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 27, 1997
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.
CHARLOTTE, NORTH CAROLINA 28202
------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(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 4, 1998
--------------------- ----------------
Par value $.10 per share 3,279,806
<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 Income................ 5
Consolidated Condensed Statements of Cash Flows............ 6
Notes to Consolidated Condensed Financial Statements....... 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............... 9 - 12
PART II. OTHER INFORMATION:
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits............................................... 13
(b) Reports on Form 8-K.................................... 13
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 27, June 28,
1997 1997
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
- ------
CURRENT:
Cash and cash equivalents $ 1,658,627 $ 3,832,534
Accounts receivable, less allowances of
$800,718 and $474,477 23,051,705 21,075,138
Inventories 14,761,901 12,970,134
Prepaid expenses and other current assets 3,025,703 2,988,786
------------ ---------
TOTAL CURRENT ASSETS 42,497,936 40,866,592
----------- ----------
PROPERTY AND EQUIPMENT:
Leasehold improvements 457,665 750,140
Machinery and equipment 1,803,785 1,770,886
Furniture, fixtures and transportation equipment 1,367,841 1,078,429
------------ ---------
Total 3,629,291 3,599,455
Less accumulated depreciation and amortization (1,460,641) (1,811,183)
----------- ------------
NET PROPERTY AND EQUIPMENT 2,168,650 1,788,272
----------- ---------
OTHER LONG TERM ASSETS 398,955 518,957
INTANGIBLES, NET OF ACCUMULATED AMORTIZATION 4,330,362 -
------------- -------------
$ 49,395,903 $ 43,173,821
============= =============
See accompanying notes to consolidated condensed financial statements.
</TABLE>
Page 3
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 27, June 28,
1997 1997
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable - bank line of credit $ 850,000 $ -
Accounts payable 15,453,822 19,075,766
Customers' deposits 1,520,812 1,380,621
Accrued expenses 2,265,073 1,667,621
Current maturities of long-term debt 1,001,062 1,769
--------- -----
TOTAL CURRENT LIABILITIES 21,090,769 22,125,777
LONG-TERM DEBT 6,098,344 110,344
---------- ----------
TOTAL LIABILITIES 27,189,113 22,236,121
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock - par value $.10; authorized 20,000,000 shares, issued
3,307,406, outstanding 3,279,806;
and authorized 20,000,000 shares, issued 3,262,866, Shares,
outstanding 3,235,266 330,740 326,287
Additional paid-in capital 12,618,721 12,512,299
Retained earnings 9,357,126 8,209,911
Foreign currency translation adjustment - (11,000)
----------- ----------
Total 22,306,587 21,037,497
Treasury stock, at cost, 27,600 common shares (99,797) (99,797)
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 22,206,790 20,937,700
----------- ----------
$ 49,395,903 $ 43,173,821
=========== ==========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
Page 4
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
12-27-97 12-28-96 12-27-97 12-28-96
(13 Weeks) (13 Weeks) (26 Weeks) (26 Weeks)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 24,331,395 $ 16,464,552 $ 45,801,025 $ 33,431,297
------------ ---------------- ----------- ----------
COSTS AND EXPENSES:
Cost of sales 19,561,270 13,795,624 37,462,825 27,903,401
Selling expenses 1,785,633 1,418,921 3,442,256 2,782,539
General and administrative
expenses 1,599,540 742,496 2,689,995 1,423,371
----------- -------------- ----------- ------------
Total costs and expenses 22,946,443 15,957,041 43,595,076 32,109,311
---------- ------------ ---------- -----------
1,384,952 507,511 2,205,949 1,321,986
NET INTEREST EXPENSE
(INCOME) 170,816 (7,629) 331,734 (54,383)
------------ --------------- ------------ -------------
INCOME BEFORE TAXES
ON INCOME 1,214,136 515,140 1,874,215 1,376,369
TAXES ON INCOME 476,000 194,000 727,000 547,000
----------- ------------ ---------- ------------
NET INCOME $ 738,136 $ 321,140 $ 1,147,215 $ 829,369
=========== ============ =========== ============
Basic earnings per share $ 0.23 $ 0.10 $ 0.35 $ 0.26
Diluted earnings per share 0.21 0.10 0.34 0.24
Weighted average shares
outstanding:
Basic 3,275,875 3,235,266 3,255,900 3,222,079
Diluted 3,450,912 3,359,341 3,423,820 3,388,822
See accompanying notes to consolidated condensed financial statements.
</TABLE>
Page 5
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
For the Six Months Ended
12-27-97 12-28-96
(26 Weeks) (26 Weeks)
----------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,147,215 $ 829,369
Adjustments to reconcile net income to cash used
by operating activities:
Depreciation and amortization 533,646 181,767
Provision for inventory obsolescence 125,000 100,000
Gain on disposal of assets (1,390) -
Foreign currency translation adjustment 11,000 (5,831)
(Increase) decrease in:
Accounts receivable 2,145,022 (3,775,819)
Inventories 325,583 (1,225,373)
Prepaid expenses and other current assets (50,878) (1,030,894)
Other assets 703,161 214,893
Increase (decrease) in:
Accounts payable (4,342,982) (1,184,254)
Customers' deposits (177,819) (1,679,113)
Accrued expenses (663,474) 244,999
-------------- ---------------
Net cash used in operating activities (245,916) (7,330,256)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Wink Davis Equipment Company (9,500,000) -
Capital expenditures (177,682) (582,678)
Proceeds on sale of assets 3,500 11,637
--------------- -------------
Net cash used in investing activities (9,674,182) (571,041)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit agreement 2,500,000 500,000
Payments of line of credit agreement (1,650,000) -
Payment on line of credit agreement of Wink Davis
Equipment Company (201,977) -
Proceeds from issuance of term note due to bank 7,000,000 -
Principal payments on long-term debt (12,707) (24,175)
Issuance of common stock for stock options 110,875 55,001
------------- -------------
Net cash provided by financing activities 7,746,191 530,826
------------ ------------
NET DECREASE IN CASH (2,173,907) (7,370,471)
CASH AT BEGINNING OF PERIOD 3,832,534 7,981,723
------------ -----------
CASH AT END OF PERIOD $ 1,658,627 $ 611,252
============ ============
Supplemental Disclosures:
Cash paid during period for:
Interest 179,796 $ 41,224
Income taxes 791,149 643,865
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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
28, 1997, which is incorporated by reference.
Note 2. Inventories
Inventories consisted of the following:
December 27, June 28,
1997 1997
(Unaudited) (Unaudited)
----------- -----------
Machines $ 9,372,580 $ 8,768,841
Parts and supplies 5,389,321 4,201,293
------------- --------------
Total $ 14,761,901 $ 12,970,134
============= ==============
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. Intangibles
Intangibles, including goodwill, arose from the acquisition of Wink
Davis Equipment Company, Inc. and are being amortized over 15 years
on a straight-line basis.
Note 5. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued FAS
No. 128, "Earnings per Share", which established new standards for
computations of earnings per share. Statement No. 128 is effective
for periods ending after December 15, 1997 and requires presentation
of: (1) "Basic earnings per share", computed by dividing income
available to common stockholders by the weighted average number of
common shares outstanding during the period and (2) "Diluted earnings
per share", which gives effect to all dilutive potential common
shares that were outstanding during the period, by increasing the
denominator to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares
had been issued.
Page 7
<PAGE>
This statement requires restatement of all prior period earnings per
share data presented.
Note 6. Subsequent Event
On February 6, 1998, the Company acquired TMC Automation Company,
Inc. ("TMC"). The Company paid the stockholders of TMC $1.8 million
in cash for all of the outstanding capital stock. The Company also
assumed certain liabilities generated in the ordinary course of
business by TMC. The Company financed the purchase price with
borrowed funds.
TMC manufactures sock boarding and finishing equipment designed for
large mills that mass-produce socks for major discount chains. These
large mills are part of the same market the Company currently serves.
Page 8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's operations consist of Speizman Industries, Inc., based in
Charlotte, North Carolina and Wink Davis Equipment Company, Inc. ("Wink Davis"),
based in Atlanta, Georgia. The revenues of Speizman Industries 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. Wink Davis, a wholly owned subsidiary of
Speizman Industries, distributes and services laundry equipment and parts,
principally in the southeastern United States and in the Chicago, Illinois area.
RESULTS OF OPERATIONS
Revenues increased by about $7.9 million to $24.3 million in the Company's
current quarter ended December 27, 1997. This compares to the second quarter of
last year when revenues totaled $16.5 million. This improvement in revenues
resulted substantially from the inclusion of Wink Davis operations. Wink Davis,
all of whose common stock was acquired on August 1, 1997, recognized revenues of
$6.5 million for the current quarter. Speizman Industries' revenues from textile
equipment operations increased by $1.4 million for the current quarter.
Increases in sales of hosiery manufacturing equipment were offset by decreases
in sales of sweater manufacturing equipment.
In the six months ended December 27, 1997, revenues increased by $12.4 million
to $45.8 million as compared to $33.4 million in the first six months of last
year. This improvement resulted substantially from the inclusion of Wink Davis.
Revenues of Wink Davis for the five-month period ended December 27, 1997 were
$10.8 million. Additionally, a $2.2 million increase in hosiery manufacturing
equipment was partially offset by decreases in sweater manufacturing equipment.
Cost of sales in the current second quarter were 80.4% of revenues as compared
to 83.8% in the same period of last year. Similarly, cost of sales in the
year-to-date were 81.8% as compared to 83.5% in the same period of last year.
These favorable shifts in both periods resulted essentially from increased
volume in higher margin sectors, including hosiery manufacturing equipment and
related parts, coupled with decreased volumes in low margin sectors no longer
distributed by the Company, including sweater manufacturing equipment.
Selling expenses in the second quarter of fiscal 1998 were approximately
$1,786,000, an increase of approximately $367,000 over the same quarter last
year. Approximately $463,000 of selling expenses were incurred by Wink Davis,
offset partially by savings of approximately $65,000 from closed European
operations.
Page 9
<PAGE>
In the year-to-date, selling expenses were approximately $3,442,000, an increase
of approximately $660,000. Selling expenses for five months in the current
fiscal year of Wink Davis operations totaled $792,000. Savings of approximately
$131,000 of selling expenses were recognized from closed European operations.
General and administrative expenses in the current fiscal quarter increased by
about $857,000. Current second quarter administrative expenses of Wink Davis
totaled approximately $356,000. Additionally, amortization of goodwill and
acquisition costs associated with the Wink Davis purchase totaled approximately
$95,000. Other increases reflect increases in salaries, higher profit-related
bonuses, and increased bad debt provisions.
In the year-to-date, general and administrative expenses increased by
approximately $1,267,000. Year-to-date administrative expenses of Wink Davis
totaled approximately $603,000. Amortization of goodwill and acquisition costs
associated with the Wink Davis purchase totaled approximately $159,000. Other
increases reflect increases in salaries and higher profit-related bonuses.
Interest expense is shown net of interest income. The $9.5 million purchase of
Wink Davis on August 1, 1997 was financed through debt. Accordingly, net
interest expense increased to approximately $171,000 in the current fiscal
quarter and to approximately $332,000 for the fiscal year-to-date.
Net income for the current second quarter was approximately $738,000 or $0.23
basic earnings per share as compared to net income of approximately $321,000 or
$0.10 basic earnings per share in the second quarter of last year. Net income in
the six months year-to-date was approximately $1,147,000 or $0.35 basic earnings
per share as compared to net income of approximately $829,000 or $0.26 basic
earnings per share in the first six months of last year.
OUTLOOK
The decline in demand for new sock manufacturing equipment during the Company's
current fiscal year is continuing. Demand for athletic socks has weakened and
the current demand for all types of socks remains soft. The Company's customers
are reluctant to make substantial commitments of purchases of new machines at
this time. The Company's backlog of firm orders for textile manufacturing
equipment remains substantial.
The Company's backlog of orders for laundry equipment in the newly acquired Wink
Davis remains at levels similar to prior years.
LIQUIDITY AND CAPITAL RESOURCES
At December 27, 1997, the Company's working capital totaled $21.4 million. This
figure represents an increase of $2,666,000 from the Company's working capital
at the end of the prior
Page 10
<PAGE>
fiscal year, June 28, 1997. The Company's current ratio at December 27, 1997 was
2.02 to 1.00. At June 28, 1997, it was 1.85 to 1.00.
On August 1, 1997, the Company purchased all of the outstanding stock of Wink
Davis for $9.5 million plus a conditional additional payment of up to $1.5
million in cash over a five-year period based on certain pre-tax earnings
calculations. The purchase was funded by (a) a $7.0 million term loan with
quarterly principal payments of $250,000 beginning December 31, 1997, the
balance due July 31, 2000 and (b) $2.5 million direct borrowings from a
revolving line of credit.
Operating activities used $246,000 for the current six-month period. This usage
of cash was generated essentially by decreases in accounts payable, partially
offset by cash from net income and decreases in accounts receivable, net of
receivables purchased with the Wink Davis acquisition. In the prior six- month
period, operating activities used $7.3 million largely due to increases in
accounts receivable, inventories and prepaid expenses and other current assets
and due to substantial decreases in accounts payable and customer deposits.
In the current six-month period, investing activities used $9.7 million in cash,
primarily related to the purchase of Wink Davis. Investing activities used
$571,000 in the same period of the prior fiscal year.
Financial activities provided $7.7 million in cash, primarily related to
borrowings from a term loan and advances on the revolving line of credit.
Financing activities provided $531,000 in cash for the first six months of the
prior fiscal year.
Overall, net cash decreased by $2.2 million as compared to a $7.4 million
decrease last year.
The Company has no firm material commitments for capital expenditures; however,
it does anticipate incurring some commitments in the balance of fiscal 1998. The
Company has plans to relocate several textile machinery warehouses and the
administrative offices of Speizman Industries into a new, single location. The
new property has been leased by the Company. The Company is expected to incur
leasehold improvement costs of approximately $300,000 to $500,000. Whether all
of these costs will be incurred in fiscal 1998 cannot now be forecasted.
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.
Page 11
<PAGE>
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 payments 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.
DISCLOSURE ABOUT FOREIGN CURRENCY RISK
A significant number of the Company's purchases of textile machinery for resale
is denominated in Italian Lira. In the ordinary course of business, the Company
enters into foreign exchange forward contracts to mitigate the effect of foreign
currency movements between the Italian Lira and the US dollar from the time of
placing the Company's purchase order until final payment for the purchase is
made. The contracts have maturity dates that do not exceed 12 months.
Substantially all of the increase or decrease of the Lira denominated purchased
price is offset by the gains and losses of the foreign exchange contract. The
unrealized gains and losses on these contracts are deferred and recognized in
the results of operations in the period in which the hedged transaction is
consummated.
Page 12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
10. Nonqualifed Stock Option Award Agreement under the
Speizman Industries, Inc. Nonqualified Stock Option
Plan between Speizman Industries, Inc. and Josef
Sklut, dated November 19, 1997.
27. Financial Data Schedule.
(b) Reports on Form 8-K:
None
Page 13
<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 10, 1998 /s/ Robert S. Speizman
-------------------------- ----------------------
Robert S. Speizman
President
Date: February 10, 1998 /s/ Josef Sklut
-------------------------- ---------------
Josef Sklut
Vice President-Finance
(Chief Financial Officer)
Page 14
EXHIBIT 10
NONQUALIFIED STOCK OPTION AWARD AGREEMENT
UNDER THE SPEIZMAN INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN
THIS AWARD AGREEMENT is made and entered into effective as of the 19th
day of November, 1997 (the "Effective Date"), by and between SPEIZMAN
INDUSTRIES, INC., a Delaware corporation (the "Company"), and JOSEF SKLUT (the
"Optionee").
WHEREAS, the Optionee is a valuable and trusted employee of the
Company; and
WHEREAS, the Committee considers it desirable and in the best interests
of the Company that the Optionee be given an opportunity to acquire a
proprietary interest in the Company as an incentive to advance the interests of
the Company; and
WHEREAS, the Committee desires to grant the Optionee a nonqualified
stock option to purchase shares of the common stock of the Company (the
"Stock"), in accordance with the Speizman Industries, Inc. Nonqualified Stock
Option Plan adopted by the Company effective as of September 21, 1995, and
approved by the stockholders of the Company on November 16, 1995, and as
subsequently amended (the "Plan") (capitalized terms used herein which are not
otherwise defined herein shall have the meanings ascribed to them under the
Plan).
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
1. Grant of Nonqualified Stock Option. The Company hereby grants to the
Optionee a nonqualified stock option (the "Option") to purchase 10,000 shares of
Stock (the "Shares") at the purchase price of $6.3125 per share in the manner
and subject to the terms and conditions hereinafter provided.
2. Time of Exercise of Option. The Option shall become exercisable in
full beginning November 19, 1998. No part of the Option shall become exercisable
following the Optionee's Termination of Employment. In the event of the
Optionee's Termination of Employment prior to such date on which the Option
becomes exercisable, the Option shall terminate. Subject to the termination
provisions set forth in Section 5 below, to the extent the Option has become
exercisable, it may be exercised, in whole or in part, at any time and from time
to time but not later than November 18, 2007 (the "Exercise Period").
3. Method of Exercise. The Option shall be exercised by written notice
directed to the Committee, a form of which is attached hereto as Exhibit A and
incorporated herein by reference, accompanied by a check in payment of the price
specified in Section 1 above for the number of Shares specified in the notice.
As soon as practicable following receipt of such notice from the Optionee, the
Committee shall notify the Optionee of any payment or other allocation required
under Section 4 below. Upon notice from the Committee that the Optionee has paid
the price specified in Section 1 above and paid or made any allocation required
under Section 4 below, the Company shall make immediate delivery of such Shares;
provided that if any law or regulation
<PAGE>
requires the Company to take any action with respect to the Shares specified in
such notice before the issuance thereof, then the date of delivery of such
Shares shall be extended for the period necessary to take such action.
4. Payment to Satisfy Withholding Obligations. Notwithstanding any
other provision of this Award Agreement, any rights of the Optionee to exercise
the Option shall be conditioned upon the Optionee forwarding to the Company, in
addition to the price per share specified in Section 1 above, cash payment of an
amount equal to the amount the Company is required by law or regulation of any
governmental authority, whether federal, state or local, domestic or foreign, to
withhold in connection with such exercise of the Option, if any, as determined
by the Committee in its discretion. The amount of such payment shall be
communicated to the Optionee by the Committee as soon as practicable following
the Committee's receipt of the notice specified in Section 3. In lieu of payment
specified in this Section 4, the Committee may in its discretion agree with the
Optionee to another means of satisfying the Company's withholding obligation in
connection with the exercise of the Option.
5. Termination of Option. Except as otherwise stated herein, the Option
shall terminate and cease to be exercisable upon the first to occur of the
following:
(a) the date all Shares available for purchase under this Award
Agreement have been so purchased;
(b) upon the Optionee's Termination of Employment if the Option is not
fully exercisable at the time of such Termination of Employment;
(c) if the Option is exercisable upon the Optionee's Termination of
Employment, upon the expiration of two (2) years following such Termination of
Employment; and
(d) upon the expiration of the Exercise Period set forth in Section 2
above.
Notwithstanding the foregoing, in the event of the Optionee's death
following the Optionee's Termination of Employment while the Option is still
exercisable, the Option may be exercised and shall not terminate until the
earlier to occur of two (2) years following such death, the date all Shares
available for purchase under this Award Agreement have been so purchased and the
expiration of the Exercise Period set forth in Section 2 above.
6. Rights Prior to Exercise of Option. The Optionee shall have no
rights as a stockholder with respect to the Shares except to the extent he has
exercised the Option, paid the Option price for such Shares, and received
delivery of such Shares as herein provided.
7. Non-Transferable. During the Optionee's lifetime, the Option shall
be exercisable only by him and neither it nor any right thereunder shall be
transferable except by will or laws of descent and distribution (and shall be
exercisable by such transferee only as provided in Sections 2 and 5 above), or
be subject to attachment, execution or other similar process. In the event of
any attempt by the Optionee to alienate, assign, pledge, hypothecate or
otherwise dispose of the Option or any right hereunder, except as provided for
herein, or in the event of the levy of any attachment,
2
<PAGE>
execution or similar process upon the rights or interest hereby conferred, the
Committee may terminate the Option by notice to the Optionee, and the Option
shall thereupon become null and void.
8. Binding Effect. This Award Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
9. Gender and Number. All terms used in this Award Agreement shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
context may require.
10. Terms and Conditions of Plan. The terms and conditions included in
the Plan are incorporated by reference herein, and to the extent that any
conflict may exist between any term or provision of this Award Agreement and any
term or provision of the Plan as in effect from time to time, such term or
provision of the Plan shall control.
11. Additional Terms or Conditions. The additional terms and conditions
as set forth on the following riders attached hereto are incorporated herein and
made a part of this Award Agreement as if set forth herein: None .
12. Entire Agreement. This Award Agreement (including the Plan which is
incorporated herein by reference and all additional riders incorporated by
Section 11 above) sets forth all of the promises, agreements, conditions,
understandings, warranties and representations between the parties hereto with
respect to the Option and the Shares, and there are no promises, agreements,
conditions, understandings, warranties or representations, oral or written,
express or implied, between them with respect to the Option or the Shares other
than as set forth therein or herein. This Award Agreement supersedes and
replaces any and all prior agreements between the parties hereto with respect to
the Option or the Shares. This Award Agreement is, and is intended by the
parties to be, an integration of any and all prior agreements or understandings,
oral or written, with respect to the Option and the Shares.
13. Invalid or Unenforceable Provision. The invalidity or
unenforceability of any particular provision of this Award Agreement shall not
affect the other provisions hereof, and this Award Agreement shall be construed
in all respects as if such invalid or unenforceable provision were omitted.
14. Governing Law. This Award Agreement shall be construed and enforced
in accordance with the laws of North Carolina.
15. Miscellaneous.
(a) Neither the granting of the Option, the exercise thereof nor
any other provision of this Award Agreement shall be construed as conferring
upon the Optionee any right to continue in the employment of the Company, or as
interfering with or restricting in any way the right of such corporations to
terminate such employment at any time.
3
<PAGE>
(b) The Company, the Committee and any employees or agents thereof
are relieved from any liability for the non-issuance or non-transfer, or any
delay in the issuance or transfer, of any of the Shares which results from the
inability of the Company to obtain, or in any delay in obtaining, from each
regulatory body having jurisdiction all requisite authority to issue or transfer
the Stock of the Company in satisfaction of the Option if counsel for the
Company deems such authorization necessary for the lawful issuance or transfer
of any such Shares.
(c) The Optionee represents and warrants that no Shares acquired by
exercise of the Option shall be sold or otherwise disposed of in violation of
any federal or state securities law or regulation. Certificates evidencing the
Shares issuable upon exercise of the Option may contain a legend regarding
resale limitations, including the requirement that the Optionee deliver an
opinion of counsel to the Company.
(d) The Option shall be exercised in accordance with the terms of
the Plan and such administrative regulations as the Committee may from time to
time adopt. All decisions of the Committee with respect to the interpretation,
construction and application of the Plan and/or this Award Agreement shall be
conclusive and binding upon the Optionee and all other persons.
(e) The Committee shall be entitled to amend this Award Agreement
at any time provided that the Award Agreement, as amended, is consistent with
the provisions of the Plan.
(f) The Optionee represents, warrants and covenants that he has not
relied upon the Committee, the Company, or an employee or agent of the Company
with respect to any tax consequences related to the grant or exercise of the
Option, or the disposition of Shares purchased pursuant to exercise of the
Option. The Optionee acknowledges that, as a result of the grant and/or exercise
of the Option, the Optionee may incur substantial tax liability. The Optionee
assumes full responsibility for all such consequences and the filing of all tax
returns and elections the Optionee may be required to or find desirable to file
in connection therewith. In the event any valuation of the Option or Shares
purchased pursuant to its exercise must be made under federal or state tax laws
and such valuation affects any return or election of the Company, the Optionee
agrees that the Company may determine such value and that the Optionee will
observe any determination so made by the Company in all returns and elections
filed by the Optionee.
IN WITNESS WHEREOF, the parties hereto have caused this Award Agreement
to be executed effective as of the day and year first above written.
SPEIZMAN INDUSTRIES, INC.
By: /s/ Robert S. Speizman
--------------------------------------
Robert S. Speizman, President
OPTIONEE:
/s/ Josef Sklut (SEAL)
----------------------------------
Josef Sklut
4
<PAGE>
EXHIBIT A
Speizman Industries, Inc.
508 West Fifth Street
Charlotte, NC 28231
Attention: Stock Option Committee
Re: Exercise of Option
Dear Committee Members:
Pursuant to the terms and conditions of the Nonqualified Stock Option
Award Agreement effective as of _________________, 19__ (the "Award Agreement")
between __________________________ and Speizman Industries, Inc. (the
"Company"), I hereby agree to purchase _______ shares of the Common Stock of the
Company and tender payment in full for such shares in accordance with the terms
of the Award Agreement.
I hereby reaffirm that the representations and warranties made in the
Award Agreement are true and correct on the date hereof as if made on the date
hereof.
Very truly yours,
--------------------------------
Print Name:______________________
Date:________________
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-29-1997
<PERIOD-END> DEC-27-1997
<CASH> 1,658,627
<SECURITIES> 0
<RECEIVABLES> 23,852,423
<ALLOWANCES> 800,718
<INVENTORY> 14,761,901
<CURRENT-ASSETS> 42,497,936
<PP&E> 3,629,291
<DEPRECIATION> 1,460,641
<TOTAL-ASSETS> 49,395,903
<CURRENT-LIABILITIES> 21,090,769
<BONDS> 0
0
0
<COMMON> 330,740
<OTHER-SE> 21,876,050
<TOTAL-LIABILITY-AND-EQUITY> 49,395,903
<SALES> 45,801,025
<TOTAL-REVENUES> 45,801,025
<CGS> 37,462,825
<TOTAL-COSTS> 43,595,076
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 331,734
<INCOME-PRETAX> 1,874,215
<INCOME-TAX> 727,000
<INCOME-CONTINUING> 1,147,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,147,215
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.34
</TABLE>
