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 March 30, 1996
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 May 10, 1996
Par value $.10 per share 3,208,599
Page 1 of 13
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
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
Page 2
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 30, July 1,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 3,905,386 $ 2,436,859
Accounts receivable, less allowances of
$251,328 and $207,158 13,152,872 16,078,683
Inventories 10,602,505 13,428,014
Prepaid expenses and other current assets 2,705,303 2,458,355
-------------- --------------
TOTAL CURRENT ASSETS 30,366,066 34,401,911
-------------- --------------
PROPERTY AND EQUIPMENT:
Leasehold improvements 550,684 543,874
Machinery and equipment 970,120 876,565
Furniture, fixtures and transporation equipment 764,200 834,187
-------------- --------------
Total 2,285,004 2,254,626
Less accumulated depreciation and amortization (1,461,799) (1,440,688)
-------------- --------------
NET PROPERTY AND EQUIPMENT 823,205 813,938
-------------- --------------
OTHER 731,983 488,609
-------------- --------------
$31,921,254 $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>
March 30, July 1,
1996 1995
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $10,593,373 $15,056,927
Customers' deposits 3,183,961 884,881
Accrued expenses 216,017 833,886
Current maturities of long-term debt 11,047 13,190
-------------- --------------
TOTAL CURRENT LIABILITIES 14,004,398 16,788,884
-------------- --------------
LONG-TERM DEBT 135,513 133,629
-------------- --------------
TOTAL LIABILITIES 14,139,911 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 5,102,545 6,097,426
Foreign currency translation adjustment (4,990) 731
-------------- --------------
Total 17,881,140 18,881,742
Treasury stock, at cost, 27,600 common shares (99,797) (99,797)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 17,781,343 18,781,945
-------------- --------------
$31,921,254 $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) (Unaudited)
For the Three Months Ended For the Nine Months Ended
3-30-96 4-01-95 3-30-96 4-01-95
(13 Weeks) (13 Weeks) (39 Weeks) (39 Weeks)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 11,832,666 $16,131,974 $29,295,220 $45,803,828
-------------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 10,125,759 13,928,919 25,989,342 40,240,039
Selling expenses 1,028,725 850,968 2,966,155 2,623,345
General and administrative expenses 545,853 537,948 1,300,555 1,314,994
--------------- --------------- --------------- ---------------
Total costs and expenses 11,700,337 15,317,835 30,256,052 44,178,378
--------------- --------------- --------------- ---------------
132,329 814,139 (960,832) 1,625,450
NET INTEREST EXPENSE
(INCOME) (9,725) 4,653 (12,741) (2,921)
--------------- --------------- --------------- ---------------
INCOME (LOSS) BEFORE TAXES
ON CONTINUING OPERATIONS 142,054 809,486 (948,091) 1,628,371
TAXES (BENEFIT) ON INCOME
FROM CONTINUING
OPERATIONS 67,000 314,000 (286,000) 591,000
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS $ 75,054 $ 495,486 $ (662,091) $ 1,037,371
-------------- ------------- --------------- -----------
DISCONTINUED OPERATIONS:
Loss from operations of
CopyGuard, net of $33,000 tax (55,115) --- (55,115) ---
Loss from disposal of CopyGuard,
net of $166,000 tax (277,675) --- (277,675) ---
--------------- --------------- --------------- ---------------
(332,790) --- (332,790) ---
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ (257,736) $ 495,486 $ (994,881) $ 1,037,371
============= ============= ============= ============
PER SHARE DATA:
NET INCOME (LOSS) FROM
CONTINUING OPERATIONS $ .02 $ .15 $ (.21) $ .32
(LOSS) ON DISCONTINUED
OPERATIONS $ (.10) $ --- $ (.10) $ ---
----- --- ---- ---
NET INCOME (LOSS) $ (.08) $ .15 $ (.31) $ .32
==== ===== ==== ====
Weighted average number of
common and equivalent shares 3,248,661 3,259,820 3,270,398 3,272,413
</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 Nine Months Ended
3-30-96 4-01-95
(39 Weeks) (39 Weeks)
------------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (994,881) $ 1,037,371
Adjustments to reconcile net income (loss) to cash provided
by operating activities:
Depreciation and amortization 110,077 130,358
Provision for inventory obsolescence 150,000 150,000
Foreign currency translation adjustment (5,721) 9,617
(Increase) decrease in:
Accounts receivable 2,925,811 1,381,615
Inventories 2,675,509 (2,908,063)
Prepaid expenses and deposits (246,948) (906,643)
Other assets (243,374) 46,139
Increase (decrease) in:
Accounts payable (4,463,554) 394,780
Customers' deposits 2,299,080 (77,279)
Accrued expenses (617,869) (159,681)
---------------- --------------
Net cash provided (used) by operating activities 1,588,130 (901,786)
---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - leased equipment (434,630) ---
Capital expenditures - other equipment (32,271) (308,712)
Disposition of property and equipment 347,557 32,977
---------------- --------------
Net cash used in investing activities (119,344) (275,735)
---------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (259) (117,053)
Issuance of common stock for stock options --- 1,500
Minority interest in subsidiary --- 2,000
---------------- --------------
Net cash provided by (used in ) financing activities (259) (113,553)
---------------- --------------
NET INCREASE (DECREASE) IN CASH 1,468,527 (1,291,074)
CASH AT BEGINNING OF PERIOD 2,436,859 5,433,664
---------------- --------------
CASH AT END OF PERIOD $ 3,905,386 $ 4,142,590
============ ==========
Supplemental Disclosures:
Cash paid during period for:
Interest $ 71,895 $ 73,852
Income taxes 112,311 301,851
</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:
March 30, July 1,
1996 1995
(unaudited)
Machines $ 7,300,269 $10,106,300
Parts and supplies 3,302,236 3,321,714
----------- ---------
Total $ 10,602,505 $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 (Loss) Per Share
Net income (loss) 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 in the Company's third fiscal quarter ended March 30, 1996 declined by
approximately $4.3 million or 26.6%. Major components of this decline are
hosiery equipment sales which were down $2.7 million and sweater and trim
equipment sales which were down $2.4 million. The decline in hosiery equipment
sales appears to continue to be related to poor retail sales of garments in the
fall and winter season of 1995. The decline in sweater and trim equipment
appears to be related to the same poor retail environment coupled with a general
decline in the consumption of sweaters. In the nine months ended March 30, 1996,
the Company's revenues declined by $16.5 million or approximately 36.0%. Major
elements in the year-to-date decline are a $12.7 million decrease in hosiery
equipment sales, a $5.5 million decrease in sales of sweater and trim equipment,
both partially offset by $2.0 million in sales from knit fabric equipment, a new
product line this year.
Cost of sales as a percentage of revenues in the Company's fiscal 1996 third
quarter declined slightly to 85.6% from 86.3% in the same quarter of last year,
reflecting changes in product mix. In the year-to-date, cost of sales as a
percentage of revenues increased to 88.7% as compared to 87.8% in the same nine
month period of last year. Service expenses, a component of cost of sales,
accounted for this unfavorable shift. Although service expenses actually
declined by $85,000 between the comparable nine month periods, service expenses
did not decline in proportion to the decline in revenues.
Selling expenses increased by $178,000 in the Company's third fiscal quarter and
by $343,000 in the year-to-date as compared to the comparable periods of last
year. Material elements of these increases occurred in sales salaries and
commissions, travel expenses and rental and space costs. The Company's United
Kingdom subsidiary accounted for $65,000 of the $343,000 increase in the
year-to-date selling expense figures.
General and administrative expenses in the current third quarter and in the
year-to-date are essentially unchanged from the comparable periods of last year.
Interest expense is shown net of interest income. The small favorable shift in
the current quarter reflects a $7,000 decrease in interest expense and a $7,000
increase in interest income. In the year-to-date, the small favorable shift
reflects a $3,000 decrease in interest expense and a $7,000 increase in interest
income.
The effective rate of taxes on income from continuing operations in the current
quarter at 47.2% has been skewed upward by the relatively small amount of
pre-tax profits as compared to partially or wholly non-deductible expenses,
year-to-date.
Page 8
<PAGE>
In the Company's current third fiscal quarter, there is a charge for
discontinued operations in the amount of $333,000. This after-tax figure records
the cost of the discontinuation of the Company's CopyGuard Division. CopyGuard
was developing a computer-generated matrix to invisibly mark garments to prevent
counterfeiting. However, its continuing cash funding requirements were diverting
funds from the Company's core business while prospects of bringing the system to
market, successfully, were diminishing. Although the system developed by
CopyGuard functioned successfully from a technical point of view, the system has
not proven to be commercially feasible for the prospective users. Consequently,
in the current third fiscal quarter, management elected to cease all CopyGuard
operations, write off all assets of the CopyGuard Division and provide for any
remaining expenses. The loss on disposal of CopyGuard is equivalent to $0.10 per
share of outstanding common stock in both the current quarter and the
year-to-date.
OUTLOOK
Late in the Company's current second quarter, the sock industry served by the
Company began to demonstrate some improvement. Demand for single cylinder
athletic sock machines with patterning capability increased strongly. Demand for
double cylinder and dial rib socks made on other machines sold by the Company
has remained sluggish. At the same time, the sweater manufacturing industry in
the United States and in the United Kingdom is displaying substantial weakness.
In February 1996, the Company became the U.S., Canadian and Mexican distributor
for Tonello S.r.l., an Italian manufacturer of garment wet processing equipment.
The Company's new garment wet processing division will distribute and install
Tonello equipment, concentrating its efforts on the processing of blue jean
garments as well as dyeing.
LIQUIDITY AND CAPITAL RESOURCES
At March 30, 1996, the Company's working capital was approximately $16.4
million, down about $1.3 million from that same position at the end of the prior
fiscal year, July 1, 1995. The Company's current ratio at March 30, 1996 was
2.17 to 1 as compared to 2.05 to 1 at July 1, 1995.
Operating activities provided about $1.6 million in the nine months ended March
30, 1996. Operating activities used about $0.9 million in the same period of
last year. In the current period, this favorable result reflects a $5.6 million
decrease in receivables and inventories, largely offset by a $2.8 million net
decrease in payables and customers' deposits, as well as the $1.0 million loss
from continuing and discontinued operations.
Investing activities used approximately $119,000 in the current year-to-date as
compared to $276,000 in the same period of last year. The current year investing
activities reflect about $435,000 in hosiery equipment inventory which the
Company leased in the current period to customers largely offset by $348,000 in
disposition of property and equipment.
Overall, net cash increased by about $1.5 million in the current nine month
period. In the same period of last year, net cash declined by about $1.3
million.
The Company presently has no material commitments for capital expenditures and
does not anticipate incurring such commitments in the balance of fiscal 1996.
Page 9
<PAGE>
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 in customer orders or other factors also may cause 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.
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: May 14, 1996 /s/ Robert S. Speizman
--------------------- ----------------------
Robert S. Speizman
President
Date: May 14, 1996 /s/ Josef Sklut
--------------------- ---------------
Josef Sklut
Vice President-Finance
(Chief Financial Officer)
Page 12
<PAGE>
Exhibit 11
NET INCOME (LOSS) PER SHARE
The following table presents the information needed to compute primary income
per common share:
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
For the Three Months Ended For the Nine Months Ended
3-30-96 4-01-95 3-30-96 4-01-95
(13 Weeks) (13 Weeks) (39 Weeks) (39 Weeks)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ (257,736) $ 495,486 $ (994,881) $ 1,037,371
Weighted average shares
outstanding 3,236,199 3,236,199 3,236,199 3,236,199
Less: Treasury Shares (27,600) (27,600) (27,600) (27,600)
Add: Assumed exercise of
options reduced by the
number of shares purchased
with proceeds 40,062 51,221 61,799 63,814
--------------- -------------- -------------- --------------
Adjusted weighted average of
shares outstanding 3,248,661 3,259,820 3,270,398 3,272,413
=============== ============== ============== ==============
Net income (loss) per share $ (.08) $ .15 $ (.31) $ .32
---- --- ---- ---
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-02-1995
<PERIOD-END> MAR-30-1996
<CASH> 3,905,386
<SECURITIES> 0
<RECEIVABLES> 13,404,200
<ALLOWANCES> 251,328
<INVENTORY> 10,602,505
<CURRENT-ASSETS> 30,366,066
<PP&E> 2,285,004
<DEPRECIATION> 1,461,799
<TOTAL-ASSETS> 31,921,254
<CURRENT-LIABILITIES> 14,004,398
<BONDS> 0
0
0
<COMMON> 323,620
<OTHER-SE> 17,457,723
<TOTAL-LIABILITY-AND-EQUITY> 31,921,254
<SALES> 29,295,220
<TOTAL-REVENUES> 29,295,220
<CGS> 25,989,342
<TOTAL-COSTS> 30,256,052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,741)
<INCOME-PRETAX> (948,091)
<INCOME-TAX> (286,000)
<INCOME-CONTINUING> (662,091)
<DISCONTINUED> 332,790
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (994,881)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> (.31)
</TABLE>
