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 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 February 5, 1997
--------------------- ----------------
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>
December 28, June 29,
1996 1996
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 611,252 $ 7,981,723
Accounts receivable, less allowances of
$382,771 and $259,956 15,936,268 12,160,449
Inventories 12,764,925 11,639,552
Prepaid expenses and other current assets 3,371,005 2,340,111
-------------- --------------
TOTAL CURRENT ASSETS 32,683,450 34,121,835
------------- -------------
PROPERTY AND EQUIPMENT:
Leasehold improvements 747,690 550,684
Machinery and equipment 1,574,606 1,208,508
Furniture, fixtures and transportation equipment 1,125,971 1,218,570
-------------- --------------
Total 3,448,267 2,977,762
Less accumulated depreciation and amortization (1,606,289) (1,525,058)
-------------- --------------
NET PROPERTY AND EQUIPMENT 1,841,978 1,452,704
-------------- --------------
OTHER 359,792 574,685
--------------- --------------
$ 34,885,220 $ 36,149,224
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 3
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 28, June 29,
1996 1996
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Note payable-bank $ 500,000 $ --
Accounts payable 13,680,313 14,864,567
Customers' deposits 1,044,353 2,723,466
Accrued expenses 454,880 209,881
Current maturities of long-term debt 2,105 11,051
----------------- ----------------
TOTAL CURRENT LIABILITIES 15,681,651 17,808,965
LONG-TERM DEBT 122,105 137,334
--------------- --------------
TOTAL LIABILITIES 15,803,756 17,946,299
------------- ------------
STOCKHOLDERS' EQUITY:
Common stock - par value $.10; authorized 20,000,000 shares, issued
3,262,866; and authorized 6,000,000,
issued 3,236,199 shares 326,287 323,620
Additional paid-in capital 12,512,299 12,459,965
Retained earnings 6,353,729 5,524,360
Foreign currency translation adjustment (11,054) (5,223)
--------------- -----------------
Total 19,181,261 18,302,722
Treasury stock, at cost, 27,600 common shares (99,797) (99,797)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 19,081,464 18,202,925
------------ -----------
$ 34,885,220 $ 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) (Unaudited)
For the Three Months Ended For the Six Months Ended
12-28-96 12-30-95 12-28-96 12-30-95
(13 Weeks) (13 Weeks) (26 Weeks) (26 Weeks)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 16,464,552 $ 9,123,704 $ 33,431,297 $ 17,462,554
---------------- ------------ ---------- -----------
COSTS AND EXPENSES:
Cost of sales 13,795,624 8,267,912 27,903,401 15,863,583
Selling expenses 1,418,921 1,015,167 2,782,539 1,937,430
General and administrative
expenses 742,496 384,940 1,423,371 754,702
-------------- ------------- ------------ -------------
Total costs and expenses 15,957,041 9,668,019 32,109,311 18,555,715
------------ ------------ ----------- -----------
507,511 (544,315) 1,321,986 (1,093,161)
NET INTEREST INCOME (7,629) (21,208) (54,383) (3,016)
--------------- ------------- ------------- --------------
INCOME (LOSS) BEFORE
TAXES ON INCOME 515,140 (523,107) 1,376,369 (1,090,145)
TAXES (BENEFIT)
ON INCOME 194,000 (165,000) 547,000 (353,000)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 321,140 $ (358,107) $ 829,369 $ (737,145)
============ ============ ============ ============
NET INCOME (LOSS) PER
SHARE $ 0.10 $ (0.11) $ 0.25 $ (0.23)
====== ======== ======= ========
Weighted average number of
common and equivalent shares 3,359,341 3,244,835 3,338,888 3,277,935
</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 Six Months Ended
12-28-96 12-30-95
(26 Weeks) (26 Weeks)
------------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 829,369 $ (737,145)
Adjustments to reconcile net income (loss) to cash used
by operating activities:
Depreciation and amortization 181,767 84,894
Provision for inventory obsolescence 100,000 100,000
Foreign currency translation adjustment (5,831) (4,592)
(Increase) decrease in:
Accounts receivable (3,775,819) 5,949,247
Inventories (1,225,373) 2,784,409
Prepaid expenses and other current assets (1,030,894) 215,405
Other assets 214,893 (137,885)
Increase (decrease) in:
Accounts payable (1,184,254) (8,067,911)
Customers' deposits (1,679,113) 254,615
Accrued expenses 244,999 (611,819)
------------- -------------
Net cash used in operating activities (7,330,256) (170,782)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - other equipment (222,044) (31,821)
Capital expenditures - equipment leased to customers (360,634) (434,630)
Disposition of property and equipment 11,637 5,883
------------- --------------
Net cash used in investing activities (571,041) (460,568)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from note payable - bank 500,000 --
Principal payments on long-term debt (24,175) (1,302)
Issuance of common stock for stock options 55,001 --
------------ ------------------
Net cash provided by (used in) financing activities 530,826 (1,302)
----------- --------------
NET DECREASE IN CASH (7,370,471) (632,652)
CASH AT BEGINNING OF PERIOD 7,981,723 2,436,859
----------- -----------
CASH AT END OF PERIOD $ 611,252 $ 1,804,207
============ ===========
Supplemental Disclosures:
Cash paid during period for:
Interest $ 41,224 $ 64,046
Income taxes 643,865 106,929
</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:
December 28, June 29,
1996 1996
(unaudited)
Machines $ 8,884,397 $ 8,211,242
Parts and supplies 3,880,528 3,428,310
----------- -----------
Total $12,764,925 $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 $7.3 million to $16.4 million in the Company's
current quarter ended December 28, 1996. That compares to revenues of $9.1
million in the same quarter of last year. The improved revenues resulted from a
$6.8 million increase in sales of hosiery manufacturing equipment, a $0.5
million increase in sales of dyeing and finishing equipment, and a $0.4 million
increase in parts sales and other revenues. These increases were partially
offset by a decline of $0.4 million in sales of sweater manufacturing equipment.
In the current six months ended 12/28/96, revenues increased by $15.9 million to
$33.4 million as compared to $17.5 million in revenues in the first six months
of last year. The improved revenues in the six months year-to-date resulted from
a $15.1 million increase in sales of hosiery manufacturing equipment, $0.4
million in circular fabric machine sales, and an $0.8 million increase in dyeing
and finishing equipment sales. These favorable variances were partially offset
by a $0.5 million decrease in sales of sweater equipment.
Cost of sales in the current second quarter were 83.8% of revenues as compared
to 90.6% in the same period of last year. Similarly, cost of sales in the
year-to-date were 83.5% as compared to 90.8% in the same period of last year.
These favorable shifts in both periods resulted essentially from the improved
volume in the hosiery equipment sector coupled with improved margins. In
addition, service expenses, which are a component of cost of sales, increased at
a substantially lower rate than the sales rate of increase. Service expenses
accounted for 4.1 points of the 83.8% in cost of sales in the second quarter of
the current fiscal year as compared to 5.5 points of the 90.6% cost of sales in
the second quarter of the prior year. In the current year-to-date, service
expense accounted for 3.7 points of the 83.5% cost of sales as compared to 5.8
points of the 90.8% cost of sales in the year-to-date a year ago.
Selling expenses in the latest quarter increased by $404,000 over the same
quarter of last year. In the year-to-date, selling expenses increased by
$846,000 as compared to the prior first six months year-to-date. Sales salaries
and commissions accounted for $304,000 of the second quarter increase and for
$585,000 of the year-to-date increase, reflecting increased sales activities.
Increases in letters of credit expense and in rental costs accounted for most of
the remaining increases.
General and administrative expenses in the current second quarter increased by
about $357,000. In the year-to-date, these expenses increased by $668,000. These
increases reflect increases in salaries, increases in profit-related executive
bonuses, increases in bad debt reserve provisions and in costs associated with a
computer installation.
Page 8
<PAGE>
Net income for the current second quarter was $321,000 or $0.10 per share as
compared to a loss of $358,000 or $0.11 per share in the second quarter of last
year. Net income in the six months year-to-date was $829,000 or $0.25 a share as
compared to a loss of $737,000 or $0.23 a share in the first six months of last
year.
OUTLOOK
During the first six months of the Company's current fiscal year, the sock
industry served by the Company has continued to show improvements. Demand for
new Lonati sock manufacturing equipment and for Conti Complett sock seaming
equipment continue to be favorable.
At the same time, the sweater manufacturing industry in the United States and in
the United Kingdom continue to deteriorate. During the current fiscal year, the
Company is consolidating its current sweater machine sales operations with its
circular fabric machine sales division, thereby closing two sales offices.
As of January 2, 1997, the Company became the exclusive distributor in Mexico
for all machines manufactured by the Lonati and Santoni companies. The Company
is in the process of incorporating a wholly-owned subsidiary to carry out
operations in Mexico. In the meantime, an office has been established and a
salesperson has been employed in Mexico City.
LIQUIDITY AND CAPITAL RESOURCES
At December 28, 1996, the Company's working capital totaled $17.0 million. This
compares to $16.3 million at the end of the prior fiscal year. The Company's
current ratio at December 28, was 2.08 to 1.0. At the end of the prior fiscal
year, the ratio was 1.92 to 1.00.
Operating activities in the current year-to-date used $7.3 million largely due
to substantial increases in accounts receivable, inventories and prepaid
expenses and other current assets and due to substantial decreases in accounts
payable and customers' deposits. In the prior year-to-date, operating activities
used $171,000.
Net cash used in investing activities totaled $571,000 as compared to a usage of
$461,000 in the prior six months year-to-date.
Financing activities provided $531,000 in the current year-to-date as compared
to a usage of $1,000 in the first six months of the prior year.
Overall net cash decreased by $7.4 million as compared to a $0.6 decrease in the
prior year-to-date.
On November 19, 1996, the Company's stockholders and directors adopted an
amendment to the Company's Certificate of Incorporation, to increase the
authorized number of shares of the Company's common stock, par value $0.10 per
share, from 6,000,000 to 20,000,000.
Page 9
<PAGE>
The Company renewed its credit facility with NationsBank, N.A. on December 19,
1996. This facility provides $25.0 million including up to a maximum of $4.0
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. This line of credit now expires October 31, 1999.
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>
<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 11, 1997 /s/ Robert S. Speizman
-------------------------------- ----------------------
Robert S. Speizman
President
Date: February 11, 1997 /s/ Josef Sklut
Josef Sklut
Vice President-Finance
(Chief Financial Officer)
Page 12
Exhibit 11
NET INCOME (LOSS) PER SHARE
The following table presents the information needed to compute primary income
per common share:
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
For the Three Months Ended For the Six Months Ended
12/28/96 12/30/95 12/28/96 12/30/95
(13 Weeks) (13 Weeks) (26 Weeks) (26 Weeks)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ 321,140 $ (358,107) $ 829,369 $ (737,145)
Weighted average shares
outstanding 3,262,866 3,236,199 3,249,826 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 124,075 36,236 116,662 69,336
----------- ------------ ----------- ------------
Adjusted weighted average of
shares outstanding 3,359,341 3,244,835 3,338,888 3,277,935
=========== ========== ========= ==========
Net income (loss) per share $ 0.10 $ (0.11) $ 0.25 $ (0.23)
===== ======= ===== ======
</TABLE>
Page 13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> DEC-28-1996
<CASH> 611,252
<SECURITIES> 0
<RECEIVABLES> 16,319,039
<ALLOWANCES> 382,771
<INVENTORY> 12,764,925
<CURRENT-ASSETS> 32,683,450
<PP&E> 3,448,267
<DEPRECIATION> 1,606,289
<TOTAL-ASSETS> 34,885,220
<CURRENT-LIABILITIES> 15,681,651
<BONDS> 0
326,287
0
<COMMON> 0
<OTHER-SE> 18,755,177
<TOTAL-LIABILITY-AND-EQUITY> 34,885,220
<SALES> 33,431,297
<TOTAL-REVENUES> 33,431,297
<CGS> 27,903,401
<TOTAL-COSTS> 32,109,311
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (54,383)
<INCOME-PRETAX> 1,376,369
<INCOME-TAX> 547,000
<INCOME-CONTINUING> 829,369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 829,369
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
