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 3, 1994
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 1-4148
REEVES INDUSTRIES, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 57-0735790
_______________________________ ______________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Highway 29 South
Post Office Box 1898
Spartanburg, S. C. 29304
________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (803)576-1210
_________________________________________________________________
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
35,021,666 shares of $.01 par value common stock of the Registrant
were outstanding at the close of business on May 17, 1994.
<PAGE>
REEVES INDUSTRIES, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet as of
December 31, 1993 and April 3, 1994 3
Condensed Consolidated Statement of Income
for the quarters ended March 28, 1993
and April 3, 1994 5
Condensed Consolidated Statement of Changes
in Stockholder's Equity for the quarter
ended April 3, 1994 6
Condensed Consolidated Statement of Cash
Flows for the quarters ended March 28,
1993 and April 3, 1994 7
Notes to Condensed Consolidated Financial
Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(in thousands, except share data)
December 31, April 3,
1993 1994
------------ --------
ASSETS
Current assets
Cash and cash equivalents of $7,222
and $380 $ 12,015 $ 4,829
Accounts receivable, less allowance for
doubtful accounts of $1,467 and $1,567 45,925 49,562
Inventories (Note A) 33,969 38,531
Deferred income taxes 5,442 5,442
Other current assets 3,300 4,463
-------- --------
Total current assets 100,651 102,827
-------- --------
Property, plant and equipment, at cost
less accumulated depreciation 51,415 55,397
Unamortized financing costs, less
accumulated amortization of $1,177
and $1,340 3,946 3,783
Goodwill, less accumulated amortization
of $9,431 and $9,766 43,357 43,022
Deferred income taxes 2,153 1,806
Other assets 1,503 1,652
-------- --------
Total assets $203,025 $208,487
======== ========
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(in thousands, except share data)
December 31, April 3,
1993 1994
------------ --------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable $ 22,810 $ 21,212
Accrued expenses and other
liabilities 21,197 19,129
-------- --------
Total current liabilities 44,007 40,341
Long-term debt (Note B) 132,677 138,402
Deferred income taxes 4,367 4,357
Other liabilities 563 522
-------- --------
Total liabilities 181,614 183,622
-------- --------
Stockholder's equity (Note C)
Common stock, $.01 par value, 50,000,000
shares authorized; 35,021,666 shares
issued and outstanding 350 350
Capital in excess of par value 5,099 5,099
Retained earnings 19,964 22,201
Equity adjustments from translation (4,002) (2,785)
-------- --------
21,411 24,865
-------- --------
Commitments and contingencies
-------- --------
Total liabilities and
stockholder's equity $203,025 $208,487
======== ========
See notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF INCOME
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(in thousands, except per share data)
Quarter Ended
---------------------
March 28, April 3,
1993 1994
--------- --------
Net sales $63,780 $72,997
Cost of sales 50,269 58,317
------- -------
Gross profit on sales 13,511 14,680
Selling, general and
administrative expenses 7,701 7,252
------- -------
Operating income 5,810 7,428
Other income (expense)
Other income, net 22 18
Interest expense and amortization of
financing costs and debt discounts (4,144) (4,085)
------- -------
(4,122) (4,067)
------- -------
Income before income taxes 1,688 3,361
Income taxes 300 1,124
------- -------
Net income $ 1,388 $ 2,237
======= =======
Earnings per common share (Exhibit 11)
Primary and fully diluted
Net income $ .04 $ .06
======= =======
Weighted average number of common
shares outstanding
Primary and fully diluted 34,968 35,022
======= =======
See notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN STOCKHOLDER'S EQUITY
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(in thousands)
Common Stock Capital Equity
$0.01 Par Value in Excess Adjustments
------------- of Retained From
Shares Amount Par Value Earnings Translation Total
------ ------ --------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993 35,022 $350 $ 5,099 $ 19,964 $ (4,002) $ 21,411
Net income 2,237 2,237
Translation
adjustments 1,217 1,217
------ ---- -------- -------- -------- --------
Balance at
April 3,
1994 35,022 $350 $ 5,099 $ 22,201 $ (2,785) $ 24,865
====== ==== ======== ======== ======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(in thousands)
Quarter Ended
--------------------
March 28, April 3,
1993 1994
--------- --------
OPERATING ACTIVITIES
Net income $ 1,388 $ 2,237
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,372 2,496
Changes in operating assets and
liabilities (7,717) (12,458)
Translation adjustments (698) 327
------- -------
NET CASH USED BY OPERATING ACTIVITIES (4,655) (7,398)
------- -------
INVESTING ACTIVITIES
Purchases of property, plant,
and equipment (2,051) (5,686)
Other 892
------- -------
NET CASH USED BY INVESTING ACTIVITIES (1,159) (5,686)
------- -------
FINANCING ACTIVITIES
Net borrowings on revolving loan 7,300 5,700
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 7,300 5,700
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (175) 198
------- -------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,311 (7,186)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 4,515 12,015
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,826 $ 4,829
======= =======
See notes to condensed consolidated financial statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
REEVES INDUSTRIES, INC. AND SUBSIDIARY
APRIL 3, 1994
GENERAL
Reeves Industries, Inc., incorporated in Delaware in 1982
("Reeves"), a wholly-owned subsidiary of Hart Holding Company
Incorporated ("Hart Holding"), is a holding company whose principal
asset is the common stock of its wholly-owned subsidiary, Reeves
Brothers, Inc. ("Reeves Brothers"). Reeves Brothers is a
diversified industrial company with operations in two principal
business segments, industrial coated fabrics, conducted through its
Industrial Coated Fabrics Group ("ICF"), and apparel textiles,
conducted through its Apparel Textile Group ("ATG").
The accompanying unaudited condensed consolidated financial
statements of Reeves have been prepared in accordance with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. For such information, refer to the
consolidated financial statements and footnotes thereto included in
Reeves' annual report on Form 10-K for the year ended December 31,
1993, as filed with the Securities and Exchange Commission on March
31, 1994. The condensed consolidated financial statements so
presented are, in the opinion of management, inclusive of all
adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation of financial position
as of April 3, 1994, and the results of operations and cash flows
for the quarters ended March 28, 1993 and April 3, 1994.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
REEVES INDUSTRIES, INC. AND SUBSIDIARY
APRIL 3, 1994
NOTE A - INVENTORIES
Inventories at December 31, 1993 and April 3, 1994, were
comprised of the following (in thousands):
December 31, April 3,
1993 1994
------------ --------
Raw materials $ 6,815 $ 7,833
Work in process 8,792 11,925
Manufactured and finished goods 18,362 18,773
------- -------
$33,969 $38,531
======= =======
Approximately 27% and 25% of Reeves' inventories at December
31, 1993 and April 3, 1994, are valued using the last-in, first-out
("LIFO") method. Interim LIFO determinations, including those as
of April 3, 1994, are based on management's estimates of expected
year end inventory levels and costs.
NOTE B - LONG-TERM DEBT
Long-term debt at December 31, 1993 and April 3, 1994,
consisted of the following (in thousands):
December 31, April 3,
1993 1994
------------ --------
11% Senior Notes due July 15, 2002,
net of unamortized discount of
$747 and $725 $121,753 $121,775
13 3/4% Subordinated Debentures due
May 1, 2000, net of unamortized
discount of $76 and $73 10,924 10,927
Revolving loan payable to bank 5,700
-------- --------
$132,677 $138,402
======== ========
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
REEVES INDUSTRIES, INC. AND SUBSIDIARY
APRIL 3, 1994
In June 1992, Reeves completed a public offering of
$122,500,000 of 11% Senior Notes due 2002 (the "Senior Notes").
Proceeds of the offering were used to redeem all of Reeves' then
outstanding 12 1/2% Senior Notes and 13% Senior Subordinated
Debentures and to pay and terminate the revolving loan outstanding
under a prior loan agreement.
Reeves is required to make sinking fund payments with respect
to the remaining 13 3/4% Subordinated Debentures of $6,000,000 on
May 1, 1999 and $5,000,000 on May 1, 2000.
On August 7, 1992, Reeves and Reeves Brothers entered into a
credit agreement with a group of banks, which was amended in 1993,
and which provides Reeves and Reeves Brothers with an aggregate
$35,000,000 revolving line of credit (the "Revolving Loan") and
letter of credit facility. The Revolving Loan bears interest at the
Alternative Base Rate (defined below) plus 1 1/2% or Eurodollar Rate
plus 2 1/2%, at the election of the borrower. The Alternative Base
Rate is defined as the higher of the Prime Rate (6 1/4% at April 3,
1994), Base CD Rate plus 1%, or the Federal Funds Effective Rate
plus 1/2%. The applicable rates above the Alternative Base Rate and
Eurodollar Rate decline based on a ratio of earnings to fixed
charges, as defined. The Revolving Loan is due December 31, 1995.
The Revolving Loan is secured by Reeves Brothers' accounts
receivable and inventories. As of April 3, 1994, Reeves had
available borrowings, net of $1,389,000 of outstanding letters of
credit, of $27,911,000. A commitment fee of 1/2% per annum is
required on the unused portion of the Revolving Loan.
The Senior Notes, Revolving Loan, and 13 3/4% Subordinated
Debentures contain certain restrictive covenants with respect to
Reeves and Reeves Brothers including, among other things,
maintenance of working capital, limitations on the payment of
dividends, the incurrence of additional indebtedness and certain
liens, restrictions on capital expenditures, mergers or
acquisitions, investments and transactions with affiliates, and
compliance with certain financial tests and limitations.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
REEVES INDUSTRIES, INC. AND SUBSIDIARY
APRIL 3, 1994
Refer to Reeves' Annual Report on Form 10-K for the year ended
December 31, 1993, as filed with the Securities and Exchange
Commission on March 31, 1994, for a more complete description of the
Senior Notes, the Revolving Loan and the 13 3/4% Subordinated
Debentures.
NOTE C - STOCKHOLDER'S EQUITY
On January 26, 1994, the Board of Directors approved a non-
qualified stock option agreement between Reeves and the Chairman of
the Board of Directors. The agreement grants an option to purchase
up to 3,800,000 shares of common stock of Reeves, par value $.01 per
share, and has an expiration date of December 31, 2023. The option
is exercisable at $.56 per share for 1,400,000 shares (exercisable
immediately), $.75 per share for 1,400,000 shares (exercisable one
year from grant date) and $1.00 per share for 1,000,000 shares
(exercisable two years from grant date).
On March 9, 1994, Hart Holding organized Reeves Holdings, Inc.
as a wholly-owned subsidiary (the "Issuer") through a capital
contribution of $1,000. The Issuer was formed for the purpose of
holding all of the outstanding common stock of Reeves. On March 31,
1994, the Issuer filed a Registration Statement on Form S-1 under
the Securities Act of 1933, as amended, for the purpose of offering
Senior Discount Debentures due 2006 anticipated to yield proceeds
of $100,000,000. As of May 17, 1994 Reeves' common stock has not
been contributed to the Issuer.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table and the discussion which follows presents
Reeves' sales and operating income by segment for the quarters ended
March 28, 1993 and April 3, 1994 (in thousands):
Quarter Ended
----------------------
March 28, April 3,
1993 1994
--------- --------
Net Sales:
Industrial Coated Fabrics Group $31,066 $37,264
Apparel Textile Group 32,714 35,733
------- -------
Total Net Sales $63,780 $72,997
======= =======
Operating Income:
Industrial Coated Fabrics Group $ 6,641 $ 6,651
Apparel Textile Group 1,841 3,004
Corporate Expenses (2,672) (2,227)
------- -------
Total Operating Income $ 5,810 $ 7,428
======= =======
Operating Income as a Percent
of Net Sales 9.1% 10.2%
======= =======
THREE MONTHS ENDED MARCH 28, 1993 COMPARED WITH
THREE MONTHS ENDED APRIL 3, 1994
NET SALES
- ---------
Reeves' total net sales increased 14.5% for the first quarter
of 1994 compared to the first quarter of 1993. ICF's net sales
represented 51.0% of Reeves' total net sales for the first quarter
of 1994 compared to 48.7% for the comparable period in 1993. ATG
net sales represented 49.0% of Reeves' total net sales for the first
quarter of 1994 compared to 51.3% for the comparable period in 1993.
<PAGE>
ICF's net sales increased 20.0% during the first quarter of 1994
compared to the first quarter of 1993. ICF's net sales increased
primarily due to higher unit volume in the coated automotive airbag
material product line. This increase was offset by a decrease in
other coated fabrics product lines, primarily less military
business.
ATG's net sales increased 9.2% during the first quarter of 1994
compared to the first quarter of 1993. ATG's net sales increase
reflects growth in unit volume in the finished goods division.
OPERATING INCOME
- ----------------
Operating income for the first quarter of 1994 was $7.4 million
compared to $5.8 million for the first quarter of 1993. As a
percentage of net sales, operating income increased to 10.2% of net sales
for the first quarter of 1994 compared to 9.1% in the same period
of 1993.
ICF's operating income for the first quarter of 1994 was above
the operating income for the first quarter of 1993. Increases in
operating income generated by the coated automotive airbag material
product line were offset by: (i) lower volume in the other coated
fabrics product lines, (ii) foreign currency exchange losses
resulting from the strengthening of the Italian Lira against most
other currencies, and (iii) start-up costs associated with the
introduction of a new generation of printing blankets and new coated
fabrics product lines.
ATG's operating income for the first quarter of 1994 increased
by 63.2% as compared to the first quarter of 1993, primarily as a
result of increased sales volume in the finished goods division and
manufacturing cost reductions. The manufacturing cost reductions
resulted principally from prior capital investments.
Corporate expenses decreased 16.7% during the first quarter of
1994 compared to the first quarter of 1993. The decrease resulted
primarily from a gain related to the settlement of a pension
obligation of a previously discontinued operation.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
In June 1992, Reeves completed a public offering of
$122,500,000 of 11% Senior Notes due 2002 (the "Senior Notes").
Proceeds of the offering were used to redeem all of Reeves' then
outstanding 12 1/2% Senior Notes and 13% Senior Subordinated
Debentures and to pay and terminate the revolving loan outstanding
under a prior loan agreement.
Reeves is required to make sinking fund payments with respect
to the remaining 13 3/4% Subordinated Debentures of $6,000,000 on
May 1, 1999 and $5,000,000 on May 1, 2000.
On August 7, 1992, Reeves and Reeves Brothers entered into a
credit agreement with a group of banks, which was amended in 1993,
and which provides Reeves and Reeves Brothers with an aggregate
$35,000,000 revolving line of credit (the "Revolving Loan") and
letter of credit facility. The Revolving Loan bears interest at the
Alternative Base Rate (defined below) plus 1 1/2% or Eurodollar Rate
plus 2 1/2%, at the election of the borrower. The Alternative Base
Rate is defined as the higher of the Prime Rate (6 1/4% at April 3,
1994), Base CD Rate plus 1%, or the Federal Funds Effective Rate
plus 1/2%. The applicable rates above the Alternative Base Rate and
Eurodollar Rate decline based on a ratio of earnings to fixed
charges, as defined. The Revolving Loan is due December 31, 1995.
The Revolving Loan is secured by Reeves Brothers' accounts
receivable and inventories. As of April 3, 1994, Reeves had
available borrowings, net of $1,389,000 of outstanding letters of
credit, of $27,911,000. A commitment fee of 1/2% per annum is
required on the unused portion of the Revolving Loan.
The Senior Notes, Revolving Loan, and 13 3/4% Subordinated
Debentures contain certain restrictive covenants with respect to
Reeves and Reeves Brothers including, among other things,
maintenance of working capital, limitations on the payment of
dividends, the incurrence of additional indebtedness and certain
liens, restrictions on capital expenditures, mergers or
acquisitions, investments and transactions with affiliates, and
compliance with certain financial tests and limitations.
Reeves believes that its cash flow from operations, available
leasing capacity and funds available under the Revolving Loan will
be sufficient to fund working capital needs, capital expenditure
requirements, and debt service obligations in future years.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Description Page
-------- ----------- ----
Exhibit 11 Computation of Earnings
Per Common Share 17
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the
three months ended April 3, 1994.
<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 thereunto duly authorized.
REEVES INDUSTRIES, INC.
DATE: May 17, 1994 By: \s\ Steven W. Hart
___________________
Steven W. Hart
Chief Financial Officer
<PAGE>
EXHIBIT 11.
CALCULATION OF PRIMARY AND FULLY DILUTED
EARNINGS PER COMMON SHARE
REEVES INDUSTRIES, INC. AND SUBSIDIARY
(in thousands, except per share data)
Quarter Ended
--------------------
March 28, April 3,
1993 1994
--------- --------
Net income $ 1,388 $ 2,237
======= =======
Earnings per common share
Primary and fully diluted:
Net income $ .04 $ .06
======= =======
Weighted average number of common
shares outstanding
Primary and fully diluted 34,968 35,022
======= =======
