(Speizman logo) SPEIZMAN
INDUSTRIES, INC.
1996 ANNUAL REPORT
<PAGE>
Dear Stockholders:
Fiscal 1996 was the first year in the last ten that your Company lost money.
We had net revenues of $46.3 million, a decline of 24.9% from last year. Those
revenues generated an operating loss of $240,000 or 7(cents) per share. We also
discontinued an operation for a loss of $333,000 or 10(cents) per share. The
combined loss was $573,000 or 17(cents) per share.
However, the fourth quarter of Fiscal 1996 shows a sales increase over the
prior year's fourth quarter of 7.6% with after-tax profits of $422,000 or
13(cents) per share, a 64% improvement over the fourth quarter of last year.
During the first three quarters of our fiscal year, demand for the products
produced by all of the equipment in the various fields in which we operate was
weak. This resulted in soft equipment sales. During our fourth quarter, demand
for our sock machines increased dramatically. This increase in demand,
particularly for our Lonati machines which produce sport athletic socks, and
other peripheral equipment which we sell to the sock industry, were the major
reasons for our rebound.
During Fiscal 1996, we determined that our CopyGuard Division was no longer
viable and we discontinued it. This resulted in a one-time loss of $333,000 or
10(cents) per share. We continue to aggressively manage and monitor the results
of all of the Divisions of your Company. We make every effort to enhance their
sales and profitability. However, when management feels that a Division is no
longer viable, we will not hesitate to terminate its operations.
Your Company will remain as a distributor/service company within the capital
equipment business. We will continue to evaluate and expand wherever possible
our current Divisions while searching for additional products to distribute.
Although we are not now in negotiations for acquiring a company, we certainly
would consider an acquisition if we felt that the company meshed with our
overall needs and strategy. Our goal is to increase the value of the shares of
Speizman Industries' stock in a prudent yet aggressive manner. We also want to
keep your Company financially strong with as little debt as possible.
We are a distributor. Our objective is to be the dominant supplier in every
industry in which we operate. We want to achieve this dominance by giving our
customers the lowest possible prices with the best technical service and
after-sales follow-up on the equipment they purchase from us. We want to help
our customers by developing and strengthening their business and making sure
that the products we sell them are delivered to them at the lowest possible
price.
We want all of our employees to feel each lost sale is a personal loss, not
just a business loss. We want to make sure that each of our customers realize
that we are totally committed to strengthening their businesses so that Speizman
can continue to be their partner as they continue to grow and succeed in their
business efforts.
Fiscal 1996 has ended in a very positive manner. We hope that we will be able
to continue this growth, both in sales and in profits, through Fiscal 1997.
Very truly yours,
SPEIZMAN INDUSTRIES, INC.
/s/ Robert S. Speizman
Robert S. Speizman
President
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JUNE 29, JULY 1, JULY 2, JULY 3, JUNE 27,
1996 1995 1994 1993 1992
(IN THOUSANDS, EXCEPT NET INCOME PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues $46,280 $61,597 $69,526 $39,552 $26,564
Cost of sales 40,547 53,986 60,004 32,635 22,997
Gross profit 5,733 7,611 9,522 6,917 3,567
Selling, general and
administrative expenses 6,045 5,478 4,350 3,651 2,546
Operating income (loss) (312) 2,133 5,172 3,266 1,021
Interest (income) expense, net (43) (15) 6 186 196
Income (loss) before taxes on income (269) 2,148 5,166 3,080 825
Taxes (benefit) on income (1) (29) 854 1,869 661 82
Income (loss) from continuing operations (240) 1,294 3,297 2,419 743
(Loss) from discontinued operation (333) -- -- -- --
Net income (loss) (573) 1,294 3,297 2,419 743
Preferred stock dividends -- -- 41 -- --
Net income (loss) applicable to common
stock $ (573) $ 1,294 $ 3,256 $ 2,419 $ 743
PER SHARE DATA:
Income (loss) from continuing operations $ (.07) $ .40 $ 1.12 $ 1.03 $ .32
Loss from discontinued operation $ (.10) -- -- -- --
Net income (loss) $ (.17) $ .40 $ 1.12 $ 1.03 $ .32
Weighted average number of shares 3,284 3,271 2,905 2,360 2,297
BALANCE SHEET DATA:
Working capital $16,313 $17,613 $16,579 $ 4,553 $ 2,792
Total assets 36,149 35,704 30,160 18,145 13,519
Short-term debt -- -- -- 175 401
Long-term debt, including current
maturity 148 147 293 1,060 1,374
Stockholders' equity 18,203 18,782 17,483 5,137 2,714
</TABLE>
(1) Reflects the utilization of prior net operating losses to completely offset
federal income taxes in 1992 and to partially offset federal income taxes in
1993.
1
<PAGE>
BUSINESS OVERVIEW
GENERAL
Speizman Industries, Inc. (the "Company") is the leading distributor of new sock
knitting machines in the United States. It distributes technologically advanced
sock knitting machines manufactured by Lonati, S.p.A., Brescia, Italy
("Lonati"), which the Company believes is the world's largest manufacturer of
hosiery knitting equipment. It also distributes Lonati sock and sheer hosiery
knitting machines in Canada. In addition, through sales arrangements with other
European textile machinery manufacturers, the Company distributes other sock
knitting machines, knitting machines for underwear, sweaters, collars and trim,
and other knitted fabrics and other equipment related to the manufacture of
socks, sheer hosiery and other textile products, principally in the United
States and Canada. The Company also sells dyeing and finishing equipment for the
textile industry. The Company sells textile machine parts and used textile
equipment in the United States and in a number of foreign countries.
ALL REFERENCES HEREIN ARE TO THE COMPANY'S 52-OR-53 WEEK FISCAL YEAR ENDING ON
THE SATURDAY CLOSEST TO JUNE 30. FISCAL 1996, 1995, 1994, AND 1992, EACH
CONTAINED 52 WEEKS AND ENDED ON JUNE 29, 1996, JULY, 1, 1995, JULY 2, 1994 AND
JUNE 27, 1992. FISCAL 1993 CONTAINED 53 WEEKS AND ENDED ON JULY 3, 1993. UNLESS
THE CONTEXT OTHERWISE REQUIRES, THE TERM THE "COMPANY" AS USED HEREIN INCLUDES
SPEIZMAN INDUSTRIES, INC. AND ITS SUBSIDIARIES.
The Lonati single cylinder machines distributed by the Company are for the
knitting of athletic socks. The Lonati double cylinder machines are for the
knitting of dress and casual socks. The Lonati machines are electronic, high-
speed, and have computerized controls. Lonati single cylinder machines are
capable of knitting pouch heel and toe, reciprocated heel and toe and tube
socks. These and other features allow the rapid change of sock design, style and
size, result in increased production volume and efficiency and simplify the
servicing of the machines. The Company distributes these sock knitting machines
as well as Lonati sheer hosiery knitting machines in Canada. In addition, the
Company distributes the knitting machines, described below, manufactured by
Santoni, S.r.l. Brescia, Italy ("Santoni"), one of Lonati's subsidiaries, in the
United States and Canada. Sales by the Company in the United States and Canada
of machines manufactured by Lonati, S.p.A., generated the following percentages
of the Company's net revenues: 46.2% in 1996, 44.4% in 1995 and 65.6% in 1994.
In addition, sales of Santoni machines in the United States and Canada generated
4.8%, 9.3% and 4.4% of the Company's net revenues in fiscal 1996, 1995 and 1994,
respectively.
In addition to the Lonati machines, the Company distributes new knitting and
other machines and equipment under written agreements and other arrangements
with the manufacturers. The following table sets forth certain information
concerning certain of these additional distribution arrangements:
<TABLE>
<CAPTION>
MANUFACTURER MACHINE TERRITORY
<S> <C> <C>
Santoni, S.r.l., Circular knitting machines for United States and Canada
Brescia, Italy underwear, men's socks and women's
sheer hosiery and surgical support
hose
Conti Complett, S.p.A., Sock toe closing machines and sock United States and Canada
Milan, Italy turning devices
Sperotto Rimar, S.p.A., Fabric processing and finishing United States
Malo, Italy machines
Corino Macchine, S.r.l., Fabric handling equipment United States and Canada
Alba, Italy
Fimatex, Turning devices for sock machines United States
Scandicci, Italy
Orizio Paolo, S.p.A., Fabric knitting machines United States
Brescia, Italy
Tonello, S.r.l., Garment wet processing equipment United States, Canada and Mexico
Sarcedo, Italy
</TABLE>
2
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<TABLE>
<CAPTION>
MANUFACTURER MACHINE TERRITORY
<S> <C> <C>
Solis, S.r.l., Flat parts for knitting machines United States
Florence, Italy
Mec-Mor, S.p.A., Circular knitting machines for United States and Canada
Varese, Italy sweaters
Zamark, S.p.A.. Flat knitting machines for collars United States, Canada, the United
Somma Lombardo, Italy and trim and sweaters Kingdom and Ireland
Jumberca, S.A., Sweater knitting machines United States, Canada, the United
Badalona, Spain Kingdom and Ireland
</TABLE>
Sales of machines manufactured by Zamark (an affiliate of Lonati) generated
1.0%, 1.0% and 1.1% of the Company's net revenues in fiscal 1996, 1995 and 1994,
respectively. In August 1996, this distribution agreement was canceled effective
December 31, 1996.
Sales of machines manufactured by Jumberca generated 2.9%, 9.8% and 9.8% of the
Company's net revenues in fiscal 1996, 1995 and 1994, respectively. In August
1995, this distribution agreement was canceled effective December 31, 1995.
The Company sells used machinery and parts to the textile industry. The Company
carries significant amounts of machinery and parts inventories to meet
customers' requirements and to assure itself of an adequate supply of used
machinery. The Company acts as a liquidator of textile mills and as a broker in
the purchase and sale of such mills.
MARKETING AND SALES
The Company markets and sells knitting machines and related equipment primarily
by maintaining frequent contacts with customers and understanding of its
customers' individual business needs. Salespersons will set up competitive
trials in a customer's plant and allow the customer to use the Company's machine
in its own work environment alongside competing machines for two weeks to three
months. The Company also offers customers the opportunity to send their
employees to the Company for training courses on the operation and service of
the machines and, depending on the number of machines purchased and the number
of employees to train, may offer such training courses at the customer's
facility. In addition, the Company exhibits its equipment at trade shows and
uses its private showroom to demonstrate new machines. These marketing
strategies are complemented by the Company's commitment to service and
continuing education. The Company also produces, at its own expense, training
videos for its major lines of equipment. At August 20, 1996, the Company
employed approximately 18 salespersons and 28 technical representatives. In
addition to its sales staff, the Company uses over 40 commission sales agents in
a number of foreign countries in connection with its sales of used machines.
3
<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
YEAR ENDED JUNE 29, 1996 COMPARED TO YEAR ENDED JULY 1, 1995
NET REVENUES. Net revenues in fiscal 1996 were $46.3 million as compared to
$61.6 million in fiscal 1995, a decrease of $15.3 million, or 24.9%. This
decrease reflects a $11.3 million decline in sales of hosiery equipment, a $7.3
million decline in sales of sweater manufacturing and related equipment, a $0.5
million decline in parts and other sales activities partially offset by a $3.8
million increase in sales of knitted fabric machines. The Company's backlog of
unfilled orders for new and used machines at June 29, 1996, was $19.3 million as
compared to $4.1 million at July 1, 1995. The improved level of backlog in 1996
results from substantially increased demand for sock knitting machines.
COST OF SALES. In fiscal 1996, cost of sales was $40.5 million as compared to
$54.0 million in fiscal 1995, a decrease of $13.5 million, or 24.9%, matching
the relative decline in revenues. Cost of sales as a percent of revenues was
87.6% in fiscal 1996, unchanged from fiscal 1995.
SELLING EXPENSES. Selling expenses increased to $4.2 million in fiscal 1996 from
$3.6 million in fiscal 1995, an increase of 16.3%. Major elements in the
increase were salespersons' salaries and commissions, warehouse and office space
costs, travel, insurance, telecommunications, and insurance, partially offset by
a decrease in letter of credit expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses totaled
$1,878,000, down by $17,000 from $1,895,000 in fiscal 1995. This small decrease
resulted from declines in salaries and bonuses and bad debt provisions,
partially offset by increases in professional fees and in life insurance
expenses.
INTEREST EXPENSE. Interest expense is expressed net of interest income. In
fiscal 1996, interest income exceeded interest expense by $43,000. Net interest
income was $15,000 in fiscal 1995.
TAXES (BENEFIT) ON INCOME (LOSS) FROM CONTINUING OPERATIONS. The provision for
income taxes in fiscal 1996 is a tax benefit of $29,000 on the $269,000 loss
from continuing operations, or 10.8% of the loss. In the prior year, the tax
provision was 39.8% of income before taxes. The current year effective rate
reflects the combined effects of non-deductible entertainment and life insurance
expenses and U.S. profits taxed at higher rates as compared to U.K. losses taxed
at lower rates.
NET INCOME (LOSS) FROM CONTINUING OPERATIONS. Net loss from continuing
operations was $240,000 in fiscal 1996. This compares to net income of
$1,294,000 in fiscal 1995.
LOSS FROM DISCONTINUED OPERATION. During the third quarter of fiscal 1996,
management decided to discontinue the operations of the Company's CopyGuard
Division which was in the development stage. 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 had not
proven to be commercially feasible for the prospective users. Consequently, in
the third fiscal quarter of fiscal 1996, management elected to cease all
CopyGuard operations, write off all assets of the CopyGuard Division and provide
for any remaining expenses. The loss on CopyGuard operations was $55,000, after
tax benefits. The loss on disposal of CopyGuard, after tax benefits, was
$278,000. The combined loss on the discontinued operation was $333,000 or
approximately $0.10 per share of outstanding common stock.
4
<PAGE>
NET INCOME (LOSS). Net income applicable to common stock declined from $1.3
million in fiscal 1995 to a loss of $0.6 million. The 1996 loss is composed of
$240,000 in losses from continuing operations and $333,000 in losses from
discontinued operations. Net loss per share in fiscal 1996 was $0.17, composed
of $0.07 from continuing operations and $0.10 from discontinued operations.
These compare to $0.40 per share net income in fiscal 1995.
YEAR ENDED JULY 1, 1995 COMPARED TO YEAR ENDED JULY 2, 1994
NET REVENUES. Net Revenues in fiscal 1995 were $61.6 million as compared to
$69.5 million in fiscal 1994, a decrease of $7.9 million, or 11.4%. This
decrease reflects a $14.3 million decline in sales of hosiery equipment,
partially offset by increases of $3.4 million in the sales of sweater machines
and related equipment, $1.8 million in the sales of dyeing and finishing
equipment, and $1.2 million in the sales of spare parts. The Company's backlog
of unfilled orders for new and used machines at July 1, 1995, was $4.1 million
as compared to $15.1 million at July 2, 1994. The decline in backlog is
attributed to weakened demand for sock and sweater machines.
COST OF SALES. In fiscal 1995, cost of sales was $54.0 million as compared to
$60.0 million for fiscal 1994, a decrease of $6.0 million, or 10.0%. Cost of
sales as a percent of net revenues increased to 87.6% in fiscal 1995 as compared
to 86.3% in fiscal 1994. Approximately 85% of this increase is attributable to
increased field service expenses associated with new machines. The remainder is
related to leveling of demand.
SELLING EXPENSES. Selling expenses increased to $3.6 million in fiscal 1995 from
$2.4 million in fiscal 1994, an increase of 48.8%. This increase resulted from
the start-up of the U.K. knitting machine division, as well as increased selling
activities, overall. Major components of the increase were salespersons'
salaries and commissions, advertising and exhibitions, travel, warehouse and
office space cost, letter of credit expense and insurance expense.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses, at
$1,895,000 in fiscal 1995, were down slightly from $1,942,000 in fiscal 1994.
The decrease reflects declines in salaries and bonuses, partially offset by
increases in payroll and other taxes and in provisions for losses on accounts
receivable. As a percent of net revenues, general and administrative expenses
were 3.1% in 1995 as compared to 2.8% in fiscal 1994, reflecting the 11.4%
decrease in net revenues between the two fiscal years.
INTEREST EXPENSE. Interest expense is expressed net of interest income. In
fiscal 1995, interest income exceeded interest expense by $15,000. Net interest
expense was $6,000 in fiscal 1994.
TAXES ON INCOME. The provision for taxes on income in fiscal 1995 was 39.8% of
income before taxes. The provision for taxes on income in fiscal 1994 was 36.2%.
NET INCOME. Net income applicable to common stock decreased to $1.3 million in
fiscal 1995 from $3.3 million in fiscal 1994. Net income per share decreased to
$0.40 as compared to $1.12 per share in fiscal 1994 on a 12.6% increase in the
equivalent number of common shares outstanding.
JUMBERCA AGREEMENT
Prior to its amendment in March 1995, the Jumberca Agreement contained certain
minimum purchase requirements for the Jumberca sweater and fabric knitting
machines. The Company did not meet the minimum purchase requirements under the
Jumberca Agreement with regard to either type of machine in fiscal 1995 due
principally to weakened demand for such machines. Due, in part to the weakened
demand, at the Company's request, in March 1995, the parties amended the
Jumberca Agreement to eliminate the minimum purchase requirements thereunder and
to allow for the termination of the agreement prior to its original termination
date in January 1997. In accordance with the terms of the Jumberca Agreements,
as amended in March 1995, the Company terminated the agreement with regard to
the Jumberca fabric knitting machines in August 1995 and with regard to the
Jumberca sweater knitting machines in December 1995. Although the weakened
demand for the machines and the termination of the Jumberca Agreement had an
adverse effect on net revenues in fiscal 1996, it did not have a significant
effect on net income for the year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require a substantial line of letters of credit to
cover its customers' orders. The Company's credit facility provides for an
overall facility of $18.0 million for letters of credit, including up to $2.0
5
<PAGE>
million in revolving funds. This facility expires October 31, 1996. Management
believes that this facility will be extended for several additional years and
will be revised appropriately to meet current financial requirements.
Working capital at June 29, 1996 was $16.3 million as compared to $17.6 million
at July 1, 1995, a decline of $1.3 million. Operating activities in fiscal 1996
provided $6.4 million in funds. In fiscal 1995, such activities required $2.4
million. This improvement in cash flow from operations resulted essentially from
substantial decreases in accounts receivable and inventories and an increase in
accrued expenses and customers' deposits. In the current fiscal year, investing
activities used $812,000 as compared to usage of $461,000 in the prior year. As
a result, cash and cash equivalents increased by $5.5 million to total $8.0
million at June 29, 1996 as compared to $2.4 million at July 1, 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 which fall
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 of customer orders or other factors may result in 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
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 significant adverse effect on future operations.
6
<PAGE>
MARKET AND DIVIDEND INFORMATION
The Company's Common Stock has been included for quotation on the NASDAQ
National Market System under the NASDAQ symbol "SPZN" since October 1993. The
following table sets forth, for the periods indicated, the high and low sale
prices as reported by the NASDAQ National Market System.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
FISCAL 1995
First Quarter (ended October 1, 1994) $8.75 $6.00
Second Quarter (ended December 31, 1994) 6.50 3.22
Third Quarter (ended April 1, 1995) 5.38 3.38
Fourth Quarter (ended July 1, 1995) 6.75 4.25
FISCAL 1996
First Quarter (ended September 30, 1995) 5.12 3.50
Second Quarter (ended December 30, 1995) 3.88 2.62
Third Quarter (ended March 30, 1996) 4.50 2.50
Fourth Quarter (ended June 29, 1996) 5.62 3.50
</TABLE>
As of June 29, 1996, there were approximately 419 stockholders of record of the
Common Stock.
The Company has never declared or paid any dividends on its Common Stock. On
November 29, 1993, the Company purchased all of the 8,147 outstanding shares of
its 5% noncumulative nonvoting preferred stock, par value $100 per share (the
"5% Preferred Stock"), for $100.00 per share. Under the terms of the 5%
Preferred Stock, the Company was obligated to pay a cash dividend of $5.00 per
share in connection with this purchase. Consequently, on November 29, 1993, a
dividend of $40,735 was paid to the former holders of the 5% Preferred Stock.
Future cash dividends, if any, will be at the discretion of the Company's Board
of Directors and will depend upon, among other things, future earnings,
operations, capital requirements, surplus, restrictive covenants in agreements
to which the Company may be subject, general business conditions and such other
factors as the Board of Directors may deem relevant. The Company's present
credit facility contains certain financial and other covenants that could limit
the Company's ability to pay cash dividends on its capital stock.
7
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Speizman Industries, Inc.
We have audited the accompanying consolidated balance sheets of Speizman
Industries, Inc. and subsidiaries as of June 29, 1996 and July 1, 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 29, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Speizman Industries,
Inc. and subsidiaries at June 29, 1996 and July 1, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended June 29, 1996, in conformity with generally accepted accounting
principles.
/s/ BDO Seidman, LLP
BDO SEIDMAN, LLP
Charlotte, North Carolina
September 10, 1996
8
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SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 29, JULY 1, JULY 2,
1996 1995 1994
<S> <C> <C> <C>
NET REVENUES (Note 1) $46,279,969 $61,596,833 $69,525,581
COSTS AND EXPENSES:
Cost of sales 40,546,962 53,986,242 60,003,901
Selling expenses 4,167,490 3,582,719 2,407,086
General and administrative expenses 1,878,193 1,894,915 1,942,375
Total costs and expenses 46,592,645 59,463,876 64,353,362
(312,676) 2,132,957 5,172,219
INTEREST (INCOME) EXPENSE, net of interest
income of $126,522, $101,562 and $128,675 (43,400) (14,858) 6,393
Income (loss) from continuing operations before taxes (269,276) 2,147,815 5,165,826
TAXES (BENEFIT) ON INCOME from continuing operations
(Note 5) (29,000) 854,000 1,869,000
INCOME (LOSS) from continuing operations (240,276) 1,293,815 3,296,826
DISCONTINUED OPERATION (Note 13):
Loss from operations of CopyGuard, net of $33,000 tax (55,115) -- --
Loss from disposal of CopyGuard, net of $166,000 tax (277,675) -- --
LOSS from discontinued operations (332,790) -- --
NET INCOME (LOSS) (573,066) 1,293,815 3,296,826
Preferred stock dividends -- -- 40,735
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCK $ (573,066) $ 1,293,815 $ 3,256,091
PER SHARE DATA:
Income (loss) from continuing operations $ (.07) $ 0.40 $ 1.12
Loss from discontinued operation $ (.10) -- --
NET INCOME (LOSS) $ (.17) $ 0.40 $ 1.12
Weighted average number of common and equivalent shares 3,283,828 3,271,464 2,904,525
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
9
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SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 29, JULY 1,
1996 1995
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 7,981,723 $ 2,436,859
Accounts receivable (Notes 2 and 6) 12,160,449 16,078,683
Inventories (Notes 3 and 6) 11,639,552 13,428,014
Prepaid expenses and other current assets 2,340,111 2,458,355
TOTAL CURRENT ASSETS 34,121,835 34,401,911
PROPERTY AND EQUIPMENT: (Notes 4 and 7)
Leasehold improvements 550,684 543,874
Machinery and equipment 1,208,508 876,565
Furniture, fixtures, and transportation equipment 1,218,570 834,187
2,977,762 2,254,626
Less accumulated depreciation and amortization (1,525,058) (1,440,688)
NET PROPERTY AND EQUIPMENT 1,452,704 813,938
OTHER 574,685 488,609
$36,149,224 $35,704,458
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable $14,864,567 $15,056,927
Customers' deposits 2,723,466 884,881
Accrued expenses 209,881 833,886
Current maturities of long-term debt (Note 7) 11,051 13,190
TOTAL CURRENT LIABILITIES 17,808,965 16,788,884
LONG-TERM DEBT (Note 7) 137,334 133,629
TOTAL LIABILITIES 17,946,299 16,922,513
COMMITMENTS (Notes 4, 9, 11, 12 and 14)
STOCKHOLDERS' EQUITY (Notes 8, 9 and 10):
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 5,524,360 6,097,426
Foreign currency translation adjustment (5,223) 731
Total 18,302,722 18,881,742
Treasury stock, at cost, 27,600 common shares (99,797) (99,797)
TOTAL STOCKHOLDERS' EQUITY 18,202,925 18,781,945
$36,149,224 $35,704,458
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
10
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURENCY
PREFERRED COMMON COMMON PAID-IN RETAINED TRANSLATION TREASURY STOCKHOLDERS'
STOCK SHARES STOCK CAPITAL EARNINGS ADJUSTMENT STOCK EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 3,
1993 $894,152 1,998,841 $199,884 $ 2,595,488 $1,547,520 $ -- $(99,797) $ 5,137,247
Net income before
preferred stock
dividend -- -- -- -- 3,296,826 -- -- 3,296,826
Preferred stock
dividend -- -- -- -- (40,735) -- -- (40,735)
Redemption of
preferred stock (894,152) -- -- -- -- -- -- (894,152)
Conversion of
preferred stock to
common stock -- 240,770 24,077 55,376 -- -- -- 79,453
Net proceeds of
common stock
offering -- 864,609 86,461 9,163,885 -- -- -- 9,250,346
Exercise of stock
options -- 130,729 13,073 174,841 -- -- -- 187,914
Tax effect of
exercise of stock
options -- -- -- 466,000 -- -- -- 466,000
BALANCE, JULY 2,
1994 -- 3,234,949 323,495 12,455,590 4,803,611 -- (99,797) 17,482,899
Net income -- -- -- -- 1,293,815 -- -- 1,293,815
Exercise of stock
options -- 1,250 125 4,375 -- -- -- 4,500
Foreign currency
translation
adjustment -- -- -- -- -- 731 -- 731
BALANCE, JULY 1,
1995 -- 3,236,199 323,620 12,459,965 6,097,426 731 (99,797) 18,781,945
Net loss -- -- -- -- (573,066) -- -- (573,066)
Foreign currency
translation
adjustment -- -- -- -- -- (5,954) -- (5,954)
BALANCE, JUNE 29,
1996 $ -- 3,236,199 $323,620 $12,459,965 $5,524,360 $(5,223) $(99,797) $18,202,925
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
11
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 29, JULY 1, JULY 2,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (573,066) $ 1,293,815 $ 3,296,826
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 173,336 166,965 193,133
Provision for losses on accounts receivable 113,500 171,477 17,850
Provision for inventory obsolescence 139,436 200,000 200,000
Provision for deferred income taxes (58,000) (75,000) 109,000
Provision for deferred compensation 6,782 (6) 28,788
Foreign currency translation adjustment (5,954) 731 --
(Increase) decrease in:
Accounts receivable 3,804,734 (1,079,970) (4,322,948)
Inventories 1,649,026 (6,331,178) (2,741,376)
Prepaid expenses 159,244 (1,176,461) (554,615)
Other assets (69,076) 43,662 (168,226)
Increase (decrease) in:
Accounts payable (192,360) 5,015,062 2,237,330
Accrued expenses and customers' deposits 1,214,580 (623,547) (1,159,937)
Net cash provided by (used in) operating activities 6,362,182 (2,394,450) (2,864,175)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- other equipment (511,039) (520,274) (102,723)
Capital expenditures -- equipment leased to customers (648,620) -- --
Proceeds from property and equipment disposals 347,557 59,377 3,501
Net cash used in investing activities (812,102) (460,897) (99,222)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on notes payable -- -- (174,785)
Principal payments on long-term debt (5,216) (145,958) (734,800)
Net proceeds of common stock offering -- -- 9,250,346
Dividends on preferred stock -- -- (40,735)
Redemption of preferred stock -- -- (814,699)
Issuance of common stock upon exercise of stock options -- 4,500 187,914
Net cash provided by (used in) financing activities (5,216) (141,458) 7,673,241
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,544,864 (2,996,805) 4,709,844
CASH AND CASH EQUIVALENTS, at beginning of year 2,436,859 5,433,664 723,820
CASH AND CASH EQUIVALENTS, at end of year $7,981,723 $ 2,436,859 $ 5,433,664
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
12
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Speizman Industries, Inc. (the
"Company") include all of its subsidiaries, all of which are majority owned. All
material intercompany transactions (domestic and foreign) have been eliminated.
The financial statements of the Company's United Kingdom subsidiary are
translated from pounds sterling to U.S. dollars in accordance with generally
accepted accounting principles.
REVENUE RECOGNITION
The major portion of the Company's revenues consists of sales and commissions on
sales of machinery and equipment. The profit derived therefrom is recognized in
full at the time of shipment, except that commissions receivable over more than
one year are recognized at their discounted present value. Total sales
commissions included in net revenues approximated $56,000, $286,000 and $142,000
for the years ended June 29, 1996, July 1, 1995 and July 2, 1994, respectively.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents. The carrying amount of cash and cash equivalents approximates fair
value because of the short term maturity of these instruments.
INVENTORIES
Inventories are carried at the lower of cost or market. Cost is computed, in the
case of machines, on an identified cost basis and, in the case of other
inventories, on an average cost basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over the
estimated useful lives of the assets by the straight-line method for financial
reporting purposes and by accelerated methods for income tax purposes.
FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign currency contracts to reduce the foreign
currency exchange risks. Foreign currency hedging contracts obligate the Company
to buy a specified amount of a foreign currency at a fixed price in specific
future periods. Realized and unrealized gains and losses are recognized in net
income in the period of the underlying transaction. As of June 29, 1996, the
Company had contracts maturing through June 1997 to purchase approximately
17.7 billion Lira for approximately $11.5 million which approximates the spot
rate on that date.
TAXES ON INCOME
For fiscal years ended 1996, 1995 and 1994, the Company adopted the FAS
Statement No. 109, "Accounting for Income Taxes", which changes the liability
approach to calculating deferred income taxes set forth in Statement No. 96. The
impact of adopting the rules on the Company's financial statements was not
material.
INCOME PER SHARE
Income per share is computed on the weighted average number of common and
equivalent shares outstanding during the period. Common equivalent shares
include those common shares which would be issued upon the full conversion of
the outstanding convertible preferred stock and those common shares issuable
upon the exercise of the stock options, when dilutive, net of shares assumed to
have been repurchased with the proceeds.
13
<PAGE>
FISCAL YEAR
The Company maintains its accounting records on a 52-53 week fiscal year. The
fiscal year ends on the Saturday closest to June 30. Years ending June 29, 1996,
July 1, 1995 and July 2, 1994 included 52 weeks.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
Statements of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," issued by the Financial Accounting Standards Board
(FASB), encourages the accounting for stock-based employee compensation programs
to be reported within the financial statements on a fair value based method;
however, it allows an entity to continue to measure compensation cost under
Accounting Principles Board Opinion ("APB") No. 25. If the Company elects to
retain the accounting under APB No. 25, then the standard requires pro forma
disclosure of the effect on net income and earnings per share as if the fair
value based method had been adopted. This pronouncement is effective for fiscal
years beginning after December 15, 1995. Implementation of this pronouncement
should have no material effect on the Company's financial statements.
14
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS AND CREDIT RISK CONCENTRATION
The Company is engaged in the distribution of machinery for the textile
industry. With operations in the United States, Canada and the United Kingdom,
the Company primarily sells to customers located within the United States.
Export sales from the United States were approximately $7,196,000, $8,547,000
and $5,439,000 during fiscal 1996, 1995 and 1994, respectively. There were no
export sales by the Canadian operations. Sales of the Company's United Kingdom
subsidiary amounted to approximately $2,286,000 in 1996, essentially all of
which were to customers in the United Kingdom.
Financial instruments which potentially subject the Company to credit risk
consist principally of temporary cash investments and trade receivables. The
Company places its temporary cash investments with high credit quality financial
institutions and, by policy, limits the amount of credit exposure to any one
financial institution.
The Company reviews a customer's credit history before extending credit. An
allowance for doubtful accounts is established based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
To reduce credit risk the Company generally requires a down payment on large
equipment orders.
A substantial amount of the Company's revenues are generated from the sale of
sock knitting and other machines manufactured by Lonati, S.p.A. and one of its
wholly owned subsidiaries (Santoni). Sales by the Company in the United States
and Canada of machines manufactured by Lonati, S.p.A., generated the following
percentages of the Company's net revenues: 46.2% in 1996, 44.4% in 1995 and
65.6% in 1994. In addition, sales of Santoni machines in the United States and
Canada generated 4.8%, 9.3% and 4.4% of the Company's net revenues in fiscal
1996, 1995 and 1994, respectively. In 1996, approximately 9% and 6% of revenues
consisted of sales to the Company's two largest customers. In 1995,
approximately 7% and 5% of revenues consisted of sales to the Company's two
largest customers. In 1994, approximately 14% and 13% of revenues consisted of
sales to the Company's two largest customers. Generally, the customers
contributing the most to the Company's net revenues vary from year to year.
NOTE 2 -- ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
JUNE 29, JULY 1,
1996 1995
<S> <C> <C>
Trade receivables $12,420,405 $16,285,841
Less allowance for doubtful accounts (259,956) (207,158)
Net accounts receivable $12,160,449 $16,078,683
</TABLE>
NOTE 3 -- INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
JUNE 29, JULY 1,
1996 1995
<S> <C> <C>
Machines
New $ 1,645,825 $ 4,786,811
Used 6,565,417 5,319,489
Parts and supplies 3,428,310 3,321,714
Total $11,639,552 $13,428,014
</TABLE>
15
<PAGE>
NOTE 4 -- LEASES
The Company conducts its operations from leased facilities which include both
offices and warehouses. Its primary operating facility is leased from a
partnership in which Mr. Robert S. Speizman, the Company's president, has a 50%
interest. The lease extends through March 1998. Lease payments to the
partnership approximated $323,000, $204,000 and $168,000 in fiscal years 1996,
1995 and 1994, respectively.
The Company leases furniture and fixtures under noncancelable capital lease
agreements which expire at various dates through 1998.
Capitalized leases included in property and equipment are summarized as follows:
<TABLE>
<CAPTION>
JUNE 29, JULY 1,
1996 1995
<S> <C> <C>
Furniture, fixtures and transportation equipment $ 105,264 $ 145,006
Less accumulated amortization (89,037) (100,440)
Net leased property $ 16,227 $ 44,566
</TABLE>
As of June 29, 1996, future net minimum lease payments under capital leases and
future minimum rental payments required under operating leases that have initial
or remaining noncancelable terms in excess of one year are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1997 $12,006 $499,894
1998 2,181 127,964
1999 -- 63,158
2000 -- 17,139
2001 -- 4,936
Beyond -- 14,809
Total minimum lease payments $14,187 $727,900
Less amount representing interest (1,366)
Present value of net minimum lease payments $12,821
</TABLE>
Total rent expense for operating leases approximated $791,400, $515,800 and
$311,600 for fiscal years 1996, 1995 and 1994, respectively.
16
<PAGE>
NOTE 5 -- TAXES ON INCOME
Provisions for federal and state income taxes applicable to continuing
operations are made up of the following components:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $114,000 $673,000 $1,556,000
Foreign (85,000) 74,000 --
State -- 182,000 204,000
29,000 929,000 1,760,000
Deferred:
Federal (58,000) (54,000) 71,000
State -- (21,000) 38,000
(58,000) (75,000) 109,000
Total taxes (benefit) on income $(29,000) $854,000 $1,869,000
</TABLE>
Deferred tax benefits and liabilities are provided for the temporary differences
between the book and tax bases of assets and liabilities. Deferred tax assets
(liabilities) are reflected in the consolidated balance sheets as follows:
<TABLE>
<CAPTION>
JUNE 29, JULY 1,
1996 1995
<S> <C> <C>
Net current assets $436,000 $395,000
Net noncurrent liabilities (22,000) (39,000)
$414,000 $356,000
</TABLE>
Principal items making up the deferred income tax (assets) liabilities are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 29, JULY 1,
1996 1995
<S> <C> <C>
Inventory valuation reserves $(191,000) $(225,000)
Depreciation 78,000 98,000
Deferred charges (69,000) (54,000)
Capitalized leases (4,000) (5,000)
Inventory capitalization (130,000) (91,000)
Accounts receivable reserves (97,000) (78,000)
Other (1,000) (1,000)
Net deferred tax asset $(414,000) $(356,000)
</TABLE>
17
<PAGE>
The Company's effective income tax rates were different than the U.S. Federal
statutory tax rate for the following reasons:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
U.S. Federal statutory tax rate 34.0% 34.0% 34.0%
State income taxes, net of Federal income tax benefit -- 3.5 3.7
Non-deductible expenses (15.8) 1.7 0.7
Foreign tax rates (14.5) 1.2 --
Net tax effect of prior year adjustments 7.4 -- --
Other (0.3 ) (0.6) (2.2)
Effective tax rate 10.8% 39.8% 36.2%
</TABLE>
NOTE 6 -- LINE OF CREDIT
The Company has a credit facility with NationsBank, expiring October 31, 1996.
This facility provides $18.0 million including up to a maximum of $2.0 million
for direct borrowings, with the balance available for the issuance of
documentary letters of credit. Amounts outstanding under the line of credit bear
interest at the greater of prime plus 1% or the Federal Funds Effective Rate
plus 1.5% for base rate loans and the 30, 60 or 90 day LIBOR rate plus 2.0% for
LIBOR loans. In connection with this line of credit, the Company granted a
security interest in accounts receivable and inventory, as defined in the loan
agreement. (See Note 14)
This credit facility contains certain covenants that require, among other
things, the Company to maintain levels of current assets to current liabilities,
total liabilities to net worth, working capital, tangible net worth of
$13,841,000, restrictions on dividends and certain fixed charge coverage. As of
June 29, 1996, the Company was in compliance with such covenants.
NOTE 7 -- LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
JUNE 29, 1996 JULY 1, 1995
TOTAL CURRENT TOTAL CURRENT
<S> <C> <C> <C> <C>
Capital lease obligations (Note 4) $ 12,821 $11,051 $ 16,037 $13,190
Other 135,564 -- 130,782 --
Total 148,385 $11,051 146,819 $13,190
Current maturities (11,051) (13,190)
$137,334 $133,629
</TABLE>
Annual maturities of long-term debt are 1997, $11,051; 1998, $1,770; 1999, $0;
2000, $0; 2001, $0; thereafter, $135,564.
18
<PAGE>
NOTE 8 -- STOCK OPTIONS
The Company has reserved 125,000, 250,000 and 145,000 shares of Common Stock
under three employee stock plans, adopted in 1981, 1991 and 1995, respectively.
As of June 29, 1996, options to purchase 11,522 shares under the 1981 Plan,
192,070 shares under the 1991 Plan, and 130,500 shares under the 1995 Plan were
outstanding. Each option granted under the Plans becomes exercisable in
cumulative increments of 20%, 50%, 80% and 100% on the first, second, third and
fourth anniversaries of the date of grant, respectively, and subject to certain
exceptions with regard to termination of employment and the percentage of
outstanding shares of Common Stock owned, must be exercised within ten (10)
years from the date of the grant. The option price under the 1981 and 1991
Plans, subject to certain exceptions, may not be less than 100% of the fair
market value per share of Common Stock on the date of the grant of the option or
110% of such value for persons who control 10% or more of the voting power of
the Company's stock on the date of the grant. The option price under the 1995
Plan is not limited and may be less than 100% of the fair market value on the
date of the grant. A summary of employee stock option transactions and other
information for 1996, 1995 and 1994 follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 29, JULY 1, JULY 2,
1996 1995 1994
<S> <C> <C> <C>
Shares under option, beginning of year 150,429 124,957 255,686
Options granted 183,663 29,722 --
Options exercised -- (1,250) (130,729)
Options expired -- (3,000) --
Shares under option, end of year 334,092 150,429 124,957
Options exercisable 117,086 78,521 16,464
Prices of options exercised -- $.75 to $ .75 to
$ 1.875 $3.1625
Prices of options outstanding, end of year $.75 to $.75 to $ .75 to
$ 5.50 $ 5.50 $ 5.50
</TABLE>
The Company has reserved 15,000 shares of Common Stock under a non-employee
directors stock option plan adopted in 1995. Each option granted under the Plan
becomes exercisable in cumulative increments of 50% and 100% on the first and
second anniversaries of the date of the grant, respectively, and subject to
certain exceptions must be exercised within ten (10) years from the date of the
grant. The option price equals the fair market value per share of Common Stock
on the date of the grant. Options to purchase 3,000 shares were granted and
outstanding at the end of the year at a price of $2.875.
NOTE 9 -- STOCK REDEMPTION AGREEMENTS
The Company has an agreement with its principal stockholder whereby, upon his
death, the Company is obligated to redeem a portion of the stock in the Company
held by the estate. The redemption price for common stock is to be the fair
market value of common stock, less 5%, plus any accrued dividends. In no case
will the Company pay out more than the amount of life insurance proceeds
received by the Company as a result of the death of the stockholder.
At June 29, 1996, there were 584,932 common shares covered by the above
agreement. The face value of life insurance carried by the Company under this
agreement amounts to $1,150,000.
NOTE 10 -- PREFERRED STOCK
During the fiscal year ended July 2, 1994, all of the Company's 5% Non-Voting
Preferred Stock was redeemed and all of the Company's 5% Non-Voting Senior
Convertible Preferred was converted into common stock.
19
<PAGE>
NOTE 11 -- DEFERRED COMPENSATION PLANS
The Company has deferred compensation agreements with two employees providing
for payments amounting to $2,056,680 upon retirement and from $1,546,740 to
$2,181,600 upon death prior to retirement. One agreement, as modified, has been
in effect since 1972 and the second agreement was effective October 1989. Both
agreements provide for monthly payments on retirement or death benefits over
fifteen year periods. Both agreements are funded under trust agreements whereby
the Company pays to the trust amounts necessary to pay premiums on life
insurance policies carried to meet the obligations under the deferred
compensation agreements.
Charges to operations applicable to those agreements were approximately $53,885,
$43,885 and $72,673 for the fiscal years 1996, 1995 and 1994, respectively.
NOTE 12 -- EMPLOYEES' RETIREMENT PLAN
The Company adopted a 401(k) retirement plan, effective October 1, 1989, for all
qualified employees of the Company to participate in the plan. Employees may
contribute a percentage of their pretax eligible compensation to the plan, and
the Company matches 25% of each employee's contribution up to 4% of pretax
eligible compensation. The Company's matching contributions totaled
approximately $21,000, $17,000 and $13,000 in fiscal years 1996, 1995 and 1994,
respectively.
NOTE 13 -- DISCONTINUED OPERATION
During fiscal 1996, management decided to discontinue the operations of the
Company's CopyGuard Division, which was in the development stage. 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 had
not proven to be commercially feasible for the prospective users. Consequently,
in the third fiscal quarter of fiscal 1996, 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 was $333,000,
after income tax benefits, or approximately $0.10 per share of outstanding
common stock. Costs incurred during fiscal year ended 1995 related to software
development and were deferred.
NOTE 14 -- COMMITMENTS AND CONTINGENCIES
The Company had outstanding commitments backed by letters of credit of
approximately $13,244,000 and $8,916,000 at June 29, 1996 and July 1, 1995,
respectively, relating to the purchase of machine inventory for delivery to
customers.
The Company has not obtained product liability insurance to date due to the
prohibitive cost of such insurance. The nature and extent of distributor
liability for product defects is uncertain. The Company has not engaged in
manufacturing activities since 1990, and management presently believes that
there is no material risk of loss to the Company from product liability claims
against the Company as a distributor.
NOTE 15 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 29, JULY 1, JULY 2,
1996 1995 1994
<S> <C> <C> <C>
Cash paid during year for:
Interest $ 81,578 $ 86,704 $ 135,068
Income taxes 120,086 524,464 2,079,097
</TABLE>
20
<PAGE>
CORPORATE INFORMATION
OFFICERS
Robert S. Speizman
CHAIRMAN OF THE BOARD
AND PRESIDENT
Josef Sklut
VICE PRESIDENT-FINANCE,
TREASURER AND SECRETARY
TRANSFER AGENT AND
REGISTRAR
First-Citizens Bank
& Trust Co.
Corporate Trust Dept.
P.O. Box 29522
Raleigh, N.C. 27626
DIRECTORS
Robert S. Speizman
CHAIRMAN OF THE BOARD
AND PRESIDENT
Steven P. Berkowitz
CHAIRMAN OF THE BOARD
OF MARWEN FOUNDATION
William Gorelick
PRIVATE INVESTOR
Scott C. Lea
CHAIRMAN OF THE BOARD,
LANCE, INC.
Josef Sklut
VICE PRESIDENT-FINANCE,
TREASURER AND SECRETARY
LOCATIONS
Speizman Industries, Inc.
Executive Offices:
508 W. Fifth Street
Charlotte, N.C. 28202
Speizman Industries, Inc.
59 Tec Street
Hicksville, N.Y. 11801
Speizman Canada, Inc.
5205 boul. Metropolitain est,
Suite 3
Montreal, Quebec H1R 1Z7
Canada
Speizman Industries
(Europe) Limited
Unit 3F, 77 Waterside Road,
Hamilton Industrial Park,
Leicester LE5 1TL, England
LISTING
Speizman Industries, Inc.
Common Stock is listed
on the NASDAQ National
Market System under the
symbol "SPZN."
GENERAL COUNSEL
Odom & Groves, P.C.
Charlotte, N.C.
INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
BDO Seidman, LLP
Charlotte, N.C.
FORM 10-K
Copies of the Company's Annual Report on Form 10-K for the year ended June 29,
1996, may be obtained without charge by writing:
Mr. Josef Sklut
Speizman Industries, Inc.
P.O. Box 31215
Charlotte, N.C. 28231
<PAGE>
(Speizman logo) SPEIZMAN
INDUSTRIES, INC.
