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 _________March 02, 1996_____
Commission file number _________________1-5901_______________
_____________________Fab Industries, Inc.________________________
(Exact name of registrant as specified in its charter)
_____________Delaware__________ _____13-2581181_______
(State or other jurisdiction of (I. R. S. Employer)
incorporation or organization) Identification No.)
___200 Madison Avenue, New York, N.Y.____ __10016___
(Address of principal executive offices) (Zip Code)
______________(212) 592-2700_______________________
(Registrant's telephone number, including area code)
________________________N/A_______________________
(Former name, former address and former fiscal year;
if changed since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _______X_____ No__________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
_______CLASS____________ _Shares Outstanding at April 12, 1996_
Common stock, $.20 par value 5,756,613
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1
Consolidated Statements of Income
13 Weeks ended Mar. 2, 1996 and Mar. 4, 1995 2
Consolidated Balance Sheets (Asset Section)
Mar. 2, 1996 and December 2, 1995 3
Consolidated Balance Sheets (Liability Section)
Mar. 2, 1996 and December 2, 1995 4
Consolidated Statements of Stockholders Equity
13 Weeks ended Mar. 2, 1996 5
Consolidated Statements of Cash Flows
13 Weeks ended Mar. 2, 1996 and Mar. 4, 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
and Financial Condition and
Results of Operations 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
(1)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 WKS ENDED
-------------------------------
MARCH 2,1996 MARCH 4,1995
---------------- --------------
(Unaudited) (Unaudited)
Net sales $35,588,000 $41,433,000
Cost of goods sold 31,040,000 35,324,000
------------- -------------
Gross profit 4,548,000 6,109,000
Selling, general and administrative expenses 3,249,000 3,971,000
------------- -------------
Operating income 1,299,000 2,138,000
------------- -------------
Other income (expense):
Interest and dividend income 857,000 949,000
Interest expense (18,000) (19,000)
Net gain (loss) on investment securities 192,000 (45,000)
------------- -------------
1,031,000 885,000
------------- -------------
Income before taxes 2,330,000 3,023,000
Income taxes 736,000 1,045,000
------------- -------------
Net Income $1,594,000 $1,978,000
============= =============
Earnings per share of common stock and $0.27 $0.33
common stock equivalents
Weighted average number of shares of common
stock and common stock equivalents 5,900,657 6,002,244
See notes to consolidated financial statements.
(2)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
------------
AS OF
-----------------------------
MARCH 2,1996 DEC. 2,1995
--------------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents (Note 2) $10,081,000 $7,883,000
Investment securities available-for-sale (Note 3) 55,543,000 54,674,000
Accounts receivable-net of allowance of
$ 550,000 and $ 500,000 for doubtful
accounts 25,942,000 35,217,000
Inventories (Note 4) 29,081,000 27,267,000
Other current assets 1,935,000 1,970,000
-------------- -------------
Total current assets 122,582,000 127,011,000
-------------- -------------
Property, plant and equipment - at cost 104,822,000 104,223,000
Less: Accumulated depreciation 74,066,000 72,644,000
-------------- -------------
30,756,000 31,579,000
Other assets 2,543,000 2,437,000
-------------- -------------
$155,881,000 $161,027,000
============== =============
See notes to consolidated financial statements.
(3)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
L I A B I L I T I E S A N D
-------------------------------
S T O C K H O L D E R S' E Q U I T Y
--------------------------------------
AS OF
-------------------------------
MARCH 2,1996 DEC. 2,1995
--------------- --------------
(Unaudited)
Current liabilities:
Accounts payable $10,287,000 $12,661,000
Corporate income and other taxes 1,974,000 1,886,000
Payable to broker (purchase of treasury stock) 2,054,000
Accrued payroll and related expenses 1,618,000 4,295,000
Dividends payable 1,032,000 1,038,000
Other current liabilities 243,000 470,000
Deferred income taxes 344,000 246,000
-------------- --------------
Total current liabilities 17,552,000 20,596,000
-------------- --------------
Obligations under capital leases - net of
current maturities 664,000 678,000
Other noncurrent liabilities 2,111,000 1,961,000
Deferred income taxes 4,779,000 4,860,000
-------------- --------------
Total liabilities 25,106,000 28,095,000
-------------- --------------
Stockholders' equity 130,775,000 132,932,000
-------------- --------------
$155,881,000 $161,027,000
============== ==============
See notes to consolidated financial statements.
(4)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 13 WEEKS ENDED MARCH 2, 1996
<TABLE>
<CAPTION>
Loan to
Common Stock * Employee Net Unearned Treasury Stock
------------- Additional Stock Unrealized Restricted ----------------------
Number of Paid-in Retained Ownership Holding Stock Com-Number of
Total Shares Amount Capital Earnings Plan Gain pensation Shares Cost
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
Dec. 2, 1995 $132,932,000 6,549,894 $1,309,000 $6,150,000 $152,473,000 ($8,697,000) $224,000 ($228,000) (619,635)($18,299,000)
Net income 1,594,000 1,594,000
Cash dividends,
$.175 per share (1,032,000) (1,032,000)
Exercise of
stock options 80,000 5,200 1,000 79,000
Purchase of
treasury stock (3,081,000) (104,000) (3,081,000)
Compensation
under restricted
stock plan 132,000 132,000
Payment of loan
from ESOP
Change in net
unrealized holding
gain on investment
securities
available-for-sale,
net of taxes 150,000 150,000
------------ --------- ---------- ---------- ------------ ----------- --------------------------- ----------
Balance at
March 2, 1996 $130,775,000 6,555,094 $1,310,000 $6,229,000 $153,035,000 ($8,697,000) $374,000 ($96,000) (723,635)($21,380,000)
(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.
See notes to consolidated financial statements.
</TABLE>
(5)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 13 WKS ENDED
---------------------------------
MARCH 2, 1996 MARCH 4, 1995
---------------- -------------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net Income $1,594,000 $1,978,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Provision for doubtful accounts 100,000 100,000
Depreciation and amortization 1,422,000 1,455,000
Deferred income taxes (83,000) (156,000)
Net (gain) loss on investment securities (192,000) 45,000
Compensation under restricted stock plan 132,000 81,000
Decrease (increase) in:
Accounts receivable 9,175,000 1,914,000
Inventories (1,814,000) (4,411,000)
Other current assets 35,000 18,000
Other assets (106,000) (194,000)
Increase (decrease) in:
Accounts payable (2,374,000) (2,385,000)
Accruals and other liabilities (2,686,000) (3,734,000)
--------------- ---------------
Net cash provided by (used in)
operating activities 5,203,000 (5,289,000)
--------------- ---------------
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (599,000) (1,450,000)
Proceeds from sales of investment securities 5,556,000 3,171,000
Acquisition of investment securities (5,983,000) (127,000)
--------------- ---------------
Net cash provided by (used in)
investing activities (1,026,000) 1,594,000
--------------- ---------------
FINANCING ACTIVITIES:
Purchase of treasury stock (1,027,000) (4,633,000)
Dividends paid (1,032,000) (962,000)
Exercise of stock options 80,000 349,000
--------------- ---------------
Net cash used in financing
activities (1,979,000) (5,246,000)
--------------- ---------------
Increase (decrease) in cash and cash
equivalents 2,198,000 (8,941,000)
Cash and cash equivalents,
beginning of year 7,883,000 11,143,000
--------------- ---------------
Cash and cash equivalents,
end of period $10,081,000 $2,202,000
============== ===============
See notes to consolidated financial statements.
(6)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation:
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Rule
10-01 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the 13 weeks ended March 2, 1996 are not
necessarily indicative of the results that may be expected for the entire
fiscal year ending November 30, 1996. The balance sheet at December 2, 1995 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 fiscal
year ended December 2, 1995.
2. Cash and cash equivalents consist of the following (in
thousands):
March 2, 1996 December 2, 1995
------------- ----------------
(Unaudited)
Cash $1,376 $1,335
Tax-free short-term
debt instruments 8,705 6,548
---------- --------
$10,081 $7,883
========== ========
(7)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Investment Securities: - Continued
At March 2, 1996 and December 2, 1995, investment securities
available-for-sale consist of the following (in thousands):
Gross Gross
Unrealized Unrealized
Holding Holding Fair
March 2, 1996 (Unaudited) Cost Gain Loss Value
------------------ --------- ---------- ---------- --------
Equities $6,948 $180 ($272) $6,856
U.S. Government securities 48 48
Corporate bonds 4,665 112 0 4,777
Tax exempt obligations 43,260 602 0 43,862
--------- ---------- ---------- --------
$54,921 $894 ($272) $55,543
========= ========== ========== ========
Gross Gross
Unrealized Unrealized
Holding Holding Fair
December 2, 1995 Cost Gain Loss Value
------------------ --------- ---------- ---------- ------
Equities $1,814 $109 ($259) $1,664
U.S. Government securities 52 52
Corporate bonds 4,665 116 (91) 4,690
Tax exempt obligations 47,769 578 (79) 48,268
--------- ---------- ---------- --------
$54,300 $803 ($429) $54,674
========= ========== ========== ========
(8)
<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.
March 2, 1996 Dec. 2, 1995
-------------- ------------
(Unaudited)
Raw materials $11,885,000 $11,753,000
Work in process 8,741,000 7,675,000
Finished goods 8,455,000 7,839,000
-------------- ------------
Total $29,081,000 $27,267,000
============== ============
Approximate percentage of
inventories valued
under LIFO valuation 69% 66%
======== ======
Excess of FIFO valuation
over LIFO valuation $7,903,000 $7,903,000
========== ==========
(9)
<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.
(b) Reports on Form 8-K: The Registrant did not file any Current
Reports on Form 8-K during the quarter ending March 02, 1996.
(13)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
First Quarter
Fiscal 1996 Compared to Fiscal 1995
-----------------------------------
Net sales for the first quarter of fiscal 1996 were $35,588,000 as
compared to $41,433,000 in 1995, a decrease of 14.1%. Weak consumer
purchasing at the retail level as well as highly competitive market
conditions continued into the current period and adversely affected
conditions within the textile industry. These conditions have to date
continued into the second quarter.
Overall profit margins for the current quarter were 12.8% compared to
14.7% for the first quarter of fiscal 1995. Lower sales volume adversely
affected both operating rates at production facilities as well as the
overall product mix. In the current quarter, no adjustments to LIFO
inventory reserves were required.
Selling, general and administrative expenses, as a percentage of
sales, declined to 9.1% from 9.6% last year as expenditures fell by
$722,000. Reduced expenses related primarily to incentive - based
compensation and lower sales related salaries and commissions. The Company
continued its expense containment programs.
The Company had realized gains from the sale of investment securities
in the quarter of $192,000 as compared to losses of $45,000 in fiscal 1995.
The effective income tax rate for the current quarter was 31.6% as
against 34.6% in the comparative 1995 period. The decline was primarily
attributable to the fact that tax exempt interest represents a higher
percentage of pre-tax income than in the comparative 1995 period.
As a result of these factors, net income declined to $1,594,000, or
4.5% of sales, from $1,978,000, or 4.8% of sales.
(10)
<PAGE>
Earnings per share, which are based upon the weighted average number
of shares outstanding(5,900,657 vs 6,002,244), were $0.27 as compared to
$0.33. There was no stock option related dilution in either comparative
quarter.
Liquidity and Capital Resources
The Company's principal source of funds continues to be cash flow
generated from operations. Net cash provided by operating activities for
the 13 weeks ended March 2, 1996 amounted to $5,203,000, whereas such
activities used cash of $5,289,000 in the comparative 1995 period. Of this
increase, $7,261,000 relates to comparative declines in accounts receivable
and $2,597,000 to changes in inventories.
Capital expenditures for the quarter were $599,000 as against
$1,450,000 in the comparable 1995 period. In the first quarter of fiscal
1995, the Company purchased additional high speed knitting machines for two
of its knitting mills to increase manufacturing efficiencies and reduce
unit costs.
During the first quarter of fiscal 1996, the Company repurchased
104,000 shares of its Common Stock at an average price of $29.63 for a
total outlay of $3,081,000. Subsequent to the end of the quarter, the
Company repurchased an additional 75,446 shares at an average price of
$28.03. The Company intends to continue to purchase its shares of Common
Stock from time-to-time as market conditions warrant and price criteria are
met.
The Company declared a quarterly dividend of $0.175 per share, payable
March 8, 1996, to stockholders of record as of February 23, 1996.
(11)
<PAGE>
Stockholders' equity was $130,775,000, or $22.43 per share, at March
2, 1996, as compared to $132,932,000, or $22.42 per share, at the previous
fiscal year-end December 2, 1995, and $130,417,000, or $21.69 per share ,
at
the end of the comparative 1995 first 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.
(12)
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: April 12, 1996 FAB INDUSTRIES, INC.
By:___s/David A. Miller/____
David A. Miller,
Vice President - Finance
and Treasurer
(Principal Financial and
Accounting Officer)
(14)
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAR-02-1996
<CASH> 10,081
<SECURITIES> 55,543
<RECEIVABLES> 26,492
<ALLOWANCES> 550
<INVENTORY> 29,081
<CURRENT-ASSETS> 122,582
<PP&E> 104,882
<DEPRECIATION> 74,066
<TOTAL-ASSETS> 155,881
<CURRENT-LIABILITIES> 17,552
<BONDS> 664
<COMMON> 1,310
0
0
<OTHER-SE> 129,465
<TOTAL-LIABILITY-AND-EQUITY> 155,881
<SALES> 35,588
<TOTAL-REVENUES> 35,588
<CGS> 31,040
<TOTAL-COSTS> 31,040
<OTHER-EXPENSES> 3,249
<LOSS-PROVISION> 100
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 2,330
<INCOME-TAX> 736
<INCOME-CONTINUING> 1,594
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,594
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
