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 December 31, 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 December 31, 1998
Common Stock (no par value) 5,139,737 shares
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PART I. - FINANCIAL INFORMATION
GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
12/31/98 12/31/97
____________ _____________
<S> <C> <C>
Net sales $ 39,037,000 $ 37,711,000
Cost of sales 28,924,000 28,894,000
____________ ____________
Gross margin on sales 10,113,000 8,817,000
Selling and administrative expenses 5,726,000 5,462,000
Interest on capitalized leases 24,000 27,000
Interest income (761,000) (797,000)
___________ ___________
Earnings before provision
for income taxes 5,124,000 4,125,000
Provision for income taxes 2,076,000 1,651,000
___________ ___________
Net earnings $ 3,048,000 $ 2,474,000
=========== ===========
Earnings per share data:
Earnings per share - Basic $ 0.59 $ 0.49
- Diluted $ 0.58 $ 0.48
Average common shares outstanding- Basic 5,137,000 5,070,000
- Diluted 5,177,000 5,122,000
Dividends paid per share $ 0.90 $ 0.60
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GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
12/31/98 9/30/98
____________ _____________
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,570,000 $ 9,599,000
U.S. Government securities - short-term 25,279,000 22,216,000
Accounts receivable, less estimated
uncollectibles of $517,000 at
12/31/98 and 9/30/98 22,625,000 42,563,000
Inventories 43,602,000 32,776,000
Other current assets 5,223,000 4,962,000
Total current assets 100,299,000 112,116,000
U.S. Government Securities - Long-term 18,444,000 15,315,000
Property, plant and equipment, less
accumulated depreciation and amortization 13,195,000 13,345,000
Other assets 5,599,000 5,397,000
TOTAL $ 137,537,000 $ 146,173,000
============ ============
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<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 6,028,000 $ 8,555,000
Accrued liabilities 14,542,000 18,575,000
Federal and state income taxes payable 3,491,000 4,000,000
Current portion of capitalized leases 137,000 137,000
Total current liabilities 24,198,000 31,267,000
Capitalized lease obligations, net of
current portion 2,143,000 2,170,000
Deferred income taxes 2,879,000 3,029,000
Shareholders' Equity:
Preferred stock ($10 par value) 500,000
shares authorized; none issued
Common stock (no par value) 15,000,000
shares authorized; issued 5,139,737
at 12/31/98 and 5,128,719 at 9/30/98 2,570,000 2,564,000
Additional paid-in-capital 6,973,000 6,792,000
Retained earnings 98,774,000 100,351,000
Total shareholders' equity 108,317,000 109,707,000
TOTAL $ 137,537,000 $ 146,173,000
============= =============
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GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
12/31/98 12/31/97
_____________ _____________
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 3,048,000 $ 2,474,000
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 914,000 703,000
Provision for losses on accounts 0 5,000
receivable
Deferred income taxes (150,000) 90,000
Changes in assets and liabilities:
U.S. Government Securities - Short-term 1,124,000 (1,576,000)
Accounts receivable 19,938,000 14,197,000
Inventories (10,826,000) (4,023,000)
Other current assets (261,000) 57,000
Accounts payable (2,527,000) (1,973,000)
Accrued liabilities (4,033,000) (2,972,000)
Income taxes payable (509,000) (75,000)
Other assets (202,000) (169,000)
Net Cash Flows Provided by Operating 6,516,000 6,738,000
Activities
____________ ____________
Cash Flows From Investing Activities:
Sale of U.S. Gov't securities - Long-term 5,404,000 1,032,000
Purchase of U.S. Gov't securi-
ties - Long-term (12,720,000) (2,507,000)
Additions to property, plant, and (764,000) (427,0000)
equipment
Net Cash Flows From Investing Activities (8,080,000) (1,902,000)
____________ ____________
Cash Flows From Financing Activities:
Payment of dividends (4,625,000) (3,041,000)
Repayment of capitalized lease obligations (27,000) (526,000)
Proceeds from exercised stock options 187,000 0
Net Cash Flows From Financing Activities (4,465,000) (3,567,000)
Net increase (decrease)in Cash and Cash
Equivalents (6,029,000) 1,269,000
Cash and Cash Equivalents At Beginning
of Period 9,599,000 8,660,000
Cash and Cash Equivalents At End of Period $ 3,570,000 $ 9,929,000
============ ============
Supplemental cash flow Disclosures
Cash Paid During The Period For:
Interest $ 24,000 $ 27,000
Income taxes 2,710,000 5,819,000
============ ============
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<PAGE> GARAN, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
(UNAUDITED)
1. In the opinion of management, all adjustments necessary to a fair
statement of the results of operations have been reflected.
2. Basic and diluted earnings per share, which are calculated on the basis
of the weighted average number of common shares outstanding during the
period in accordance with the provisions of the Statements of Financial
Accounting Standards No. 128, are as follows:
1998 1997
----------------------------- -------------------------------
Income Shares Per Share Income Shares Per Share
Basic EPS $3,048,000 5,136,731 $0.59 $2,474,000 5,069,892 $0.49
========= ========
Effect of
dilutive options 39,872 51,771
------------------- ----------------------
$3,048,000 5,176,603 $0.58 $2,474,000 5,121,663 $0.48
============================= ===============================
3. Inventories consist of the following:
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<CAPTION>
12/31/98 09/30/98
____________ _____________
<S> <C> <C>
Raw Materials $ 6,618,000 $ 7,305,000
Work in Process 9,133,000 5,560,000
Finished Goods 27,851,000 19,911,000
___________ ____________
$43,602,000 $32,776,000
=========== ===========
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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 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 significant customers 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 December 31, 1998, working capital was $76,101,000 a decrease of
$4,748,000 from working capital at September 30, 1998, of $80,849,000.
Substantially all of the decrease was due to the special dividend of $0.70
per share, in addition to the regular quarterly dividend of $0.20 per
share, which were paid in December, 1998. Shareholders' equity at December
31, 1998, was $108,317,000, or $21.07 book value per share, as compared to
$109,707,000, or $21.39 book value per share, at September 30, 1998.
RESULTS OF OPERATIONS
Three Month Period Ended December 31, 1998.
Net sales for the three month period ended December 31, 1998, were
$39,037,000 compared to $37,711,000, for the same period in fiscal 1998.
Net earnings for the three month period were $3,048,000, equal to $0.59 per
share, compared to $2,474,000, or $0.49 per share, last year. The increase
in net sales for the quarter was primarily a result of an increase in total
units shipped.
Gross margin for the three months ended December 31, 1998, was $10,113.000,
or 25.9% of net sales, compared to $8,817,000, or 23.4% of net sales, for
the comparable period in fiscal 1998. The increase in gross margin in
dollar terms was due primarily to the increased sales volume and as a
percentage of sales was due to improvements in operating efficiency.
Selling and administrative expenses for the three months ended
December 31, 1998, were $5,726,000, or 14.7% of net sales, as compared to
$5,462,000, or 14.5% of net sales, for the comparable period in fiscal
1998. The increase in selling and administrative expenses was a result of
continued investment in improving internal operating systems and increases
in expenses related to volume.
Year 2000
The Company's principal MIS computer systems consist of (1) accounting
software, such as payroll, accounts receivable, and general ledger, (2)
electronic data interchange ("EDI") for receiving orders, invoicing, and
the like between the registrant and its major customers and suppliers, and
(3) customer order management systems. In addition, the registrant uses
computer systems in its manufacturing operations. The registrant has
purchased software to replace all of the components of its MIS systems
which were not Year 2000 compliant and is implementing the Year 2000
compliant EDI software for 1, 2 and 3 above. The registrant 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 Company anticipates that all of its MIS computer
systems will be Year 2000 compliant by June 30, 1999.
Qualitative and Quantitative Disclosure about Market Risk
The registrant does not believe it is exposed to market risks with respect
to any of its investments; the registrant does not utilize market rate
sensitive instruments for trading or other purposes. The registrant's
investments consist primarily of U.S. Government securities with maturities
of four years of less.
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PART II. - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit 27. Financial Data Schedule
b. Reports on Form 8-K
No reports have been filed on Form 8-K during the quarter
ended December 31, 1998.
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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
BY:Seymour Lichtenstein
Seymour Lichtenstein
Principal Executive Officer
BY:William J. Wilson
William J. Wilson
Principal Financial Officer
DATE: February 12, 1999
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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>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-1-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,570,000
<SECURITIES> 25,279,000
<RECEIVABLES> 23,142,000
<ALLOWANCES> 517,000
<INVENTORY> 43,602,000
<CURRENT-ASSETS> 100,299,000
<PP&E> 33,971,000
<DEPRECIATION> 20,776,000
<TOTAL-ASSETS> 137,537,000
<CURRENT-LIABILITIES> 24,198,000
<BONDS> 2,143,000
<COMMON> 2,570,000
0
0
<OTHER-SE> 105,747,000
<TOTAL-LIABILITY-AND-EQUITY> 137,537,000
<SALES> 39,037,000
<TOTAL-REVENUES> 39,037,000
<CGS> 28,924,000
<TOTAL-COSTS> 28,924,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,000
<INCOME-PRETAX> 5,124,000
<INCOME-TAX> 2,076,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,048,000
<EPS-PRIMARY> .59
<EPS-DILUTED> .58
</TABLE>
