FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 No. 0-8544
SPEIZMAN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-0901212
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
508 West Fifth St. 28202
-------------------- ----------
Charlotte, North Carolina (Zip Code)
(Address of principal executive offices)
(704) 372-3751
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
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, 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 latest practicable date.
Outstanding at
Class of Common Stock November 7, 1995
--------------------- ----------------
Par value $.10 per share 3,208,599
Page 1 of 13
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. FINANCIAL INFORMATION:
<S> <C>
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets................................................. 3 - 4
Consolidated Condensed Statements of Operations....................................... 5
Consolidated Condensed Statements of Cash Flows....................................... 6
Notes to Consolidated Financial Statements............................................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................................... 8 - 10
PART II. OTHER INFORMATION:
Item 6. Exhibits and reports on Form 8-K
(a) Reports on Form 8-K............................................................... 11
(b) Exhibit 11. Computation of Net Income (Loss) per Share........................... 12
</TABLE>
Page 2
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, July 1,
1995 1995
------------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 407,301 $ 2,436,859
Accounts receivable, less allowances of
$187,018 and $207,158 10,269,322 16,078,683
Inventories 13,268,977 13,428,014
Prepaid expenses and other current assets 2,163,129 2,458,355
----------- -----------
TOTAL CURRENT ASSETS 26,108,729 34,401,911
----------- ----------
PROPERTY AND EQUIPMENT:
Leasehold improvements 543,874 543,874
Machinery and equipment 877,165 876,565
Furniture, fixtures and transportation equipment 822,364 834,187
------------ -----------
Total 2,243,403 2,254,626
Less accumulated depreciation and amortization (1,450,208) (1,440,688)
----------- ----------
NET PROPERTY AND EQUIPMENT 793,195 813,938
------------ -----------
OTHER 700,909 488,609
------------ -----------
$27,602,833 $35,704,458
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, July 1,
1995 1995
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable - bank $ 1,350,000 $ -
Accounts payable 6,510,757 15,056,927
Customers' deposits 711,385 884,881
Accrued expenses 483,557 833,886
Current maturities of long-term debt 12,036 13,190
------------- -------------
TOTAL CURRENT LIABILITIES 9,067,735 16,788,884
LONG-TERM DEBT 134,307 133,629
------------ -------------
TOTAL LIABILITIES 9,202,042 16,922,513
----------- ----------
STOCKHOLDERS' EQUITY:
Common stock - par value $.10; authorized 6,000,000
shares; issued 3,236,199 shares 323,620 323,620
Additional paid-in capital 12,459,965 12,459,965
Retained earnings 5,718,388 6,097,426
Foreign currency translation adjustment (1,385) 731
-------------- ---------------
Total 18,500,588 18,881,742
Treasury stock, at cost, 27,600 common shares (99,797) (99,797)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 18,400,791 18,781,945
---------- ----------
$27,602,833 $ 35,704,458
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
For the Three Months Ended
-----------------------------------------------------------
September 30, 1995 October 1, 1994
(13 Weeks) (13 Weeks)
------------------------- ------------------
<S> <C> <C>
REVENUES $ 8,338,850 $ 12,420,493
----------- --------------
COSTS AND EXPENSES:
Cost of sales 7,595,671 11,204,031
Selling expenses 922,263 861,272
General and administrative expenses 369,762 325,952
--------------- ---------------
Total costs and expenses 8,887,696 12,391,255
--------------- ---------------
(548,846) 29,238
NET INTEREST EXPENSE (INCOME) 18,192 (11,247)
--------------- ---------------
Income (loss) before taxes on income (567,038) 40,485
TAXES (BENEFIT) ON INCOME (188,000) 14,500
--------------- ---------------
NET INCOME (LOSS) $ (379,038) $ 25,985
=============== ===============
NET INCOME (LOSS) PER SHARE $(0.12) $.01
====== ====
Weighted average number of common and
equivalent shares 3,258,860 3,284,150
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
For the Three Months Ended
9/30/95 10/1/94
(13 Weeks) (13 Weeks)
-----------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (379,038) $ 25,985
Adjustments to reconcile net income (loss) to cash provided
by operating activities:
Depreciation and amortization 38,982 43,822
Provision for inventory obsolescence 50,000 50,000
Foreign currency translation adjustment (2,116) -
(Increase) decrease in:
Accounts receivable 5,809,361 3,893,000
Inventories 109,037 (2,513,221)
Prepaid expenses and deposits 295,226 (609,021)
Other assets (212,300) 7,048
Increase (decrease) in:
Accounts payable (8,546,170) (4,052,369)
Customers' deposits (173,496) (253,280)
Accrued expenses (350,329) (383,503)
----------- --------------
Net cash used in operating activities (3,360,843) (3,791,539)
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (20,239) (62,853)
Disposition of property and equipment 2,000 1,042
-------------- -------------
Net cash used in investing activities (18,239) (61,811)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from note payable - bank 1,350,000 -
Principal payments on long-term debt (476) (23,210)
Issuance of common stock for stock options - 1,629
------------------- --------------
Net cash provided by (used in) financing activities 1,349,524 (21,581)
------------ -------------
NET DECREASE IN CASH (2,029,558) (3,874,931)
CASH AND CASH EQUIVALENTS at beginning of period 2,436,859 5,433,664
------------ -------------
CASH AND CASH EQUIVALENTS at end of period $ 407,301 $ 1,558,733
============= ===========
Supplemental Disclosures:
Cash paid during period for:
Interest $ 44,957 $ 39,638
Income taxes 104,026 16,883
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Management Statement re Adjustments
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present the
Registrant's financial position, the results of operations and
changes in cash flow for the periods indicated.
The accounting policies followed by the Registrant are set forth on
page F-6 of the Registrant's Form 10-K for the fiscal year ended July
1, 1995, which is incorporated by reference.
Note 2. Inventories
Inventories consisted of the following:
September 30, July 1,
1995 1995
(unaudited)
Machines $ 9,906,853 $10,106,300
Parts and supplies 3,362,124 3,321,714
----------- -----------
Total $13,268,977 $13,428,014
=========== ===========
Note 3. Taxes on Income
Taxes on income are allocated to interim periods on the basis of an
estimated annual effective tax rate.
Note 4. Net Income Per Share
Net income per share is computed by dividing net income by the
average number of common and common equivalent shares outstanding
during the period. Common equivalent shares include those common
shares which are issuable upon the exercise of stock options, when
dilutive, net of shares assumed to have been repurchased with the
proceeds.
Page 7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenues are generated primarily from its distribution of textile
equipment, principally knitting machines, to manufacturers of textile products
and, to a lesser extent, from the sale of parts used in such equipment and the
sale of used textile equipment.
RESULTS OF OPERATIONS
Revenues declined by about $4.1 million in the first quarter of the current
fiscal year as compared to the first quarter of last year. This 32.9% decrease
includes declines of $3.1 million in hosiery manufacturing equipment, and $1.4
million in outerwear knitting equipment, partially offset by improved revenues
of about $0.4 million from all other sales activities.
Cost of sales as a percentage of net revenues was 91.1% in the first quarter of
the current fiscal year as compared to 90.2% in the first quarter of the prior
year. Although revenues declined substantially, service expenses remained almost
constant at about $500,000 in the comparable periods. Since service expenses are
a part of cost of sales, this factor increased cost of sales in the latest
quarter by 2.3%, more than accounting for all of the 0.9% overall increase in
cost of sales. These service expenses are expected to decline in future quarters
of the current fiscal year as a result of actions taken in the Company's current
second quarter.
Selling expenses increased by about $61,000 in the first quarter of fiscal 1996
as compared to the same quarter of last year. This variation reflects increases
in travel and space rentals, partially offset by decreases in salaries and
exhibition expenses. The Company's English subsidiary, which began operations in
the first quarter of fiscal 1995, accounted for $47,000 of the $61,000 overall
increase in selling expenses.
General and administrative expenses increased by about $44,000 in the first
quarter of fiscal 1996 as compared to the same quarter of fiscal 1995. The
increase resulted from increases in travel expenses, professional fees, and life
and group insurance, which were partially offset by decreases in taxes and bad
debt provisions.
Interest expense is shown net of interest income. In the first quarter of the
current fiscal year, interest was a net expense of about $18,000 as compared to
a net interest income of about $11,000 in the same quarter of last year. This
shift results from a reduction in interest income of about $26,000, reflecting a
reduced level of corporate funds invested in money markets in the current year.
OUTLOOK
The sock industry in the United States and in Canada, served by the Company,
continues to show a mixed picture. Demand for fine gauge rib socks and for
athletic tube socks continues to be slow.
Page 8
<PAGE>
Demand for course gauge rib socks and for reciprocated heel and toe athletic
socks is showing some strength. The sweater manufacturing industry in the United
States and in the United Kingdom continues to show substantial signs of
weakness.
In August 1995, the Company became the U.S. distributor for Orizio Paolo,
S.p.A., an Italian manufacturer of circular fabric knitting machines. The
Company has formed a new division to market these machines which are used to
manufacture tee-shirt fabric and other knitted fabric.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, the Company's working capital totaled $17.0 million. This
figure represents a decrease of $572,000 from the Company's working capital
position at the end of the prior fiscal year, July 1, 1995. The Company's
current ratio at September 30 is 2.88 to 1. This compares to a current ratio of
2.05 to 1 at July 1, 1995.
Operating activities used $3.4 million in cash in the quarter ended September
30, 1995, as compared to $3.8 million used by operating activities in the first
quarter of last year. In the current quarter, this requirement was generated
essentially by substantial reductions in accounts payable, partially offset by a
reduction in accounts receivable. In the first quarter of last year, the cash
requirement was generated by increases in inventories and decreases in accounts
payable, partially offset by decreases in accounts receivable.
Financing activities provided $1,350,000 in the current first quarter as
compared to a usage of $22,000 in the like period of last year. This change is a
reflection of the Company's use of $1,350,000 in revolving loan funds from its
bank line.
Overall, net cash decreased by about $2.0 million in the first quarter of fiscal
1996 as compared to a decline of about $3.9 million in the prior year's first
quarter.
The Company presently has no material commitments for capital expenditures and
does not anticipate incurring such commitments in the balance of fiscal 1995.
SEASONALITY AND OTHER FACTORS
There are certain seasonal factors that may affect the Company's business.
Traditionally, manufacturing businesses in Italy close for the month of August,
and the Company's customers close for one week in July. Consequently, no
shipments or deliveries, as the case may be, of machines distributed by the
Company that are manufactured in Italy are made during these periods in the
Company's first quarter. In addition, manufacturing businesses in Italy
generally close for two weeks in December, during the Company's second quarter.
Fluctuations on customer orders or other factors may affect quarterly variations
in net revenues from year to year.
EFFECTS OF INFLATION AND CHANGING PRICES
Management believes that inflation has not had a material effect on the
Company's operations.
Page 9
<PAGE>
A substantial portion of the Company's machine and spare part purchases are
denominated and payable in Italian lira. Currency fluctuations of the lira could
result in substantial price level changes and therefore impede or promote
import/export sales and substantially impact profits. However, to reduce
exposure to adverse foreign currency fluctuations during the period from
customer orders to payment for goods sold, the Company enters into forward
foreign exchange contracts. The Company is not able to assess the quantitative
effect that such currency fluctuations could have upon the Company's operations.
There can be no assurance that fluctuations in foreign currency exchange rates
will not have a significantly adverse effect on future operations.
Page 10
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) No reports on Form 8-K were filed by the Registrant during or
applicable to the period reported here.
(b) Exhibit 11. - Computation of Net Income (Loss) Per Share
Page 11
<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.
SPEIZMAN INDUSTRIES, INC.
(Registrant)
Date: 11/14/95 (Signature of Robert S. Speizman)
Robert S. Speizman
President
Date: 11/14/95 (Signature of Josef Sklut)
Josef Sklut
Vice President-Finance
(Chief Financial Officer)
Page 12
Exhibit 11
NET INCOME (LOSS) PER SHARE
The following table presents the information needed to compute primary income
per common share:
<TABLE>
<CAPTION>
For the Three Months Ended
-------------------------------------------------------
September 30, 1995 October 1, 1994
(13 Weeks) (13 Weeks)
------------------------ ----------------
<S> <C> <C>
Net income (loss) $ (379,038) $ 25,985
============== ==============
Weighted average shares outstanding 3,236,199 3,236,199
Less: Treasury shares (27,600) (27,600)
Add: Assumed exercise of options reduced by
the number of shares purchased with proceeds 50,261 75,551
-------------- --------------
Adjusted weighted average of shares outstanding 3,258,860 3,284,150
============== ==============
Net income (loss) per share $(0.12) $0.01
====== =====
Page 13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-2-1995
<PERIOD-END> SEP-30-1995
<CASH> 407,301
<SECURITIES> 0
<RECEIVABLES> 10,456,340
<ALLOWANCES> 187,018
<INVENTORY> 13,268,977
<CURRENT-ASSETS> 26,108,729
<PP&E> 2,243,403
<DEPRECIATION> 1,450,208
<TOTAL-ASSETS> 27,602,833
<CURRENT-LIABILITIES> 9,067,738
<BONDS> 0
<COMMON> 323,620
0
0
<OTHER-SE> 18,077,171
<TOTAL-LIABILITY-AND-EQUITY> 27,602,833
<SALES> 8,338,850
<TOTAL-REVENUES> 8,338,850
<CGS> 7,595,671
<TOTAL-COSTS> 8,887,696
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,192
<INCOME-PRETAX> (567,038)
<INCOME-TAX> (188,000)
<INCOME-CONTINUING> (379,038)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (379,038)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
