<PAGE>
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
For the fiscal year ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----- -----
Commission File No. 1-4506
GARAN, INCORPORATED
(Exact name of registrant as specified in its charter)
VIRGINIA 13-5665557
(State of incorporation) (I.R.S. Employer
Identification No.)
350 Fifth Avenue, New York, New York 10118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-563-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
Common Stock, no par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Purchase Rights
(Title of class)
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 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 statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant on December 1, 1995, was approximately $72,804,000.
At December 1, 1995, 5,069,892 shares of the registrant's
Common Stock, no par value, were outstanding.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The registrant incorporates by reference in Part III of this Report
specified portions of its definitive Proxy Statement
to be filed with the Securities and Exchange Commission in connection with its
1996 Annual Meeting of Shareholders ("1996 Proxy Statement").
2
<PAGE>
PART I
Item 1. Business.
(a) General development of business.
(a)(1) The registrant was incorporated on December 4, 1957.
During the fiscal year ended September 30, 1995, there were no material changes
or developments in the business done by the registrant or its subsidiaries or in
the manner in which it conducted its business during the prior five fiscal
years.
(a)(2) Not applicable.
(b) Financial information about industry segments.
The registrant produces only apparel and, accordingly,
information relative to industry segments is not applicable.
(c) Narrative description of business.
(c)(i) The registrant is engaged in the design, manufacture, and
sale of apparel for men, women, and children including boys, girls, toddlers,
and infants. The percentage of registrant's net sales in each of the foregoing
categories in the last three fiscal years is as follows:
3
<PAGE>
Percentage of Net Sales
(years ended September 30)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Men's apparel 10% 13% 16%
Women's apparel 18 17 17
Children's apparel 72 70 67
</TABLE>
The registrant produces apparel primarily sold to regional mass merchandisers,
major national chain stores, department stores, and specialty stores. Sales are
made primarily by the registrant's salaried sales staff.
(c)(ii) Not applicable.
(c)(iii) Raw materials essential to the registrant are readily
available from various alternate sources of supply.
(c)(iv) The registrant distributes: children's apparel under
various of its own trademarks including, principally, GARAN, GARANIMALS, and
ROB ROY, men's apparel under various of its own trademarks including,
principally, GARAN, and women's apparel under various of its own trademarks
including, principally, GARAN. Sales of branded apparel under the registrant's
own trademarks accounted for approximately 6%, 9%, and 7% of the registrant's
net sales in fiscal 1995, 1994, and 1993, respectively.
4
<PAGE>
Since 1975, registrant has been a non-exclusive licensee of
professional sports leagues and teams for T-shirts, knit shirts, sweatshirts,
and sweaters for boys and men, and since 1990, registrant has been a
non-exclusive licensee of various colleges and universities for sweatshirts
and knit shirts. Sales of such apparel by registrant accounted for
approximately 12%, 19%, and 26% of the registrant's net sales in fiscal 1995,
1994, and 1993, respectively. Since 1986, the registrant has been the
exclusive licensee of the trademark BOBBIE BROOKS for girls' and women's
apparel, and sales of apparel by registrant bearing the BOBBIE BROOKS
trademark accounted for approximately 7%, 3%, and 6% of the registrant's net
sales in fiscal 1995, 1994, and 1993, respectively. (The registrant also
sublicenses the BOBBIE BROOKS trademark to non-affiliates.) Since fiscal
1991, registrant has been a non-exclusive licensee of The Walt Disney Company
for various trademarks and for characters, scenes, and logos from various
animated television series and motion pictures for children's apparel, and
sales of apparel bearing such trademarks accounted for approximately 8%, 11%,
and 9% of registrant's net sales for fiscal 1995, 1994, and 1993,
respectively. In 1995, the registrant became the exclusive licensee of the
trademark EVERLAST for men's, boys', and girls' activewear, and of the
trademark HANG TEN for boys' sportswear, although the registrant's sales of
articles bearing either such trademark were insignificant in fiscal 1995.
Total sales of apparel bearing licensed trademarks and logos, some of which
apparel also bears the registrant's trademarks LONG GONE, TEAM
RATED, GLORY DAYS, and G.T.S., accounted for approximately 27%, 35%, and 41%
of the registrant's
5
<PAGE>
net sales in fiscal 1995, 1994, and 1993, respectively. The terms of the
foregoing license agreements range from 1 to 3 years, royalty rates range from
2% to 12% of net sales, each license agreement has a minimum royalty commitment,
and certain license agreements impose an advertising commitment. Shortfalls
between earned royalties and minimum royalties have not been material. Except
for certain license agreements with The Walt Disney Company for characters,
scenes, and logos relating to motion pictures no longer in general release, the
registrant anticipates that it will be able to renew each license agreement
when it expires upon substantially the same terms.
(c)(v) The registrant operates primarily on the basis of two
seasons - Spring/Summer and Fall/Holiday. Shipments for the Spring/Summer
season are generally made from December through July and for the Fall/Holiday
season from June through December. Registrant has been able to keep production
levels relatively constant throughout the year. However, because of long
production runs and short shipping periods, the registrant's inventory levels
fluctuate during the year.
(c)(vi) Not applicable.
(c)(vii) Wal-Mart Stores, Inc. accounted for 63%, 62%, and 54%
of the registrant's net sales during fiscal 1995, 1994, and 1993, respectively.
During the same periods, J.C. Penney Company, Inc. accounted for 20%, 18%, and
16% of the registrant's net sales. The registrant has had a business
relationship with Wal-Mart Stores, Inc. for more than the past 18
6
<PAGE>
years and with J.C. Penney Company, Inc. for more than the past 30 years. The
registrant knows of no circumstance that would have a material adverse effect on
its future business relationships with Wal-Mart Stores, Inc. or J.C. Penney
Company, Inc. The balance of the registrant's sales are made to approximately
3,500 accounts, none of which is responsible for more than 10% of the
registrant's net sales.
(c)(viii) The registrant has been consistently able to secure
substantial orders from its customers to insure that production levels are kept
relatively constant throughout the year. As of December 1, 1995, firm backlog
orders amounted to $37,000,000, and firm backlog orders as of December 1, 1994,
amounted to $34,000,000. Registrant expects that all of its backlog orders at
December 1, 1995, will be filled during the 1996 fiscal year. Registrant's firm
backlog orders at any given time represent orders taken throughout the year and
vary throughout the year. The registrant believes that year to year variations
are immaterial to an understanding of its business.
(c)(ix) Not applicable.
(c)(x) The men's, women's, and children's apparel business in
the United States is highly competitive primarily in price, style, and delivery
and consists of many domestic and foreign manufacturers, importers, and
distributors. The registrant does not compete solely on a price basis with low
cost foreign sources; the registrant competes by relying on style, programs, and
delivery as well as price. No single enterprise
7
<PAGE>
sells more than a small portion of the total apparel sold in the United States,
and there are no reliable figures available from which the registrant's relative
position in the United States apparel industry can be determined or from which
the effect of foreign competition can be assessed.
(c)(xi) No material expenditures are made by the registrant for
research activities relating to the development of new services or products or
the improvement of existing services or products.
(c)(xii) The registrant's compliance with Federal, state, and
local environmental laws and regulations had no material effect upon its capital
expenditures, earnings, or competitive position during the fiscal year ended
September 30, 1995. The registrant does not anticipate any material capital
expenditures for environmental control in either its present or succeeding
fiscal years.
(c)(xiii) The registrant employed approximately 2,600 persons at
September 30, 1995.
(d) Financial information about foreign and domestic operations and
export sales.
The registrant has operated a manufacturing facility in Costa
Rica since 1984, and in fiscal 1995, began operating two manufacturing
facilities in El Salvador, but it was not otherwise engaged in business within
any foreign country during the fiscal year ended September 30, 1995.
8
<PAGE>
During fiscal 1995, 1994, and 1993, export sales by registrant
amounted to less than 1% of total sales and are not considered to be significant
to an understanding of registrant's business.
Item 2. Properties.
<TABLE>
<CAPTION>
Expiration
Location Use Sq. Ft. Estate Date
- -------- --- ------- ------ ----------
<S> <C> <C> <C> <C>
Adamsville,
Tennessee Manufacturing 100,000 Fee
Manufacturing 60,080 Lease 1999(1)
Carthage,
Mississippi Manufacturing 105,300 Lease (1)(2)
Church Point,
Louisiana Manufacturing 73,000 Lease 1996(1)
Clinton,
Kentucky Manufacturing 52,000 Fee
Corinth,
Mississippi Manufacturing 76,000 Lease 1997(1)
Eupora,
Mississippi Manufacturing 96,742 Lease (1)(3)
Haleyville,
Alabama Manufacturing 10,000 Fee
Jemison,
Alabama Manufacturing 20,800 Lease 2001(1)
Kaplan,
Louisiana Manufacturing 87,900 Lease (1)(4)
43,900 Fee (4)
Lambert,
Mississippi Manufacturing 100,300 Lease (1)(5)
Marksville,
Louisiana Manufacturing 75,000 Lease 1999(1)
New York,
New York Showroom
and Office 45,500 Lease 1996
9
<PAGE>
Expiration
Location Use Sq. Ft. Estate Date
- -------- --- ------- ------ ----------
Ozark,
Arkansas Manufacturing 75,000 Lease 1997(1)
Philadelphia,
Mississippi Manufacturing 107,920 Lease (1)(6)
Rainsville,
Alabama Manufacturing 53,000 Lease 2016(1)
San Jose,
Costa Rica Manufacturing 33,258 Fee
San Salvador,
El Salvador Manufacturing 22,350 Lease 1999
San Salvador,
El Salvador Manufacturing 41,047 Lease 2000
Starkville,
Mississippi Manufacturing
and Office 90,000 Lease 1998(1)
</TABLE>
(1) The registrant or a wholly-owned subsidiary of the registrant has
the option to purchase the facilities and/or to renew each of the current leases
for terms which vary between 2 and 69 years.
(2) One continuous building consisting of a 63,000 square foot
section leased to 1999, a 22,500 square foot section leased to 2002, and a
19,800 square foot section leased to 2004.
(3) One continuous building consisting of a 15,000 square foot
section leased to 1999, a 21,000 square foot section leased to 1996, a 41,000
square foot section leased to 1997, and a 19,742 square foot section leased to
2004.
10
<PAGE>
(4) One continuous building consisting of a 72,000 square foot
section leased to 1999 and a 15,900 square foot section leased to 2005, which
was expanded by a 43,000 square foot section owned by a wholly-owned subsidiary
of the registrant and financed with the proceeds of Industrial Revenue Bonds
issued in September, 1990. The entire building is located on land owned by a
wholly-owned subsidiary of the registrant.
(5) The registrant determined that it no longer required the
manufacturing capacity of its plant in Lambert, Mississippi, and that facility
was closed in 1995. The carrying value of the Lambert facility has been written
down to its net realizable value.
(6) One continuous building consisting of a 78,000 square foot
section leased to 2000 and a 29,920 square foot section leased to 2004.
The registrant believes that its manufacturing facilities are suitable
and adequate for its foreseeable needs, and except as otherwise noted, each was
fully utilized and operated at virtually 100% of capacity during fiscal 1995.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
11
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
(a), (b), and (c) Market information, Holders, and Dividends.
The registrant's common stock is listed and traded on the American Stock
Exchange under the symbol GAN. The high and low sales prices during each
quarterly period for fiscal years 1995 and 1994 are set forth in the table
below:
<TABLE>
<CAPTION>
Sales Price of Common Stock
-----------------------------------------
1995 1994
---- ----
Quarters High Low High Low
- -------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First . . . . . . . . . . . . $18 1/4 $15 1/2 $33 5/8 $31 1/8
Second . . . . . . . . . . . 18 14 7/8 33 28 1/2
Third . . . . . . . . . . . . 18 1/4 15 5/8 28 1/4 22
Fourth . . . . . . . . . . . . 17 3/4 15 7/8 24 1/2 15 5/8
</TABLE>
Dividends paid during the last two fiscal years were as follows:
<TABLE>
<CAPTION>
Dividends Paid per Share
Quarters 1995 1994
- -------- ---- ----
<S> <C> <C>
First -Regular . . . . . . . $ .20 $ .20
-Special . . . . . . . .20 1.00
Second -Regular . . . . . . . .20 .20
Third -Regular . . . . . . . .20 .20
Fourth -Regular . . . . . . . .20 .20
---- ----
Total . . . . . . . . . $ 1.00 $ 1.80
----- -----
----- -----
</TABLE>
As at December 1, 1995, there were 533 shareholders of record including Cede &
Company in its capacity as nominee for the Depository Trust Company.
12
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
FIVE-YEAR REVIEW
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Net Sales $ 141,330,000 $ 173,002,000 $ 189,581,000 $ 170,377,000 $ 146,292,000
Cost of Sales 111,454,000 131,687,000 134,212,000 122,716,000 108,454,000
- ------------------------------------------------------------------------------------------------------------
Gross Margin on Sales 29,876,000 41,315,000 55,369,000 47,661,000 37,838,000
Selling and Administrative
Expenses 23,270,000 27,320,000 29,319,000 25,093,000 23,206,000
Interest on Capitalized Leases 141,000 153,000 202,000 250,000 297,000
Interest Income (2,534,000) (1,491,000) (1,592,000) (2,007,000) (2,094,000)
- ------------------------------------------------------------------------------------------------------------
Earnings before Provision for
Income Taxes 8,999,000 15,333,000 27,440,000 24,325,000 16,429,000
Provision for Income Taxes 3,510,000 5,980,000 10,591,000 9,001,000 6,243,000
- ------------------------------------------------------------------------------------------------------------
Net Earnings 5,489,000 9,353,000 16,849,000 15,324,000 10,186,000
- ------------------------------------------------------------------------------------------------------------
Earnings Per Share 1.08 1.84 3.32 3.03 2.025
Average Shares Outstanding 5,070,000 5,070,000 5,068,000 5,058,000 5,036,000
Dividends Paid Per Share 1.00 1.80 1.80 1.175 1.00
- ------------------------------------------------------------------------------------------------------------
Current Assets 88,685,000 98,896,000 101,847,000 94,082,000 90,236,000
Current Liabilities 20,237,000 18,519,000 21,181,000 20,902,000 22,334,000
- ------------------------------------------------------------------------------------------------------------
Working Capital 68,448,000 80,377,000 80,666,000 73,180,000 67,902,000
Working Capital Ratio 4.38 5.34 4.81 4.50 4.04
- ------------------------------------------------------------------------------------------------------------
Total Assets 120,431,000 118,525,000 121,791,000 112,863,000 105,658,000
- ------------------------------------------------------------------------------------------------------------
Long-term Obligations 3,061,000 3,620,000 4,176,000 4,625,000 5,556,000
- ------------------------------------------------------------------------------------------------------------
Shareholders' Equity 94,315,000 93,896,000 93,669,000 85,795,000 76,148,000
Common Stock Issued and
Outstanding 5,069,892 5,069,892 5,069,892 5,052,132 5,018,632
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: All share and per share data give effect to the two-for-one stock split on
December 7, 1992.
13
<PAGE>
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NET SALES
Net sales in 1995 were $141,330,000, a decrease of $31,672,000 from 1994
net sales of $173,002,000. The sales decreases occurred primarily in the
Sports Licensing divisions due to ongoing competitive conditions in the
marketplace, in the Disney division as a result of not participating in a
film property in 1995, and in the Women's Sweaters division, which ceased
operations early in fiscal 1995.
Net sales in 1994 were $173,002,000, a decrease of $16,579,000 from 1993 net
sales of $189,581,000. The 1994 sales decrease of 9% resulted from competitive
conditions in the marketplace which caused a decline in total units shipped of
approximately 4% and a decline in the average unit selling price in our Sports
Licensing division.
GROSS MARGIN
Gross margin for 1995 was $29,876,000, or 21% of net sales, as compared to
$41,315,000 or 24% of net sales, in 1994. Gross margin was $55,369,000, or 29%
of net sales, in 1993. The declines in gross margin from year to year primarily
resulted from (A) reduced volume in our Sports Licensing divisions, which
historically maintain higher gross margins than our other divisions (the gross
margin for the Sports Licensing divisions is higher than for other divisions,
but net sales of these divisions are subject to a royalty expense which is
included in selling and administrative expenses), which affected product mix,
and (B) customer orders taken at lower margins to maintain market share.
SELLING AND ADMINISTRATIVE EXPENSES; INTEREST INCOME
Selling and administrative expenses in 1995 were $23,270,000, or 16% of net
sales, as compared to $27,320,000, or 16% of net sales, in 1994. Selling and
administrative expenses were $29,319,000, or 16% of net sales, in 1993. The
dollar amount decreases primarily resulted from reduced royalty and commission
expense associated with the reduced sales volume in our Sports Licensing
divisions.
Interest income in 1995 was $2,534,000, which increased from interest income of
$1,491,000 in 1994. Interest income was $1,592,000 in 1993. The increase from
1994 to 1995 was the result of more favorable rates of returns throughout the
year and higher levels of investments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial position remained strong through 1995. At September
30, 1995 working capital was $68,448,000, a decrease of $11,929,000 from
September 30, 1994 working capital of $80,377,000. As is noted in footnote
1h, the Company adopted Statement of Financial Accounting Standards No.
115 (SFAS 115), which requires that investments held to maturity be
classified based on contractual maturities. As such, at September 30, 1995,
$12,015,000 of investments have been classified as long term and
transferred from working capital. (In accordance with SFAS 115, prior
years financial statements have not been restated to reflect the change
in accounting method.)
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON'T)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The Company's primary source of cash during the three years ended September 30,
1995 has been its operating activities. In 1995, 1994 and 1993, operating
activities provided $6,727,000, $17,113,000, and $12,377,000, respectively.
The primary uses of cash during the three year period ended September 30, 1995,
have been additions to property, plant and equipment, payment of dividends, and
repayment of capitalized lease obligations.
In fiscal 1995 the Company continued its year end special dividend payment which
it initiated in fiscal 1988.
At September 30, 1995, shareholders' equity was $94,315,000 or $18.60 per share,
up from $93,896,000, or $18.52 per share, at September 30, 1994. At September
30, 1993 shareholders' equity was $93,669,000, or $18.48 per share.
Management believes that the Company has sufficient working capital to finance
its operations and projected growth. There were no short term borrowings
outstanding during fiscal 1995, 1994 and 1993, and management does not
anticipate the need for any such borrowings. If necessary, the Company has the
ability to obtain funds from a number of sources to meet its seasonal and long
term requirements.
15
<PAGE>
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,649,000 $ 7,664,000
U.S. Government securities--short-term 20,424,000 20,559,000
Accounts receivable, less estimated uncollectibles:
1995, $514,000; 1994, $507,000 25,746,000 39,707,000
Inventories 29,454,000 27,881,000
Other current assets 4,412,000 3,085,000
- ---------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 88,685,000 98,896,000
- ---------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES--LONG-TERM 12,015,000
PROPERTY, PLANT AND EQUIPMENT, NET 15,069,000 15,544,000
OTHER ASSETS 4,662,000 4,085,000
- ---------------------------------------------------------------------------------------------------
TOTAL $ 120,431,000 $ 118,525,000
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 6,851,000 $ 6,546,000
Accrued liabilities 11,005,000 11,009,000
Income taxes payable 2,227,000 813,000
Current portion of capitalized lease obligations 154,000 151,000
- ---------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 20,237,000 18,519,000
- ---------------------------------------------------------------------------------------------------
CAPITALIZED LEASE OBLIGATIONS, NET OF CURRENT PORTION 3,061,000 3,620,000
- ---------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 2,818,000 2,490,000
- ---------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Preferred stock ($10 par value), 500,000 shares
authorized; none issued
Common stock (no par value), 15,000,000 shares
authorized; shares issued: 5,069,892 at 1995 and
1994 2,535,000 2,535,000
Additional paid-in capital 5,821,000 5,821,000
Retained earnings 85,959,000 85,540,000
- ---------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 94,315,000 93,896,000
- ---------------------------------------------------------------------------------------------------
TOTAL $ 120,431,000 $ 118,525,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
16
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $ 141,330,000 $ 173,002,000 $ 189,581,000
Cost of sales 111,454,000 131,687,000 134,212,000
- -----------------------------------------------------------------------------------------------
Gross margin on sales 29,876,000 41,315,000 55,369,000
Selling and administrative expenses 23,270,000 27,320,000 29,319,000
Interest on capitalized leases 141,000 153,000 202,000
Interest income (2,534,000) (1,491,000) (1,592,000)
- -----------------------------------------------------------------------------------------------
Earnings before provision for income taxes 8,999,000 15,333,000 27,440,000
Provision for income taxes 3,510,000 5,980,000 10,591,000
- -----------------------------------------------------------------------------------------------
NET EARNINGS $ 5,489,000 $ 9,353,000 $ 16,849,000
- -----------------------------------------------------------------------------------------------
Earnings per share $ 1.08 $ 1.84 $ 3.32
Average shares outstanding 5,070,000 5,070,000 5,068,000
- -----------------------------------------------------------------------------------------------
</TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
YEARS ENDED 1993, 1994 AND 1995 STOCK CAPITAL EARNINGS TOTAL
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1992 $ 2,526,000 $ 5,630,000 $ 77,639,000 $ 85,795,000
- --------------------------------------------------------------------------------------------------
Stock options exercised 9,000 191,000 200,000
Net earnings 16,849,000 16,849,000
Dividends paid--$1.80 per share (9,124,000 (9,124,000)
Stock rights redemption--$.01 per share (51,000) (51,000)
- --------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1993 $ 2,535,000 $ 5,821,000 $ 85,313,000 $ 93,669,000
- ---------------------------------------------------------------------------------------------------
Net earnings 9,353,000 9,353,000
Dividends paid--$1.80 per share (9,126,000) (9,126,000)
- ---------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1994 $ 2,535,000 $ 5,821,000 $ 85,540,000 $ 93,896,000
- ---------------------------------------------------------------------------------------------------
Net earnings 5,489,000 5,489,000
Dividends paid--$1.00 per share (5,070,000) (5,070,000)
- ---------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995 $ 2,535,000 $ 5,821,000 $ 85,959,000 $ 94,315,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
NOTE: All share data give effect to the two-for-one stock split on December 7,
1992.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
17
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET EARNINGS $ 5,489,000 $ 9,353,000 $16,849,000
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET
CASH FLOWS FROM OPERATING ACTIVITIES:
Depreciation and amortization 3,591,000 3,647,000 3,312,000
Provision for losses on accounts receivable 112,000 170,000 390,000
Deferred income taxes (537,000) 480,000 1,055,000
Changes in assets and liabilities:
U.S. Government Securities--short-term (14,880,000)
Accounts receivable 13,849,000 1,443,000 (9,430,000)
Inventories (1,573,000) 5,992,000 756,000
Other current assets (514,000) 208,000 112,000
Accounts payable 305,000 (71,000) 1,013,000
Accrued liabilities (4,000) (1,113,000) 585,000
Income taxes payable 1,466,000 (1,710,000) (1,018,000)
Other assets (577,000) (1,286,000) (1,247,000)
- ------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 6,727,000 17,113,000 12,377,000
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of U.S. Government Securities--long-term 3,000,000 25,924,000 19,100,000
Purchase of U.S. Government Securities--long-term (27,149,000) (18,252,000)
Additions to property, plant and equipment (3,284,000) (2,535,000) (3,569,000)
Proceeds from sales of property, plant and equipment 168,000 489,000 341,000
- ------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (116,000) (3,271,000) (2,380,000)
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 200,000
Payment of dividends (5,070,000) (9,126,000) (9,124,000)
Stock rights redemption (51,000)
Repayment of capitalized lease obligations (556,000) (854,000) (411,000)
- ------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES (5,626,000) (9,980,000) (9,386,000)
- ------------------------------------------------------------------------------------------------------
INCREASE IN CASH 985,000 3,862,000 611,000
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 7,664,000 3,802,000 3,191,000
- ------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,649,000 $ 7,664,000 $ 3,802,000
- ------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES
CASH PAID DURING THE YEAR FOR:
Interest $ 141,000 $ 153,000 $ 202,000
Income taxes 2,167,000 7,211,000 10,596,000
- ------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All inter-company accounts and
transactions have been eliminated in consolidation.
Certain reclassifications have been made to conform prior years' data to the
current presentation.
b. REVENUE RECOGNITION
Sales are recognized upon shipment of merchandise. The Company does not provide
for allowances or return of goods except for cause. When an allowance or return
occurs, it is accounted for as a reduction of sales. Sales allowances are not
significant to the operations of the Company.
c. INVENTORIES
Inventories are stated at the lower of cost (principally standard cost which
approximates actual cost on a first-in, first-out basis) or market.
d. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Depreciation and amortization
for financial accounting purposes are provided by using the straight line method
over the estimated useful lives of the assets.
Leases of manufacturing facilities which are in substance financing arrangements
have been capitalized, with the corresponding liability included in capitalized
lease obligations.
e. INCOME TAXES
Deferred income taxes are provided to reflect the tax effect of timing
differences in reporting income and deductions for tax and financial statement
purposes. During the fourth quarter of fiscal year 1993 the Company adopted the
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). SFAS 109 provides for accounting for deferred income taxes
using the liability method rather than the deferred method.
f. EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted average number of
common shares outstanding during the year. All share and per share amounts give
effect to a two-for-one stock split on December 7, 1992.
g. CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months or less
to be cash equivalents.
h. INVESTMENTS
Short-term investments at September 30, 1994 consist of highly liquid direct
obligations of the United States Government with a maturity of more than three
months when purchased. Such investments are stated at cost plus accrued
interest, which approximates market value.
Effective December 31, 1994, the Company adopted Statement of Financial
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115), under which the Company's investments are designated as
trading or held-to-maturity. Trading securities are reported at fair value, with
changes in fair value included in earnings. When the Company has the intent and
ability to hold the securities to maturity they are classified as
held-to-maturity securities and reported at amortized cost. In accordance with
SFAS 115, prior years' financial statements have not been restated to reflect
the change in accounting method. There was no cumulative effect as a result of
adopting SFAS 115 and the impact on net earnings for the year ended September
30, 1995 was not material.
NOTE 2--INVESTMENTS
Investments in the trading category amounted to $19,427,000 at September 30,
1995 and consisted of U.S. Treasury Bills maturing from November 1995 through
September 1996. Gross unrealized holding gains at September 30, 1995 were
approximately $83,000.
19
<PAGE>
Investments in the held-to-maturity category amounted to $13,012,000 at
September 30, 1995 and consisted of U.S. Treasury Notes with contractual
maturities as follows:
<TABLE>
<S> <C>
1996 (included in U.S. Government securities --
short-term)............................................ $ 997,000
1997..................................................... 6,027,000
1998..................................................... 5,036,000
1999..................................................... 952,000
------------
$ 13,012,000
------------
------------
</TABLE>
The estimated fair value of investments approximates the amortized cost, and,
therefore, there are no unrealized gains or losses as at September 30, 1995.
NOTE 3--INVENTORIES
INVENTORIES CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Raw materials........................................ $ 5,135,000 $ 7,135,000
Work in process...................................... 9,374,000 10,735,000
Finished goods....................................... 14,945,000 10,011,000
----------- -----------
$29,454,000 $27,881,000
----------- -----------
----------- -----------
</TABLE>
NOTE 4--PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Capitalized leased manufacturing plants.............. $12,626,000 $12,626,000
Machinery and equipment.............................. 14,711,000 13,971,000
Leasehold improvements............................... 3,689,000 3,277,000
Transportation equipment............................. 1,788,000 1,716,000
----------- -----------
32,814,000 31,590,000
Less accumulated depreciation and amortization....... 17,745,000 16,046,000
----------- -----------
$15,069,000 $15,544,000
----------- -----------
----------- -----------
</TABLE>
The net book value of the capitalized leased manufacturing plants was $4,716,000
at September 30, 1995 and $5,069,000 at September 30, 1994.
NOTE 5--CAPITALIZED LEASES
Substantially all of the Company's leases of manufacturing facilities have been
capitalized. Future minimum lease payments of principal and interest under
leases capitalized at September 30, 1995 are as follows:
<TABLE>
<S> <C>
1996...................................................... $ 266,000
1997...................................................... 227,000
1998...................................................... 226,000
1999...................................................... 262,000
2000...................................................... 165,000
Later years............................................... 3,098,000
------------
4,244,000
Less interest--4.0% to 8.0%............................... (1,029,000)
------------
Total minimum lease payments.............................. 3,215,000
Less amounts due within one year.......................... (154,000)
------------
$ 3,061,000
------------
------------
</TABLE>
20
<PAGE>
NOTE 6--INCOME TAXES
The difference between the total statutory Federal income tax and the actual
income tax expense is accounted for as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------- ------------------------- --------------------------
PERCENT OF PERCENT OF PERCENT OF
PRE-TAX PRE-TAX PRE-TAX
AMOUNT EARNINGS AMOUNT EARNINGS AMOUNT EARNINGS
------------------------- ------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal statutory tax
expense...................... $3,150,000 35.0% $5,367,000 35.0% $ 9,604,000 35.0%
State and local income tax
expense, net of Federal
income tax benefit........... 360,000 4.0 613,000 4.0 987,000 3.6
---------- ----- ---------- ----- ----------- -----
Income tax expense........... $3,510,000 39.0% $5,980,000 39.0% $10,591,000 38.6%
---------- ----- ---------- ----- ----------- -----
---------- ----- ---------- ----- ----------- -----
</TABLE>
Income tax expense consists of the following components:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
Current...................................... $4,047,000 $5,500,000 $ 9,536,000
Deferred..................................... (537,000) 480,000 1,055,000
---------- ---------- -----------
$3,510,000 $5,980,000 $10,591,000
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
Deferred income taxes are provided to reflect the tax effect of timing
differences in reporting income and deductions for tax and financial statement
purposes, principally depreciation, pension, employee benefits, deferred
compensation and inventory.
Included in Other Current Assets at September 30, 1995 and 1994 is $1,478,000
and $665,000, respectively, of current deferred income tax debits, and included
in Income Taxes Payable at September 30, 1995 and 1994 is $863,000 and $915,000,
respectively, of current deferred income tax credits.
NOTE 7--COMMITMENTS
The Company is obligated under certain long-term leases which do not meet the
criteria for capitalization. The annual minimum rental commitments (excluding
escalation) of these leases are: 1996 -- $1,111,000; 1997 -- $1,111,000; 1998 --
$1,111,000; 1999 -- $1,111,000; 2000 -- $1,040,000 and $4,240,000 through 2005.
Total rental expense charged to operations in 1995, 1994 and 1993 amounted to
$2,474,000, $2,421,000, and $2,534,000, respectively.
The Company is obligated under various licensing agreements for annual minimum
royalty expense commitments, amounting to approximately $2,800,000, $3,000,000
and $800,000 for 1996, 1997 and 1998, respectively.
Total royalty expense charged to operations in 1995, 1994 and 1993 amounted to
$3,336,000, $5,309,000, and $6,386,000, respectively.
NOTE 8--STOCK OPTION PLAN
In 1980 and 1989 the Company adopted plans for granting stock options to
employees to purchase common stock at a price equal to its fair market value at
the respective date of grant. Options expire five years after the respective
date of grant.
For the years ended September 30, 1993, 1994 and 1995, there were 200,000
options available for grant, and there were no unexercised options for these
respective periods.
21
<PAGE>
NOTE 9--PENSION AND RETIREMENT PLANS
The Company contributes to defined benefit pension plans which cover all
eligible employees. Pension costs are generally funded currently. Pension
expense amounted to $391,055 in 1995, $549,587 in 1994 and $330,700 in 1993. Net
pension costs under FASB No. 87 included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Service cost-benefits earned during the
period.................................. $ 562,230 $ 620,643 $ 550,922
Interest cost on projected benefit
obligation.............................. 980,101 1,056,531 986,284
Actual return on plan assets loss
(gain).................................. (1,797,953) 253,612 (1,278,715)
Net amortization and deferral............ 640,469 (1,381,199) 171,456
------------ ------------ ------------
Net periodic pension cost before
settlement.............................. 384,847 549,587 429,947
Settlement gain.......................... 6,208 (99,247)
------------ ------------ ------------
Net periodic pension cost after
settlement.............................. $ 391,055 $ 549,587 $ 330,700
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The following table sets forth the funded status for the Company's defined
benefit pension plans:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligation
Vested benefit obligation........................... $(11,651,126) $(11,340,602)
Nonvested benefit obligation........................ (465,500) (411,013)
------------ ------------
Accumulated benefit obligation...................... (12,116,626) (11,751,615)
Excess of projected benefit obligation over
accumulated benefit obligation..................... (1,409,543) (1,847,959)
------------ ------------
Projected benefit obligation........................ (13,526,169) (13,599,574)
Actual plan assets at fair value.................... 15,774,026 13,901,195
------------ ------------
Projected benefit obligation less than plan
assets............................................. 2,247,857 301,621
Unrecognized net (gain)............................. (105,711) (849,208)
Unrecognized prior service cost..................... 535,719 1,309,789
Unrecognized net transition obligation at September
30,................................................ 655,568 716,274
------------ ------------
Prepaid pension cost at September 30,............... $ 3,333,433 $ 1,478,476
------------ ------------
------------ ------------
</TABLE>
The weighted average discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the projected benefit
obligation for the Company's plans was 7.0% in 1995 and 7.5% in 1994 and 1993.
The expected long-term rate of return on assets used for the Company's plans was
7.5% in 1995 and 9.5% in 1994 and 1993.
The Board of Directors adopted on April 1, 1989 a Supplemental Executive
Retirement Plan for certain executive employees to restore pension benefits
which have been reduced by legislative action. The Company purchases annuity
contracts to fund its obligation for the four participants (all
officers-directors of the Company) under such plan and reimburses the
participants for the current tax recognition resulting from such purchases. The
respective costs are being amortized over the remaining estimated employment
lives of the participants. The 1995, 1994 and 1993 expense for such plan was
$705,000, $736,000 and $847,000, respectively.
The Board of Directors adopted on January 1, 1995, a Supplemental Benefit
Restoration Plan for certain employees not covered by the Supplemental Executive
Retirement Plan to restore pension benefits which have been reduced by
legislative action. The Company is currently funding its obligations to the five
participants, and the 1995 expense for such plan was $75,000.
NOTE 10--MAJOR CUSTOMERS
The Company operates within one industry segment - the manufacture of apparel.
Sales to one national retail chain accounted for approximately 63% of the
Company's net sales in 1995, 62% in
22
<PAGE>
1994 and 54% in 1993. Another national retail chain accounted for approximately
20%, 18% and 16% of the Company's net sales in 1995, 1994 and 1993,
respectively. No other customer accounted for more than 10% of the Company's net
sales in each of the three years ended 1995.
NOTE 11--SHAREHOLDERS' EQUITY
In April 1993, the Company's Board of Directors restructured the Rights Plan it
had adopted in 1988 by amending and restating its rights agreement, redeeming
its outstanding preferred stock rights, and paying a dividend of new common
stock rights to shareholders of record on May 17, 1993. In the event any person
acquires 20 percent of the Company's common stock, each new right will give the
holder the option to purchase one share of the Company's common stock for $90.
The new rights expire May 16, 2003, and may be redeemed by the Company for $.01
per right. As of September 30, 1995, 5,069,892 shares of the Company's common
stock were reserved for issuance under the Shareholders Rights Plan.
NOTE 12--COMMON STOCK SPLIT
On November 9, 1992, the Board of Directors authorized a two-for-one stock split
of the Company's $1 par value common stock which was paid on December 7, 1992 to
shareholders of record on November 19, 1992. In addition, common stock changed
to no par value. As a result of the split, the additional 2,534,446 shares
issued did not change the common stock or additional paid-in capital accounts.
All references in the accompanying financial statements to the number of common
shares and per share amounts give effect to the stock split.
NOTE 13--EMPLOYMENT AGREEMENTS
The Company maintains employment agreements with four directors, three of whom
are also officers of the Company. The employment agreements contain change in
control provisions that would entitle each of the four directors to receive up
to 2.99 times his five year average annual salary plus continuation of certain
benefits if there is a change in control in the Company (as defined) and a
termination of his employment. The maximum contingent liability under these
agreements in such event is approximately $5,800,000. The employment agreements
also provide for severance benefits, disability and death benefits and, as to
one officer-director, consulting services under certain circumstances.
NOTE 14--QUARTERLY FINANCIAL DATA (UNAUDITED)
Financial data for the interim periods of 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NET GROSS NET EARNINGS
SALES MARGINS EARNINGS PER SHARE
--------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Fiscal Year 1995
Quarters
- ----------------
First........................................ $ 38,668 $ 7,404 $ 1,122 $ .22
Second....................................... 28,380 6,588 1,052 .21
Third........................................ 33,040 7,092 1,404 .28
Fourth....................................... 41,242 8,792 1,911 .37
--------- ----------- ----------- ------
Total..................................... $ 141,330 $ 29,876 $ 5,489 $ 1.08
--------- ----------- ----------- ------
--------- ----------- ----------- ------
Fiscal Year 1994
Quarters
- ----------------
First........................................ $ 45,335 $ 11,533 $ 3,131 $ .62
Second....................................... 36,898 10,552 2,429 .48
Third........................................ 35,407 7,702 884 .17
Fourth....................................... 55,362 11,528 2,909 .57
--------- ----------- ----------- ------
Total..................................... $ 173,002 $ 41,315 $ 9,353 $ 1.84
--------- ----------- ----------- ------
--------- ----------- ----------- ------
</TABLE>
23
<PAGE>
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Board of Directors and Shareholders
Garan, Incorporated
We have audited the accompanying consolidated balance sheets of Garan,
Incorporated and its subsidiaries as at September 30, 1995 and 1994 and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the three fiscal years in the period ended September 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the consolidated financial position of Garan, Incorporated
and its subsidiaries as at September 30, 1995 and 1994, and the results of
consolidated operations, changes in shareholders' equity and cash flows for each
of the three fiscal years in the period ended September 30, 1995 in conformity
with generally accepted accounting principles.
Robbins, Greene, Horowitz, Lester & Co., LLP
New York, New York
November 13, 1995
24
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required to be set forth in this Item will
be contained in registrant's 1996 Proxy Statement under the caption "Election of
Directors" and is incorporated by reference into this Report.
Item 11. Executive Compensation.
The information required to be set forth in this Item will
be contained in registrant's 1996 Proxy Statement under the caption "Executive
Compensation" and is incorporated by reference into this Report.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required to be set forth in this Item will
be contained in registrant's 1996 Proxy Statement under the caption "Election of
Directors; Security Ownership of Certain Beneficial Owners and Management" and
is incorporated by reference into this Report.
Item 13. Certain Relationships and Related Transactions.
The information required to be set forth in this Item will
be contained in registrant's 1996 Proxy Statement under the caption
"Transactions with Management" and is incorporated by reference into this
Report.
25
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) Index to Consolidated Financial Statements and Consolidated
Financial Statement Schedules.
Page
----
(1) Consolidated Financial Statements.
Included in Part II, Item 8 of this
Report:
Consolidated Balance Sheets as at
September 30, 1995, and September 30, 1994. 16
Consolidated Statements of Earnings -
years ended September 30, 1995, September 30, 1994, and
September 30, 1993. 17
Consolidated Statements of Shareholders'
Equity - years ended September 30, 1995, September 30, 1994,
and September 30, 1993. 17
Consolidated Statements of Cash Flows
- - years ended September 30, 1995, September 30, 1994,
and September 30, 1993. 18
Notes to Consolidated Financial Statements
for the years ended September 30, 1995, September 30, 1994,
and September 30, 1993. 19-23
26
<PAGE>
Page
----
Independent Auditors' Report dated
November 13, 1995. 24
(2) Consolidated Financial Statement Schedules.
Independent Auditors' Report on Schedules
dated November 13, 1995, and Consent of Independent Certified
Public Accountants dated December 26, 1995. F-1
Supplemental Notes to Consolidated Finan-
cial Statements for the years ended September 30, 1995,
September 30, 1994, and September 30, 1993. F-2
Schedules other than those listed above are omitted for the reason that they are
not required, are not applicable, or the required information is shown in the
Consolidated Financial Statements or Notes thereto.
Individual financial statements of the registrant and its
subsidiaries are omitted because all subsidiaries included in the Consolidated
Financial Statements are 100% owned.
(b) No reports on Form 8-K have been filed by the registrant during
the last quarter of the period covered by this Report.
27
<PAGE>
(c) Exhibits filed as part of this Report.
Page
----
(3) Articles of Incorporation and by-laws.
(i) Restated Articles of
Incorporation was reported and filed as
an exhibit in the registrant's Annual
Report on Form 10-K for the fiscal year
ended September 30, 1988, and is
incorporated by reference into this
report.
(ii) Articles of Amendment of the
Restated Articles of Incorporation was
reported and filed as an exhibit in the
registrant's Annual Report on Form 10-K
for the fiscal year ended September 30,
1988, and is incorporated by reference
into this report.
(iii)Articles of Amendment of the
Restated Articles of Incorporation dated
November 9, 1992, was reported and filed
as an Exhibit in the registrant's Annual
Report on Form 10-K for the fiscal year
ended September 30, 1992, and is incor-
porated by reference into this report.
(iv) By-laws, as amended through
April 21, 1993, were reported and
filed as an Exhibit in the registrant's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993, and are
incorporated by reference into this
report.
(4) Instruments defining the rights of
security holders, including indentures.
Amended and Restated Rights
Agreement dated as of April 21, 1993,
between the registrant and Chemical
Bank was reported and filed as an exhibit in
the registrant's Quarterly Report on Form
10-Q for the quarter ended March 31,
1993, and is incorporated by reference
into this report.
28
<PAGE>
Page
----
(10) Material Contracts.
(i) Employment Agreement as amended
and restated on December 4, 1992, between
the registrant and Rodney Faver, was
reported and filed as an Exhibit in the
registrant's Annual Report on Form 10-K
for the fiscal year ended September 30, 1992,
and is incorporated by reference into this
report.
(ii) Amendment to Employment
Agreement dated November 15, 1995,
between the registrant and Rodney Faver. 32-33
(iii)Employment Agreement as amended
and restated on December 4, 1992, between
the registrant and Jerald Kamiel, was
reported and filed as an Exhibit in the
registrant's Annual Report on Form 10-K for
the fiscal year ended September 30, 1992,
and is incorporated by reference into this report.
(iv) Employment and Consulting
Agreement as amended and restated on
December 4, 1992, between the registrant
and Seymour Lichtenstein, was reported and
filed as an Exhibit in the registrant's
Annual Report on Form 10-K for the fiscal
year ended September 30, 1992, and is
incorporated by reference into this report.
(v) Employment Agreement as
amended and restated on December 4, 1992,
between the registrant and William J.
Wilson, was reported and filed as an
Exhibit in the registrant's Annual Report
on Form 10-K for the fiscal year ended
September 30, 1992, and is incorporated
by reference into this report.
(vi) Supplemental Executive
Retirement Plan, effective April 1,
1989, was reported and filed as an
exhibit in the registrant's Annual
Report on Form 10-K for the fiscal year
ended September 30, 1989, and is in-
corporated by reference into this
report.
29
<PAGE>
Page
----
(vii)Form of Indemnity Agreement
dated August 9, 1993, between the regist-
rant and each of its directors was re-
ported and filed as an exhibit in the
registrant's Annual Report on Form 10-K
for the fiscal year ended September 30,
1993, and is incorporated by reference
into this report.
(viii) Indemnity Agreement dated August
9, 1993, between the registrant and Alexander
J. Sistarenik was reported and filed as an
exhibit in the registrant's Annual Report on
Form 10-K for the fiscal year ended September
30, 1993, and is incorporated by reference into
this report.
(21) Schedule of Subsidiaries of registrant. 34
(27) Financial Data Schedule. 35
(d) The Consolidated Financial Statement Schedules Specified in Item
14(a)(2) are annexed.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) 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.
GARAN, INCORPORATED
December 28, 1995 By: /s/ William J. Wilson
------------------------------
William J. Wilson, Vice President
Finance and Administration
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
December 28, 1995 /s/ Seymour Lichtenstein
---------------------------------
Seymour Lichtenstein
Principal Executive Officer, Director
December 28, 1995 /s/ William J. Wilson
---------------------------------
William J. Wilson
Principal Financial Officer, Director
December 28, 1995 /s/ Alexander J. Sistarenik
---------------------------------
Alexander J. Sistarenik,
Principal Accounting Officer
December 28, 1995 /s/ Rodney Faver
---------------------------------
Rodney Faver, Director
December 28, 1995 /s/ Jerald Kamiel
---------------------------------
Jerald Kamiel, Director
December 28, 1995 /s/ Marvin S. Robinson
---------------------------------
Marvin S. Robinson, Director
31
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
Board of Directors
and Shareholders
Garan, Incorporated
In connection with our audit of the Consolidated Financial Statements
of Garan, Incorporated for the year ended September 30, 1995, incorporated into
this Annual Report on Form 10-K in Part II, Item 8, we also have audited the
supporting Consolidated Financial Statement Schedules listed in Item 14(a)(2) of
this Report. In our opinion, those Consolidated Financial Statement Schedules
present fairly, when read in conjunction with the related Consolidated Financial
Statements, the financial data required to be set forth therein.
ROBBINS, GREENE, HOROWITZ, LESTER & CO., LLP
November 13, 1995
New York, New York
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report dated November 13, 1995 included in, or incorporated
by reference in, Registration Statement Nos. 2-72544 and 33-29054 on Form S-8
and the related Prospectuses.
ROBBINS, GREENE, HOROWITZ, LESTER & CO., LLP
December 26, 1995
New York, New York
F-1
<PAGE>
GARAN, INCORPORATED AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - INTEREST INCOME
--------------------
Interest income is comprised of the following components:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Investments $ 2,155,000 $ 1,066,000 $ 1,177,000
Other 379,000 425,000 415,000
----------- ----------- -----------
$ 2,534,000 $ 1,491,000 $ 1,592,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
NOTE 16 - ACCRUED LIABILITIES
-------------------
Accrued liabilities as at September 30, 1995 and September
30, 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Payroll $ 2,663,000 $ 3,275,000
Payroll taxes 67,000 153,000
Accrued expenses 8,275,000 7,581,000
----------- -----------
$ 11,005,000 $ 11,009,000
----------- -----------
----------- -----------
</TABLE>
F-2
<PAGE>
GARAN, INCORPORATED
350 Fifth Avenue
New York, New York 10118
November 15, 1995
Mr. Rodney Faver
Route 1, Box 260
Starkville, Mississippi 10598
Dear Rodney:
We are writing to amend, as of October 1, 1995, the agreement between you
and Garan, Incorporated ("Garan") originally entered into on October 1, 1988,
and subsequently amended and restated as of October 1, 1992 (the agreement, as
amended and restated, "Employment Agreement"), with respect to your continuing
employment by Garan. We have agreed that:
A. Section 1.3, Period of Employment, shall be amended to read as
follows:
"Subject to Section 3, your employment under this Employment
Agreement shall be for a term ending September 30, 1998."
B. Section 3.2, Termination by Garan Other than for Cause, shall be
amended (i) by changing the date in the first paragraph from "October 1, 1995"
to "October 1, 1998", and (ii) by changing the date in Paragraph 3.2.b from
"September 30, 1995" to "September 30, 1998."
<PAGE>
Mr. Rodney Faver November 15, 1995
Page 2
C. Section 3.5, Disability, shall be amended by chang-ing the date in
Paragraph 3.5.a from "September 30, 1995" to "September 30, 1998."
D. Section 4.2, Non-Competition, shall be amended by changing the
date in Paragraph 4.2.b from "October 1, 1995" to "October 1, 1998."
E. In all other respects, the Employment Agreement shall be
unchanged.
If the foregoing correctly sets froth our agreement, please sign and return
the enclosed copy of this letter.
Sincerely,
GARAN, INCORPORATED
By: /S/ JERALD KAMIEL
------------------------
Jerald Kamiel, President
AGREED AND ACCEPTED:
/S/ RODNEY FAVER
- ----------------------
Rodney Faver
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Name of Corporation State of Incorporation
------------------- ----------------------
Garan Central America Corp. Virginia
Garan Export Corp. New York
Garan Manufacturing Corp. Virginia
Garan Services Corp. Delaware
Garan de El Salvador, S.A. de C.V. El Salvador
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF EARNINGS AND BALANCE SHEETS OF GARAN,
INCORPORATED ANNEXED HERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> SEP-30-1995
<CASH> 8,649,000
<SECURITIES> 20,424,000
<RECEIVABLES> 26,262,000
<ALLOWANCES> 514,000
<INVENTORY> 29,454,000
<CURRENT-ASSETS> 88,685,000
<PP&E> 32,814,000
<DEPRECIATION> 17,745,000
<TOTAL-ASSETS> 120,431,000
<CURRENT-LIABILITIES> 20,237,000
<BONDS> 3,061,000
<COMMON> 2,535,000
0
0
<OTHER-SE> 91,780,000
<TOTAL-LIABILITY-AND-EQUITY> 120,431,000
<SALES> 141,330,000
<TOTAL-REVENUES> 141,330,000
<CGS> 111,454,000
<TOTAL-COSTS> 111,454,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,000
<INCOME-PRETAX> 8,999,000
<INCOME-TAX> 3,510,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,489,000
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 0
</TABLE>
