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 28, 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 November 8, 1996
- --------------------- ----------------
Par value $.10 per share 3,235,266
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 Condensed 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>
September 28, June 29,
1996 1996
------------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT:
Cash and cash equivalents $5,216,007 $ 7,981,723
Accounts receivable, less allowances of
$338,234 and $259,956 14,358,695 12,160,449
Inventories 12,097,205 11,639,552
Prepaid expenses and other current assets 2,786,337 2,340,111
----------- -----------
TOTAL CURRENT ASSETS 34,458,244 34,121,835
---------- ----------
PROPERTY AND EQUIPMENT:
Leasehold improvements 553,036 550,684
Machinery and equipment 1,264,004 1,208,508
Furniture, fixtures and transportation equipment 1,136,417 1,218,570
----------- -----------
Total 2,953,457 2,977,762
Less accumulated depreciation and amortization (1,525,377) (1,525,058)
----------- ----------
NET PROPERTY AND EQUIPMENT 1,428,080 1,452,704
----------- ----------
OTHER 585,620 574,685
------------ -----------
$36,471,944 $36,149,224
========== ==========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
Page 3
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 28, June 29,
1996 1996
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $15,800,331 $14,864,567
Customers' deposits 1,271,282 2,723,466
Accrued expenses 497,198 209,881
Current maturities of long-term debt 1,181 11,051
----------- ----------
TOTAL CURRENT LIABILITIES 17,569,992 17,808,965
LONG-TERM DEBT 129,557 137,334
---------- ----------
TOTAL LIABILITIES 17,699,549 17,946,299
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock - par value $.10; authorized 6,000,000
shares; issued 3,262,866 and 3,236,199 shares 326,287 323,620
Additional paid-in capital 12,512,299 12,459,965
Retained earnings 6,032,589 5,524,360
Foreign currency translation adjustment 1,017 (5,223)
---------- ----------
Total 18,872,192 18,302,722
Treasury stock, at cost, 27,600 common shares (99,797) (99,797)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 18,772,395 18,202,925
---------- ----------
$36,471,944 $36,149,224
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 4
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
For the Three Months Ended
-----------------------------------------------------------
September 28, 1996 September 30, 1995
(13 Weeks) (13 Weeks)
------------------------- ------------------
<S> <C> <C>
REVENUES $16,966,745 $ 8,338,850
---------- ------------
COSTS AND EXPENSES:
Cost of sales 14,107,777 7,595,671
Selling expenses 1,363,618 922,263
General and administrative expenses 680,875 369,762
---------- ------------
Total costs and expenses 16,152,270 8,887,696
---------- ------------
814,475 (548,846)
NET INTEREST EXPENSE (INCOME) (46,754) 18,192
---------- ------------
Income (loss) before taxes on income 861,229 (567,038)
TAXES (BENEFIT) ON INCOME 353,000 (188,000)
----------- ------------
NET INCOME (LOSS) $ 508,229 $ (379,038)
=+========= ============
NET INCOME (LOSS) PER SHARE $ 0.15 $(0.12)
====== ======
Weighted average number of common and
equivalent shares 3,305,761 3,258,860
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 5
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
For the Three Months Ended
9-28-96 9-30-95
(13 Weeks) (13 Weeks)
------------------ ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 508,229 $ (379,038)
Adjustments to reconcile net income (loss) to cash used
by operating activities:
Depreciation and amortization 87,877 38,982
Provision for inventory obsolescence 50,000 50,000
Foreign currency translation adjustment 6,240 (2,116)
(Increase) decrease in:
Accounts receivable (2,198,246) 5,809,361
Inventories (507,653) 109,037
Prepaid expenses and other current assets (446,226) 295,226
Other assets (10,935) (212,300)
Increase (decrease) in:
Accounts payable 935,764 (8,546,170)
Customers' deposits (1,452,184) (173,496)
Accrued expenses 287,317 (350,329)
---------------- --------------
Net cash used in operating activities (2,739,817) (3,360,843)
---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - other equipment (22,604) (20,239)
Capital expenditures - equipment leased to customers (51,786) -
Disposition of property and equipment 11,137 2,000
---------------- --------------
Net cash used in investing activities (63,253) (18,239)
---------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from note payable - bank - 1,350,000
Principal payments on long-term debt (17,647) (476)
Issuance of common stock for stock options 55,001 -
---------------- --------------
Net cash provided by financing activities 37,354 1,349,524
---------------- --------------
NET DECREASE IN CASH (2,765,716) (2,029,558)
CASH AND CASH EQUIVALENTS at beginning of period 7,981,723 2,436,859
---------------- --------------
CASH AND CASH EQUIVALENTS at end of period $ 5,216,007 $ 407,301
================ ==============
Supplemental Disclosures:
Cash paid during period for:
Interest $ 5,857 $ 44,957
Income taxes 1,102 104,026
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 6
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED 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 June
29, 1996, which is incorporated by reference.
Note 2. Inventories
Inventories consisted of the following:
September 28, June 29,
1996 1996
(unaudited)
--------------- ------------
Machines $ 8,887,299 $ 8,211,242
Parts and supplies 3,209,906 3,428,310
----------- -----------
Total $ 12,097,205 $ 11,639,552
=========== ============
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 and dyeing and finishing equipment, 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 increased by about $8.6 million in the first quarter of the current
fiscal year to total $17.0 million. This compares to the first quarter of last
year when revenues totaled $8.3 million. This improvement in revenues resulted
from an $8.3 million increase in sales of hosiery manufacturing equipment, an
$0.8 million increase in sales of knitted fabric manufacturing equipment and an
increase of $0.3 million in sales of dyeing and finishing equipment. These
increases were partially offset by $0.8 million in declines in sales of sweater
manufacturing machines and miscellaneous other activities.
Cost of sales as a percentage of net revenues was 83.1% as compared to 91.1% in
the first quarter of the prior fiscal year. This favorable movement reflects an
improved sales environment, with better margins, as well as a changing product
mix. In addition, service expenses, which are a part of cost of sales, remained
relatively constant at about $0.5 million between the comparable periods. The
stability of service expenses between the comparable periods accounted for about
2.9 percentage points of the improved cost of sales percentage.
Selling expenses in the first quarter of fiscal 1997 were $1,364,000 or about
8.0% of revenues. This compares to $922,000 or 11.1% of revenues in the same
quarter of last year. Substantial increases in sales salaries, sales commissions
and in letter of credit expenses, reflecting the increased sales activity,
accounted for most of the increase.
General and administrative expenses in the first quarter of fiscal 1997 were
$681,000 or 4.0% of revenues as compared to $370,000 or 4.4% of revenues in the
first quarter of fiscal 1996. Major increases occurred in salaries and bonuses
and in bad debt provisions.
Interest expense is shown net of interest income. In the first quarter of fiscal
1997, interest income exceeded expense by about $47,000. In the same quarter of
fiscal 1996, interest expense exceeded interest income by $18,000.
In the first quarter of fiscal 1997, the income tax provision represents 41.0%
of pre-tax income. In the same quarter of last year, the tax benefit represented
35.8% of the pre-tax loss. The upward shift in the current quarter reflects a
loss in the English subsidiary's operations for which a tax loss carryback is
not recognized.
Net income for the current first quarter totaled $508,000 as compared to a loss
of $379,000 in the same quarter of last year. Earnings per share were $0.15 as
compared to a loss per share of $0.12 in the same quarter of last year.
Page 8
<PAGE>
OUTLOOK
During the Company's current first quarter, the sock industries served by the
Company continued to show improvements. Demand for single cylinder athletic sock
machines with patterning capabilities continued to show moderate demand. Demand
for rib socks made on double cylinder and dial rib machines has remained
somewhat sluggish. At the same time, the sweater manufacturing industry in the
United States and in the United Kingdom continues to display substantial
weakness.
In September 1996, the Company was appointed the exclusive distributor in Mexico
for all machines manufactured by the Lonati and Santoni companies, effective
January 2, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 28, 1996, the Company's working capital totaled $16.9 million. This
figure represents an increase of $575,000 from the Company's working capital
position at the end of the prior fiscal year, June 29, 1996. The Company's
current ratio at September 28 was 1.96 to 1.00. At June 29, 1996, it was 1.92 to
1.00.
Operating activities used $2.7 million in cash in the quarter ended September
28, 1996, as compared to $3.4 million used by operating activities in the first
quarter of last year. In the current quarter, this requirement was generated
essentially by increases in accounts receivable, inventories and other current
assets, and a decrease in customer deposits, partially offset by an increase in
accounts payable. In the first quarter of last year, this requirement was
generated by substantial reductions in accounts payable, partially offset by a
reduction in accounts receivable.
Financing activities provided $37,000 in the current first quarter. This
compares with $1,350,000 provided by a bank loan in the prior year.
Overall, net cash decreased by $2.8 million in the first quarter of fiscal 1997
as compared with a net cash decrease of $2.0 million in the same quarter of last
year.
The Company presently has no material commitments for capital expenditures and
does not anticipate incurring such commitments in the balance of fiscal 1997.
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.
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>
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: November 12, 1996 /s/ Robert S. Speizman
------------------------------ ----------------------
Robert S. Speizman
President
Date: November 12, 1996 /s/ Josef Sklut
------------------------------- ------------------------
Josef Sklut
Vice President-Finance
(Chief Financial Officer)
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 28, 1996 September 30, 1995
(13 Weeks) (13 Weeks)
--------------------- ------------------
<S> <C> <C>
Net income (loss) $ 508,229 $ (379,038)
=========== ==========
Weighted average shares outstanding 3,236,785 3,236,199
Less: Treasury shares (27,600) (27,600)
Add: Assumed exercise of options reduced by
the number of shares purchased with proceeds 96,576 50,261
----------- ----------
Adjusted weighted average of shares outstanding 3,305,761 3,258,860
=========== ==========
Net income (loss) per share $0.15 $(0.12)
===== ======
</TABLE>
Page 12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000092827
<NAME> SPEIZMAN INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> SEP-28-1996
<CASH> 5,216,007
<SECURITIES> 0
<RECEIVABLES> 14,696,929
<ALLOWANCES> 338,234
<INVENTORY> 12,097,205
<CURRENT-ASSETS> 34,458,244
<PP&E> 2,953,457
<DEPRECIATION> 1,525,377
<TOTAL-ASSETS> 36,471,944
<CURRENT-LIABILITIES> 17,569,992
<BONDS> 0
0
0
<COMMON> 326,287
<OTHER-SE> 18,446,108
<TOTAL-LIABILITY-AND-EQUITY> 36,471,944
<SALES> 16,966,745
<TOTAL-REVENUES> 16,966,745
<CGS> 14,107,777
<TOTAL-COSTS> 16,152,270
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (46,754)
<INCOME-PRETAX> 861,229
<INCOME-TAX> 353,000
<INCOME-CONTINUING> 508,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 508,229
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
