UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 1-9411
BAILEY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3229215
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
700 Lafayette Road, P.O. Box 307, Seabrook, NH 03874
(Address of principal executive offices) (Zip Code)
(603) 474-3011
(Registrant's telephone number, including area code)
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 ____
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<PAGE>
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the last practicable
date.
As of June 10, 1995, the number of shares of $.10 par
value per share common stock outstanding was 5,353,558.
PART 1. - FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have
been prepared by Bailey Corporation (the "Company"), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. While
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, the Company believes that the disclosures made herein are
adequate to make the information presented not misleading. It is
recommended that these condensed statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended July 31, 1994.
In the opinion of the Company all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the financial
position of Bailey Corporation and Subsidiaries as of April 30, 1995, the
results of their operations for the three and nine months ended April 30, 1995
and May 1, 1994, and the cash flows for the nine months then ended, have been
included.
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<PAGE>
BAILEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
APRIL 30, 1995 and JULY 31, 1994
(in thousands, except share and per share data)
<TABLE>
Apr 30 Jul 31
1995 1994
------ ------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 810 $ 201
Restricted cash 500 500
Accounts receivable 21,344 19,809
Inventories:
Raw materials 7,640 7,433
Work-in-process 2,314 2,480
Finished goods 4,003 3,548
Tooling 6,951 2,039
------- -------
Total inventories 20,908 15,500
------- -------
Prepaid expenses and other current assets 2,078 1,419
Deferred income taxes 1,142 1,142
------- -------
Total current assets 46,782 38,571
Property, plant and equipment, net 46,671 43,240
Other assets, net 10,599 9,910
------- -------
$104,052 $91,721
======== =======
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<PAGE>
___LIABILITIES AND STOCKHOLDERS' EQUITY___
Current liabilities:
Bank overdraft $ 3,535 $ 321
Short-term debt 5,424 3,846
Current portion of long-term debt 2,640 1,690
Accounts payable 25,170 18,554
Accrued liabilities and other current liabilities 4,604 6,468
Income taxes payable 494 126
-------- -------
Total current liabilities 41,867 31,005
Long-term debt, less current portion 34,622 35,438
Other long-term liabilities 2,043 2,104
Deferred income taxes 2,574 2,574
-------- -------
Total liabilities $ 81,106 $71,121
-------- -------
Stockholders' equity:
Common stock 539 538
Additional paid-in capital 13,612 13,587
Retained earnings 9,364 6,781
Minimum pension liability adjustment (306) (306)
Treasury stock (263) -
-------- -------
Total stockholders' equity 22,946 20,600
-------- -------
$104,052 $91,721
======== =======
</TABLE>
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<PAGE>
BAILEY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 1995 AND MAY 1, 1994
(in thousands, except share and per share data)
<TABLE>
Three Months Ended Nine Months Ended
Apr 30 May 01 Apr 30 May 01
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $47,729 $30,677 $133,963 $84,233
------- ------- -------- -------
Cost and expenses:
Cost of products sold 41,931 25,843 115,946 71,383
Selling, general and administrative 3,834 2,736 10,921 6,823
------- ------- ------- -------
Operating income 1,964 2,098 7,096 6,027
------- ------- ------- -------
Interest expense (net) 969 406 2,721 1,267
------- ------- ------- -------
Income before income taxes 995 1,692 4,375 4,760
Provision for income taxes 407 798 1,792 2,059
------- ------- ------- -------
Net income $ 588 $ 894 $ 2,583 $ 2,701
======= ======= ======= =======
Net income per common share:
Primary $ .11 $ .16 $ .47 $ .51
Fully diluted $ .11 $ .16 $ .46 $ .50
Weighted average shares outstanding:
Primary 5,443,000 5,525,000 5,448,000 5,344,000
Fully diluted 6,468,000 5,604,000 6,473,000 5,497,000
</TABLE>
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<PAGE>
BAILEY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FOR THE NINE MONTHS ENDED APRIL 30, 1995 AND MAY 1, 1994
<TABLE>
Nine Months Ended
Apr 30 May 01
1995 1994
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $2,583 $ 2,701
------ -------
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation and amortization 3,986 2,207
Gain on disposal of property, plant and equipment - 18
Deferred income taxes - 511
Gain on early payment of debt - (165)
Change in assets and liabilities net of effects
of acquisitions:
Increase in accounts receivable (1,535) (3,414)
Increase in inventories (5,408) (2,724)
(Increase) decrease in prepaid expenses and
other current assets (659) 175
Increase in other assets - net (756) (1,002)
Increase in accounts payable 6,616 1,824
Decrease in accrued liabilities and other
current liabilities (1,864) (272)
Increase (decrease) in income taxes payable 368 (863)
Decrease in other liabilities (61) (386)
------ ------
Net cash used in operating activities 3,270 (1,390)
------ ------
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<PAGE>
Cash flows from investing activities:
Capital expenditures (5,977) (2,920)
------ ------
Net cash used in investing activities (5,977) (2,920)
------ ------
Cash flows from financing activities:
Increase (decrease) in short-term debt (including
bank overdrafts), net 4,792 (1,074)
Payments on long-term debt and capital leases (1,239) (5,168)
Purchase of treasury stock (263) -
Proceeds from issuance of common stock - 10,597
Proceeds from exercise of stock options 26 451
------ ------
Net cash provided by financing activities 3,316 4,806
------ ------
Net increase in cash 609 496
Cash, beginning of period 201 256
------ -------
Cash, end of period $ 810 $ 752
====== =======
Cash paid for:
Interest $2,158 $ 1,182
Income taxes 1,131 2,495
Supplemental disclosures:
Gain on debt extinguishment $ - $ 165
Assets acquired under capitalized leases 1,373 210
</TABLE>
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
THIRD QUARTER FISCAL 1995 VS THIRD QUARTER FISCAL 1994
Net sales for the third quarter ended April 30, 1995 increased $17.0
million, or 55.4%, to $47.7 million compared to $30.7 million in the third
quarter of fiscal 1994. The increased sales are net of certain planned price
decreases that took effect earlier in the fiscal year. Contributing to the
sales increase was $14.8 million of sales of the product lines acquired in
the July 1994 purchase of assets of Premix/E.M.S. Inc. (the "Premix/EMS Acquisi-
tion"), plus $3.8 million of new products introduced since the beginning of the
fiscal year and a $1.9 million increase in sales of certain products carried
over from the prior year. These increases were offset by a $1.3 million period-
to-period sales decrease related to certain other carry-over products, and
the elimination of $2.2 million of sales related to the Tempo/Topaz program
which phased out during the latter half of fiscal 1994.
Although sales increased in the third quarter of fiscal 1995 compared to
fiscal 1994, third quarter sales nevertheless reflected a softening of customer
product schedules and delayed new product launches during the period. As a
result, net sales in the fiscal quarter ended April 30, 1995 were approxi-
mately seven percent lower than the sales volume planned and expected for the
period.
Gross profit in the third quarter ended April 30, 1995 increased $964,000,
or 19.9%, to $5.79 million compared to $4.83 million in the third quarter of
fiscal 1994. The increase was primarily due to higher sales volume compared to
the same period of the prior year. As a percentage of net sales, however,
gross profit for the third quarter declined to 12.1% from 15.8% in the third
quarter of the prior year. Contributing to the contraction of gross margin
were the aforementioned price decreases, changes in the product mix toward
components with lower gross margins including the product lines acquired in
the Premix/EMS Acquisition, certain raw material cost increases that took
effect during the quarter and costs associated with product launches that
were subject to customer delays.
Selling, general and administrative expenses in the third quarter ended
April 30, 1995 increased $1.1 million, or 40.1%, to $3.8 million compared to
$2.7 million in the third quarter of fiscal 1994. The increase was attribu-
table to planned increases in engineering, design and program management acti-
vities and the inclusion this year of the operations acquired in the Premix/EMS
Acquisition. As a percentage of net sales, selling, general and administrative
expenses were 8.0% in the third quarter compared to 8.9% in the third quarter
of fiscal 1994. The higher percentage in the prior year third quarter was due
to a one-time charge of $300,000 taken in the period related to settlement of
alleged non-compliance with hazardous waste handling regulations.
Interest expense for the third quarter ended April 30, 1995 increased
$563,000, or 139%, to $969,000 compared to $406,000 in the third quarter of
fiscal 1994. The increase was attributable to the inclusion this year of
interest on additional debt that resulted from the Premix/EMS Acquisition
and a higher average level of borrowing under the Company's revolving line-
of-credit.
The Company's effective tax rate was 41% in the third fiscal quarter of
1995 compared to 47% in the third fiscal quarter of 1994. The higher effective
tax rate in the prior year third fiscal quarter was due to the aforementioned
one-time charge that was non-deductible for tax purposes resulting in a sub-
stantial increase in the effective tax rate for the period.
Net income in the third quarter ended April 30, 1995 declined $306,000,
or 34.2%, to $588,000 compared to $894,000 in the third quarter of the prior
year. As a percentage of net sales, net income in the third quarter of fiscal
1995 decreased to 1.2% compared to 2.9% in the third quarter of fiscal 1994.
Net income per fully diluted share declined $.05, or 31.3%, to $.11 in the
third quarter of fiscal 1995. Fully diluted share amounts reflect a 15.4%
increase in shares outstanding calculated on a weighted average of 6,468,000
shares outstanding in the fiscal 1995 period compared to 5,604,000 in the same
period of the prior year. The increase in weighted average shares is primarily
due to shares related to the conversion feature of the Company's 8% Convertible
Debenture issued as partial consideration for the Premix/EMS Acquisition.
FIRST NINE MONTHS FISCAL 1995 VS FIRST NINE MONTHS FISCAL 1994
Net sales in the nine months ended April 30, 1995 increased $49.7 million,
or 59.0%, to $133.9 million compared to $84.2 million in the first nine months
of fiscal 1994. The increased sales are net of planned price decreases that
were effected during the period. The sales increase was made up of $43.3
million of sales of the product lines acquired in the Premix/EMS Acquisition,
plus $5.7 million of new products introduced since the beginning of the fiscal
year, and a $9.0 million increase in sales of certain products carried over
from the prior year. These increases were offset by a $1.0 million period-to-
period sales decrease related to certain other carry-over products and the
elimination of $7.3 million of sales related to the Tempo/Topaz program which
phased out during the latter half of the prior fiscal year.
Gross profit for the nine months ended April 30, 1995 increased $5.2
million, or 40.2%, to $18.0 million compared to $12.8 million in the fiscal
1994 nine months. The increase was due in most part to the higher sales volume
this year compared to the corresponding period last year. Gross profit as a
percentage of net sales in the first nine months of fiscal 1995 declined to
13.4% from 15.3% in the same period of the prior year. This contraction of
gross margin is attributable to price decreases that took effect during the
first nine months, changes in product mix toward components with lower gross
margins including the product line acquired in the Premix/EMS Acquisition,
raw material cost increases that took effect during the period and the stretch-
ing out of certain product launch costs caused by customer production delays.
Selling, general and administrative expenses in the nine months ended April
30, 1995 increased $4.1 million, or 60.1%, to $10.9 million compared to $6.8
million in the fiscal 1994 nine months. The increase reflects planned addi-
tions to engineering, design and program management activities and additions
resulting from the Premix/EMS Acquisition. As a percentage of net sales,
selling, general and administrative expenses were 8.2% in the first nine months
compared to 8.1% in the same period of the prior year.
Interest expense in the nine months ended April 30, 1995 increased $1.45
million or 115%, to $2.72 million compared to $1.27 million in the 1994 fiscal
nine months. The increase was attributable to the addition of the Premix/EMS
Acquisition debt and a higher average level of borrowing under the Company's
revolving line-of-credit.
The Company's effective tax rate was 41% in the first nine months of
fiscal 1995 compared to 43% in the first nine months of the period year. The
higher rate for the period last year was due to the aforementioned one-time
charge in the third quarter that was non-deductible for tax purposes.
Net income for the nine months ended April 30, 1995 decreased $118,000, or
4.4% to $2.6 million ($.46 per fully diluted share) compared to $2.7 million
($.50 per fully diluted share) in the same period of the prior year. Fully
diluted per share amounts reflect a 17.8% increase in shares outstanding cal-
culated on a weighted average of 6,473,000 shares outstanding in the fiscal
1995 nine months compared to 5,497,000 shares outstanding in the same period of
fiscal 1994. The increased shares are related to the aforementioned 8% Con-
vertible Debenture.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of fiscal 1995 ended April 30, 1995 cash flow
- - defined as the sum of net income plus depreciation and amortization -
totaled $6.6 million while capital expenditures, including assets acquired under
capitalized leases, totaled $7.4 million.
Also, during the first nine months, increased levels of operating activi-
ties resulted in increased investments in working capital assets, primarily
accounts receivable and tooling inventories. The tooling inventory increase
was associated with development of molds and secondary equipment for new pro-
duct programs to be launched later in the fiscal year.
These investments were funded primarily by utilization of the line-of-
credit available under the Company's bank credit agreement, increases in
accounts payable, and lease financing.
During the first nine months, in accordance with a previously announced
share re-purchase plan, the Company bought back 40,000 shares of its $.10 par
value common stock at an average purchase price of $6.574 per share. Addi-
tional purchases may be made from time to time in the future consistent with
the judgment of the Company as to market conditions and the availability of
funds for this purpose.
Considering funds currently available, expected cash flow from operations
and the availability of credit under bank credit and leasing facilities, the
Company anticipates sufficient financial resources to meet its requirements
for at least the next twelve months.
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<PAGE>
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 15, 1994, Judge Stephen McAuliffe of the United States District
Court for the District of New Hampshire entered a judgment in favor of the
Company in VICKI MATCH SUNA AND LORI ROSEN V. BAILEY CORPORATION, granting the
Company's motion to dismiss the action. The plaintiffs have since filed a
motion to vacate the judgment, reopen the case, amend the complaint and add
additional defendants. The Company has opposed this motion, and the court has
not issued a decision.
With respect to other legal proceedings, reference is made to the Company's
Annual Report on Form 10-K for the fiscal year ended July 31, 1994, filed with
the Securities and Exchange Commission on October 31, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index is set forth below.
(b) None.
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<PAGE>
<TABLE>
___EXHIBIT INDEX___
<CAPTION>
_EXHIBIT_ _TITLE_ _METHOD OF FILING_
_No._
<S> <C> <C> <C>
11.1 Computation of Net Income Per Share Filed herewith
(included in
Condensed
Consolidated
Statements of
Operations for the
three months ended
April 30, 1995
and May 1, 1994)
27.1 Financial Data Schedule Filed herewith
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
___BAILEY CORPORATION___
Registrant
Date: June 13, 1995 ___Leonard J. Heilman___
Executive Vice President--
Finance and Administration,
Treasurer and Assistant
Secretary (principal financial
and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from S.E.C. Form
10-Q for the quarterly period ended April 30, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-START> AUG-01-1994
<PERIOD-END> APR-30-1995
<CASH> 810
<SECURITIES> 0
<RECEIVABLES> 22,197
<ALLOWANCES> (853)
<INVENTORY> 20,908
<CURRENT-ASSETS> 46,782
<PP&E> 64,515
<DEPRECIATION> (17,844)
<TOTAL-ASSETS> 104,052
<CURRENT-LIABILITIES> 41,867
<BONDS> 34,622
<COMMON> 539
0
0
<OTHER-SE> 22,407
<TOTAL-LIABILITY-AND-EQUITY> 104,052
<SALES> 133,963
<TOTAL-REVENUES> 133,963
<CGS> 115,946
<TOTAL-COSTS> 126,867
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,721
<INCOME-PRETAX> 4,375
<INCOME-TAX> 1,792
<INCOME-CONTINUING> 2,583
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,583
<EPS-PRIMARY> .47
<EPS-DILUTED> .46
</TABLE>
