SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998 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, NY 10118
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 563-2000
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 than the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report.
Class Outstanding June 30, 1998
Common Stock (no par value) 5,128,719 shares
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PART I. - FINANCIAL INFORMATION
GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
6/30/98 6/30/97
------------ -------------
<S> <C> <C>
Net sales $ 43,706,000 $ 29,568,000
Cost of sales 33,267,000 22,088,000
------------- -------------
Gross margin on sales 10,439,000 7,480,000
Selling and administrative expenses 5,980,000 5,095,000
Interest on capitalized leases 27,000 35,000
Interest income (729,000) (705,000)
------------ ------------
Earnings before provision
for income taxes 5,161,000 3,055,000
Provision for income taxes 2,090,000 1,222,000
------------ ------------
Net earnings $ 3,071,000 $ 1,833,000
============ ============
Earnings per share data:
Earnings per share $ 0.60 $ 0.36
Diluted $ 0.60 $ 0.36
Average common shares outstanding 5,103,000 5,070,000
Diluted 5,137,000 5,070,000
Dividends paid per share $ 0.20 $ 0.20
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<TABLE>
GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
06/30/98 06/30/97
------------- -------------
<S> <C> <C>
Net sales $122,515,000 $ 98,172,000
Cost of sales 93,358,000 74,457,000
------------ ------------
Gross margin on sales 29,157,000 23,715,000
Selling and administrative expenses 17,074,000 16,068,000
Interest on capitalized leases 83,000 87,000
Interest income (2,343,000) (2,089,000)
------------ ------------
Earnings before provision
for income taxes 14,343,000 9,649,000
Provision for income taxes 5,776,000 3,838,000
------------ ------------
Net earnings $ 8,567,000 $ 5,811,000
============ ============
Earnings per share data:
Earnings per share $ 1.68 $ 1.14
Diluted $ 1.67 $ 1.14
Average common shares outstanding 5,103,000 5,070,000
Diluted 5,137,000 5,070,000
Dividends paid per share $ 1.00 $ 0.80
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<TABLE>
GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
06/30/98 9/30/97
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 572,000 $ 8,660,000
U.S. Government securities - short-term 15,582,000 16,223,000
Accounts receivable, less estimated
uncollectibles of $518,000 at
6/30/98 and $510,000 at 9/30/97 24,727,000 31,092,000
Inventories 49,067,000 33,731,000
Other current assets 3,917,000 4,308,000
------------ ------------
Total current assets 93,865,000 94,014,000
U.S. Government Securities - long-term 21,109,00 19,853,000
Property, plant and equipment, less
accumulated depreciation and amortization 13,410,000 13,470,000
Other assets 5,413,000 5,049,000
------------ -----------
TOTAL $ 133,797,000 $ 132,386,000
============ ============
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<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 5,912,000 $ 6,589,000
Accrued liabilities 15,534,000 16,434,000
Federal and state income taxes payable 1,805,000 2,454,000
Current portion of capitalized leases 130,000 130,000
------------ ------------
Total current liabilities 23,381,000 25,607,000
============ ============
Capitalized lease obligations, net of
current portion 2,177,000 2,807,000
Deferred income taxes 2,976,000 3,186,000
------------ ------------
Shareholders' Equity:
Preferred stock ($10 par value) 500,000
shares authorized; none issued
Common stock (no par value) 15,000,000
shares authorized; 5,128,719 issued at
6/30/98 and 5,069,892, at 9/30/97 2,564,000 2,535,000
Additional paid-in-capital 6,792,000 5,821,000
Retained earnings 95,907,000 92,430,000
----------- ------------
Total shareholders' equity 105,263,000 100,786,000
----------- ------------
TOTAL $ 133,797,000 $ 132,386,000
============ ============
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<TABLE>
GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
06/30/98 06/30/97
------------ -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 8,567,000 $ 5,811,000
Adjustments to reconcile net cash
Provided by Operating Actitivies:
Depreciation and amortization 2,517,000 2,244,000
Provision for losses on accounts receivable 10,000 61,000
Deferred income taxes (210,000) (60,000)
Changes in assets and liabilities:
U.S. Government Securities - short-term 113,000 1,376,000
Accounts receivable 6,355,000 9,947,000
Inventories (15,336,000) (14,981,000)
Other current assets 391,000 1,766,000
Accounts payable (677,000) 1,406,000
Accrued liabilities (900,000) 463,000
Income taxes payable (649,000) (909,000)
Other assets (364,000) (570,000)
----------- ------------
Net Cash provided by Operating Activities (183,000) 6,554,000
----------- ------------
Cash Flows From Investing Activities:
Sale of U.S. Gov't securities - long-term 5,063,000 6,028,000
Purchase of U.S. Gov't securi-
ties - long-term (5,791,000) (21,721,000)
Additions to property plant and equipment (2,457,000) (821,000)
Proceeds from sales of property,
plant and equipment 0 135,000
----------- ------------
Net Cash used for Investing Activities (3,185,000) (16,379,000)
----------- ------------
Cash Flows From Financing Activities:
Payment of dividends (5,090,000) (4,056,000)
Repayment of capitalized lease obligations (630,000) (124,000)
Proceeds from exercised stock options 1,000,000 0
------------ ------------
Net Cash used for Financing Activities (4,720,000) (4,180,000)
------------ ------------
Net decrease in Cash and Cash Equivalents (8,088,000) (14,005,000)
Cash and Cash Equivalents At Beginning
of Period 8,660,000 20,587,000
----------- ------------
Cash and Cash Equivalents At End of Period $ 572,000 $ 6,582,000
=========== ============
Supplemental Disclosures
Cash Paid During The Period For:
Interest $ 83,000 $ 87,000
Income taxes 6,743,000 4,350,000
=========== ============
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GARAN, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
1. In the opinion of management, all adjustments necessary to a fair
statement of the results of operations have been reflected.
2. Earnings per share are calculated on the basis of the weighted average
number of common shares outstanding during the period in accordance with the
provisions of Statement of Financial Accounting Standards No. 128 as follows:
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1998 1997
---------------------------------- ---------------------------------
Income Shares Per Share Income Shares Per Share
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $8,567,000 5,103,000 $ 1.68 $ 5,811,000 5,070,000 $ 1.14
========= ========
Effect of dilutive
options 34,000
--------------------- ------------------------
Diluted EPS $8,567,000 5,137,000 $ 1.67 5,811,000 5,070,000 $ 1.14
================================== =================================
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<CAPTION>
3. Inventories consist of the following:
6/30/98 9/30/97
------------ -------------
<S> <C> <C>
Raw Materials $ 7,633,000 $ 6,697,000
Work in process 7,352,000 6,921,000
Finished Goods 34,082,000 20,113,000
----------- ------------
$ 49,067,000 $ 33,731,000
============ =============
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ITEM 2.
GARAN, INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and elsewhere in this report
contain "forward-looking statements" based upon management's expectations and
beliefs concerning future events impacting the registrant. Actual results of
operations or financial condition may differ because of business conditions in
the apparel industry generally, competition, the addition or loss of a
significant customer or personnel, the timing of orders placed by the
registrant's customers, and such other risk factors as may be identified from
time to time in the registrant's filings with the Securities and Exchange
Commission.
FINANCIAL CONDITION
At June 30, 1998, working capital was $70,484,000, an increase of $ 2,077,000
from September 30, 1997, working capital of $68,407,000. The increase was due
primarily to a seasonal increase in inventory offset by decreases in accounts
receivable and cash and cash equivalents. Shareholders' equity at June 30,
1998, was $105,263,000, or $20.52 book value per share, as compared to
$100,786,000, or $19.88 book value per share, at September 30, 1997.
RESULTS OF OPERATIONS
Three and Nine Month Periods Ended June 30, 1998, and June 30, 1997.
Net sales for the third quarter of fiscal 1998 were $43,706,000, compared to
$29,568,000 for the same period last year. Net earnings for the third quarter
were $3,071,000, equal to $0.60 per share, compared to $1,833,000, or $0.36
per share, last year. Net sales for the first nine months of fiscal 1998 were
$122,515,000 compared to $98,172,000 last year. Net earnings for the nine
month period were $8,567,000, equal to $1.68 per share, compared to
$5,811,000, or $1.14 per share, last year. The increase in net sales for both
periods was principally attributable to an increase in units sold.
Gross margin for the three month period ended June 30, 1998, was $10,439,000,
or 23.9% of net sales, compared to $7,480,000, or 25.3% of net sales, for the
comparable period last year. Gross margin for the nine months ended June 30,
1998, was $29,157,000, or 23.8% of net sales, compared to $23,715,000, or
24.2% of net sales, for the comparable period last year. The increase in
gross margin dollars was due to the increased sales volume. The slight
reduction in the gross profit percentage was due to changes in the product
mix.
Selling and administrative expenses for the three months ended June 30, 1998,
were $5,980,000, or 13.7% of net sales, as compared to $5,095,000, or 17.2% of
net sales, for the comparable period last year. Selling and administrative
expenses for the nine-months ended June 30, 1998, were $17,074,000, or 13.9%
of net sales, as compared to $16,068,000, or 16.4% of net sales, for the
comparable period last year. The increase in selling and administrative
expenses was a result of increased volume related expenses and advertising
costs. The decrease in selling and administrative expenses as a percentage of
net sales resulted from the increased sales volume.
YEAR 2000
The registrant's principal computer systems consist of (i) management
information software ("MIS"), such as payroll, accounts receivable, and
general ledger, (ii) electronic data interchange ("EDI") for order-taking,
invoicing, and the like between the registrant and its major customers and
suppliers, and (iii) systems involved in the registrant's manufacturing
operations. The registrant has either purchased or plans to purchase new
software to replace all of the components of its MIS systems which were not
Year 2000 compliant, has purchased and is implementing new, Year 2000
compliant EDI software, and does not require any material change to its
manufacturing systems for Year 2000 compliance. Although the registrant could
incur operating problems if it were unable to receive orders from its
customers through EDI if the customer is not EDI compliant, the registrant
believes that its major customers either have completed or are in the process
of completing Year 2000 compliance projects with respect to their EDI systems.
The entire cost of the registrant's Year 2000 compliance program is not
material to the registrant, and the registrant anticipates that all of its
computer systems will be Year 2000 compliant by June 30, 1999.
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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.
GARAN, INCORPORATED
/s/ SEYMOUR LICHTENSTEIN
BY: ----------------------------
Seymour Lichtenstein
Principal Executive Officer
/s/ WILLIAM J. WILSON
BY: ----------------------------
William J. Wilson
Principal Financial Officer
DATE: August 13, 1998
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF EARNINGS AND BALANCE SHEETS OF GARAN, INCORPORATED
AND SUBSIDIARIES ANNEXED HERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000039917
<NAME> GARAN, INCORPORATED
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1998
<PERIOD-START> APR-01-1998 OCT-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 572,000 572,000
<SECURITIES> 15,582,000 15,582,000
<RECEIVABLES> 25,245,000 25,245,000
<ALLOWANCES> 518,000 518,000
<INVENTORY> 49,067,000 49,067,000
<CURRENT-ASSETS> 93,865,000 93,865,000
<PP&E> 34,597,000 34,597,000
<DEPRECIATION> 21,186,000 21,186,000
<TOTAL-ASSETS> 133,797,000 133,797,000
<CURRENT-LIABILITIES> 23,381,000 23,381,000
<BONDS> 2,177,000 2,177,000
<COMMON> 2,564,000 2,564,000
0 0
0 0
<OTHER-SE> 102,699,000 102,699,000
<TOTAL-LIABILITY-AND-EQUITY> 133,797,000 133,797,000
<SALES> 43,706,000 122,515,000
<TOTAL-REVENUES> 43,706,000 122,515,000
<CGS> 33,267,000 93,358,000
<TOTAL-COSTS> 33,267,000 93,358,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 27,000 83,000
<INCOME-PRETAX> 5,161,000 14,343,000
<INCOME-TAX> 2,090,000 5,776,000
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,071,000 8,567,000
<EPS-PRIMARY> 0.60 1.68
<EPS-DILUTED> 0.60 1.67
</TABLE>
