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 OCTOBER 2, 1999
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.)
701 GRIFFITH ROAD 28217
------------------------------ ---------------------
CHARLOTTE, NORTH CAROLINA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(704) 559-5777
------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
-----------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF
CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
OUTSTANDING AT
CLASS OF COMMON STOCK NOVEMBER 5 , 1999
--------------------- ------------------
Par value $.10 per share 3,228,706
<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 - 11
PART II. OTHER INFORMATION:
Item 6. Exhibits and reports on Form 8-K..................... 12
Page 2
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
October 2, July 3,
1999 1999
--------- ---------
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C>
CURRENT:
Cash and cash equivalents $ 736,591 $ 642,167
Accounts receivable, less allowances of
$675,798 and $646,316 20,389,416 21,138,563
Inventories 18,665,537 16,360,366
Prepaid expenses and other current assets 6,115,572 6,140,919
--------- ---------
TOTAL CURRENT ASSETS 45,907,116 44,282,015
---------- ----------
PROPERTY AND EQUIPMENT:
Building and leasehold improvements 4,474,901 4,449,204
Machinery and equipment 1,619,998 1,610,559
Furniture, fixtures and transportation equipment 1,754,225 1,726,918
--------- ---------
Total 7,849,124 7,786,681
Less accumulated depreciation and amortization (2,166,405) (1,972,975)
---------- ------------
NET PROPERTY AND EQUIPMENT 5,682,719 5,813,706
--------- ---------
OTHER LONG-TERM ASSETS 704,568 689,902
INTANGIBLES, NET OF ACCUMULATED AMORTIZATION 5,560,410 5,670,410
--------- ---------
$ 57,854,813 $ 56,456,033
============ ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 3
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
October 2, July 3,
1999 1999
--------- ---------
(Unaudited) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Note payable - bank line of credit $11,300,000 $ 4,900,000
Accounts payable 10,250,028 15,069,201
Customers' deposits 4,316,816 5,280,271
Accrued expenses 2,209,472 1,434,229
Current maturities of long-term debt 1,541,568 1,540,273
--------- ---------
TOTAL CURRENT LIABILITIES 29,617,884 28,223,974
Long-term debt 3,420,000 3,800,000
Obligation under capital lease 1,849,436 1,855,341
--------- ---------
TOTAL LIABILITIES 34,887,320 33,879,315
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock - par value $.10; authorized 20,000,000
shares, issued 3,369,506, outstanding 3,228,706 336,951 336,951
Additional paid-in capital 12,935,886 12,935,886
Retained earnings 10,281,479 9,890,704
---------- ---------
Total 23,554,316 23,163,541
Treasury stock, at cost, 140,800 shares (586,823) (586,823)
----------- ------------
TOTAL STOCKHOLDERS' EQUITY 22,967,493 22,576,718
---------- ----------
$57,854,813 $56,456,033
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 4
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Unaudited)
For the Three Months Ended
---------------------------------------
October 2, 1999 October 3, 1998
(13 Weeks) (14 Weeks)
--------------- --------------
<S> <C> <C>
REVENUES $ 27,551,666 $ 20,465,641
------------ ------------
COSTS AND EXPENSES:
Cost of sales 22,567,407 16,988,902
Selling expenses 2,147,351 1,807,355
General and administrative expenses 1,796,343 1,730,385
------------ ------------
Total costs and expenses 26,511,101 20,526,642
----------- -----------
1,040,565 (61,001)
NET INTEREST EXPENSE 386,790 230,845
------------ ------------
Income (loss) before taxes on income 653,775 (291,846)
TAXES (BENEFIT) ON INCOME 263,000 (110,000)
---------- -----------
NET INCOME (LOSS) $ 390,775 $ (181,846)
============ ===========
Basic earnings (loss) per share $ 0.12 $ ( 0.05)
Diluted earnings (loss) per share $ 0.12 ( 0.05)
Weighted average shares outstanding:
Basic 3,228,706 3,311,020
Diluted 3,290,707 3,311,020
</TABLE>
See accompanying notes to consolidated condensed financial statements.
Page 5
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(Unaudited)
For the Three Months Ended
---------------------------------
10-02-99 10-03-98
(13 Weeks) (14 Weeks)
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 390,775 $ (181,846)
Adjustments to reconcile net income (loss) to cash used
by operating activities:
Depreciation and amortization 364,269 296,879
Provision for losses on accounts receivable 37,204 96,522
Provision for inventory obsolescence 226,190 75,000
Gain on disposal of assets (3,699) (600)
(Increase) decrease in:
Accounts receivable 711,943 3,472,938
Inventories (2,531,361) (1,772,304)
Prepaid expenses and other current assets (49,410) (956,949)
Other assets 33,277 (250,300)
Increase (decrease) in:
Accounts payable (4,819,173) (2,602,465)
Accrued expenses and customers' deposits (188,212) (262,923)
------------- ------------
Net cash used in operating activities (5,828,197) (2,086,048)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (97,606) (90,898)
Proceeds on sale of assets 4,837 3,000
------------- ------------
Net cash used in investing activities (92,769) (87,898)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit agreement 6,400,000 1,100,000
Principal payments on long-term debt (384,610) (760,000)
Purchase of treasury stock - (78,206)
------------- ------------
Net cash provided by financing activities 6,015,390 261,794
------------- ------------
NET INCREASE (DECREASE) IN CASH 94,424 (1,912,152)
CASH AND CASH EQUIVALENTS at beginning of period 642,167 2,193,329
------------- ------------
CASH AND CASH EQUIVALENTS at end of period $ 736,591 $ 281,177
============= ============
Supplemental Disclosures:
Cash paid during period for:
Interest 358,295 270,822
Income taxes 10,639 273,850
</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 July
3, 1999, which is incorporated by reference.
Note 2. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
October 2, July 3,
1999 1999
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Machines $12,616,192 $10,262,358
Parts and supplies 6,049,345 6,098,008
----------- -----------
Total $18,665,537 $16,360,366
=========== ===========
</TABLE>
Note 3. Taxes on Income
Taxes on income are allocated to interim periods on the basis of an
estimated annual effective tax rate.
Note 4. Net Income (Loss) Per Share
Basic net income per share includes no dilution and is calculated by
dividing net income by the weighted average number of common shares
outstanding for the period. Diluted net income per share reflects the
potential dilution of securities that could share in the net income
of the Company which consists of stock options (using the treasury
stock method). In a period with a net loss, the weighted average
shares outstanding will be the same.
Note 5. Intangibles
Goodwill is calculated as the excess cost of purchased businesses
over the value of their underlying net assets and is being amortized
on a straight-line basis over fifteen years.
Page 7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Speizman Industries, Inc. and subsidiaries (collectively the "Company") is a
major distributor operating through four companies: Speizman Industries, Inc.
("Speizman" or "Speizman Industries"), Wink Davis Equipment Co., Inc. ("Wink
Davis"), Todd Motion Controls, Inc. ("TMC"), and Speizman Yarn Equipment, Inc.
("Speizman Yarn"). Speizman distributes sock knitting machines, other knitting
equipment and related parts. Wink Davis sells commercial and industrial laundry
equipment, including the distribution of machines and parts as well as
installation and after sales service. TMC manufactures automated boarding,
finishing and packaging equipment used in the sock knitting industry. TMC's
products are sold through Speizman's distribution network. Speizman Yarn
distributes equipment used in the yarn processing industry.
RESULTS OF OPERATIONS
Revenues increased by about $7.1 million to $27.6 million for the 13-week period
ended October 2, 1999 as compared to the 14-week period ended October 3, 1998.
Revenues for knitted fabric equipment, laundry products and used yarn processing
equipment increased by approximately $6.6 million, $2.0 million and $1.1
million, respectively. These increases were offset by a decrease of about $3.1
million in sales of hosiery related equipment.
Cost of sales as a percentage of net revenues in the first fiscal quarter was
81.9% as compared to 83.0% for the same period of the prior fiscal year. This
favorable shift is due primarily to increased operating efficiencies associated
with higher sales volume. Service expenses represented approximately 6.5% of
revenues in the current fiscal year as compared to 8.0% of revenues for the same
period in the prior year.
Selling expenses increased to $2.1 million in the current fiscal year from $1.8
million in the prior fiscal year. The increase is primarily due to increased
sales activities of yarn processing equipment operations.
General and administrative expenses for the quarter ended October 2, 1999 were
about $1,796,000 as compared to $1,730,000 in the prior year.
Interest expense is shown net of interest income. Net interest expense in the
current fiscal year was $387,000 as compared to $231,000 for the same period
last year. This increase is due to higher borrowings on the bank line of credit
and interest expense on the obligation under capital lease for the Company's new
main facilities.
Income tax expense in the current fiscal year was $263,000 or 40.2% of net
income before taxes. In the prior year, income tax benefit on the net operating
loss was $110,000 or 37.7% of net
Page 8
<PAGE>
income before taxes. The higher effective income tax rate in the current fiscal
year is due to the unfavorable impact of certain non-deductible expenses.
Net income for the first quarter was $391,000 or $0.12 per share both basic and
diluted. In the first quarter of the prior fiscal year, the net loss was
$182,000 or $0.05 per share both basic and diluted.
OUTLOOK
The Company has received increased quantities, as compared to recent quarters,
of circular knitting machinery used in the production of seamless garments and
action wear. The Company anticipates a slowdown in new customer orders for this
equipment as the market absorbs the large volume of machine shipments currently
on backorder. The sock manufacturing industry is currently assessing the impact
of new technology which enables hosiery manufacturers to automate their
production processes by knitting in the toe as opposed to manually seaming. The
Company has received many customer orders for this equipment and anticipates
significant shipments to begin in the next quarter. The yarn processing
equipment division's customers continue to face difficult business conditions,
including foreign competition. The outlook for Wink Davis (laundry equipment,
parts and services) remains substantially unchanged.
LIQUIDITY AND CAPITAL RESOURCES
At October 2, 1999, the Company's working capital was $16.3 million, as compared
to $16.1 million at July 3, 1999, the end of the Company's previous fiscal year.
The current ratio decreased to 1.55 from 1.57 over that same period.
Operating activities used approximately $5.8 million in the first quarter of the
current fiscal year. In the same quarter of the prior fiscal year operating
activities used about $2.1 million. In each of these years, a primary reason for
cash usage is the decrease in accounts payable. Accounts payable typically
decrease in August when the Company receives no new machine shipments.
Investing activities used $93,000 for the period ended October 2, 1999 and
$88,000 for the same period last year.
For the first quarter of the current year, financing activities provided $6.0
million, primarily through borrowings on the line of credit. For the first
quarter of the prior fiscal year financing activities provided $262,000.
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 hosiery 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
Page 9
<PAGE>
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.
DISCLOSURE ABOUT FOREIGN CURRENCY RISK
Generally, the Company's purchases of foreign manufactured machinery for resale
are 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 U.S. 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 generally exceed 12 months.
Substantially all of the increase or decrease of the lira denominated purchase
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.
A substantial portion of the Company's textile 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.
NOTE REGARDING PRIVATE SECURITIES LITIGATION REFORM ACT
Statements made by the Company which are not historical facts are forward
looking statements that involve risks and uncertainties. Actual results could
differ materially from those expressed or implied in forward-looking statements.
All such forward-looking statements are subject to the safe harbor created by
the Private Securities Litigation Reform Act of 1995. Important factors that
could cause financial performance to differ materially from past results and
from those expressed and implied in this document include, without limitation,
the risks of acquisition of businesses (including limited knowledge of the
businesses acquired and misrepresentations by sellers) availability of
financing, competition, management's ability to manage growth, loss of
customers, and a variety of other factors.
YEAR 2000 COMPLIANCE
Many computer systems and other electronic equipment with embedded
microprocessors were designed to recognize only the last two digits of the year.
With the arrival of the Year 2000 ("Y2K"), these systems and microprocessors may
encounter operating problems due to their
Page 10
<PAGE>
inability to distinguish years after 1999 from years preceding 1999. As a
result, the Company has been identifying, rectifying or replacing computer
systems or other electronic components that are not Y2K compliant. Examples of
equipment the Company has been analyzing include its primary accounting system,
other information systems and various support equipment, the products
distributed by the company and other products and services procured by the
Company.
The Company has reviewed its primary information system. In the fall of 1998,
the Company upgraded this system by increasing two digit date fields to four
digits. Costs incurred in this project were not significant. Presently, all
subsidiaries (Wink Davis, TMC and Speizman Yarn) and Speizman Industries use
this system for all primary accounting functions. All known issues in the
primary accounting system relating to Y2K have been resolved. In the spring of
1999, Wink Davis was converted to this information system from their previous
system which was not Y2K compliant. At the time of the purchase of Wink Davis on
August 1, 1997, management planned to integrate Wink Davis' information system
into the existing system used by Speizman Industries. This integration project,
which was not accelerated due to the Y2K issue, cost approximately $125,000.
These costs were expensed in fiscal 1999.
The Company does use various other information systems and electronic support
equipment such as telephone and voice mail systems, computer programs and
computer equipment. The Company is currently in the process of making these
non-critical systems Y2K compliant and the Company anticipates that this will be
done by the end of November 1999. These systems will be upgraded through a
combination of modifications done by Company staff and various software patches
from major vendors of telecommunications equipment. Costs incurred in these
projects are not expected to be significant.
A substantial portion of the equipment distributed by the Company has
computerized controls and features. However, to the Company's knowledge, no
operating features are dependent on time or date functions. Additionally, the
Company has received similar assurances from its major suppliers.
The Company is reliant on material vendors, suppliers and customers for a number
of critical operations. We are unable to control the actions of others with
respect to their Year 2000 compliance. However, our material suppliers and
service providers are large companies within their industries and have much at
stake in ensuring their own compliance. We have questioned significant third
parties regarding compliance and to date have not been advised of any major
non-compliance issues. Non-compliance by any of these companies could have a
materially adverse impact on the Company.
The estimates and conclusions in this description of the Y2K issue contain
forward-looking statements and are based on management's estimates of future
events.
Page 11
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
10(a). 1999 Fourth Amendment Agreement to $37,000,000 Amended
and Restated Loan Agreement and Term Note dated as of
September 30, 1999
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPEIZMAN INDUSTRIES, INC.
(Registrant)
Date: November 16, 1999 /s/ Robert S. Speizman
----------------------- --------------------------------
Robert S. Speizman
President
Date: November 16, 1999 /s/ James H. McCorkle, III
----------------------- --------------------------------
James H. McCorkle, III
CFO/Secretary-Treasurer
Page 13
1999 FOURTH AMENDMENT AGREEMENT TO
$37,000,000 AMENDED AND RESTATED LOAN AGREEMENT AND TERM NOTE
THIS AMENDMENT AGREEMENT, made and entered into as of this 30th day of
September, 1999, by and between SPEIZMAN INDUSTRIES, INC., a Delaware
corporation (the "Borrower"), WINK DAVIS EQUIPMENT CO., INC., a Georgia
corporation ("WD"), TODD MOTION CONTROLS, INC., a North Carolina corporation
("TMC") and BANK OF AMERICA, N.A. d/b/a NATIONSBANK, N.A., successor to
NATIONSBANK, N.A., a national banking association (the "Lender");
W I T N E S S E T H:
WHEREAS, pursuant to the $37,000,000 Amended and Restated Loan
Agreement dated as of July 31, 1997 between Borrower and Lender, as amended by
1998 First Amendment Agreement thereto dated as of February 6, 1998, 1998 Second
Amendment Agreement dated as of December 30, 1998, 1999 First Amendment
Agreement thereto dated as of May 17, 1999, 1999 Second Amendment Agreement
thereto dated as of August 27, 1999, and 1999 Third Amendment Agreement thereto
dated as of September 27, 1999, among the Borrower, WD, TMC and the Lender
(collectively the "Loan Agreement"), arrangements were made for the extension by
the Lender to the Borrower of credit on the terms and conditions set forth in
such Loan Agreement;
WHEREAS, under the Loan Agreement, the Borrower obtained a Credit
Facility in the maximum aggregate principal amount at any time outstanding of up
to $37,000,000, of which (i) up to $30,000,000 may be allocated under a "Letter
of Credit Facility" for the issuance of documentary Letters of Credit to support
the Borrower's purchase and importing of (x) presold textile machinery in the
ordinary course of its business and (y) in certain cases, equipment to be held
as inventory for sale and, within such $30,000,000, up to $8,500,000, as
temporarily increased to $11,500,000, may be allocated to borrowings for the
Borrower's short term operating needs under a Revolving Line of Credit, and up
to $500,000 may be allocated for the issuance of Standby Letters of Credit, as
provided in such Loan Agreement, and (ii) up to $7,000,000, as subsequently
increased to $8,050,000 by Note Modification Agreement dated February 6, 1998,
may be allocated as a term loan, all upon the terms and conditions provided in
the Loan Agreement;
WHEREAS, under the Loan Agreement, the Borrower has issued to the
Lender its Amended and Restated Revolving Credit Note dated July 31, 1997 in the
principal amount of $8,500,000 (the "Revolving Credit Note"), as modified by
Note Modification Agreement dated August 27, 1999 and Note Modification
Agreement dated September 27, 1999;
WHEREAS, under the Loan Agreement, the Borrower has issued to the
Lender its Term Note dated July 31, 1997 in the original principal amount of
$7,000,000, as subsequently
<PAGE>
increased to $8,050,000 by Note Modification Agreement dated February 6, 1998
(the "Term Note");
WHEREAS, collateral for the indebtedness and obligations of the
Borrower in respect of the Loan Agreement, the Revolving Credit Note and the
Letter of Credit Facility is provided under the Amended and Restated Security
Agreement dated July 31, 1997 between the Borrower, WD and the Lender and a
Security Agreement dated as of February 6, 1998 between TMC and the Lender
(collectively, the "Security Agreement");
WHEREAS, the Borrower has requested that the Lender agree to certain
modifications to the Loan Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and conditions herein set forth, it is hereby agreed as follows:
1. Terms. All terms used herein without definition, unless the context
clearly requires otherwise, shall have the meanings provided therefor in the
Loan Agreement.
2. Amendment to Loan Agreement.
(A) Section 8.2 is hereby amended to add the following
sentence immediately following the last sentence
thereof:
"Notwithstanding the foregoing, the ratio of (x)
Indebtedness for Money Borrowed of the Borrower and
Subsidiaries, all determined on a consolidated basis
to (y) EBITDA shall not exceed 5.5 to 1.0 for the
measuring date June 30, 1999."
(B) Section 8.5 is hereby amended to add the following
sentence:
"Notwithstanding the foregoing, for the Four-Quarter
Period of the Borrower ended June 30, 1999, the
Consolidated Fixed Charge Ratio shall not be less
than .7 to 1.0. In calculating compliance with this
Section for such Four-Quarter Period, there shall be
excluded from the calculation the charge of
$2,045,236 incurred during such Four-Quarter Period
for upfitting of new locations."
3. Representations and Warranties. Each of the Borrower, WD and TMC
hereby jointly and severally represents and warrants that:
(A) The representations and warranties contained in Article V
of the Loan Agreement are hereby made by the Borrower on and as of the
date hereof except the representations of Sections 5.3 and 5.4 shall
refer to the most recent financial statements delivered under Section
7.1 of the Loan Agreement.
2
<PAGE>
(B) There has been no material change, and there exists no
known prospective change, in the condition, financial or otherwise, of
the Borrower, WD or TMC since the date of the most recent financial
reports received by the Lender, other than changes in the ordinary
course of business, none of which has been a materially adverse change;
(C) The business and properties of the Borrower, WD or TMC are
not, and since the date of the most recent financial reports thereof
received by Lender have not, been materially adversely affected as the
result of any fire, explosion, earthquake, chemical spill, accident,
strike, lockout, combination of workmen, flood, embargo, riot, or
cancellation or loss of any major contracts;
(D) No event has occurred and no condition exists which,
either prior to or upon the consummation of the transactions
contemplated hereby, constitutes an Event of Default under the Loan
Agreement, either immediately or with the lapse of time or the giving
of notice, or both;
(E) The property which is collateral for the indebtedness of
the Borrower, WD or TMC to the Lender under the Security Agreement and
other collateral documents of the Borrower, WD or TMC in favor of the
Lender are subject to no liens or encumbrances except Permitted Liens;
(F) The execution, delivery and performance by the Borrower,
WD or TMC of its obligations under this Amendment Agreement will not
cause a violation or default under any indenture, loan agreement, or
other agreement of, or applicable to, the Borrower, WD or TMC; and
(G) Each of the Borrower, WD and TMC has the requisite
corporate power and authority to execute, deliver and perform this
Amendment Agreement; each of such documents has been duly authorized,
executed and delivered; and each of such documents constitutes a valid,
binding and enforceable instrument, obligation or agreement of the
Borrower, WD or TMC, in accordance with its respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement
of creditors' rights generally.
4. Effectiveness of Documents. The terms and conditions hereof shall
not be effective until each of the following are delivered to the Lender:
(A) Amendment Agreement. Three (3) fully executed originals of
this Amendment Agreement.
(B) Other Documents, Etc. Such other documents, instruments
and certificates as the Lender may reasonably request.
3
<PAGE>
5. Miscellaneous.
(A) This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the
subject matter hereof and supersedes any prior negotiations and
agreements among the parties relative to such subject matter. No
promise, condition, representation or warranty, express or implied, not
herein set forth shall bind any party hereto, and none of them has
relied on any such promise, condition, representation or warranty. Each
of the parties hereto acknowledges that, except as in this Amendment
Agreement otherwise expressly stated, no representations, warranties,
or commitments, express or implied, have been made by any other party
to the other regarding the subject matter hereof. None of the terms or
conditions of this Amendment Agreement may be changed, modified, waived
or canceled, orally or otherwise, except in a writing, signed by the
party to be charged therewith, specifying such change, modification,
waiver or cancellation of such terms or conditions, or of any preceding
or succeeding breach thereof, unless expressly so stated.
(B) Except as hereby specifically amended, modified, or
supplemented, the Loan Agreement, the Loan Documents and all other
agreements, documents, and instruments related thereto are hereby
confirmed and ratified in all respects and shall remain in full force
and effect according to their respective terms.
(C) This Amendment Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which
together shall constitute one and the same instrument.
(D) This Amendment Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of
North Carolina.
(E) Upon request of the Lender, each of the parties hereto
will duly execute and deliver or cause to be duly executed and
delivered to the Lender such further instruments and do and cause to be
done such further acts that may be reasonably necessary or proper in
the opinion of the Lender to carry out more effectively the provisions
and purposes hereof, including documents deemed necessary by the Lender
to more fully evidence the obligations of Borrower, TMC or WD to Lender
and protect and perfect the collateral therefor.
(F) The Borrower agrees to pay all reasonable costs and
expenses of the Lender in connection with the preparation, execution
and delivery of the documents executed in connection with this
Amendment Agreement, including without limitation, the reasonable fees
and out-of-pocket expenses of special counsel to the Lender.
(G) Each of WD and TMC (collectively the "Guarantors") as
guarantors under, in the case of WD, a Guaranty Agreement dated July
31, 1997 from the WD in favor of the Lender and, in the case of TMC, a
Guaranty Agreement dated February 6,
4
<PAGE>
1998, of TMC in favor of the Lender, hereby joins in this Amendment
Agreement to join in the terms hereof and evidence its consent to the
terms and conditions hereof.
[Signatures appear on following page]
5
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date hereof by the Company and the Lender.
ATTEST: SPEIZMAN INDUSTRIES, INC.
/s/ James H. McCorkle, III By: /s/ Robert S. Speizman
- ----------------------------- ---------------------------------
Secretary Name: Robert S. Speizman
-------------------------------
Title: President
------------------------------
ATTEST: WINK DAVIS EQUIPMENT CO., INC.
/s/ Dana G. Russell By: /s/ James H. McCorkle, III
- ----------------------------- ---------------------------------
Assistant Secretary Name: James H. McCorkle, III
-------------------------------
Title: Vice President
------------------------------
ATTEST: TODD MOTION CONTROLS, INC.
/s/ James H. McCorkle, III By: /s/ Robert S. Speizman
- ----------------------------- ---------------------------------
Secretary Name: Robert S. Speizman
-------------------------------
Title: President
------------------------------
BANK OF AMERICA, N.A.
d/b/a NATIONSBANK, N.A.
successor to NATIONSBANK, N.A.
By: /s/ E. Phifer Helms
---------------------------------
Name: E. Phifer Helms
-------------------------------
Title: Managing Director
------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-01-2000
<PERIOD-START> JUL-04-1999
<PERIOD-END> OCT-02-1999
<CASH> 736,591
<SECURITIES> 0
<RECEIVABLES> 21,065,214
<ALLOWANCES> 675,798
<INVENTORY> 18,665,537
<CURRENT-ASSETS> 45,907,116
<PP&E> 7,849,124
<DEPRECIATION> 2,166,405
<TOTAL-ASSETS> 57,854,813
<CURRENT-LIABILITIES> 29,617,884
<BONDS> 0
0
0
<COMMON> 336,951
<OTHER-SE> 22,630,542
<TOTAL-LIABILITY-AND-EQUITY> 57,854,813
<SALES> 27,551,666
<TOTAL-REVENUES> 27,551,666
<CGS> 22,567,407
<TOTAL-COSTS> 26,511,101
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 386,790
<INCOME-PRETAX> 653,775
<INCOME-TAX> 263,000
<INCOME-CONTINUING> 390,775
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 390,775
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.12
</TABLE>
