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 01, 1996
-------------------------------------------------
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
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
------ -----
CLASS Shares Outstanding at July 09, 1996
- ---------------------------- -------------------------------------
Common stock, $.20 par value 5,758,959
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1
Consolidated Statements of Income
13 Weeks ended June 1, 1996 and June 3, 1995 2
Consolidated Statements of Income 26 weeks
ended June 1, 1996 and June 3, 1995 3
Consolidated Balance Sheets (Asset Section)
June 1, 1996 and December 2, 1995 4
Consolidated Balance Sheets (Liability Section)
June 1, 1996 and December 2, 1995 5
Consolidated Statements of Stockholders Equity
26 Weeks ended June 1, 1996 6
Consolidated Statements of Cash Flows
26 Weeks ended June 1, 1996 and June 3, 1995 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
and Financial Condition and
Results of Operations 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
(1)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 WKS ENDED
-----------------------------
JUNE 1, 1996 JUNE 3, 1995
---------- -------------
(Unaudited) (Unaudited)
Net sales $ 40,768,000 $ 48,318,000
Cost of goods sold 34,753,000 40,146,000
------------ ------------
Gross profit 6,015,000 8,172,000
Selling, general and administrative expenses 3,837,000 4,555,000
------------ ------------
Operating income 2,178,000 3,617,000
------------ ------------
Other income (expense):
Interest and dividend income 914,000 737,000
Interest expense (70,000) (72,000)
Net gain on investment securities 129,000 512,000
------------ ------------
Total other income 973,000 1,177,000
------------ ------------
Income before taxes 3,151,000 4,794,000
Taxes on Income 995,000 1,655,000
------------ ------------
Net Income $ 2,156,000 $ 3,139,000
============ ============
Earnings per share of common stock and $ 0.37 $ 0.52
common stock equivalents
Weighted average number of shares of common
stock and common stock equivalents 5,767,621 6,019,977
See notes to consolidated financial statements.
(2)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 26 WKS ENDED
-----------------------------
JUNE 1, 1996 JUNE 3, 1995
------------ -------------
(Unaudited) (Unaudited)
Net sales $ 76,356,000 $ 89,751,000
Cost of goods sold 65,793,000 75,470,000
------------ ------------
Gross profit 10,563,000 14,281,000
Selling, general and administrative expenses 7,086,000 8,526,000
------------ ------------
Operating income 3,477,000 5,755,000
------------ ------------
Other income (expense):
Interest and dividend income 1,771,000 1,686,000
Interest expense (88,000) (91,000)
Net gain on investment securities 321,000 467,000
------------ ------------
Total other income 2,004,000 2,062,000
------------ ------------
Income before taxes 5,481,000 7,817,000
Taxes on Income 1,731,000 2,700,000
------------ ------------
Net Income $ 3,750,000 $ 5,117,000
============ ============
Earnings per share of common stock and
common stock equivalents $ 0.64 $ 0.85
Weighted average number of shares of common
stock and common stock equivalents 5,834,139 6,011,110
See notes to consolidated financial statements.
(3)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
-----------
AS OF
---------------------------------
JUNE 1, 1996 DECEMBER 2, 1995
------------ ------------------
(Unaudited)
Current assets:
Cash and cash equivalents (Note 2) $ 6,838,000 $ 7,883,000
Investment securities available-for-sale
(Note 3) 53,762,000 54,674,000
Accounts receivable-net of allowance of
$600,000 and $500,000 for doubtful
accounts 27,967,000 35,217,000
Inventories (Note 4) 30,127,000 27,267,000
Deferred income taxes 0 0
Other current assets 2,145,000 1,970,000
------------ ------------
Total current assets 120,839,000 127,011,000
------------ ------------
Property, plant and equipment - at cost 105,120,000 104,223,000
Less: Accumulated depreciation 75,489,000 72,644,000
------------ ------------
29,631,000 31,579,000
Other assets 2,563,000 2,437,000
------------ ------------
$153,033,000 $161,027,000
============ ============
See notes to consolidated financial statements.
(4)
<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 1, 1996 DECEMBER 2, 1995
------------ ----------------
(Unaudited)
Current liabilities:
Accounts payable $ 9,762,000 $ 12,661,000
Corporate income and other taxes 1,819,000 1,886,000
Accrued payroll and related expenses 2,760,000 4,295,000
Dividends payable 1,008,000 1,038,000
Other current liabilities 434,000 470,000
Deferred income taxes 154,000 246,000
------------ ------------
Total current liabilities 15,937,000 20,596,000
------------ ------------
Obligations under capital leases - net of
current maturities 649,000 678,000
Other noncurrent liabilities 2,190,000 1,961,000
Deferred income taxes 4,698,000 4,860,000
------------ ------------
Total liabilities 23,474,000 28,095,000
------------ ------------
Stockholders' equity 129,559,000 132,932,000
------------ ------------
$153,033,000 $161,027,000
============ ============
See notes to consolidated financial statements.
(5)
<PAGE>
<TABLE>
<CAPTION>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 26 WEEKS ENDED JUNE 1, 1996
Common Stock * Net
------------- Additional Loan to Unrealized
Number of Paid-in Retained Employee Stock Holding
Total Shares Amount Capital Earnings Ownership Plan Gain
------ ---------- ----------- ----------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 2, 1995 $ 132,932,000 6,549,894 $ 1,309,000 $6,150,000 $152,473,000 ($8,697,000) $224,000
Net income 3,750,000 3,750,000
Cash dividends,
$.35 per share (2,040,000) (2,040,000)
Exercise of
stock options 91,000 5,800 2,000 89,000
Purchase of
treasury stock (5,155,000)
Compensation under
restricted stock plan 112,000 36,000
Change in net unrealized
holding gain on
investment securities
available-for-sale,net
of taxes (131,000) (131,000)
------------- ---------- ----------- ---------- ------------ ----------- --------
Balance at June 1, 1996 $ 129,559,000 6,555,694 $ 1,311,000 $6,275,000 $154,183,000 ($8,697,000) $ 93,000
(Unaudited) ============= ========= =========== ========== ============ ============ ========
</TABLE>
* 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>
<CAPTION>
Unearned Treasury Stock
Restricted ------------------------
Stock Number of
Compensation Shares Cost
--- -------- --------- -------------
<S> <C> <C> <C>
Balance at December 2, 1995 ($228,000) (619,635) ($18,299,000)
Net income
Cash dividends,
$.35 per share
Exercise of
stock options
Purchase of
treasury stock (177,917) (5,155,000)
Compensation under
restricted stock plan 76,000
Change in net unrealized
holding gain on
investment securities
available-for-sale,net
of taxes
--------- -------- ------------
Balance at June 1, 1996 ($152,000) (797,552) ($23,454,000)
(Unaudited) ========= ======== ============
</TABLE>
* 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.
(6)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 26 WKS ENDED
--------------------
JUNE 1, 1996 JUNE 3, 1995
------------ ------------
(Unaudited) (Unaudited)
OPERATING ACTIVITIES:
Net Income $ 3,750,000 $ 5,117,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Provision for doubtful accounts 200,000 200,000
Depreciation and amortization 2,845,000 2,909,000
Deferred income taxes (167,000) (308,000)
Net (gain) on investment securities (321,000) (467,000)
Compensation under restricted stock plan 112,000 162,000
Decrease (increase) in:
Accounts receivable 7,050,000 (999,000)
Inventories (2,860,000) (2,931,000)
Other current assets (175,000) 210,000
Other assets (126,000) (255,000)
(Decrease) in:
Accounts payable (2,899,000) (3,759,000)
Accruals and other liabilities (1,468,000) (2,106,000)
----------- ------------
Net cash provided by (used in)
operating activities 5,941,000 (2,227,000)
----------- ------------
INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (897,000) (2,832,000)
Proceeds from sales of investment securities 6,616,000 9,922,000
Acquisition of investment securities (5,601,000) (2,907,000)
----------- ------------
Net cash provided by
investing activities 118,000 4,183,000
----------- ------------
FINANCING ACTIVITIES:
Purchase of treasury stock (5,155,000) (4,634,000)
Dividends paid (2,040,000) (2,016,000)
Exercise of stock options 91,000 501,000
----------- ------------
Net cash used in financing
activities (7,104,000) (6,149,000)
----------- ------------
(Decrease) in cash and cash
equivalents (1,045,000) (4,193,000)
Cash and cash equivalents,
beginning of year 7,883,000 11,143,000
----------- ------------
Cash and cash equivalents,
end of period $ 6,838,000 $ 6,950,000
=========== ============
See notes to consolidated financial statements.
(7)
<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 1, 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):
June 1, 1996 December 2, 1995
----------- ----------------
(Unaudited)
Cash $1,124 $1,335
Tax-free short-term debt instruments 5,714 6,548
------ ------
$6,838 $7,883
====== ======
(8)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Investment Securities: - Continued
At June 1, 1996 and December 2, 1995, investment securities
available-for-sale consist of the following (in thousands):
Gross Gross
Unrealized Unrealized
Holding Holding Fair
June 1, 1996 (Unaudited) Cost Gain Loss Value
- ------------------------ ------- ----- -------- -------
Equities $ 7,102 $ 317 ($ 278) $ 7,141
U.S. Government securities 44 44
Corporate bonds 4,667 9 0 4,676
Tax exempt obligations 41,793 108 0 41,901
------- ----- -------- -------
$53,606 $ 434 ($ 278) $53,762
======= ===== ======== =======
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
======= ===== ========= =======
(9)
<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 1, 1996 December 2, 1995
---------- ----------------
(Unaudited)
Raw materials $10,986,000 $11,753,000
Work in process 9,298,000 7,675,000
Finished goods 9,843,000 7,839,000
----------- -----------
Total $30,127,000 $27,267,000
=========== ===========
Approximate percentage of
inventories valued
under LIFO valuation 63% 66%
=========== ===========
Excess of FIFO valuation
over LIFO valuation $ 7,903,000 $ 7,903,000
=========== ===========
(10)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Second Quarter
Fiscal 1996 Compared to Fiscal 1995
Net sales for the second quarter of fiscal 1996 were $40,768,000 as
compared to $48,318,000 in 1995, a decrease of 15.6%. Business conditions within
the textile industry remained weak during the period as a result of sluggish
consumer demand. These conditions have continued into the third quarter.
For the six months ended June 1, 1996, net sales were $76,356,000, a
decline of $13,395,000, or 14.9%, from 1995. The decline reflects an industry
wide slowdown in demand for knit fabrics as a result of weak consumer purchasing
of apparel at the national retail level as well as highly competitive market
conditions.
Profit margins declined during the quarter to 14.8% from 16.9% last
year. For the six months ended June 1, 1996, gross margin percentages were 13.8%
compared to 15.9% in 1995. Lower sales volume reduced operating schedules at
manufacturing plants and a less profitable mix also exerted unfavorable
pressures on profit margins. In the current quarter, no adjustments to LIFO
inventory reserves were required.
Selling, general and administrative expenses in the current quarter
decreased by $718,000, or 15.8%, and as a percentage of sales remained constant
at 9.4%. For the six months ended June 1, 1996, selling, general and
administrative expenses decreased by $1,440,000, or 16.9%, and as a percentage
(11)
<PAGE>
of sales declined to 9.3% from 9.5% last year. Reduced expenses related
primarily to incentive-based compensation and lower sales related salaries and
commissions. The Company continued its expense containment program.
Interest and dividend income increased by 24.0% in the quarter to
$914,000 as against $737,000, as a result of both higher average available
balances and higher average rates.
The effective income tax rate for the current quarter was 31.6% as
against 34.5% 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, quarterly net income declined to
$2,156,000, or 5.3% of sales, from $3,139,000, or 6.5% of sales.
Earnings per share, which are based upon the weighted average number of
shares outstanding(5,767,621 vs 6,019,977), were $0.37 as compared to $0.52.
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 26
weeks ended June 1, 1996 amounted to $5,941,000, whereas such activities used
cash of $2,227,000 in the comparative 1995 period. Of this increase, $8,049,000
relates to comparative declines in accounts receivable.
(12)
<PAGE>
Capital expenditures for the six months were $897,000 as against
$2,832,000 in the comparable 1995 period. In the first six months 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,
and also installed energy conservation related equipment in its production
facilities.
During the first six months of fiscal 1996, the Company repurchased
177,917 shares of its Common Stock at a cost of $5,155,000 (an average price of
$28.97). 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
July 22, 1996, to stockholders of record as of June 3, 1996.
Stockholders' equity was $129,559,000, or $22.50 per share at June
1,1996, as compared to $132,932,000, or $22.42 per share, at the previous fiscal
year-end December 2, 1995, and $132,822,000, or $22.05 per share at the end of
the comparative 1995 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.
(13)
<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 2, 1996. The
matters submitted to a vote of the Company's stockholders were (i) the election
of two directors to Class ll of the Company's Board of Directors and (ii) the
election of one director to Class I of the Company's Board of Directors.
The Company's stockholders elected Messrs. Lawrence H. Bober and Louis
Feil to Class II of the Company's Board of Directors, to hold office until the
1999 Annual Meeting of stockholders and until their respective successors are
duly elected and qualified, and Mr. Richard Marlin to Class I of the Company's
Board of Directors, to hold office until the 1998 Annual Meeting of stockholders
and until his successor is duly elected and qualified. The results of the voting
were as follows :
Each of Messrs. Bober and Feil
------------------------------
Voted for 4,796,779
Authority withheld 130,002
Abstained 0
Broker non-votes 0
Mr. Richard Marlin
------------------------------
Voted for 4,765,100
Authority withheld 120,381
Abstained 0
Broker non-votes 41,300
(14)
<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 June 01, 1996.
(15)
<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 09, 1996 FAB INDUSTRIES, INC.
By:/s/David A. Miller
------------------
David A. Miller, Vice President -
Finance and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> JUN-01-1996
<CASH> 6,838
<SECURITIES> 53,762
<RECEIVABLES> 27,967
<ALLOWANCES> 600
<INVENTORY> 30,127
<CURRENT-ASSETS> 120,839
<PP&E> 105,120
<DEPRECIATION> 75,489
<TOTAL-ASSETS> 153,033
<CURRENT-LIABILITIES> 15,937
<BONDS> 649
0
0
<COMMON> 1,311
<OTHER-SE> 129,559
<TOTAL-LIABILITY-AND-EQUITY> 153,033
<SALES> 76,356
<TOTAL-REVENUES> 76,356
<CGS> 65,793
<TOTAL-COSTS> 65,793
<OTHER-EXPENSES> 7,086
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> 88
<INCOME-PRETAX> 5,481
<INCOME-TAX> 1,731
<INCOME-CONTINUING> 3,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,750
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
