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, 2000 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, 2000
Common Stock (no par value) 5,071,838 shares
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GARAN, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page #
Item 1. Consolidated Statements of Earnings
Three Months Ended June 30, 2000 and 1999 4
Consolidated Statements of Earnings
Nine Months Ended June 30, 2000 and 1999 5
Consolidated Balance Sheets
June 30, 2000 and September 30, 1999 6
Consolidated Statements of Cash Flows
Nine Months ended June 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of operations 9
Item 3. Qualitative and Quantitative Disclosure about
Market Risk 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
PART I. - FINANCIAL INFORMATION
GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
THREE MONTHS ENDED
6/30/00 6/30/99
----------- -----------
Net sales $47,941,000 $45,836,000
Cost of sales 35,900,000 33,999,000
----------- -----------
Gross margin on sales 12,041,000 11,837,000
Selling and administrative expenses 7,258,000 6,292,000
Interest on capitalized leases 29,000 21,000
Interest income (519,000) (707,000)
----------- -----------
Earnings before provision
for income taxes 5,273,000 6,231,000
Provision for income taxes 2,188,000 2,555,000
----------- -----------
Net earnings $ 3,085,000 $ 3,676,000
=========== ===========
Earnings per share data:
Earnings per share - Basic $ 0.60 $ .70
- Diluted $ 0.60 $ .69
Average common shares outstanding - Basic 5,264,000 5,178,000
- Diluted 5,280,000 5,218,000
Dividends paid per share $ 0.25 $ 0.25
<PAGE>
GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
NINE MONTHS ENDED
6/30/00 6/30/99
----------- -----------
Net sales $155,954,000 $143,529,000
Cost of sales 119,108,000 106,650,000
----------- -----------
Gross margin on sales 36,846,000 36,879,000
Selling and administrative expenses 21,228,000 18,826,000
Interest on capitalized leases 75,000 67,000
Interest income (1,902,000) (2,085,000)
----------- -----------
Earnings before provision
for income taxes 17,445,000 20,071,000
Provision for income taxes 7,239,000 8,161,000
----------- -----------
Net earnings $10,206,000 $11,910,000
=========== ===========
Earnings per share data:
Earnings per share - Basic $ 1.94 $ 2.30
- Diluted $ 1.93 $ 2.28
Average common shares outstanding- Basic 5,264,000 5,178,000
- Diluted 5,280,000 5,218,000
Dividends paid per share $ 1.55 $ 1.40
<PAGE>
GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
06/30/00 9/30/99
ASSETS ------------- ------------
Current Assets:
Cash and cash equivalents $ 1,744,000 $ 12,952,000
U.S. Government securities - short-term 0 0
Accounts receivable, less estimated
uncollectibles of $512,000 at
6/30/00 and 9/30/99 38,991,000 59,381,000
Inventories 65,867,000 37,333,000
Other current assets 6,957,000 6,706,000
----------- -----------
Total current assets 113,559,000 116,372,000
U.S. Government Securities - Long-term 20,638,000 25,435,000
Property, plant and equipment, less
accumulated depreciation and amortization 15,193,000 15,393,000
Other assets 7,544,000 6,492,000
------------ ------------
TOTAL $ 156,934,000 $ 163,692,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 11,891,000 $ 9,959,000
Accrued liabilities 20,870,000 22,495,000
Federal and state income taxes payable 2,021,000 6,496,000
Current portion of capitalized leases 20,000 20,000
------------ ------------
Total current liabilities 34,802,000 38,970,000
------------ ------------
Capitalized lease obligations, net of
current portion 2,130,000 2,150,000
------------ ------------
Deferred income taxes 2,285,000 2,445,000
------------ ------------
Shareholders' Equity:
Preferred stock ($10 par value) 500,000
shares authorized; none issued
Common stock (no par value) 15,000,000
shares authorized; issued 5,071,838
at 6/30/00 and 5,305,737 at 9/30/99 2,536,000 2,653,000
Additional paid-in-capital 6,319,000 11,272,000
Unamortized value of restricted stock (3,286,000) (3,925,000)
Retained earnings 112,148,000 110,127,000
------------ ------------
Total shareholders' equity 117,717,000 120,127,000
------------ ------------
TOTAL $ 156,934,000 $ 163,692,000
============= =============
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GARAN, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
06/30/00 06/30/99
Cash Flows From Operating Activities: ------------- ------------
Net earnings $ 10,206,000 $ 11,910,000
Adjustments to reconcile to net cash
provided by operating activities:
Deferred compensation 639,000 142,000
Depreciation and amortization 3,678,000 2,952,000
Deferred income taxes (160,000) (310,000)
Changes in assets and liabilities:
U.S. Government securities - Short-term 0 5,597,000
Accounts receivable 20,390,000 12,831,000
Inventories (28,534,000) (25,719,000)
Other current assets (251,000) 205,000
Accounts payable 1,932,000 2,920,000
Accrued liabilities (1,625,000) (27,000)
Income taxes payable (4,475,000) (2,004,000)
Other assets (1,052,000) (1,429,000)
------------ ------------
Net Cash Provided by Operating 748,000 7,068,000
Activities ------------ ------------
Cash Flows From Investing Activities:
Sale of U.S. Gov't securities - Long-term 17,926,000 18,155,000
Purchase of U.S. Gov't securities -
Long-term (13,129,000) (18,707,000)
Additions to property, plant, and (3,478,000) (3,608,000)
Equipment ------------ ------------
Net Cash provided by (used for)
Investing Activities 1,319,000 (4,160,000)
------------ ------------
Cash Flows From Financing Activities:
Payment of dividends (8,185,000) (7,238,000)
Repayment of capitalized lease obligations (20,000) (137,000)
Proceeds from exercised stock options 274,000 280,000
Repurchase of Common Stock (5,344,000) 0
------------ ------------
Net Cash used for Financing Activities (13,275,000) (7,095,000)
------------ ------------
Net (decrease) increase in Cash and Cash
Equivalents (11,208,000) (4,187,000)
Cash and Cash Equivalents At Beginning
of Period 12,952,000 9,599,000
------------ ------------
Cash and Cash Equivalents At End of Period $ 1,744,000 $ 5,412,000
============ ============
Supplemental cash flow Disclosures
Cash Paid During The Period For:
Interest $ 75,000 $ 67,000
Income taxes 11,660,000 10,400,000
============ ============
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GARAN, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(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 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 as follows:
2000 1999
------------------------------ -------------------------------
Income Shares Per Share Income Shares Per Share
Basic EPS $10,206,000 5,264,000 $1.94 $11,910,000 5,178,000 $2.30
========= ========
Effect of
dilutive options 16,296 40,000
-------------------- ----------------------
$10,206,000 5,280,296 $1.93 $11,910,000 5,218,000 $2.28
============================= ===============================
3. Inventories consist of the following:
06/30/00 09/30/99
----------- -----------
Raw Materials $11,333,000 $ 6,997,000
Work in Process 11,126,000 6,932,000
Finished Goods 43,408,000 23,404,000
----------- -----------
$65,867,000 $37,333,000
=========== ===========
4. Common Stock Repurchase
On April 24, 2000, the registrant repurchased 250,000 shares of its
Common Stock in a single block purchase from an institutional investor at
the market price.
<PAGE>
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 significant customers or personnel, availability of raw materials,
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.
RESULTS OF OPERATIONS
Three and Nine-Month Periods Ended June 30, 2000 and June 30, 1999
Net sales for the three-month period ended June 30, 2000, were $47,941,000,
compared to $45,836,000, for the same period last year. Net sales for the
first nine-months of fiscal 2000 were $155,954,000, compared to
$143,529,000 for the same period last year. Net earnings for the three-
month period were $3,085,000, equal to $0.60 per share, compared to
$3,676,000, or $0.70 per share, last year. Net earnings for the nine-month
period were $10,206,000, equal to $1.94 per share compared to $11,910,000,
or $2.30 per share, last year. The increase in net sales for both periods
was due primarily to the increase in units shipped in the registrant's
Childrenswear Division offset in part by the ending of sales of the
registrant's Women's Plus products.
Gross margin for the three-months ended June 30, 2000, was $12,041,000, or
25.1% of net sales, compared to $11,837,000, or 25.8% of net sales, for the
comparable period in fiscal 1999. Gross margin for the nine-months ended
June 30, 2000, was $36,846,000, or 23.6% of net sales, compared to
$36,879,000, or 25.7% of net sales, for the comparable period last year.
The decrease in gross margin in both percentage of net sales and absolute
dollars for both periods was due primarily to expenses related to the start-
up of additional manufacturing facilities in El Salvador and Honduras and a
domestic facility dedicated to the support of those operations and changes
in customer programs (product mix).
Selling and administrative expenses for the three-months ended June 30,
2000, were $7,258,000, or 15.1% of net sales as compared to $6,292,000, or
13.7% of net sales, for the comparable period last year. Selling and
administrative expenses for the nine-months ended June 30, 2000, were
$21,228,000, or 13.6% of net sales, as compared to $18,826,000, or 13.1% of
net sales, for the comparable period last year. The increase in both
periods in dollars and as a percentage of net sales primarily resulted from
new Management Information Systems and data and voice communication
systems. Additionally, the registrant started a distribution facility
which is not yet fully operational.
Interest income for the three-months ended June 30, 2000, decreased to
$519,000 from $707,000 for the comparable period last year. Interest
income for the nine-months ended June 30, 2000, was $1,902,000 as compared
to $2,085,000 for the comparable period last year. The decrease in interest
income for both periods was due primarily to a decline in the level of
investments.
FINANCIAL CONDITION
At June 30, 2000, working capital was $78,757,000, an increase of
$1,355,000 from September 30, 1999, working capital of $77,402,000.
Shareholders' equity at September 30, 1999, was $120,127,000 or $22.64 book
value per share, as compared to $117,717,000 or $23.21 book value per
share, at June 30, 2000. The decrease in shareholders' equity was due
primarily to the registrant's repurchase of 250,000 shares of its stock,
which took place on April 24, 2000, in a single block purchase from an
institutional investor at the market price.
Accounts receivable were $38,991,000 at June 30, 2000, a decrease of
$20,390,000 over the balance at September 30, 1999. Because the
registrant's business is seasonal, the receivable balance should be
compared to the balance of $29,732,000 at June 30, 1999, rather than the
September 30, 1999 year-end balance. The increase in the receivable
balance at June 30, 2000, as compared to the balance at June 30, 1999, was
primarily due to a change in shipping schedules with increased shipping
during the last month of the quarter.
Inventory increased to $65,867,000 at June 30, 2000, from $37,333,000 at
September 30, 1999. Because the registrant's business is seasonal, and
certain programs are manufactured throughout the year but shipped primarily
in the fourth quarter, the inventory should be compared to the inventory of
$58,495,000 at June 30, 1999, rather than the September 30, 1999, year-end
prior balance. The inventory increase from June 30, 1999, to June 30,
2000, was due to elevated inventory levels in both finished goods and raw
materials as a result of higher production levels.
YEAR 2000
The registrant has successfully updated its management information systems
and in doing so dealt with its Year 2000 compliance issues. The registrant
had no material problems related to the millennium date change on
January 1, 2000, and does not anticipate that any Y2K issues will have any
material adverse effect on its operations and financial condition. At this
time, the registrant continues to believe that the most likely "worst-case"
scenario involves potential disruptions in areas in which the registrant's
operations must rely on third parties whose systems may not work properly
at all times after January 1, 2000, including failures impacting on the
registrant's Central American operations. However, no such failures have
occurred, and while such failures could affect important operations of the
registrant, either directly or indirectly, the registrant cannot at present
estimate either the likelihood or the potential cost of such failures.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not believe it is exposed to market risks with respect to
any of its investments; the Company does not utilize market rate sensitive
instruments for trading or other purposes. The Company's investments
consist primarily of U.S. Government securities with maturities of three
years or less.
<PAGE>
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 June 30, 2000.
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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: /s/ Seymour Lichtenstein
-----------------------------------
Seymour Lichtenstein
Principal Executive Officer
BY: /s/ William J. Wilson
----------------------------------
William J. Wilson
Principal Financial Officer
DATE: August 11, 2000
