscal
year-end, the interim LIFO calculations are based on management's estimates
of expected year-end inventory levels and costs.
June 3, 1995 December 3, 1994
-------- ----------
(Unaudited)
Raw Materials $12,380,000 $12,817,000
Work in process 9,686,000 7,908,000
Finished goods 10,859,000 9,269,000
----------- -----------
Total $32,925,000 $29,994,000
========== ==========
Approximate percentage of
inventories valued
under LIFO valuation 63% 66%
======== =======
Excess of FIFO valuation over LIFO valuation
$7,310,000 $7,010,000
========== ==========
(11)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Second Quarter
1995 Compared to 1994
Net sales for the second fiscal quarter of 1995 were
$48,318,000 as compared to $49,733,000 in 1994, a decrease
of 2.8%. Except for sales of the Recreation Division which
experienced strong customer demand, general textile business
conditions were sluggish during the quarter. Cautious consumer
buying at the national retail level continues to result in
highly competitive market conditions.
Gross profit for the quarter declined to 16.9% from 19.4%.
A less favorable product mix together with increases in raw
material prices exerted downward pressures on profit margins.
Plant operations were also adversely impacted by the current
product mix as operating rates at certain related manufacturing
facilities declined from year-ago levels. In addition, because of
higher unit inventory costs resulting from raw material price
increases, LIFO inventory reserves for the period rose by
$250,000 as compared to an increase of $100,000 in 1994.
Selling, general and administrative expenses increased by
$379,000, and as a percentage of sales to 9.4% from 8.4%. The
increase relates to increased payroll and related statutory costs
and to a comparative increase in the provision for doubtful
accounts.
Interest and dividend income declined 7.6% in the quarter
to $737,000 as a result of both lower average available balances
and lower average rates.
(12)
<PAGE>
The Company had realized gains of $512,000 from the sale of a
portion of its marketable security portfolios (primarily equities)
as compared to a reported loss of $509,000 (mainly unrealized) in
the similar 1994 quarter.
As a result of these aforementioned factors, net income
declined to $3,139,000, or 6.5% of sales, from $3,772,000, or
7.6% of sales. Earnings per share, which are based upon the
weighted average number of shares outstanding (6,019,977 vs.
6,193,772), were $0.52 as compared to $0.61. There was no stock
option related dilution in either comparative quarter.
Liquidity and Capital Resources
The Company's principal source of funds is expected to
be cash flow generated from operations. Operating activities used
cash of $2,227,000 for the 26 weeks ended June 3, 1995, whereas
such activities provided cash of $3,197,000 in the comparative 1994
period. Of this change, $1,413,000 related to a comparative
decline in accounts payable and $2,537,000 to a comparative
increase in accounts receivable.
Capital expenditures for the six months were $2,832,000
as against $4,105,000 in the 1994 period. The Company purchased
additional high speed knitting machines for its knitting mills
to increase manufacturing efficiencies and reduce unit costs.
During the first half of fiscal 1995, the Company repurchased
26,699 shares of its Common Stock at an average price of $31.31.
Subsequent to quarter-end, the Company repurchased an additional
28,500 shares at an average price of $31.67. The Company intends to
continue to purchase its shares of Common Stock from time-to-time
as market conditions warrant and price criteria are met.
(13)
<PAGE>
The Company declared a quarterly dividend of $0.175 per share
(up from $0.16 per share per quarter last year), payable July 24,
1995, to stockholders of record as of June 2, 1995.
Stockholders' equity rose to $132,822,000, or $22.05 per
share, from $129,533,000, or $21.52 per share, at the previous
year-end December 3, 1994, and $128,664,000, or $20.77 per
share at the end of the comparative 1994 second quarter.
Management believes that the current financial position of the
Company is more than adequate to internally fund any future
expenditures to maintain, modernize and expand its manufacturing
facilities, pay dividends and make acquisitions of textile related
businesses if criteria relating to indebtedness, market expansion
and existing management are met.
(14)
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Company held its Annual Meeting of stockholders on May
4, 1995. The matters submitted to a vote of the Company's
stockholders were (i) the election of two directors to Class I of
the Company's Board of Directors and (ii) the ratification of the
Employment Agreement dated March 1, 1993 between the Company and
Mr. Samson Bitensky.
The Company's stockholders elected Messrs. Oscar R.
Kunreuther and Donald D. Shack to Class I of the Company's Board of
Directors.
The Company's stockholders ratified the Employment Agreement
dated March 1, 1993 between the Company and Mr. Samson Bitensky,
which is described in the Company's definitive Proxy Statement
which was filed with Securities and Exchange Commission on March
30, 1995, by a vote of 5,433,335 for, 186,689 against, and 51,167
abstentions.
(15)
<PAGE>
PART II. OTHER INFORMATION
---------------------
Item 6. Exhibits and Reports on Form 8-K
-------------------
(a) Exhibits: No exhibits are filed herewith except for Exhibit 27
which is filed with EDGAR filing only.
Exhibit Description of Exhibit
----- --------------
3.1 Restated Certificate of Incorporation incorporated
by reference to Exhibit 3.1 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended November 27, 1993 (the "1993 10-K").
3.2 Amended and Restated By-laws of the Registrant,
incorporated by reference to Exhibit 3.2 to the
1993 10-K.
3.3 Certificate of Amendment of Restated Certificate of
Incorporation incorporated by reference to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 3, 1994.
4.1 Specimen of Common Stock Certificate, incorporated
by reference to Exhibit 4-A to Registration
Statement No. 2-30163, filed November 4, 1968.
4.2 Rights Agreement dated as of June 6, 1990 between
the Registrant and Manufacturers Hanover Trust
Company, as Rights Agent, which includes as Exhibit
A the form of Rights Certificate and Exhibit B the
Summary of Rights to purchase Common Stock,
incorporated by reference to Exhibit 4.2 to the
1993 10-K.
4.3 Amendment to the Rights Agreement between the
Registrant and Manufacturers Hanover Trust Company,
dated as of May 24,1991, incorporated by reference
to Exhibit 4.3 to the 1993 10-K.
27 Financial Data Schedule pursuant to Article 5 of
Regulation S-X filed with EDGAR filing only.
(b) Reports on Form 8-K: The Registrant did not file
any Current Reports on Form 8-K during the quarter ending June 03, 1995.
(16)
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Dated: July 10,1995 FAB INDUSTRIES, INC.
By:___s/Howard Soren/_______
Howard Soren, Vice
President and Treasurer
By:____s/David A. Miller/______
David A. Miller, Controller
and Chief Accounting Officer
(17)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-02-1995
<PERIOD-END> JUN-03-1995
<CASH> 6,950
<SECURITIES> 46,717
<RECEIVABLES> 34,539
<ALLOWANCES> 1,150
<INVENTORY> 32,925
<CURRENT-ASSETS> 122,173
<PP&E> 101,840
<DEPRECIATION> 69,985
<TOTAL-ASSETS> 156,470
<CURRENT-LIABILITIES> 16,260
<BONDS> 704
<COMMON> 1,304
0
0
<OTHER-SE> 131,518
<TOTAL-LIABILITY-AND-EQUITY> 156,470
<SALES> 89,751
<TOTAL-REVENUES> 89,751
<CGS> 75,470
<TOTAL-COSTS> 75,470
<OTHER-EXPENSES> 8,526
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> 91
<INCOME-PRETAX> 7,817
<INCOME-TAX> 2,700
<INCOME-CONTINUING> 5,117
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,117
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85
</TABLE>
