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 May 29, 1999
---------------------
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 office) (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 12, 1999
- ------------------------------------ --------------------------------------
Common stock, $.20 par value 5,406,452
<PAGE>
FAB INDUSTRIES INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION PAGE
Table of Contents 1
Consolidated Statements of Income
13 Weeks ended May 29, 1999 and May 30, 1998 2
Consolidated Statements of Income
26 Weeks ended May 29, 1999 and May 30, 1998 3
Consolidated Balance Sheets (Asset Section)
May 29, 1999 and November 28, 1998 4
Consolidated Balance Sheets (Liabilities and
Stockholders' Equity Section) May 29, 1999 and 5
November 28, 1998
Consolidated Statements of Stockholders' Equity
26 Weeks ended May 29, 1999 6
Consolidated Statements of Cash Flows
26 Weeks ended May 29, 1999 and May 30, 1998 7
Consolidated Statements of Comprehensive Income (Loss)
13 Weeks and 26 Weeks ended May 29, 1999
and May 30, 1998 8
Notes to Consolidated Financial Statements 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
SIGNATURES 20
(1)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 13 WKS ENDED
----------------------------
May 29, 1999 May 30, 1998
(Unaudited) (Unaudited)
----------------------------
Net sales $ 37,467,000 $ 39,761,000
Cost of goods sold 31,801,000 33,403,000
------------ ------------
Gross profit 5,666,000 6,358,000
Selling, general and administrative expenses 4,112,000 4,091,000
------------ ------------
Operating income 1,554,000 2,267,000
------------ ------------
Other income (expense):
Interest and dividend income 686,000 890,000
Interest expense (17,000) (30,000)
Net gain on investment securities 467,000 280,000
------------ ------------
Total other income 1,136,000 1,140,000
------------ ------------
Income before taxes 2,690,000 3,407,000
Taxes on income 708,000 1,073,000
------------ ------------
Net Income $ 1,982,000 $ 2,334,000
============ ============
Earnings per share (Note 5):
Basic $0.37 $0.41
Diluted $0.37 $0.41
See notes to consolidated financial statements.
(2)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 26 WKS ENDED
----------------------------
May 29, 1999 May 30, 1998
(Unaudited) (Unaudited)
----------------------------
Net sales $ 66,474,000 $ 74,012,000
Cost of goods sold 60,562,000 63,321,000
------------ ------------
Gross profit 5,912,000 10,691,000
Selling, general and administrative expenses 7,987,000 7,400,000
------------ ------------
Operating income (loss) (2,075,000) 3,291,000
------------ ------------
Other income (expense):
Interest and dividend income 1,523,000 2,014,000
Interest expense (30,000) (45,000)
Net gain on investment securities 786,000 679,000
------------ ------------
Total other income 2,279,000 2,648,000
------------ ------------
Income before taxes 204,000 5,939,000
Taxes on Income 37,000 1,870,000
------------ ------------
Net Income $ 167,000 $ 4,069,000
============ ============
Earnings per share (Note 5):
Basic $0.03 $0.72
Diluted $0.03 $0.71
See notes to consolidated financial statements.
(3)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
- - - - - -
AS OF
-------------------------------
May 29, 1999 November 28, 1998
-------------------------------
(Unaudited)
Current Assets:
Cash and cash equivalents (Note 2) $ 2,225,000 $ 6,078,000
Investment securities available-for-sale (Note 3) 48,384,000 48,233,000
Accounts receivable-net of allowance of
$1,400,000 and $1,000,000 for doubtful accounts 28,610,000 27,979,000
Inventories (Note 4) 28,802,000 32,213,000
Other current assets 1,944,000 1,727,000
------------ ------------
Total current assets 109,965,000 116,230,000
------------ ------------
Property, plant and equipment - at cost 130,558,000 128,428,000
Less: Accumulated depreciation 91,632,000 88,407,000
------------ ------------
38,926,000 40,021,000
Other assets 4,181,000 4,152,000
------------ ------------
$153,072,000 $160,403,000
============ ============
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 and
-------------------------------
S T O C K H O L D E R S' E Q U I T Y
------------------------------------------------
AS OF
-------------------------------
May 29, 1999 November 28, 1998
-------------------------------
(Unaudited)
Current liabilities:
Accounts payable $ 7,653,000 $ 9,110,000
Corporate income and other taxes 408,000 768,000
Accrued payroll and related expenses 1,867,000 1,980,000
Dividends payable 946,000 977,000
Other current liabilities 398,000 495,000
Deferred income taxes 1,112,000 1,538,000
------------ ------------
Total current liabilities 12,384,000 14,868,000
------------ ------------
Obligations under capital leases - net of
current maturities 447,000 486,000
Other noncurrent liabilities 3,082,000 2,817,000
Deferred income taxes 4,907,000 4,705,000
------------ ------------
Total liabilities 20,820,000 22,876,000
------------ ------------
Stockholders' equity 132,252,000 137,527,000
------------ ------------
$153,072,000 $160,403,000
============ ============
See notes to consolidated financial statements.
(5)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 26 WEEKS ENDED MAY 29, 1999
<TABLE>
<CAPTION>
Common Stock *
============ Additional
Number of Paid-in Retained
Total Shares Amount Capital Earnings
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
November 28, 1998 $ 137,527,000 6,588,444 $ 1,318,000 $ 6,903,000 $ 164,714,000
Net income 167,000 167,000
Cash dividends (1,895,000) (1,895,000)
Exercise of
stock options 54,000 3,500 1,000 53,000
Purchase of
treasury stock (3,292,000)
Compensation under
restricted stock plan 12,000 11,000
Change in net
unrealized holding
gain (loss) on investment
securities available-for-
sale, net of taxes (321,000)
--------------------------------------------------------------------------------
Balance at
May 29, 1999 $ 132,252,000 6,591,944 $ 1,319,000 $ 6,967,000 $ 162,986,000
(Unaudited) ============= ========= ============= ============= =============
<CAPTION>
Accumulated
Other Unearned Treasury Stock
Loan to Comprehensive Restricted ==============
Employee Stock Income Stock Number of
Ownership Plan (Loss) Compensation Shares Cost
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
November 28, 1998 ($ 6,327,000) $ 550,000 ($ 1,000) (1,005,081) ($ 29,630,000)
Net income
Cash dividends
Exercise of
stock options
Purchase of
treasury stock (178,493) (3,292,000)
Compensation under
restricted stock plan 1,000
Change in net
unrealized holding
gain (loss) on investment
securities available-for-
sale, net of taxes
(321,000)
--------------------------------------------------------------------------------
Balance at
May 29, 1999 ($ 6,327,000) $ 229,000 $ 0 (1,183,574) ($ 32,922,000)
(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
<TABLE>
<CAPTION>
FOR THE 26 WKS ENDED
----------------------------------
May 29, 1999 May 30, 1998
----------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 167,000 $ 4,069,000
Adjustments to reconcile net income
to net cash used in operating
activities:
Provision for doubtful accounts 400,000 200,000
Depreciation and amortization 3,225,000 2,550,000
Deferred income taxes (11,000) (81,000)
Net gain on investment securities (786,000) (679,000)
Compensation under restricted stock plan 12,000 24,000
Decrease (increase) in:
Accounts receivable (1,031,000) (3,350,000)
Inventories 3,411,000 (7,164,000)
Other current assets (217,000) 167,000
Other assets (29,000) (372,000)
(Decrease) increase in:
Accounts payable (1,457,000) 2,554,000
Accruals and other liabilities (375,000) (2,209,000)
------------ ------------
Net cash (used in) provided by
operating activities 3,309,000 (4,291,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (2,130,000) (11,997,000)
Proceeds from sales of investment securities 1,195,000 18,892,000
Acquisition of investment securities (1,094,000) (949,000)
------------ ------------
Net cash provided by (used in)
investing activities (2,029,000) 5,946,000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (3,292,000) (2,817,000)
Dividends (1,895,000) (1,978,000)
Exercise of stock options 54,000 344,000
------------ ------------
Net cash used in financing activities (5,133,000) (4,451,000)
------------ ------------
Decrease in cash and cash equivalents (3,853,000) (2,796,000)
Cash and cash equivalents, beginning of period 6,078,000 4,574,000
------------ ------------
Cash and cash equivalents, end of period $ 2,225,000 $ 1,778,000
============ ============
</TABLE>
See notes to consolidated financial statements.
(7)
<PAGE>
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR THE 13 WEEKS ENDED
May 29, 1999 May 30, 1998
------------ ------------
(Unaudited) Unaudited)
Net Income $ 1,982,000 $ 2,334,000
Unrealized holding loss on investment
securities, available-for-sale,
arising during the period net of taxes of $(139,000)
and $(35,000) (209,000) (53,000)
------------ ------------
Comprehensive Income $1,773,000 $2,281,000
========== ==========
FOR THE 26 WEEKS ENDED
May 29, 1999 May 30, 1998
------------ ------------
(Unaudited) Unaudited)
Net Income $ 167,000 $ 4,069,000
Unrealized holding loss on investment
securities, available - for - sale,
arising during the period net of taxes of $(214,000)
and $(41,000) (321,000) (62,000)
------------ ------------
Comprehensive Income (Loss) ($ 154,000) $ 4,007,000
============ ============
(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 May 29, 1999 are not necessarily indicative of
the results that may be expected for the entire fiscal year ending November 27,
1999. The balance sheet at November 28, 1998 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 November 28, 1998.
2. Cash and cash equivalents consist of the following (in thousands):
May 29, 1999 November 28, 1998
------------ -----------------
(Unaudited)
Cash $1,194 $1,458
Tax-free short-term debt instruments 1,031 4,620
------ ------
$2,225 $6,078
====== ======
(9)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Investment Securities:
At May 29, 1999 and November 28, 1998, investment securities
available-for-sale consist of the following (in thousands):
Gross Gross
Unrealized Unrealized
Holding Holding Fair
May 29, 1999 (Unaudited) Cost Gain Loss Value
- ------------------------ ---- ---- ---- -----
Equities $ 9,458 $ 152 ($ 42) $ 9,568
U.S. Treasury obligations 10 10
Corporate bonds 3,553 47 (152) 3,448
Tax-exempt obligations 34,982 470 (94) 35,358
-------- -------- -------- --------
$ 48,003 $ 669 ($ 288) $ 48,384
======== ======== ======== ========
Gross Gross
Unrealized Unrealized
Holding Holding Fair
November 28, 1998 Cost Gain Loss Value
- ----------------- ---- ---- ---- -----
Equities $ 9,885 $ 331 ($ 55) $ 10,161
U.S. Treasury obligations 14 14
Corporate bonds 4,698 139 (171) 4,666
Tax-exempt obligations 32,719 686 (13) 33,392
-------- -------- -------- --------
$ 47,316 $ 1,156 ($ 239) $ 48,233
======== ======== ======== ========
(10)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Inventories:
The Company's inventories are valued at the lower of cost or market. Cost
for a portion of the inventories is determined by the last-in, first-out (LIFO)
method, with the remainder being determined by the first-in, first-out (FIFO)
method. Because of changes in the global marketplace which resulted in
unpredictability of future changes in yarn prices, the Company based its LIFO
reserve at February 27, 1999 on actual rather than projected FIFO costs. This
resulted in a reduction in the LIFO reserve of $1,095,000 in the first quarter
of fiscal 1999. This reduction related principally to a decline in the average
cost of yarn purchased during the first quarter. As of May 29, 1999, management
believes that yarn prices have stabilized. Accordingly, the interim LIFO
calculations as of the end of the second quarter are based on management's
estimates of projected year-end inventory levels and costs. Such projections
indicate that no further material changes are anticipated in the Company's LIFO
reserves for the remainder of the fiscal year.
May 29, 1999 November 28, 1998
---------------- ----------------
(Unaudited)
Raw materials $ 8,089,000 $ 9,090,000
Work in process 10,085,000 14,177,000
Finished goods 10,628,000 8,946,000
----------- -----------
Total $28,802,000 $32,213,000
=========== ===========
Approximate percentage of
inventories valued
under LIFO valuation 45% 50%
============ ============
Excess of FIFO valuation
over LIFO valuation $ 3,500,000 $ 4,595,000
============ ============
(11)
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Earnings Per Share:
Basic and diluted earnings per share for the 13 weeks ended May 29, 1999
and May 30, 1998 are calculated as follows:
<TABLE>
<CAPTION>
Net Per-share
Income Shares Amount
------ ------ ------
<S> <C> <C> <C>
For the 13 weeks ended May 29, 1999
Basic earnings per share $1,982,000 5,413,898 $0.37
=====
Effect of assumed conversion of employee
stock options -- 2,230
---------- ----------
Diluted earnings per share $1,982,000 5,416,128 $0.37
========== ========== =====
For the 13 weeks ended May 30, 1998
Basic earnings per share $2,334,000 5,655,979 $0.41
=====
Effect of assumed conversion of employee
stock options -- 50,514
---------- ---------
Diluted earnings per share $2,334,000 5,706,493 $0.41
========== ========== =====
Basic and diluted earnings per share for the 26 weeks ended May 29, 1999 and May
30, 1998 are calculated as follows:
<CAPTION>
Net Per-share
Income Shares Amount
------ ------ ------
<S> <C> <C> <C>
For the 26 weeks ended May 29, 1999
Basic earnings per share $ 167,000 5,424,462 $0.03
=====
Effect of assumed conversion of employee
stock options -- 9,261
---------- ---------
Diluted earnings per share $ 167,000 5,433,723 $0.03
========== ========== =====
For the 26 weeks ended May 30, 1998
Basic earnings per share $4,069,000 5,669,851 $0.72
=====
Effect of assumed conversion of employee
stock options -- 50,254
---------- ---------
Diluted earning per share $4,069,000 5,720,105 $0.71
========== ========== =====
</TABLE>
(12)
<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 6, 1999. The
matter submitted to a vote of the Company's stockholders was the election of
three directors to Class II of the Company's Board of Directors.
The Company's stockholders elected Messrs. Lawrence H. Bober, Martin B.
Bernstein and Frank S. Greenberg to Class II of the Company's Board of
Directors, to hold office until the 2002 Annual Meeting of Stockholders and
until their respective successors are duly elected and qualified. The results of
the voting were as follows:
Lawrence H. Bober
-----------------
Voted for 5,125,749
Authority withheld 57,239
Abstained 0
Broker non-votes 0
Martin B. Bernstein
-------------------
Voted for 5,126,347
Authority withheld 56,641
Abstained 0
Broker non-votes 0
Frank S. Greenberg
------------------
Voted for 5,126,347
Authority withheld 56,641
Abstained 0
Broker non-votes 0
(13)
<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 May 29, 1999.
(14)
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
Second Quarter and Six Months
Fiscal 1999 Compared to Fiscal 1998
- -----------------------------------
Net sales for the second quarter of fiscal 1999 were $37,467,000 as
compared to $39,761,000 in the similar 1998 period, a decrease of 5.8%. For the
six months ended May 29, 1999, net sales were $66,474,000, a decline of
$7,538,000, or 10.2%, from 1998. Business conditions within the textile industry
remained erratic, and the Company continued to experience competitive market
conditions, both domestic and foreign. U.S. firms are forced to compete against
a flood of cheap imports and falling demand for U.S. goods overseas. These
conditions have to date continued into the third quarter.
Gross margins for the second quarter 1999 as a percentage of sales
declined from 16.0% to 15.1%. Lower sales volume reduced operating schedules at
manufacturing plants. Margins were aided by improved product mix, and cost
control programs. In the 1998 quarter, a reduction in LIFO reserves arising from
lower average FIFO cost levels benefited margins in the amount of $600,000. In
the current quarter, no adjustments to LIFO inventory reserves were required.
For the six months ended May 29, 1999, gross profit margins were 8.9% compared
to 14.4% in 1998. The comparative effect of changes in LIFO inventory reserves
benefited margins in the amount of $495,000.
(15)
<PAGE>
Selling, general and administrative expenses in the current quarter
remained relatively constant, despite the lower sales volume. As a percentage of
sales, such costs increased from 10.3% to 11.0% Because of lower sales volume.
For the six months ended May 29, 1999, selling general and administrative
expenses increased by $587,000, and as a percentage of sales from 10.0% From
12.0%. An increase in selling expenses is attributable primarily to the
acquisitions of Lida Stretch Fabrics and SMS Textiles acquired in the latter
part of second quarter 1998) and was partially offset by lower incentive-based
compensation and effects of the company's expense containment program.
Interest and dividend income for the current quarter decreased by $204,000
as a result of lower average available balances.
The effective income tax rate for the current quarter was 26.3% as against
31.5% in the comparative 1998 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 1998 period.
As a result of these factors, quarterly net income decreased to
$1,982,000, from $2,334,000. As a percentage of sales, quarterly net income
decreased to 5.3% compared to 5.9% in last year's second quarter.
For the current quarter, basic and diluted earnings per share were $0.37
compared to $0.41 last year. For the six months, basic and diluted earnings per
share were $0.03 compared to $0.72 basic and $0.71 diluted earnings per share
last year.
(16)
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Operating activities for the six-month period provided cash of
$3,309,000,as compared to cash used of $4,291,000 in the comparable 1998 period.
Of this increase, $10,575,000 relates to comparative changes in inventories and
$2,319,000 in accounts receivable, which was offset by a $3,902,000 reduction in
net income and $2,177,000 related to changes in accounts payable, accruals and
other liabilities.
Capital expenditures for the six months were $2,130,000 against
$11,997,000 in the comparable 1998 period. In 1998 these capital expenditures
included assets acquired from SMS Textiles Mills, Inc. and Lida Stretch Fabrics,
Inc., manufacturers of wide elastic fabrics and circular knit stretch fabrics,
respectively.
During the first six months of fiscal 1999, the Company repurchased
178,493 shares of its common stock at a cost of $3,292,000 (an average price of
$18.44). 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 23, 1999, to stockholders of record as of June 1, 1999.
Stockholders' equity was $132,252,000 ($24.45 per share) at May 29, 1999,
as compared to $137,527,000 ($24.63 per share) at the previous fiscal year-end
November 27, 1998, and $137,472,000 ($24.49 per share) at the end of the
comparative 1998 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, and pay dividends.
(17)
<PAGE>
Compliance With Year 2000
The Company has devoted significant resources and has taken steps in an
attempt to make the transition to the year 2000 successful and without incident.
Management has initiated a Company wide program to prepare the Company's
computer systems, hardware, devices and other equipment for year 2000
compliance.
An inventory of hardware and software is being completed, including the
Company's centralized information system department, distributed technologies,
and process control and non-technical components such as checks and forms. A
primary plan for remediation of the Company's legacy systems is in place, and
system and program changes are being implemented and tested as they become
ready. The Company has established a corporate task force to monitor the
progress toward the resolution of identified year 2000 issues. All known
computer systems corrections are expected to be completed by July 30, 1999.
The Company expects to incur internal staff costs as well as other
expenses necessary to prepare its systems for the year 2000, including costs for
outside consultants. The Company expects to resolve year 2000 compliance issues
primarily through normal upgrades of its software or, when necessary, through
replacement of existing software with year 2000 compliant applications. As of
June 1, 1999, the Company has incurred approximately $102,000 of external costs
to address the Company's year 2000 issues. The total cost of this effort is
still being evaluated, but is not expected to be material to the Company's
results of operations or financial condition. However, there can be no assurance
that such corrections can be completed on schedule or within estimated costs or
can successfully address the year 2000 compliance issues.
The Company has provided information regarding the status of its year 2000
compliance to customers who requested. The Company is in the process of asking
its major customers and suppliers to certify that they are year 2000 compliant
or, if they are not yet so compliant, to provide the Company with a description
of their plans to become so. If the Company's present efforts to address the
year 2000 compliance issues are not successful, or if customers, suppliers and
other third parties with which the Company conducts business do not successfully
address such issues, the Company's business, results of operations and financial
condition could be materially and adversely affected.
(18)
<PAGE>
FORWARD LOOKING INFORMATION
Certain statements in this report are "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. All forward
looking statements involve risks and uncertainties. In particular, any statement
contained herein, in press releases, written statements or other documents filed
with the Securities and Exchange Commission, or in the Company's communications
and discussions with investors and analysts in the normal course of business
through meetings, phone calls and conference calls, regarding the consummation
and benefits of future acquisitions, as well as expectations with respect to
future sales, operating efficiencies and product expansion, are subject to known
and unknown risks, uncertainties and contingencies, many of which are beyond the
control of the Company, which may cause actual results, performance or
achievements to differ materially from anticipated results, performances or
achievements. Factors that might affect such forward looking statements include,
among other things, overall economic and business conditions; the demand for the
Company's goods and services; competitive factors in the industries in which the
Company competes; changes in government regulation; changes in tax requirements
(including tax rate changes, new tax laws and revised tax law interpretations);
interest rate fluctuations and other capital market conditions, including
foreign currency rate fluctuations: economic and political conditions in
international markets, including governmental changes and restrictions on the
ability to transfer capital across borders; the ability to achieve anticipated
synergies and other cost savings in connection with acquisitions; the timing,
impact and other uncertainties of future acquisitions; and the Company's ability
and its customers' and suppliers' ability to replace, modify or upgrade computer
programs in order to adequately address Year 2000 issue.
(19)
<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 12, 1999 FAB INDUSTRIES, INC.
By: /s/ David A. Miller
----------------------
David A. Miller
Vice President-Finance, Treasurer
And Chief Financial Officer
(Principal Financial and Accounting
Officer)
(20)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
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1,319
0
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