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 December 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 February 7, 1995
Par value $.10 per share 3,208,599
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
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
</TABLE>
Page 2
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 30, July 1,
1995 1995
(Unaudited)
ASSETS
CURRENT:
<S> <C> <C>
Cash and cash equivalents $ 1,804,207 $ 2,436,859
Accounts receivable, less allowances of
$173,028 and $207,158 10,129,436 16,078,683
Inventories 10,543,605 13,428,014
Prepaid expenses and other current assets 2,242,950 2,458,355
___________ ___________
TOTAL CURRENT ASSETS 24,720,198 34,401,911
___________ ___________
PROPERTY AND EQUIPMENT:
Leasehold improvements 550,684 543,874
Machinery and equipment 1,311,795 876,565
Furniture, fixtures and transportation equipment 763,750 834,187
___________ __________
Total 2,626,229 2,254,626
Less accumulated depreciation and amortization (1,436,617) (1,440,688)
___________ _________
NET PROPERTY AND EQUIPMENT 1,189,612 813,938
___________ __________
OTHER 626,494 488,609
$26,536,304 $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>
December 30, July 1,
1995 1995
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 6,989,016 $15,056,927
Customers' deposits 1,139,496 884,881
Accrued expenses 222,067 833,886
Current maturities of long-term debt 10,351 13,190
__________ __________
TOTAL CURRENT LIABILITIES 8,360,930 16,788,884
LONG-TERM DEBT 135,166 133,629
_________ __________
TOTAL LIABILITIES 8,496,096 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 5,360,281 6,097,426
Foreign currency translation adjustment (3,861) 731
__________ __________
Total 18,140,005 18,881,742
Treasury stock, at cost, 27,600 common shares (99,797) (99,797)
__________ __________
TOTAL STOCKHOLDERS' EQUITY 18,040,208 18,781,945
__________ __________
$26,536,304 $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 Six Months Ended
---------------------------- ------------------------
12-30-95 12-31-94 12-30-95 12-31-94
(13 Weeks) (13 Weeks) (13 Weeks) (26 Weeks)
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 9,123,704 $ 17,251,361 $17,462,554 $ 29,671,854
--------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 8,267,912 15,107,089 15,863,583 26,311,120
Selling expenses 1,015,167 911,105 1,937,430 1,772,377
General and administrative
expenses 384,940 451,094 754,702 777,046
--------- ---------- ---------- ----------
Total costs and expenses 9,668,019 16,469,288 18,555,715 28,860,543
--------- ---------- ---------- ----------
(554,315) 782,073 (1,093,161) 811,311
NET INTEREST EXPENSE
(INCOME) (21,208) 3,673 (3,016) (7,574)
--------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
TAXES ON INCOME (523,017) 778,400 (1,090,145) 818,885
TAXES (BENEFIT)
ON INCOME (165,000) 262,500 (353,000) 277,000
--------- ---------- ---------- ----------
NET INCOME (LOSS) $ (358,107) $ 515,900 $ (737,145) $ 541,885
NET INCOME (LOSS) PER
SHARE $ (.11) $ .16 $ (.23) $ .17
=== === === ===
Weighted average number of
common and equivalent shares 3,244,835 3,269,190 3,277,935 3,280,618
</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 Six Months Ended
---------------------------
12/30/95 12/31/94
(26 Weeks) (26 Weeks)
------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (737,145) $ 541,885
Adjustments to reconcile net income (loss) to cash provided
by operating activities:
Depreciation and amortization 84,894 87,928
Provision for inventory obsolescence 100,000 100,000
Foreign currency translation adjustment (4,592) (1,779)
(Increase) decrease in:
Accounts receivable 5,949,247 309,230
Inventories 2,784,409 (2,420,013)
Prepaid expenses and deposits 215,405 (441,735)
Other assets (137,885) 67,084
Increase (decrease) in:
Accounts payable (8,067,911) 765,557
Customers' deposits 254,615 (2,660)
Accrued expenses (611,819) (286,293)
---------- ---------
Net cash used in operating activities (170,782) (1,280,796)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - leased equipment ( 434,630) -
Capital expenditures - other equipment ( 31,821) (193,998)
Disposition of property and equipment 5,883 29,691
---------- ---------
Net cash used in investing activities (460,568) (164,307)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (1,302) (81,454)
---------- ---------
Issuance of common stock for stock options - 1,653
Minority interest in subsidiary - 2,000
---------- ---------
Net cash provided by (used in) financing activities (1,302) (77,801)
---------- ---------
NET INCREASE (DECREASE) IN CASH (632,652) (1,522,904)
CASH AT BEGINNING OF PERIOD 2,436,859 5,433,664
---------- ---------
CASH AT END OF PERIOD $ 1,804,207 $ 3,910,760
========= =========
Supplemental Disclosures:
Cash paid during period for:
Interest $ 64,046 $ 57,477
Income taxes 106,929 23,519
</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:
<TABLE>
<CAPTION>
December 30, July 1,
1995 1995
------------ ----------
(unaudited)
<S> <C> <C>
Machines $ 7,279,578 $10,106,300
Parts and supplies 3,264,027 3,321,714
---------- ----------
Total $ 10,543,605 $13,428,014
========== ==========
</TABLE>
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 from
the sale of used textile equipment.
RESULTS OF OPERATIONS
Revenues in the Company's second fiscal quarter ended December 30, 1995 declined
by approximately $8.1 million or 47.1%. Major elements of this decline are
hosiery equipment sales which were down $6.9 million and sweater and trim
equipment sales which were down $1.6 million. The decline in hosiery equipment
sales appears 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 the general decline in
the consumption of sweaters. In the six months ended December 30, 1995, the
Company's revenues declined by $12.2 million or 41.2%. Major elements in that
decline are hosiery equipment sales which were down $10.0 million and sweater
and trim equipment sales which were down $3.4 million. Both declines reflect the
same poor retail environments which affected the second quarter performance.
Cost of sales as a percentage of revenues in the Company's fiscal 1996 second
quarter which ended December 30 increased to 90.6% from 87.6% in the same
quarter of last year. Service expenses, a component of cost of sales, accounted
for most of this unfavorable shift. Service expenses between the second quarter
of the current year and the second quarter of last year declined by about 5.4%;
however, as a percent of the reduced revenues, service expenses increased by
2.4% quarter to quarter. In the year-to-date, cost of sales as a percentage of
revenues increased to 90.8% as compared to 88.7% in the same period of last
year. Service expenses as a component of cost of sales remained constant between
the two six-month periods at $1.0 million, accounting for 2.4% of the overall
unfavorable shift of 2.1%.
Selling expenses in the second quarter increased by $104,000 as compared to the
second quarter of last year. Material elements of this overall increase occurred
in sales salaries, travel expenses, consulting fees and rental and space costs.
These increases were partially offset by decreases in salespersons' commissions
and in letter of credit expenses. In the year-to-date, selling expenses
increased by $165,000 in fiscal 1996 as compared to the same period of last
year. The Company's United Kingdom subsidiary accounted for $47,000 of this
increase. Elements similar to the quarterly elements accounted for this change
in the Company's year-to-date selling expenses.
General and administrative expenses in the current quarter declined by about
$66,000. The quarterly decrease relates to reductions in executive bonuses and
in bad debt provisions. In the year-to-date, general and administrative expenses
declined by about $22,000 as compared to the same period of last year. This
reflects decreases in executive bonuses and in bad debt provisions. (No
executive bonuses were accrued in either of the current periods.)
Page 8
<PAGE>
Interest expense is shown net of interest income. The favorable shift of about
$25,000 in the latest quarter results from a $27,000 increase in interest
income, as compared to the second quarter of last year.
OUTLOOK
Late in the Company's current second quarter, the sock industry served by the
Company began to demonstrate some improvement. Demand for Lonati single cylinder
athletic sock machines with patterning capability increased strongly. The
Company is not certain as to how long this surge in demand will continue. Demand
for double cylinder and dial rib socks made on other machines sold by the
Company remains sluggish. The sweater manufacturing industry in the United
States and in the United Kingdom continues to display substantial 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 formed a new division to market these machines which are used to
manufacture tee-shirt fabric and other knitted fabric. This new division has
recorded sales of $1.2 million of this type of equipment since it was formed.
LIQUIDITY AND CAPITAL RESOURCES
At December 30, 1995, the Company's working capital position was approximately
$16.4 million, down about $1.2 million from that same position at the end of the
prior fiscal year, July 1, 1995. The Company's current ratio at December 30 is
2.96 to 1 as compared to 2.05 to 1 at July 1, 1995.
Operating activities used about $171,000 in cash in the six months ended
December 30, 1995. They used $1.3 million in the same period of last year. In
the current period, this requirement reflects a $8.7 million reduction in
payables and accruals, largely offset by a $5.9 million reduction in receivables
and a $2.8 million reduction in inventories.
Investing activities used about $461,000 in the current year-to-date as compared
to about $164,000 in the first six months of last year. This increase reflects
about $435,000 in hosiery equipment inventory which the Company leased in the
current period to customers.
Overall, net cash declined by about $633,000 in the current six-month period. In
the same period of last year, net cash declined about $1.5 million.
The Company presently has no material commitments for capital expenditures and
does not anticipate incurring such commitments in the balance of fiscal 1996.
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
Page 9
<PAGE>
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 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: February 13, 1995 /s/ Robert S. Speizman
--------------------- ----------------------
Robert S. Speizman
President
Date: February 13, 1995 /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 Six Months Ended
-------------------------- ------------------------
12/30/95 12/31/94 12/30/95 12/31/94
(13 Weeks) (13 Weeks) (26 Weeks) (26 Weeks)
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $(358,107) $ 515,900 $ (737,145) $ 541,885
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 36,236 60,591 69,336 72,019
--------- ---------- ---------- -----------
Adjusted weighted average of
shares outstanding 3,244,835 3,269,190 3,277,935 3,280,618
========= ========= ========= =========
Net income (loss) per share $ (.11) $ .16 $ (.23) $ .17
--------- ---------- ---------- -----------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-02-1995
<PERIOD-END> DEC-30-1995
<CASH> 1,804,207
<SECURITIES> 0
<RECEIVABLES> 10,302,464
<ALLOWANCES> 173,028
<INVENTORY> 10,543,605
<CURRENT-ASSETS> 24,720,198
<PP&E> 2,626,229
<DEPRECIATION> 1,436,617
<TOTAL-ASSETS> 26,536,304
<CURRENT-LIABILITIES> 8,360,930
<BONDS> 0
323,620
0
<COMMON> 0
<OTHER-SE> 17,716,588
<TOTAL-LIABILITY-AND-EQUITY> 26,536,304
<SALES> 17,462,554
<TOTAL-REVENUES> 17,462,554
<CGS> 15,863,583
<TOTAL-COSTS> 18,555,715
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,016)
<INCOME-PRETAX> (1,090,145)
<INCOME-TAX> (353,000)
<INCOME-CONTINUING> (737,145)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (737,145)
<EPS-PRIMARY> (0.23)
<EPS-DILUTED> (0.23)
</TABLE>
