-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VTdsnHeJaUmTxRZQ+q+Ko+HlGaBwpp6Xq+uNs818ThAmjcYKzy4cvaZ0MjqnofTG nRFqSezNxR4nO06pxcVPAg== 0000950168-00-001410.txt : 20000517 0000950168-00-001410.hdr.sgml : 20000517 ACCESSION NUMBER: 0000950168-00-001410 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPEIZMAN INDUSTRIES INC CENTRAL INDEX KEY: 0000092827 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-INDUSTRIAL MACHINERY & EQUIPMENT [5084] IRS NUMBER: 560901212 STATE OF INCORPORATION: DE FISCAL YEAR END: 0703 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08544 FILM NUMBER: 636749 BUSINESS ADDRESS: STREET 1: 508 W. 5TH STREET CITY: CHARLOTTE STATE: NC ZIP: 28231 BUSINESS PHONE: 7043723751 MAIL ADDRESS: STREET 1: 508 W. 5TH STREET CITY: CHARLOTTE STATE: NC ZIP: 28231 10-Q 1 SPEIZMAN INDUSTRIES 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 APRIL 1, 2000 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 MAY 5, 2000 --------------------- ----------- Par value $.10 per share 3,252,428 Page 1 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 - 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................... 9 - 13 PART II. OTHER INFORMATION: Item 6. Exhibits and reports on Form 8-K............................................... 14
Page 2 CONSOLIDATED CONDENSED BALANCE SHEETS
April 1, July 3, 2000 1999 ------- ------- (Unaudited) (Unaudited) ASSETS CURRENT: Cash and cash equivalents $ 242,650 $ 642,167 Accounts receivable, less allowances of $628,528 and $646,316 19,826,491 21,138,563 Inventories 19,321,284 16,360,366 Prepaid expenses and other current assets 3,839,395 6,140,919 --------- --------- TOTAL CURRENT ASSETS 43,229,820 44,282,015 ---------- ---------- PROPERTY AND EQUIPMENT: Building and leasehold improvements 6,194,063 4,449,204 Machinery and equipment 1,464,861 1,610,559 Furniture, fixtures and transportation equipment 1,746,591 1,726,918 --------- --------- Total 9,405,515 7,786,681 Less accumulated depreciation and amortization (2,147,925) (1,972,975) ----------- ------------ NET PROPERTY AND EQUIPMENT 7,257,590 5,813,706 --------- --------- OTHER LONG-TERM ASSETS 846,318 689,902 INTANGIBLES, NET OF ACCUMULATED AMORTIZATION 5,340,410 5,670,410 --------- --------- $ 56,674,138 $ 56,456,033 =========== ===========
See accompanying notes to consolidated condensed financial statements. Page 3 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
April 1, July 3, 2000 1999 ----- ---- (Unaudited) (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Note payable - bank line of credit $ 7,200,000 $ 4,900,000 Accounts payable 12,573,041 15,069,201 Customers' deposits 3,800,271 5,280,271 Accrued expenses 1,712,080 1,434,229 Current maturities of long-term liabilities 1,576,891 1,540,273 --------- --------- TOTAL CURRENT LIABILITIES 26,862,283 28,223,974 Long-term debt 2,660,000 3,800,000 Obligation under capital lease 3,494,568 1,855,341 --------- --------- TOTAL LIABILITIES 33,016,851 33,879,315 ---------- ---------- STOCKHOLDERS' EQUITY: Common stock - par value $.10; authorized 20,000,000 shares, issued 3,393,228 and outstanding 3,252,428; and issued 3,369,506, outstanding 3,228,706 339,323 336,951 Additional paid-in capital 13,045,200 12,935,886 Retained earnings 10,859,587 9,890,704 ---------- --------- Total 24,244,110 23,163,541 Treasury stock, at cost, 140,800 shares (586,823) (586,823) ------------- ------------ TOTAL STOCKHOLDERS' EQUITY 23,657,287 22,576,718 ---------- ---------- $ 56,674,138 $ 56,456,033 =========== ===========
See accompanying notes to consolidated condensed financial statements. Page 4 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited) (Unaudited) For the Three Months Ended For the Nine Months Ended -------------------------- ------------------------- 04-01-00 04-03-99 04-01-00 04-03-99 (13 Weeks) (13 Weeks) (39 Weeks) (40 Weeks) ---------- ---------- ---------- ---------- REVENUES $ 23,372,530 $ 22,714,726 $ 83,812,505 $ 71,391,446 ----------- ----------- ----------- ------------ COSTS AND EXPENSES: Cost of sales 20,085,102 19,246,048 69,083,473 60,684,884 Selling expenses 1,817,379 1,751,802 6,319,615 5,408,522 General and administrative expenses 1,726,932 2,125,212 5,574,286 5,894,992 ------------ ------------ ------------ ------------ Total costs and expenses 23,629,413 23,123,062 80,977,374 71,988,398 ----------- ----------- ----------- ----------- (256,883) (408,336) 2,835,131 (596,952) NET INTEREST EXPENSE 416,675 268,867 1,206,248 766,613 ------------- ------------ ------------ ------------- INCOME (LOSS) BEFORE TAXES ON INCOME (673,558) (677,203) 1,628,883 (1,363,565) TAXES (BENEFIT) ON INCOME (249,000) (233,000) 660,000 (501,000) ------------ ------------ ------------ ------------ NET INCOME (LOSS) (424,558) $ (444,203) 968,883 $ (862,565) ============ ============ ============ ============ Basic earnings (loss) per share $ (0.13) $ (0.14) $ 0.30 $ (0.26) Diluted earnings (loss) per share $ (0.13) (0.14) $ 0.29 (0.26) Weighted average shares Outstanding: Basic 3,251,178 3,273,773 3,240,227 3,288,441 Diluted 3,251,178 3,273,773 3,299,864 3,288,441
See accompanying notes to consolidated condensed financial statements. Page 5 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) --------------------------------------- For the Nine Months Ended ---------------------------------------- 04-01-00 04-03-99 (39 Weeks) (40 Weeks) ------------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 968,883 $ (862,565) Adjustments to reconcile net income (loss) to cash used by operating activities: Depreciation and amortization 1,055,032 906,464 Provision for inventory obsolescence 401,190 225,000 Gain on disposal of assets (5,726) (4,389) (Increase) decrease in: Accounts receivable 1,312,072 2,855,385 Inventories (3,362,108) (1,096,523) Prepaid expenses and other current assets 2,301,524 (1,229,298) Other assets (156,416) (428,819) Increase (decrease) in: Accounts payable (2,496,160) 401,210 Accrued expenses and customers' deposits (1,202,149) 1,289,831 ------------- ------------ Net cash provided by (used in) operating activities (1,183,858) 2,056,296 ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (471,714) (1,418,905) Proceeds on sale of assets 8,524 317,025 --------------- -------------- Net cash used in investing activities (463,190) (1,101,880) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings on line of credit agreement 2,300,000 (500,000) Principal payments on long-term debt (1,164,155) (1,970,000) Issuance of common stock for stock options 111,686 47,550 Purchase of treasury stock - (282,410) ------------------ ------------- Net cash provided by (used in) financing activities 1,247,531 (2,704,860) ----------- ------------ NET DECREASE IN CASH (399,517) (1,750,444) CASH AND CASH EQUIVALENTS at beginning of period 642,167 2,193,329 ------------ ------------ CASH AND CASH EQUIVALENTS at end of period $ 242,650 $ 442,885 ============ ============= Supplemental Disclosures: Cash paid during period for: Interest $ 1,374,433 $ 898,088 Income taxes 805,782 371,100
See accompanying notes to consolidated condensed financial statements. Page 6 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 1. Management Statement regarding 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: April 1, July 3, 2000 1999 ----- ---- (Unaudited) (Unaudited) Machines $14,038,241 $10,262,358 Parts and supplies 5,283,043 6,098,008 --------- --------- Total $ 19,321,284 $16,360,366 =========== ========== 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 Note 6. Segment Information The Company operates primarily in two segments of business, textile equipment and laundry equipment and services. The table below summarizes financial data by segment:
For the Three Months Ended For the Nine Months Ended -------------------------- ------------------------- 04-01-00 04-03-99 04-01-00 04-03-99 ------------- ------------- ------------ ----------- Total revenues for the period ended Textile equipment $ 16,484,930 $ 16,210,120 $ 60,474,383 $ 52,209,317 Laundry equipment and services 6,887,600 6,504,606 23,338,122 19,182,129 ----------- ----------- ---------- ----------- $ 23,372,530 $ 22,714,726 $ 83,812,505 $ 71,391,446 Income before interest and taxes for the period ended Textile equipment (442,024) (384,226) 2,278,120 (495,201) Laundry equipment and services 185,141 (24,110) 557,011 (101,751) ------------ ------------- ------------ ------------ (256,883) (408,336) 2,835,131 (596,952)
Total assets as of April 1, 2000 July 3, 1999 ------------- ------------ Textile equipment $43,778,022 $42,554,774 Laundry equipment and services 12,896,116 13,901,259 ---------- ---------- $ 56,674,138 $ 56,456,033 =========== ===========
Note 7. Obligation under Capital Lease The Company expanded its existing facilities in the current fiscal year through a modification to its existing capital lease obligation of approximately $1.7 million. Page 8 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 for the Company's third fiscal quarter were $23.4 million, an increase of approximately $700,000 as compared to the same quarter of the prior fiscal year. Sales of hosiery equipment increased by approximately $1.7 million, offset by a $1.0 million decrease of yarn processing equipment revenues. Yarn processing equipment revenues are negatively impacted by dissolution of the Marzoli distribution agreement. For the year to date, revenues increased by approximately $12.4 million to $83.8 million. The largest components of the increase are attributable to knitted fabric equipment sales, an increase of $15.7 million and Wink Davis' laundry equipment, parts and service, an increase of approximately $4.2 million. Knitted fabric equipment includes the Santoni line for producing ladies' seamless apparel. Revenues from hosiery knitting equipment decreased by approximately $4.7 million. This decrease is largely related to the anticipated delivery of closed toe equipment. Many customers have either delayed ordering new equipment, or, are awaiting delivery of closed toe equipment. Yarn processing revenues decreased by about $3.0 million. Cost of sales as a percentage of revenue for the Company's third fiscal quarter was 85.9% for the current year as compared to 84.7% in the prior year. The increase is primarily due to lower margins on knitted fabric equipment sales. In February 2000, Speizman Industries and Marzoli agreed to a settlement agreement terminating the Company's exclusive distribution rights of Marzoli equipment, parts and service. Margins have been favorably impacted by the loss of the Marzoli product line with generally low margins and high installation costs. Page 9 For the year to date, cost of sales as a percentage of revenues has decreased to 82.4 % from 85.0%. This decrease is attributable to favorable margins on knitted fabric equipment and a more favorable product mix with the decrease in new yarn processing equipment. Selling expenses in the Company's third fiscal quarter of the current year were approximately $1,817,000 as compared to $1,752,000 in the prior year. For the nine-month period, selling expenses were $6.3 million, an increase of $911,000 over the prior year. The increases are due to higher expenses related directly to increased sales volume including salaries and commissions. General and administrative expenses decreased to $1.7 million in the current year as compared to $2.1 million in the prior year. The current fiscal quarter is a net loss; accordingly, the accrual of the projected annual bonus is reduced in the current fiscal quarter. Other decreases include lower bad debt expense. Net interest expense increased to approximately $417,000 and $1,206,000 in the current fiscal quarter and year, respectively. The increases are due to higher borrowings over the comparable period on the bank line of credit and interest expense on the obligation under capital lease for the Company's new main facilities. The Company relocated into these facilities in April 1999. Net loss for the third fiscal quarter of 2000 was $0.13 per share, both basic and diluted. For the nine-month period ended April 1, 2000, net income is $0.30 per share basic and $0.29 diluted. In the prior fiscal quarter and year, the Company reported net losses of $0.14 and $0.26 per share, respectively. OUTLOOK Hosiery Equipment - The closed toe machine produced by Lonati has taken approximately two years longer than anticipated to finalize a production model. The field tests and necessary improvements made to the closed toe machine of Lonati continue during the current quarter and are anticipated to last for at least two more quarters. The Company has begun some deliveries of closed toe models in its fourth fiscal quarter. The Company anticipates that closed toe machines will gradually replace most of the conventional athletic sock machines over the next two to four years. Knitted Fabric Equipment - As the seamless apparel industry becomes more mature and defined, the Company expects sales of this equipment to be lower but, hopefully, less erratic. TMC - The boarding and packaging machinery industry is very competitive, with a number of foreign and domestic manufacturers. TMC represents the Company's only manufacturing operations; accordingly, many competitors may possess greater capital resources or manufacturing capabilities. TMC provides significant technological and developmental capabilities. The Company continues to explore the most effective manners in which to capitalize on these capabilities. Yarn Processing Equipment - Speizman Industries maintains a presence in the yarn processing industry through its sales of new and used equipment and related parts. The Company has Page 10 entered distribution agreements with other manufacturers of new equipment. Revenues and gross margins from new equipment sales are expected to improve to equal or greater levels than those with former suppliers. Revenues from used yarn processing equipment sales are contingent upon having an adequate availability of such equipment and products. Frequently the company may purchase substantial portions of equipment from liquidating mills. The Company is rapidly expanding its parts business through relationships with various suppliers. The yarn processing industry continues to face difficult business conditions due to foreign competition. The Company mitigates this risk by maintaining low values of receivables and inventories. Wink Davis - Wink Davis recently closed a large order for a continuous batch washer ("CBW") system to be installed in fiscal 2001. Sales to on-premises laundries ("OPL's") have been slow over recent quarters. However, OPL revenues are anticipated to increase based on several large orders currently in the backlog. Competition continues to put pressure on margins. As of May 5, 2000, the Company's backlog of unfilled orders was approximately $58 million. The period of time required to fill orders varies depending on the model ordered, manufacturers' production capabilities, availability of overseas shippers, etc. Most orders are filled in less than one year. LIQUIDITY AND CAPITAL RESOURCES Working capital at April 1, 2000 was approximately $16.4 million, a slight increase from $16.1 million at the beginning of the fiscal year. The current ratio has also increased slightly to 1.61 at the end of the Company's third fiscal quarter from 1.57 at July 3, 1999. For the nine-month period ending April 1, 2000, operating activities used approximately $1.2 million as compared to providing approximately $2.1 million for the prior year. The increase in inventory is primarily used yarn processing equipment in which the Company has purchased all or substantial portions of equipment of plants that are reorganizing or liquidating. The Company is able to effectively maintain a presence in this industry due to its prior distribution relationship with Marzoli. Investing activities remain minimal, with only limited capital expenditures. No significant capital expenditures are anticipated in the near future. Financing activities provided approximately $1.2 million for the nine-month period ending April 1, 2000. The primary source of financing was borrowings on the Company's line of credit. The Company expanded its existing facilities in the current fiscal year through a modification to its existing capital lease obligation of approximately $1.7 million. Page 11 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 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 Page 12 sellers) availability of financing, competition, management's ability to manage growth, loss of customers, and a variety of other factors. YEAR 2000 COMPLIANCE As of the date of filing of this Form 10-Q, the Company has experienced no material impact to its business, including suppliers' and customers' operations, performance of electronic components of equipment distributed by the Company, or other parties. The Company will continue to monitor operations for possible issues related to Y2K. Page 13 PART II. OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K (a) Exhibits: 10(a). 2000 Second Amendment Agreement to $37,000,000 Amended and Restated Loan Agreement and Term Note dated as of February 29, 2000 27 Financial Data Schedule (b) Reports on Form 8-K: None. Page 14 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: May 15, 2000 /s/ Robert S. Speizman ----------------------------- ----------------------- Robert S. Speizman President Date: May 15, 2000 /s/ James H. McCorkle, III ----------------------------- --------------------------- James H. McCorkle, III Secretary-Treasurer (Chief Financial Officer) Page 15 EX-10 2 EXHIBIT 10(A), AMENDMENT 2 TO LOAN AGREEMENT EXHIBIT 10(a) 2000 SECOND AMENDMENT AGREEMENT TO $37,000,000 AMENDED AND RESTATED LOAN AGREEMENT AND TERM NOTE THIS AMENDMENT AGREEMENT, made and entered into as of this 29th day of February, 2000, 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, 1999 Third Amendment Agreement thereto dated as of September 27, 1999, 1999 Fourth Amendment Agreement thereto dated as of September 30, 1999, 1999 Fifth Amendment Agreement thereto dated as of October 29, 1999, 1999 Sixth Amendment Agreement thereto dated as of November 16, 1999, and 2000 First Amendment Agreement thereto dated as of January 26, 2000, 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 and Note Modification Agreement dated November 10, 1999 and Note Modification Agreement dated January 26, 2000; 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 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 2.4(b)(iv) of the Loan Agreement is hereby amended to read as follows: "(iv) Notwithstanding the foregoing, the Committed Amount shall be $10,000,000 during the period August 12, 1999 to September 17, 1999, $11,500,000 during the period September 18, 1999 to January 20, 2000, $11,000,000 during the period January 21, 2000 to February 29, 2000 and $10,500,000 during the period March 1, 2000 to March 31, 2000, subject to such permanent reductions as may be required hereunder during such period. At April 1, 2000 and thereafter, the Committed Amount shall be permanently reduced to $6,000,000, less any other permanent reductions which may otherwise be required hereunder." 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 (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 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 4 dated February 6, 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. 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 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/ Leesa C. Sluder Name: Leesa C. Sluder Title: Managing Director 5 EX-27 3 FDS
5 9-MOS JUL-01-2000 JAN-02-2000 APR-01-2000 242,650 0 20,445,019 628,528 19,321,284 43,229,820 9,405,515 2,147,925 56,674,138 26,862,283 0 0 0 339,323 23,317,964 56,674,138 83,812,505 83,812,505 69,083,473 80,977,374 0 0 1,206,248 1,628,883 660,000 968,883 0 0 0 968,883 .30 .29
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