-----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, PqjDybUnXJ8ioOtHBAsu18g7e7i18lC5Xn6sHzmkG3mvm3pz4r10jjynCDDRWXpI RvqhnS5fv5DYMO+/TmllYw== 0000950168-95-000827.txt : 19951003 0000950168-95-000827.hdr.sgml : 19951003 ACCESSION NUMBER: 0000950168-95-000827 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950929 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPEIZMAN INDUSTRIES INC CENTRAL INDEX KEY: 0000092827 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY (NO METALWORKING MACHINERY) [3550] IRS NUMBER: 560901212 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-08544 FILM NUMBER: 95577307 BUSINESS ADDRESS: STREET 1: P O BOX 31215 CITY: CHARLOTTE STATE: NC ZIP: 28231 BUSINESS PHONE: 7043723751 MAIL ADDRESS: STREET 1: P O BOX 31215 CITY: CHARLOTTE STATE: NC ZIP: 28231 10-K 1 SPEIZMAN INDUSTRIES 40058 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended July 1, 1995 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] 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 incorporation or organization) (I.R.S. Employer Identification No.) 508 West Fifth Street, Charlotte, North Carolina 28202 (Address of principal executives offices) (Zip Code)
Registrant's telephone number, including area code: (704) 372-3751 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.10 Par Value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing such requirements for the past 90 days. Yes [(Check Mark)] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K. The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 14, 1995, was $9,462,064, based on the last sale price of $3.75 per share reported by the NASDAQ National Market System on that date. As of September 14, 1995, there were 3,208,599 shares of the registrant's Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement for its Annual Meeting of Stockholder to be held on November 16, 1995, are incorporated herein by reference into Part III. PART I Item 1. Business. General Speizman Industries, Inc. (the "Company") is the leading distributor of new sock knitting machines in the United States. It distributes technologically advanced sock knitting machines manufactured by Lonati, S.r.l., Brescia, Italy ("Lonati"), which the Company believes is the world's largest manufacturer of hosiery knitting equipment. It also distributes Lonati sock and sheer hosiery knitting machines in Canada. In addition, through sales arrangements with other European textile machinery manufacturers, the Company distributes other sock knitting machines, knitting machines for underwear, sweaters, collars and trim, and other knitted fabrics and other equipment related to the manufacture of socks and sheer hosiery, principally in the United States and Canada. The Company also sells dyeing and finishing equipment for the textile industry. The Company sells textile machine parts and used textile equipment in the United States and a number of foreign countries. Prior to 1990, the Company also manufactured mechanical single cylinder sock knitting machines. In 1990, the Company ceased its manufacturing activities due to a decline in the profitability of this line of business and in order to focus the Company's activities on the distribution of single cylinder machines manufactured by Lonati. All references herein are to the Company's 52-or-53 week fiscal year ending on the Saturday closest to June 30. Fiscal 1995, 1994, 1992, and 1991, each contained 52 weeks and ended on July, 1, 1995, July 2, 1994, June 27, 1992 and June 29, 1991. Fiscal 1993 contained 53 weeks and ended on July 3, 1993. Unless the context otherwise requires, the term the "Company" as used herein includes Speizman Industries, Inc. and its subsidiaries. The Company and Lonati entered into their present agreement for the sale of Lonati machines in the United States in January 1992 (the "Lonati Agreement"). The Company and Lonati also entered into a similar agreement in January 1992 relating to the Company's distribution of Lonati sock and sheer hosiery knitting machines in Canada. The company has distributed Lonati double cylinder machines in the United States continuously since 1982. The Company began distributing Lonati single cylinder machines in 1989. Pursuant to the Lonati Agreement, Lonati has appointed the Company as Lonati's exclusive agent in the United States for the sale of its range of single and double cylinder sock knitting machines as of the date of the Lonati Agreement and related spare parts. Under the Lonati Agreement, the Company also serves as the distributor of such equipment in the United States. Although the Lonati Agreement does not establish the Company as the exclusive distributor of Lonati sock machines in the United States, the Company in fact has exclusively distributed Lonati double cylinder sock machines continuously since 1982 and Lonati single cylinder sock knitting machines since 1989 when the Company began to phase out its manufacturing activities. The Lonati Agreement extends to December 31, 1995 and continues from year to year thereafter, although it may be terminated on 90 days written notice at any year end or without notice in the event of a breach. The Company and Lonati also entered into a similar agreement in January 1992 relating to the Company's distribution of Lonati sock and sheer hosiery knitting machines in Canada. The Lonati Agreement contains certain covenants and conditions relating to the Company's sale of Lonati machines, including, among others, requirements that the Company, at its own expense, promote the sale of Lonati machines and assist Lonati in maintaining its competitive position, maintain an efficient sales staff, provide for the proper installation and servicing of the machines, maintain an adequate inventory of parts and pay for all costs of advertising the machines. The Company is prohibited during the term of the Lonati Agreement from distributing any machines or parts that compete with Lonati machines and parts. The Company believes that it is and will remain in compliance in all material respects with such covenants. The cost to the Company of Lonati machines, as well as the delivery schedule of these machines, are totally at the discretion of Lonati. The Lonati Agreement allows Lonati to sell machines directly to the sock manufacturer with any resulting commission paid to the Company determined on a case by case basis. 1 The Lonati single cylinder machines distributed by the Company are for the knitting of athletic socks. The Lonati double cylinder machines are for the knitting of dress and casual socks. The Lonati machines are electronic and high-speed and have computerized controls. Lonati single cylinder machines are capable of knitting pouch heel and toe, reciprocated heel and toe and tube socks. These and other features allow the rapid change of sock design, style and size, result in increased production volume and efficiency and simplify the servicing of the machines. The Company distributes these sock knitting machines as well as Lonati sheer hosiery knitting machines in Canada. In addition, the Company distributes the knitting machines, described below, manufactured by Santoni, S.r.l. Brescia, Italy ("Santoni"), one of Lonati's subsidiaries, in the United States and Canada. Sales by the company in the United States and Canada of machines manufactured by Lonati, S.r.l., generated the following percentages of the Company's net revenues: 44.4% in 1995, 65.6% in 1994 and 66.7% in 1993. In addition, sales of Santoni machines in the United States and Canada generated 9.3%, 4.4% and 5.4% of the Company's net revenues in fiscal 1995, 1994 and 1993, respectively. In addition to the Lonati machines, the Company distributes new knitting and other machines and equipment under written agreements and other arrangements with the manufacturers. The following table sets forth certain information concerning certain of these additional distribution arrangements:
Manufacturer Machine Territory Santoni, S.r.l., Circular knitting machines for United States and Brescia, Italy underwear, men's socks and women's Canada sheer hosiery and surgical support hose Jumberca, S.A., Sweater knitting machines United States, Canada, the United Badalona, Spain Kingdom and Ireland Zamark, S.p.A.. Flat knitting machines for collars and United States, Canada, the United Somma Lombardo, Italy trim and sweaters Kingdom and Ireland Conti Complett, S.p.A., Sock toe closing machines and sock United States Milan, Italy turning devices Sperotto Rimar, S.p.A., Fabric processing and finishing United States Malo, Italy machines Corino Machine, S.r.l., Fabric handling equipment United States and Canada Alba, Italy Fimatex, Turning devices for sock machines United States Scandicci, Italy Orizio Paolo, S.p.A., Fabric knitting machines United States Brescia, Italy
Sales of machines manufactured by Zamark (an affiliate of Lonati) and Conti Complett generated an aggregate of 5.3%, 4.4% and 0.6% of the Company's net revenues in fiscal 1995, 1994 and 1993, respectively. Sales of machines manufactured by Jumberca generated 9.8%, 9.8% and 3.2% of the Company's net revenues in fiscal 1995, 1994 and 1993, respectively. The Company entered into its present agreement with Jumberca (the "Jumberca Agreement") for the distribution of Jumberca sweater and fabric knitting machines in February 1994. All of the Jumberca machines sold by the Company to date have been sweater and fabric knitting machines. The Company did not meet the minimum purchase requirements under the Jumberca Agreement with regard to the sweater or fabric 2 knitting machines in fiscal 1995 due to weakened demand for such machines. In addition, although the percentage of the Company's net revenues generated by sales of Jumberca machines in fiscal 1995 did not change as compared to fiscal 1994, such sales did not contribute to the Company's net income in fiscal 1995 due principally to the Company's lowering its sales prices to customers to generate orders. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations." The Company expects sales of Jumberca machines to decrease in fiscal 1996 as compared to fiscal 1995, and does not expect its gross profit from the sales of such machines to increase. In fiscal 1995, purchasers of the Jumberca machines from the Company increased their demands for extended payment terms due principally to the significant capital commitment required in connection with such purchases and the Company was unwilling to assume the credit risk resulting from such extended terms. As a result of the foregoing, at the Company's request, in March 1995 the parties amended the Jumberca Agreement to eliminate the minimum purchase requirements thereunder and to allow for the termination of the agreement prior to its original termination date in January 1997. In accordance with the terms of the Jumberca Agreement as amended, the Company terminated the agreement with regard to the fabric knitting machines in July 1995 and the agreement will terminate with regard to the sweater knitting machines in December 1995. Although the Company believes that the the weakened demand for the machines and the termination of the Jumberca Agreement will have an adverse effect on its net revenues in fiscal 1996, it does not believe that it will have any such effect on its net income for the year. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Effects of Inflation and Changing Prices." There can be no assurance that the Company will not encounter significant difficulties in any attempt to enforce any provision of the Lonati Agreement or Jumberca Agreement (or any other agreement with a foreign manufacturer), or any agreement that may arise in connection with the placement and confirmation of orders for the machines manufactured by Lonati or Jumberca (or any other foreign manufacturer) or obtain an adequate remedy for a breach of any such provision, due principally to the fact that Lonati or Jumberca (or any other foreign manufacturer) is a foreign company. Used Machines, Parts and Liquidations The Company sells used machinery and parts to the textile industry. The Company carries significant amounts of machinery and parts inventories to meet customers requirements and to assure itself of an adequate supply of used machinery. The Company acts as a liquidator of textile mills and as a broker in the purchase and sale of such mills. Marketing and Sales The Company markets and sells knitting machines and related equipment primarily by maintaining frequent contacts with customers and understanding of its customers' individual business needs. Salespersons will set up competitive trials in a customer's plant and allow the customer to use the Company's machine in its own work environment alongside competing machines for two weeks to three months. The Company also offers customers the opportunity to send their employees to the Company for training courses on the operation and service of the machines and, depending on the number of machines purchased and the number of employees to train, may offer such training courses at the customer's facility. In addition, the Company exhibits its equipment at trade shows and uses its private showroom to demonstrate new machines. These marketing strategies are complemented by the Company's commitment to service and continuing education. At August 15, 1995, the Company employed approximately 13 salespersons and 26 technical representatives. In addition to its sales staff, the Company uses over 30 commission sales agents in a number of foreign countries in connection with its sales of used machines. The terms of new machine sales generally are individually negotiated including both the purchase price, payment terms and delivery schedule. The Company is usually required to purchase imported machines with a letter of credit in favor of the manufacturer delivered not less than 15 days prior to the machine's shipment to the customer's plant. Generally, the letter of credit must be payable 60 days or longer from the date of the on-board bill of lading and upon presentation of the bill of lading. The period from shipment by the manufacturer to installation in the customer's plant is generally 30-45 days. 3 The Company encourages trade-ins of older equipment, which reduces the customer's initial capital outlay. The Company believes that its trade-in policy has increased sales of certain of the Company's new equipment lines. Substantially all of the machines sold by the Company are drop-shipped from the foreign manufacturer by container or air freight directly to the customer's plant using the Company's freight forwarder to coordinate shipment. Title is taken at the European port, and the Company insures the machines for 110% of cost. Because a substantial portion of the Company's revenues are derived from sales of machines and equipment imported from abroad, these sales may be subject to import controls, duty and currency fluctuations. The majority of the Company's purchases of Italian machines for sale in the United States are denominated in Italian lira. Generally, the Company has been able to adjust sales prices or purchase lira hedging contracts to compensate for anticipated dollar fluctuations. However, international currency fluctuations that result in substantial price level changes could impede import sales and substantially impact profits. The Company is not able to assess the quantitative effect such international price level changes could have upon the Company's operations. All of the Company's export sales originating from the United States are made in U.S. dollars. All of the sales of the Company's United Kingdom subsidiary are denominated in pounds sterling. The Company also markets used machines through its employees and outside commission salespersons. The Company markets its used machines in the United States and in a number of foreign countries. The Company uses trade advertising extensively and at least once every two months distributes lists throughout the industry of used machines that the Company has for sale. The Company exports certain new and used machines and parts for sale in Canada and a number of other foreign countries. See Note 1 of Notes to Consolidated Financial Statements for certain financial information concerning the Company's foreign sales in fiscal 1995, 1994 and 1993. Customers The Company's customers consist primarily of the major sock manufacturers in the United States. In fiscal 1995, the Company's two largest customers, Renfro Corporation and Kayser-Roth Corporation, accounted for 7.3% and 5.2%, respectively, of the Company's net revenues. In fiscal 1994, the Company's two largest customers, Fruit of the Loom, Inc., and Renfro Corporation, accounted for 13.8% and 13.4% of the Company's net revenues. Generally, the customers contributing the most to the Company's net revenues vary from year to year. The Company believes that the loss of any principal customer could have a material adverse effect on the Company. Backlog The Company's backlog of unfilled orders for new and used machines was $4.1 million at July 1, 1995 as compared to $15.1 million at July 2, 1994, and $24.5 million at July 3, 1993. Management believes that all the company's unfilled orders at July 1, 1995 will be filled by the end of fiscal 1996. The period of time required to fill orders varies depending on the machine ordered. The decline in backlog is attributed to weakened demand for sock and sweater machines. Competition The sock knitting machine industry is competitive. Lonati single cylinder machines compete primarily with machines manufactured by an Italian and a Czech company and Lonati double cylinder machines compete primarily with machines manufactured by an Italian company acquired in 1993 by Lonati but not represented by the Company. Lonati machines compete, to a lesser extent, with machines manufactured by a number of other foreign companies of varying sizes and a small domestic company, and with companies selling used machines. The principal competitive factors in the distribution of sock knitting machines are technology, price, service, allowance of trade-ins and delivery. 4 The Company believes that its competitive advantages are the technological advantages of the Lonati machines, the Company's commitment to customer service and the Company's allowance of trade-ins of used machines on new Lonati machines. The Company believes that it is at a short term competitive disadvantage if a potential customer's decision will be based primarily on price since, generally, the purchase price of Lonati machines is higher than that of competing machines. In its sale of new equipment, in addition to Lonati machines, the Company competes with a number of foreign and domestic manufacturers and distributors of new and used machines. In its sale of such other machines and equipment, certain of the company's competitors may have substantially greater resources than the Company. Domestic and foreign sales of used sock and sheer hosiery knitting machines is fragmented and highly competitive. The Company competes with a number of domestic and foreign companies that sell used machines as well as domestic and foreign manufacturers that have used machines as a result of trade-ins. In the United States, the Company has one primary competitor in its sale of used sock knitting machines. The principal competitive factors in the Company's domestic and foreign sales of used machines are price and availability of machines that are in demand. Although the Company is the exclusive distributor of parts for a number of the machines it distributes, it competes with firms that manufacture and distribute duplicates of such parts. In addition, the Company competes with a number of distributors and manufacturers in its other parts sales. Regulatory Matters The Company is subject to various federal, state and local statutes and regulations relating to the protection of the environment and safety in the work place. The failure by the Company to comply with any of such statutes or regulations could result in significant monetary penalties, the cessation of certain of its operations, or both. Management believes that the Company's current operations are in compliance with applicable environmental and work place safety statutes and regulations in all material respects. The Company's compliance with these statutes and regulations has not materially affected its business; however, the Company cannot predict the future effects of compliance with such statutes or regulations. Employees As of August 15, 1995, the Company had 78 full-time employees. The Company's employees are not represented by a labor union, and the Company has never suffered an interruption of business as a result of a labor dispute. The Company considers its relations with its employees to be good. Item 2. Properties. The Company's headquarters, in which its administrative offices, machinery rebuilding facilities and a substantial portion of its warehouse space are located, is in Charlotte, North Carolina in an approximately 89,000 square foot building that is leased from a partnership owned by Robert S. Speizman and his brother. The City of Charlotte has designated this building an "historic landmark," and, as a result, modifications to the building require prior approval of the Charlotte-Mecklenburg Historic Landmark Commission. The term of the lease extends to March 31, 1996 and the annual rent thereunder was $168,400 from January 1, 1993 to March 31, 1995. Annual rent is $311,500 from April 1995 through March 1996. The Company also leases approximately 25,000 square feet of additional warehouse space for approximately $68,800 per year under a lease agreement that expires April 1996, approximately 20,000 square feet of additional warehouse space under a lease that expires September 1996 for an annual rental of $48,000, and approximately 10,000 square feet of additional warehouse space on a month-to-month basis for $100 per month, all in Charlotte, North Carolina. The Company leases approximately 5,000 square feet of office and warehouse space in Hicksville, New York, for approximately $30,000 per year, under a lease expiring June 1997. The Company leases approximately 250 square feet of office space, in which the headquarters of its Canadian subsidiary are located, in Montreal, Canada, for approximately $315 per month. The Company leases approximately 2,500 square feet of office and warehouse space in Leicester, United Kingdom, for approximately $1,700 per month. 5 The Company is considering plans to move its headquarters to a different building in Charlotte, North Carolina in which its administrative offices, machinery rebuilding facilities and all or substantially all of its warehouse space can be located. The Company anticipates that it will lease any such building. Item 3. Legal Proceedings. On August 21, 1989, Dorothy L. Boyd, Administratrix, instituted an action against the Company in the United States District Court for the Western District of Virginia, seeking $5,000,000.00 in damages allegedly resulting from a wrongful death that involved machinery manufactured and sold by the Company more than 20 years before the death. On January 12, 1994, the District Court granted the Company's Motion for Summary Judgment and entered a judgment for the Company. The plaintiff appealed to the United States Court of Appeals for the Fourth Circuit, which on December 12, 1994, affirmed the judgment of the District Court. The time in which the plaintiff could either petition the Fourth Circuit Court for a re-hearing or petition the United States Supreme Court for a writ of certiorari, has expired. Therefore, this case is completed with no finding of liability on the part of the Company. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of the Company's security holders during the fourth quarter of fiscal 1995. Executive Officers of Registrant The following table sets forth certain information regarding the executive officers of the Company: Name Age Positions with the Company Robert S. Speizman 55 Chairman of the Board, President and Director Josef Sklut 66 Vice President-Finance, Secretary, Treasurer and Director Robert S. Speizman has served as President of the Company since November 1976. From 1969 to October 1976, Mr. Speizman served as Executive Vice President of the Company. Mr. Speizman has been a director of the Company'since 1967 and Chairman of the Board of Directors since July 1987. Josef Sklut has served as Vice President-Finance of the Company'since 1978, as Secretary of the Company since 1977, as Treasurer of the Company'since 1969 and as a director of the Company since 1977. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. The Company's Common Stock was listed on October 6, 1993, on the NASDAQ National Market System under the symbol "SPZN". Previously, the Common Stock was listed on the NASDAQ Small-Cap Market System. The following table sets forth for the periods indicated (i) before October 6, 1993, the high and low bid prices per share of Common Stock as reported by the NASDAQ Small-Cap Market System and (ii) after October 5, 1993, the high and low sales prices as reported by the NASDAQ National Market System. Fiscal 1994 High Low First Quarter (ended October 2, 1993) $19.50 $10.00 Second Quarter (ended January 1, 1994) 14.25 12.00 Third Quarter (ended April 2, 1994) 17.50 11.25 Fourth Quarter (ended July 2, 1994) 13.50 7.25 6 Fiscal 1995 First Quarter (ended October 1, 1994) 8.75 6.00 Second Quarter (ended December 31, 1994) 6.50 3.22 Third Quarter (ended April 1, 1995) 5.38 3.38 Fourth Quarter (ended July 1, 1995) 6.75 4.25 As of June 30, 1995, there were approximately 453 stockholders of record of the Common Stock. The Company has never declared or paid any dividends on its Common Stock. On November 29, 1993, the Company purchased all of the 8,147 outstanding shares of its 5% noncumulative nonvoting preferred stock, par value $100 per share (the "5% Preferred Stock"), for $100.00 per share. Under the terms of the 5% Preferred Stock, the Company was obligated to pay a cash dividend of $5.00 per share in connection with this purchase. Consequently, on November 29, 1993, a dividend of $40,735 was paid to the former holders of the 5% Preferred Stock. Future cash dividends, if any, will be at the discretion of the Company's Board of Directors and will depend upon, among other things, future earnings, operations, capital requirements, surplus, restrictive covenants in agreements to which the Company may be subject, general business conditions and such other factors as the Board of Directors may deem relevant. The Company's present credit facility contains certain financial and other covenants that could limit the Company's ability to pay cash dividends on its capital stock. Item 6. Selected Consolidated Financial Data.
Fiscal Year Ended July 1, July 2, July 3, June 27, June 29, 1995 1994 1993 1992 1991 (In thousands, except net income per share data) Statement of Income Data: Net revenues $61,597 $69,526 $39,552 $26,564 $20,107 Cost of sales 53,986 60,004 32,635 22,997 16,829 Gross profit 7,611 9,522 6,917 3,567 3,278 Selling, general and administrative expenses 5,478 4,350 3,651 2,546 2,202 Operating income 2,133 5,172 3,266 1,021 1,076 Interest (income) expense, net (15) 6 186 196 300 Income before taxes on income 2,148 5,166 3,080 825 776 Taxes on income (1) 854 1,869 661 82 64 Net income 1,294 3,297 2,419 743 712 Preferred stock dividends - 41 - - - Net income applicable to common stock $ 1,294 $ 3,256 $ 2,419 $ 743 $ 712 Per Share Data: Net income per share $ .40 $ 1.12 $ 1.03 $ .32 $ .33 Weighted average number of shares 3,271 2,905 2,360 2,297 2,185 Balance Sheet Data: Working capital $17,613 $16,579 $ 4,553 $ 2,792 $ 2,772 Total assets 35,704 30,160 18,145 13,519 7,223 Short-term debt - - 175 401 248 Long-term debt, including current portion 147 293 1,060 1,374 1,845 Redeemable preferred stock - - - - 234 Stockholder's equity 18,782 17,483 5,137 2,714 1,836
(1) Reflects the utilization of prior net operating losses to completely offset federal income taxes in years 1991 and 1992 and to partially offset federal income taxes in 1993. 7 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. General The Company's revenues are generated primarily from its distribution of textile equipment, principally knitting machines and dyeing and finishing equipment, to manufacturers of textile products and, to a lesser extent, from the sale of parts used in such equipment and the sale of used textile equipment. Results of Operations Year Ended July 1, 1995 Compared to Year Ended July 2, 1994 Net Revenues. Net Revenues in fiscal 1995 were $61.6 million as compared to $69.5 million in fiscal 1994, a decrease of $7.9 million, or 11.4%. This decrease reflects a $14.3 million decline in sales of hosiery equipment, partially offset by increases of $3.4 million in the sales of sweater machines and related equipment, $1.8 million in the sales of dyeing and finishing equipment, and $1.2 million in the sales of spare parts. The Company's backlog of unfilled orders for new and used machines at July 1, 1995, was $4.1 million as compared to $15.1 million at July 2, 1994. The decline in backlog is attributed to weakened demand for sock and sweater machines. Cost of Sales. In fiscal 1995, cost of sales was $54.0 million as compared to $60.0 million for fiscal 1994, a decrease of $6.0 million, or 10.0%. Cost of sales as a percent of net revenues increased to 87.6% in fiscal 1995 as compared to 86.3% in fiscal 1994. Approximately 85% of this increase is attributable to increased field service expenses associated with new machines. The remainder is related to leveling of demand. Selling Expenses. Selling expenses increased to $3.6 million in fiscal 1995 from $2.4 million in fiscal 1994, an increase of 48.8%. This increase resulted from the start-up of a foreign knitting machine division, as well as increased selling activities, overall. Major components of the increase were salespersons salaries and commissions, advertising and exhibitions, travel, warehouse and office space cost, letter of credit expense and insurance expense. General and Administrative Expenses. General and administrative expenses, at $1,895,000 in fiscal 1995, were down slightly from $1,942,000 in fiscal 1994. The decrease reflects declines in salaries and bonuses, partially offset by increases in payroll and other taxes and in provisions for losses on accounts receivable. As a percent of net revenues, general and administrative expenses were 3.1% in 1995 as compared to 2.8% in fiscal 1994, reflecting the 11.4% decrease in net revenues between the two fiscal years. Interest Expense. Interest expense is expressed net of interest income. In fiscal 1995, interest income exceeded interest expense by $15,000. Net interest expense was $6,000 in fiscal 1994. Taxes on Income. The provision for taxes on income in fiscal 1995 was 39.8% of income before taxes. The provision for taxes on income in fiscal 1994 was 36.2%. Net Income. Net income applicable to common stock decreased to $1.3 million in fiscal 1995 from $3.3 million in fiscal 1994. Net income per share decreased to $0.40 as compared to $1.12 per share in fiscal 1994 on a 12.6% increase in the equivalent number of common shares outstanding. Year Ended July 2, 1994 Compared to Year Ended July 3, 1993 Net Revenues. Net revenues in fiscal 1994 were $69.5 million as compared to $39.6 million in fiscal 1993, an increase of $29.9 million, or 75.8%. This increase reflects increases of $21.5 million in sales of hosiery equipment, $7.1 million in sweater machines and related equipment and $1.3 million from all other activities. The Company's 8 backlog of unfilled orders for new and used machines at July 2, 1994, was $15.1 million as compared to $24.5 million at July 3, 1993. Cost of Sales. In fiscal 1994, cost of sales was $60.0 million as compared to $32.6 million for fiscal 1993, an increase of $27.4 million, or 83.9%. Cost of sales as a percentage of net revenues increased to 86.3% from 82.5% in fiscal 1993. This increase in cost of sales in fiscal 1994 reflected a narrowing of margins due to the somewhat lower sales prices in response to a leveling of demand, as well as increased competition for certain hosiery machines. Selling Expenses. Selling expenses increased to $2.4 million in fiscal 1994 from $2.0 million in fiscal 1993, an increase of 22.6%, reflecting the Company's increased selling activities. The principal components of this increase were salesperson's salaries and commissions, advertising and exhibitions, travel, and warehouse and office space cost. As a percentage of net revenues, selling expenses declined to 3.5% in fiscal 1994 as compared to 5.0% in fiscal 1993. General and Administrative Expenses. General and administrative expenses were $1.9 million in fiscal 1994 as compared to $1.7 million in fiscal 1993. Principal components of the $256,000 increases were increases in salaries and bonuses, partially offset by declines in life insurance expenses and in provisions for losses on accounts receivable. As a percentage of net revenues, general and administrative expenses decreased to 2.8% in fiscal 1994 as compared to 4.3% in fiscal 1993. Interest Expense. Interest expense is expressed net of interest income. Interest expense declined from $186,000 in fiscal 1993 to $6,000 in fiscal 1994. This decline reflects the elimination of all debt to stockholders in fiscal 1994, reduced interest paid to lending institutions, as well as an increase of $103,000 in interest income in fiscal 1994. Taxes on Income. The provision for taxes on income in fiscal 1994 was 36.2% of income before taxes as compared to 21.5% of such income in fiscal 1993. The income tax provision in fiscal 1993 was favorably affected by utilization of the Company's federal operating loss carryforwards. Such carryforwards were fully utilized during fiscal 1993. Net Income. Net income applicable to common stock increased in fiscal 1994 by $837,000 to $3.3 million from $2.4 million in fiscal 1993. That represents an increase of 34.6% in fiscal 1994 over fiscal 1993. Net income per share increased in fiscal 1994 to $1.12 as compared to $1.03 per share in fiscal 1993, on a 23.1% increase in the equivalent number of common shares outstanding. Jumberca Agreement Prior to its amendment in March 1995, the Jumberca Agreement contained certain minimum purchase requirements for the Jumberca sweater and fabric knitting machines. The Company did not meet the minimum purchase requirements under the Jumberca Agreement with regard to either type of machine in fiscal 1995 due principally to weakened demand for such machines. Due, in part, to the weakened demand, at the Company's request, in March 1995, the parties amended the Jumberca Agreement to eliminate the minimum purchase requirements thereunder and to allow for the termination of the agreement prior to its original termination date in January 1997. In accordance with the terms of the Jumberca Agreements, as amended in March 1995, the Company terminated the agreement with regard to the Jumberca fabric knitting machines in July 1995 and the agreement will terminate with regard to the Jumberca sweater knitting machines in December 1995. Although the Company believes that the weakened demand for the machines and the termination of the Jumberca Agreement will have an adverse effect on its net revenues in fiscal 1996, it does not believe that it will have any such effect on its net income for the year. See Item 1, "Business--General." Liquidity and Capital Resources The Company filed a registration statement on Form S-1 (Registration No. 33-69748), and amendments thereto, with the Securities and Exchange Commission for the offering of 1,430,766 shares of the Company's Common Stock 9 of which 700,000 were offered by the Company and 730,766 were offered by certain stockholders. This registration statement was declared effective by the Securities and Exchange Commission on November 12, 1993. Subsequently, the 15% over-allotment provision was elected by the underwriters. As a result, the offering was increased by 214,614 shares, of which 164,164 were offered by the Company and 50,000 shares were offered by a stockholder. The Company used net proceeds of this offering (approximately $9.3 million) to collateralize letters of credit, repurchase preferred stock, repay indebtedness owed to the Company's President and principal stockholder, finance inventories of new and used machines and for general corporate purposes. The Company's operations require a substantial line of letters of credit to cover its customers' orders. The Company's credit facility provides for an overall facility of $14.0 million for letters of credit, including up to $2.0 million in revolving funds. This facility expires October 31, 1996. Management believes that this facility will be adequate to meet current financial requirements. Working capital increased by $1.0 million to $17.6 million at July 1, 1995 as compared to $16.6 million at July 2, 1994. Operating activities required $2.4 million in fiscal 1995 as compared to $2.9 million required by such activities in fiscal 1994. This decrease in funds required resulted essentially from a $6.3 million increase in inventories and a $1.2 million increase in prepaid expenses, which were largely funded by a $5.0 million increase in accounts payable. As a result, cash and cash equivalents declined from $5.4 million at July 2, 1994, to $2.4 million at July 1, 1995. Seasonality and Other Factors There are certain seasonal factors that may affect the Company's business. Traditionally, manufacturing businesses in Italy close for the month of August, and the Company's customers close for one week in July. Consequently, no shipments or deliveries, as the case may be, of machines distributed by the Company that are manufactured in Italy are made during these periods 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 on customer orders or other factors may affect quarterly variations in net revenues from year to year. Effects of Inflation and Changing Prices Management believes that inflation has not had a material effect on the Company's operations. A substantial portion of the Company's machine and spare part purchases are denominated and payable in Italian lira. Currency fluctuations of the lira could result in substantial price level changes and therefore impede or promote import/export sales and substantially impact profits. However, to reduce exposure to adverse foreign currency fluctuations during the period from customer orders to payment for goods sold, the Company enters into forward exchange contracts. The Company is not able to assess the quantitative effect that such currency fluctuations could have upon the Company's operations. There can be no assurance that fluctuations in foreign currency exchange rates will not have a significant adverse effect on future operations. In addition, the Jumberca Agreement denominates the purchase prices for the Jumberca machines specified therein in Spanish pesetas. Since February 1994 to date, the Company, in orders that it has placed with Jumberca, has denominated the purchase price for the machines ordered in U.S. dollars and Jumberca has accepted all such orders. The Company intends to continue this practice (which eliminates the risk of adverse fluctuations in the value of the peseta as compared to the dollar during the period between the date a machine is ordered and the payment date) through December 1995, the termination date of the Jumberca Agreement, with regard to any Jumberca machines that it purchases during this period. Under the Jumberca Agreement, in the event that the value of the peseta as compared to the U.S. dollar is below a specified level at the time a machine is ordered, there is an automatic upward adjustment of the specified purchase price. (Since February 1994, the date of the Jumberca Agreement, to date, the value of the peseta as compared to the 10 dollar has not been below the level specified therein at any time that the Company ordered a machine.) There is no similar adjustment provision in the Jumberca Agreement in the event that the value of the peseta as compared to the dollar increases. Also since February 1994 to date, in a number of instances, the Company has not paid Jumberca the purchase prices for the machines specified in the Jumberca Agreement, but rather has negotiated the purchase price for a particular machine at the time it places the order based on, among other things, the then current value of the peseta and the dollar, the number of machines ordered and competitive and other market conditions. Item 8. Financial Statements and Supplementary Data. The financial statements and supplementary data required by this Item 8 appear on Pages F-1 through F-12 and S-1 through S-2 of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The response to this Item 10 is set forth in part under the caption "Executive Officers of the Registrant" in Part I of this Annual Report on Form 10-K and the remainder is set forth in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held November 16, 1995 (the "October 1995 Proxy Statement") under the sections captioned "Election of Directors," "Certain Information Regarding the Board of Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of 1934," which sections are incorporated herein by reference. Item 11. Executive Compensation. The response to this Item 11 is set forth in the October 1995 Proxy Statement under the section captioned "Executive Compensation and Related Information," which section, other than the subsections captioned "Report of the Compensation Committee and the Stock Option Committee on Executive Compensation" and "Comparative Performance Graph," is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The response to this Item 12 is set forth in the October 1995 Proxy Statement under the section captioned Stock Ownership of Certain Beneficial Owners and Management, which section is incorporated by reference. Item 13. Certain Relationships and Related Transactions. The response to this Item 13 is set forth in the October 1995 Proxy Statement under the section captioned "Certain Transactions," which section is incorporated herein by reference. 11 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a) The following documents are included as part of the Annual Report on Form 10-K: 1. Financial Statements:
Page Report of Independent Certified Public Accountants F-1 Consolidated Balance Sheets - July 1, 1995 and July 2, 1994 F-2 Consolidated Financial Statements for each of the three years in the periods ended July 1, 1995, July 2, 1994 and July 3, 1993: Consolidated Statements of Income F-3 Consolidated Statements of Stockholders Equity F-4 Consolidated Statements of Cash Flows F-5 Summary of Accounting Policies F-6 Notes to Consolidated Financial Statements F-7 2. Financial Statement Schedules: Report of Independent Certified Public Accountants S-1 Schedule II - Valuation and Qualifying Accounts S-2 3. Exhibits:
The Exhibits filed as part of this Annual Report on Form 10-K are listed on the Exhibit Index immediately preceding such Exhibits, and are incorporated herein by reference. (b) Reports on Form 8-K The Company filed no Forms 8-K in any of the months included in the fourth quarter of the Company's current fiscal year. 12 SIGNATURES Pursuant to the requirements of Section 131 or 15(d) 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. Date: September __, 1995 By: Robert S. Speizman, President Pursuant to the requirements of the Securities Act of 1933, this has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures Title Date President and Director September 29, 1995 Robert S. Speizman (Principal Executive Officer) Vice President-Finance, September 29, 1995 Josef Sklut Secretary, Treasurer and Director (Principal Financial Officer and Principal Accounting Officer) Director September 29, 1995 Steven P. Berkowitz Director September 29, 1995 William Gorelick Director September 29, 1995 Scott Lea 13 (BDO Seidman, LLP Letter Head Appears Here) REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders Speizman Industries, Inc. We have audited the accompanying consolidated balance sheets of Speizman Industries, Inc. and subsidiaries as of July 1, 1995 and July 2, 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended July 1, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Speizman Industries, Inc. and subsidiaries at July 1, 1995 and July 2, 1994, and the results of their operations and their cash flows for each of the three years in the period ended July 1, 1995, in conformity with generally accepted accounting principles. (Signature of BDO Seidman, LLP) Charlotte, North Carolina BDO Seidman, LLP September 1, 1995 F-1 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
July 1, July 2, 1995 1994 ASSETS Current: Cash and cash equivalents $ 2,436,859 $ 5,433,664 Accounts receivable (Notes 2 and 6) 16,078,683 15,170,190 Inventories (Notes 3 and 6) 13,428,014 7,296,836 Prepaid expenses and other current assets 2,458,355 1,182,894 TOTAL CURRENT ASSETS 34,401,911 29,083,584 Property and Equipment : (Notes 4 and 7) Leasehold improvements 543,874 542,361 Machinery and equipment 876,565 509,197 Furniture, fixtures and transportation equipment 834,187 877,498 2,254,626 1,929,056 Less accumulated depreciation and amortization (1,440,688) (1,409,050) NET PROPERTY AND EQUIPMENT 813,938 520,006 Other 488,609 556,271 $35,704,458 $30,159,861 LIABILITIES AND STOCKHOLDERS EQUITY Current: Accounts payable $15,056,927 $10,041,865 Customers deposits 884,881 1,827,196 Accrued expenses 833,886 515,118 Current maturities of long-term debt (Note 7) 13,190 120,630 TOTAL CURRENT LIABILITIES 16,788,884 12,504,809 Long-Term Debt (Note 7) 133,629 172,153 TOTAL LIABILITIES 16,922,513 12,676,962 Commitments (Notes 4, 9, 11, 12 and 13) Stockholders Equity (Notes 8, 9 and 10): Common Stock - par value $.10; authorized 6,000,000 shares; issued 3,236,199 and 3,234,949 shares 323,620 323,495 Additional paid-in capital 12,459,965 12,455,590 Retained earnings 6,097,426 4,803,611 Foreign currency translation adjustment 731 - Total 18,881,742 17,582,696 Treasury stock, at cost, 27,600 common shares (99,797) (99,797) TOTAL STOCKHOLDERS EQUITY 18,781,945 17,482,899 $35,704,458 $30,159,861
See accompanying summary of accounting policies and notes to consolidated financial statements. F-2 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Year Ended July 1, July 2, July 3, 1995 1994 1993 NET REVENUES (Note 1) $61,596 ,833 $69,525,581 $39,552,021 COSTS AND EXPENSES: Cost of sales 53,986,242 60,003,901 32,634,909 Selling expenses 3,582,719 2,407,086 1,964,246 General and administrative expenses 1,894,915 1,942,375 1,686,722 Total costs and expenses 59,463,876 64,353,362 36,285,877 2,132,957 5,172,219 3,266,144 INTEREST (INCOME) EXPENSE, net of interest income of $101,562, $128,675 and $26,031 (14,858) 6,393 186,388 Income before taxes on income 2,147,815 5,165,826 3,079,756 TAXES ON INCOME (Note 5) 854,000 1,869,000 661,000 NET INCOME 1,293,815 3,296,826 2,418,756 Preferred stock dividends - 40,735 - NET INCOME APPLICABLE TO COMMON STOCK $ 1,293,815 $ 3,256,091 $ 2,418,756 NET INCOME PER SHARE $ 0.40 $ 1.12 $ 1.03 Weighted average number of common and equivalent shares 3,271,464 2,904,525 2,359,754
See accompanying summary of accounting policies and notes to consolidated financial statements. F-3 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Foreign Additional Retained Currency Preferred Common Common Paid-In Earnings Translation Treasury Stockholder's Stock Shares Stock Capital (Deficit) Adjustment Stock Equity BALANCE, JUNE 28, 1992 $894,152 1,994,699 $199,470 $ 2,591,171 $(871,236) $ - $(99,797) $2,713,760 Net income - - - - 2,418,756 - - 2,418,756 Exercise of stock options - 4,142 414 4,317 - - - 4,731 BALANCE, JULY 3, 1993 894,152 1,998,841 199,884 2,595,488 1,547,520 - (99,797) 5,137,247 Net income before preferred stock dividend - - - - 3,296,826 - - 3,296,826 Preferred stock dividend - - - - (40,735) - - (40,735) Redemption of preferred stock (894,152) - - - - - - (894,152) Conversion of preferred stock to common stock - 240,770 24,077 55,376 - - - 79,453 Net proceeds of common stock offering - 864,609 86,461 9,163,885 - - - 9,250,346 Exercise of stock options - 130,729 13,073 174,841 - - - 187,914 Tax effect of exercise of stock options - - - 466,000 - - - 466,000 BALANCE, JULY 2, 1994 - 3,234,949 323,495 12,455,590 4,803,611 - (99,797) 17,482,899 Net income - - - - 1,293,815 - - 1,293,815 Exercise of stock options - 1,250 125 4,375 - - - 4,500 Foreign currency translation adjustment - - - - - 731 - 731 BALANCE, JULY 1, 1995 $ - 3,236,199 $323,620 $12,459,965 $6,097,426 $ 731 $(99,797) $18,781,945
See accompanying summary of accounting policies and notes to consolidated financial statements. F-4 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended July 1, July 2, July 3, 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,293,815 $ 3,296,826 $ 2,418,756 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 166,965 193,133 219,293 Provision for losses on accounts receivable 171,477 17,850 83,840 Provision for inventory obsolescence 200,000 200,000 200,000 Provision for deferred income taxes (75,000) 109,000 (390,000) Provision for deferred compensation (6) 28,788 70,000 Foreign currency translation adjustment 731 - - (Increase) decrease in: Accounts receivable (1,079,970) (4,322,948) (5,991,612) Inventories (6,331,178) (2,741,376) 1,363,427 Prepaid Expenses (1,176,461) (554,615) 228,795 Other assets 43,662 (168,226) (56,682) Increase (decrease) in: Accounts payable 5,015,062 2,237,330 1,249,242 Accrued expenses and customers deposits (623,547) (1,159,937) 1,493,546 Net cash provided by (used in) operating activities (2,394,450) (2,864,175) 888,605 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (520,274) (102,723) (119,647) Proceeds from property and equipment disposals 59,377 3,501 16,537 Net cash used in investing activities (460,897) (99,222) (103,110) CASH FLOWS FROM FINANCING ACTIVITIES: Net payments on notes payable - (174,785) (226,359) Principal payments on long term debt (145,958) (734,800) (579,641) Net proceeds of common stock offering - 9,250,346 - Dividends on preferred stock - (40,735) - Redemption of preferred stock - (814,699) - Issuance of common stock upon exercise of stock options 4,500 187,914 4,731 Net cash provided by (used in) financing activities (141,458) 7,673,241 (801,269) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,996,805) 4,709,844 (15,774) CASH AND CASH EQUIVALENTS, at beginning of year 5,433,664 723,820 739,594 CASH AND CASH EQUIVALENTS, at end of year $2,436,859 $ 5,433,664 $ 723,820
See accompanying summary of accounting policies and notes to consolidated financial statements. F-5 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES SUMMARY OF ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements of Speizman Industries, Inc. (the "Company") include all of its subsidiaries, all of which are majority owned. All material intercompany transactions (domestic and foreign) have been eliminated. The financial statements of the Company's United Kingdom subsidiary are translated from pounds sterling to U.S. dollars in accordance with generally accepted accounting principles. REVENUE RECOGNITION The major portion of the Company's revenues consists of sales and commissions on sales of machinery and equipment. The profit derived therefrom is recognized in full at the time of shipment, except that commissions receivable over more than one year are recognized at their discounted present value. Total sales commissions included in net revenues approximated $286,000, $142,000 and $1,041,000 for the years ended July 1, 1995, July 2, 1994 and July 3, 1993, respectively. CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. INVENTORIES Inventories are carried at the lower of cost or market. Cost is computed, in the case of machines, on an identified cost basis and, in the case of other inventories, on an average cost basis. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the assets by the straight-line method for financial reporting purposes and by accelerated methods for income tax purposes. FOREIGN EXCHANGE CONTRACTS The Company enters into foreign currency contracts to reduce the foreign currency exchange risks. Foreign currency hedging contracts obligate the Company to buy a specified amount of foreign currency at a fixed price in specific future periods. Realized and unrealized gains and losses are recognized in net income in the period of the underlying transaction. As of July 1, 1995, the Company had contracts maturing through December 1995 to purchase approximately 27.3 billion Lira, approximately $16.7 million at the spot rate on that date. TAXES ON INCOME For the fiscal year ended 1993 the Company followed the liability method of accounting for income taxes in accordance with the Financial Accounting Standards ("FAS") Board Statement No. 96. For fiscal years ended 1995 and 1994, the Company adopted the FAS Statement No. 109, "Accounting for Income Taxes", which changes the liability approach to calculating deferred income taxes set forth in Statement No. 96. The impact of adopting the rules on the Company's financial statements was not material. INCOME PER SHARE Income per share is computed on the weighted average number of common and equivalent shares outstanding during the period. Common equivalent shares include those common shares which would be issued upon the full conversion of the outstanding convertible preferred stock and those common shares issuable upon the exercise of the stock options, when dilutive, net of shares assumed to have been repurchased with the proceeds. FISCAL YEAR The Company maintains its accounting records on a 52-53 week fiscal year. The fiscal year ends on the Saturday closest to June 30. Years ending July 1, 1995 and July 2, 1994 included 52 weeks. The year ended July 3, 1993 included 53 weeks. RECLASSIFICATION Certain 1993 amounts have been reclassified to conform with 1995 presentation. F-6 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- BUSINESS AND CREDIT RISK CONCENTRATION The Company is engaged in the distribution of machinery for the textile industry. With operations in the United States, Canada and the United Kingdom, the Company primarily sells to customers located within the United States. Export sales from the United States were approximately $8,547,000, $5,439,000 and $4,039,000 during fiscal 1995, 1994 and 1993, respectively. There were no export sales by the Canadian operations. Sales of the Company's United Kingdom subsidiary amounted to approximately $2,983,000, essentially all of which were to customers in the United Kingdom. Financial instruments which potentially subject the Company to credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments with high credit quality financial institutions and, by policy, limits the amount of credit exposure to any one financial institution. The Company reviews a customer's credit history before extending credit. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific customers, historical trends and other information. To reduce credit risk the Company generally requires a down payment on large equipment orders. A substantial amount of the Company's revenues are generated from the sale of sock knitting and other machines manufactured by Lonati, S.r.l. and one of its wholly owned subsidiaries. In 1995, approximately 7% and 5% of revenues consisted of sales to the Company's two largest customers. In 1994, approximately 14% and 13% of revenues consisted of sales to the Company's two largest customers. In 1993, approximately 13% and 11% of revenues consisted of sales to the Company's two largest customers. Generally, the customers contributing the most to the Company's net revenues vary from year to year. NOTE 2 -- ACCOUNTS RECEIVABLE Accounts receivable are summarized as follows: July 1, 1995 July 2, 1994 Trade receivables $16,285,841 $15,239,891 Less allowance for doubtful accounts (207,158) (69,701) Net accounts receivable $16,078,683 $15,170,190 NOTE 3 -- INVENTORIES Inventories are summarized as follows: July 1, 1995 July 2, 1994 Machines New $ 4,786,811 $ 638,690 Used 5,319,489 3,579,346 Parts and supplies 3,321,714 3,078,800 Total $13,428,014 $7,296,836 NOTE 4 -- LEASES The Company conducts its operations from leased facilities which include both offices and warehouses. Its primary operating facility is leased from a partnership in which Mr. Robert S. Speizman, the Company's president, has a 50% interest. Lease payments to the partnership approximated $204,000, $168,000, and $135,000 in fiscal years 1995, 1994 and 1993, respectively. The Company leases machinery and equipment, furniture and fixtures and transportation equipment under noncancelable capital lease agreements which expire at various dates through 1998. F-7 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Capitalized leases included in property and equipment are summarized as follows: July 1, 1995 July 2, 1994 Machinery and Equipment $ - $ 19,216 Furniture, fixtures and transportation equipment 145,006 360,756 145,006 379,972 Less accumulated amortization (100,440) (190,329) Net leased property $ 44,566 $ 189,643 As of July 1, 1995, future net minimum lease payments under capital leases and future minimum rental payments required under operating leases that have initial or remaining noncancelable terms in excess of one year are as follows: Capital Operating Leases Leases 1996 $ 14,613 $436,942 1997 2,032 168,483 1998 2,181 65,474 1999 - 25,854 2000 - 17,139 Beyond - 19,745 Total minimum lease payments 18,826 $733,637 Less amount representing interest (2,789) Present value of net minimum lease payments $ 16,037 Total rent expense for operating leases approximated $515,800, $311,600, and $176,300 for fiscal years 1995, 1994 and 1993, respectively. NOTE 5 -- TAXES ON INCOME Provisions for federal and state income taxes in the consolidated statements of income are made up of the following components: 1995 1994 1993 Current: Federal $747,000 $1,556,000 $ 818,000 State 182,000 204,000 233,000 929,000 1,760,000 1,051,000 Deferred: Federal $ (54,000) $ 71,000 $ (310,000) State (21,000) 38,000 (80,000) (75,000) 109,000 (390,000) Total taxes on income $ 854,000 $1,869,000 $ 661,000 Deferred tax benefits and liabilities are provided for the temporary differences between the book and tax bases of assets and liabilities. Deferred tax assets (liabilities) are reflected in the consolidated balance sheets as follows: July 1, 1995 July 2, 1994 Net current assets $395,000 $296,000 Net noncurrent assets (liability) (39,000) (15,000) $356,000 $281,000 F-8 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Principal items making up the deferred income tax (assets) liabilities are as follows:
Year Ended July 1, July 2, 1995 1994 Inventory valuation reserves $(225,000) $(230,000) Depreciation 98,000 148,000 Deferred charges (54,000) (72,700) Capitalized leases (5,000) (61,000) Inventory capitalization (91,000) (39,000) Accounts receivable reserves (78,000) (26,000) Other (1,000) (300) Net deferred tax asset $(356,000) $(281,000)
The Company's effective income tax rates were different than the U.S. Federal statutory tax rate for the following reasons:
1995 1994 1993 U.S. Federal statutory tax rate . . . . . . . . . . . . . . . 34.0% 34.0% 34.0% Net tax effect of prior year temporary difference for which no deferred federal income tax benefits were recorded . . . - - (2.5) State income taxes, net of Federal income tax benefit . . . . 3.5 3.7 3.7 Utilization of net operating loss carryforward . . . . . . . - - (8.7) Utilization of tax credits . . . . . . . . . . . . . . . . . - - (5.5) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 (1.5) 0.5% Effective tax rate . . . . . . . . . . . . . . . . . . . . . 39.8% 36.2% 21.5%
Operating loss carryforwards utilized in 1993 reduced the Company's income tax liability by approximately $267,000. In 1993, all remaining operating loss carryforwards were utilized; thus, the income tax liability for 1994 was not offset by carryforwards or credits. NOTE 6 -- NOTES PAYABLE The Company has a credit facility with NationsBank, expiring October 31, 1996. This facility provides $14.0 million including up to a maximum of $2.0 million for direct borrowings, with the balance available for the issuance of documentary letters of credit. Amounts outstanding under the line of credit bear interest at the greater of prime plus 1% or the Federal Funds Effective Rate plus 1.5% for base rate loans and the 30, 60 or 90 day LIBOR rate plus 2.0% for LIBOR loans. In connection with this line of credit, the Company granted a security interest in accounts receivable and inventory, as defined in the loan agreement. (See Note 13) F-9 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) This credit facility contains certain covenants that require, among other things, the Company to maintain levels of current assets to current liabilities, total liabilities to net worth, working capital, tangible net worth of $14,147,000 and certain fixed charge coverage. As of July 1, 1995, the Company was in compliance with such covenants. NOTE 7 -- LONG-TERM DEBT Long-term debt consists of:
July 1, 1995 July 2, 1994 Total Current Total Current Capital lease obligations (Note 4) $16,037 $13,190 $163,995 $120,630 Other 130,782 - 128,788 - Total 146,819 13,190 292,783 $120,630 Current maturities (13,190) (120,630) $133,629 $172,153
Annual maturities of long-term debt are 1996, $13,190; 1997, $1,078; 1998, $1,769; 1999, $0; 2000, $0; thereafter, $130,782. NOTE 8 -- STOCK OPTIONS The Company has reserved 125,000 and 250,000 shares of common stock under two employee stock plans, adopted in 1981 and 1991, respectively. As of July 1, 1995, options to purchase 11,522 shares under the 1981 Plan and 138,907 shares under the 1991 Plan were outstanding. Each option granted under the 1991 Plan or the 1981 Plan becomes exercisable in cumulative increments of 20%, 50%, 80% and 100% on the first, second, third and fourth anniversaries of the date of grant, respectively, and subject to certain exceptions with regard to termination of employment and the percentage of outstanding shares of Common Stock owned, must be exercised within 10 years from the date of the grant. The option price, subject to certain exceptions, may not be less than 100% of the fair market value per share of Common Stock on the date of the grant of the option or 110% of such value for persons who control 10% or more of the voting power of the Company's stock on the date of grant. A summary of option transactions and other information for 1995, 1994 and 1993 follows:
Year Ended July 1, July 2, July 3, 1995 1994 1993 Shares under option, beginning of year 124,957 255,686 205,046 Options granted 29,722 - 54,782 Options exercised (1,250 (130,729) (4,142) Options expired (3,000) - - Shares under option, end of year 150,429 124,957 255,686 Options exercisable 78,521 16,464 91,607 Prices of options exercised $.75 to $.75 to $.75 to $1.875 $3.1625 $1.875 Prices of options outstanding, end of year $.75 to $.75 to $.75 to $5.50 $5.50 $5.50
F-10 SPEIZMAN INDUSTRIES INC., AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 9 -- STOCK REDEMPTION AGREEMENTS The Company has an agreement with its principal holder whereby, upon his death, the Company is obligated to redeem a portion of the stock in the Company held by the estate. The redemption price for common stock is to be the fair market value of common stock, less 5%, plus any accrued dividends. In no case will the Company pay out more than the amount of life insurance proceeds received by the Company as a result of the death of the stockholder. At July 1, 1995, there were 584,932 common shares covered by the above agreement. The face value of life insurance carried by the Company under this agreement amounts to $1,150,000. NOTE 10 -- PREFERRED STOCK During the fiscal year ended July 2, 1994, all of the Company's 5% Non-Voting Preferred Stock was redeemed and all of the Company's 5% Non-Voting Senior Convertible Preferred was converted into common stock. The 5% Non-Voting Preferred Stock was non-cumulative as to dividends and non-participating and, in the event of dissolution, was redeemable at $100 par value per share together with unpaid dividends and accrued interest, in preference to common stock distributions. The 5% Non-Voting Senior Convertible Preferred Stock (the "Senior Preferred Stock") was non-cumulative as to dividends and non-participating and was redeemable at the option of the Company at $105 per share. In the event of dissolution, the Senior Preferred Stock was redeemable at par and was superior to the other series of preferred stock and to all common stock. The Senior Preferred Stock was convertible at the option of the holder into shares of common stock at a conversion price of $3.00 par value of the Senior Preferred Stock for each share of common stock (240,766 common shares). As of July 3, 1993, the Senior Convertible Preferred Stock was stated at its fair value at the time of issuance. NOTE 11 -- DEFERRED COMPENSATION PLANS The Company has deferred compensation agreements with two employees providing for payments amounting to $2,056,680 upon retirement and from $1,546,740 to $2,181,600 upon death prior to retirement. One agreement, as modified, has been in effect since 1972 and the second agreement was effective October 1989. Both agreements provide for monthly payments on retirement or death benefits over fifteen year periods. Both agreements are funded under trust agreements whereby the Company pays to the trust amounts necessary to pay premiums on life insurance policies carried to meet the obligations under the deferred compensation agreements. Charges to operations applicable to those agreements were approximately $43,881, $72,673 and $113,885 for the fiscal years 1995, 1994 and 1993, respectively. NOTE 12 -- EMPLOYEES' RETIREMENT PLAN The Company has a 401(k) retirement plan, effective October 1, 1989, for all qualified employees of the Company to participate in the plan. Employees may contribute a percentage of their pretax eligible compensation to the plan, and the Company matches 25% of each employee's contribution up to 4% of pretax eligible compensation. The Company's matching contributions totaled approximately $17,000, $13,000 and $17,000 in fiscal years 1995, 1994 and 1993, respectively. F-11 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 13 -- COMMITMENTS AND CONTINGENCIES The Company had outstanding commitments backed by letters of credit of approximately $8,916,000 and $10,554,000 at July 1, 1995 and July 2, 1994, respectively, relating to the purchase of machine inventory for delivery to customers. The Company has not obtained product liability insurance to date due to the prohibitive cost of such insurance. The nature and extent of distributor liability for product defects is uncertain. The Company has not engaged in manufacturing activities since 1990, and management presently believes that there is no material risk of loss to the Company from product liability claims against the Company as a distributor. NOTE 14 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Year Ended July 1, July 2, July 3, 1995 1994 1993 Cash paid during year for: Interest $ 86,704 $ 135,068 $ 212,419 Income taxes 524,464 2,079,097 512,664
Supplemental data of non-cash investing and financing activities: The Company incurred capital lease obligations in connection with lease agreements to acquire equipment of $0, $4,304 and $238,238 during fiscal 1995, 1994 and 1993, respectively. F-12 (BDO Seidman LLP Letterhead) REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS SPEIZMAN INDUSTRIES, INC. The audits referred to in our report dated September 1, 1995, relating to the consolidated financial statements of Speizman Industries, Inc. and subsidairies which is contained in Item 8 of this Form 10-K included the audit of the financial statement schedule listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based upon our audits. In our opinion, such consolidated financial statement schedule presents fairly, in all material respects, the information set forth therein. (Signature of BDO Seidman, LLP) Charlotte, North Carolina BDO Seidman, LLP September 1, 1995 S-1 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E Column F Balance at Charged to Charged to Deductions Balance beginning costs and other from at end Description of period expenses accounts reserves of period Fiscal year ended July 3, 1993: Reserve for doubtful accounts . . . $ 70,399 $ 83,840 $ - $ 26,678 $127,561 Reserve for inventory obsolescence 423,145 $200,000 $ - $ - $623,145 Fiscal year ended July 2, 1994: Reserve for doubtful accounts . . . $127,561 $ 17,580 $ - $ 75,440 $69,701 Reserve for inventory obsolescence $623,145 $200,000 $ - $212,114 $611,031 Fiscal year ended July 1, 1995: Reserve for doubtful accounts . . . $ 69,701 $171,477 $ - $ 34,020 207,158 Reserve for inventory obsolescence $611,031 $200,000 $ - $215,041 $595,990
S-2 SPEIZMAN INDUSTRIES, INC. INDEX TO EXHIBITS Exhibit Sequential Number Description of Exhibit Page No. 3.1 Certificate of Incorporation of Speizman Industries, Inc. (the "Company"). (Incorporated by reference to Exhibit 3.1 contained in the Company s Registration Statement on Form S-1 (the "1993 Form S-1"), registration number 33-69748, filed with the Securities and Exchange Commission on September 30, 1993, and amendments thereto.) 3.2 Certificate of Amendment to Certificate of Incorporation of the Company, dated December 4, 1978. (Incorporated by reference to Exhibit 3.2 contained in the 1993 Form S-1.) 3.3 Certificate of Amendment to Certificate of Incorporation of the Company, dated February 8, 1993. (Incorporated by reference to Exhibit 3.3 contained in the 1993 Form S-1.) 3.4 Certificate of Stock Designation of the Company, dated October 23, 1973. (Incorporated by reference to Exhibit 3.4 contained in the 1993 Form S-1.) 3.5 Certificate of Stock Designation of the Company, dated June 27, 1978, as modified by Certificate of Increasing Stock Designated, dated January 11, 1979. (Incorporated by reference to Exhibit 3.5 contained in the 1993 Form S-1.) 3.6 Bylaws of the Company, as amended November 7, 1978. (Incorporated by reference to Exhibit 3.6 contained in the 1993 Form S-1.) 4.1 Certificate of Incorporation of the Company as currently in effect (included as Exhibits 3.1 through 3.5). (Incorporated by reference to Exhibit 4.1 contained in the 1993 Form S-1.) 4.2 Bylaws of the Company, as amended November 7, 1978. (Incorporated by reference to Exhibit 4.2 contained in the 1993 Form S-1.) 4.3 Specimen Common Stock Certificate. (Incorporated by reference to Exhibit 4.3 contained in the 1993 Form S-1.) 10.1 Agency Agreement between the Company and Lonati, S.r.l., Brescia, Italy ("Lonati"), dated January 2, 1992, relating to the Company's distribution of machines in the United States. (Incorporated by reference to Exhibit 10.1 contained in the 1993 Form S-1.) 10.2 Agency Agreement between the Company and Lonati, dated January 2, 1992, relating to the Company's distribution of machines in Canada. (Incorporated by reference to Exhibit 10.2 contained in the 1993 Form S-1.) 10.3 Agency Agreement between the Company and Santoni, S.r.l., Brescia, Italy ("Santoni"), dated January 2, 1992 ("Santoni Agreement"). (Incorporated by reference to Exhibit 10.3 contained in the 1993 Form S-1.) 10.4 Letter from Santoni relating to the Santoni Agreement, dated June 8, 1992. (Incorporated by reference to Exhibit 10.4 contained in the 1993 Form S-1.) 10.5 Letter Agreement between the Company and Santoni relating to the Santoni Agreement, dated July 21, 1993. (Incorporated by reference to Exhibit 10.5 contained in the 1993 Form S-1.) 10.6 Agreement between the Company and Jumberca, S.A. Badalona, Spain ("Jumberca") dated October 20, 1992, in original Spanish and an uncertified English translation. (Incorporated by reference to Exhibit 10.6 contained in the 1993 Form S-1.) 10.7 Agreement between the Company and Jumberca, dated July 13, 1993. (Incorporated by reference to Exhibit 10.6.1 contained in the Company's Annual Report on Form 10-K (the "1994 Form 10-K") for the fiscal year ended July 2, 1994, File No. 0-8544, filed on September 30, 1994.) 10.8 Agreement between the Company and Jumberca dated February 1, 1994, in original Spanish and an uncertified English translation. (Portions of Exhibit 10.8) were omitted pursuant to a request for confidential treatment filed with the Securities and Exchange Commission ("Commission"). The omitted portions were filed separately with the Commission.) (Incorporated by reference to Exhibit 10.6.2 contained in the Company's Annual Report on Form 10-K/A Amendment No. 1 for the fiscal year ended July 2, 1994, File No. 0-8544, filed on December 12, 1994.) 10.9 Collaboration Agreement between the Company and Jumberca dated May 10, 1994. (Incorporated by reference to Exhibit 10.6.3 contained in the Company's 1994 Form 10-K). 10.10 Agreement between the Company and Jumberca, dated March 41 16, 1995. 10.11 Fax to Jumberca dated July 28, 1995, canceling fabric 47 portion of agreement effective July 31, 1995. 10.12 Fax to Jumberca dated August 22, 1995, canceling 48 sweater portion of agreement effective December 31, 1995. 10.13 Agency Agreement between the Company and Zamark, S.p.A., Somma Lombardo, Italy, dated August 3, 1992. (Incorporated by reference to Exhibit 10.7 contained in the Company's 1994 Form 10-K.) 10.14 Distributorship Agreement between the Company and Conti Complett, S.p.A., Milan, Italy, dated October 2, 1989. (Incorporated by reference to Exhibit 10.8 contained in the Company's 1994 Form 10-K.) 10.15 Letter from Orizio Paolo, S.p.A., Brescia, Italy, dated 48 July 18, 1995, appointing Company as its exclusive distributor. 10.16 Split Dollar Insurance Agreement, dated January 15, 1992, between the Company and Richard A. Bigger, Jr., Successor Trustee of the Robert S. Speizman Irrevocable Insurance Trust. (Incorporated by reference to Exhibit 10.13 contained in the 1993 Form S-1.) 10.17 Lease Agreement between the Company and Speizman Brothers Partnership, dated as of December 12, 1990. (Incorporated by reference to Exhibit 10.14 contained in the 1993 Form S-1.) 10.18 Lease Amendment and Extension Agreement between the 49 Company and Speizman Brothers Partnership dated April 1, 1995. 10.19 Deed of Lease between Speizman Canada, Inc., and Metro II & III, undated, as renewed by letter agreement, dated February 17, 1992. (Incorporated by reference to Exhibit 10.19 contained in the 1993 Form S-1.) 10.20 Letter Agreement extending lease between Speizman 53 Canada, Inc., and Metro II & III, dated October 21, 1994. 10.21 Agreement of Lease between the Company and LBA Properties, Inc., dated June 2, 1994. (Incorporated by reference to Exhibit 10.17.1 contained in the Company s 1994 Form 10-K.) 10.22 Lease Agreement between the Company and B.F. Knott, dated May 12, 1993. (Incorporated by reference to Exhibit 10.18 contained in the Company's 1994 Form 10- K.) 10.23 Modification and Extension of Lease between the Company and B.F. Knott, dated March 29, 1994. (Incorporated by reference to Exhibit 10.18.1 contained in the Company's 1994 Form 10-K.) 10.24 Modification and Extension of Lease between the Company 54 and B.F. Knott, dated October 17, 1994. 10.25 Modification and Extension of Lease between the Company 55 and B.F. Knott, dated February 13, 1995. 10.26 Lease Agreement between the Company and Daniel H. 57 Porter, dated August 17, 1995. 10.27* 1981 Incentive Stock Option Plan of the Company. (Incorporated by reference to Exhibit 10.19 contained in the 1993 Form S-1.) 10.28* 1991 Incentive Stock Option Plan and Amendment to 1981 Incentive Stock Option Plan of the Company. (Incorporated by reference to Exhibit 10.20 contained in the 1993 Form S-1.) 10.29* 1991 Incentive Stock Option Plan, as Amended and Restated Effective September 20, 1993, of the Company. (Incorporated by reference to Exhibit 10.21 contained in the 1993 Form S-1.) 10.30* Restated Deferred Compensation Agreement, dated May 22, 1989, between the Company and Josef Sklut, as amended by Amendment to Deferred Compensation Agreement, dated December 30, 1992 (the "Deferred Compensation Agreement"). (Incorporated by reference to Exhibit 10.27 contained in the 1993 Form S-1.) 10.31* Restated Trust Agreement, dated May 22, 1989, between the Company and First Citizens Bank and Trust Company, as amended by First Amendment to Trust Agreement dated December 30, 1992, relating to the Deferred Compensation Agreement. (Incorporated by reference to Exhibit 10.28 contained in the 1993 Form S-1.) 10.32* Executive Bonus Plan of the Company, adopted February 2, 1990, as amended March 5, 1990. (Incorporated by reference to Exhibit 10.29 contained in the 1993 Form S-1.) 10.33* Executive Bonus Plan of the Company, adopted July 20, 1993. (Incorporated by reference to Exhibit 10.30 contained in the 1993 Form S-1.) 10.34* Resolutions of the Company's Board of Directors dated 58 November 15, 1995, extending Executive Bonus Plan adopted July 20, 1993. 10.35 Redemption Agreement between the Company and Robert S. Speizman, dated May 31, 1974, as amended by Modified Redemption Agreement, dated April 14, 1987, Second Modified Redemption Agreement, dated September 30, 1991, and Third Modified Redemption Agreement, dated as of July 14, 1993. (Incorporated by reference to Exhibit 10.34 contained in the 1993 Form S-1.) 10.36 Fourth Modified Redemption Agreement between the 59 Company and Robert S. Speizman, dated September 14, 1994. 10.37 NationsBank of North Carolina, National Association $12,000,000 Credit Facility for Speizman Industries, Inc., dated April 19, 1994. (Incorporated by reference to Exhibit 10.45 contained in the 1994 Form 10-K.) 10.38 1995 Consolidated Amendment Agreement to Loan Agreement 62 and Related Documents dated May, 1995. 11 Statement re: Computation of Net Income per Share 70 23 Consent of BDO Seidman 71 * Represents a management contract or compensatory plan or arrangement of the Registrant. EX-10 2 EXHIBIT 10.10 AGREEMENT BETWEEN SPEIZMAN INDUSTRIES, INC. - USA AND JUMBERCA, S.A. OF BADALONA, SPAIN Speizman agrees to purchase the fabric machines in Exhibit A and you agree to deliver them as described in the delivery schedule outlined in Exhibit A. If machines are not shipped within 30 days of the designated schedule, Speizman has the right to cancel the late machines and Jumberca agrees to return the deposit which applies to the late machines. You also reconfirmed the agreements reached in your fax 53:903 of March 6, 1995. For clarification sake, we attach a copy of your fax 53:903 as Exhibit B. In addition, Jumberca confirms that Speizman's right to sell the sweater machines is exclusive to Speizman in the USA and Canada through December 31, 1995. Jumberca agrees not to appoint another agent or distributor for their fabric machines before June 15, 1995. With no further notice, either party may cancel the fabric machine portion of the contract after June 15, 1995. Jumberca agrees that should Speizman continue as the exclusive distributor in the United States and Canada for the sweater machines after December 31, 1995, that Speizman would also have the exclusive right to operate Jumberca Service and Parts in the United States and Canada, according to the terms of purchase as specifically agreed. Speizman would also have the exclusive right, after consultation with Jumberca, to determine which personnel will be retained from Jumberca Service and Parts - USA and Canada. Agreed to: SPEIZMAN INDUSTRIES, INC. JUMBERCA, S.A. By: (Robert J. Speizman's signature By: (Jumberca signature appears here) appears here) Its: President Its: Date: March 16, 1995 Date: (Jumberca logo appears here) CONTRATO ENTRE SPEIZMAN INDUSTRIES, INC. - USA Y JUMBERCA, S.A. DE BARCELONA, ESPANA Speizman conviene a la compra de las maquinarias de tejido en el "Exhibit A" y Jumberca conviene a la entrega de las maquinarias como dicta la plan de entrega detallado en el "Exhibit A". Si las maquinarias no estan embarcada dentro de 30 dias del plan designado, Speizman tiene el derecho de cancelar la las maquinarias entrgadas con retraso y Jumberca conviene a devolver el deposito que aplica a estas maquinarias. Jumberca reconfirma los acuerdos dictados en su fax 53:903 del 6 de Marzo de 1995. Para clarificar estos acuerdos anexamos la copia de su fax 53:903 como "Exhibit B". En addicion, Jumberca confirma que el derecho de Speizman de efectuar ventas de las maquinarias de sueters es exclusivamente de Speizman en USA y Canada hasta de el 31 de diciembre de 1995. Jumberca acuerda a no nombrar otro agente o distribuidor para sus maquinarias de tejido antes de el 15 de Junio de 1995. Sin notificacion alguna, cualquier parte puede cancelar la parte del contrato de las maquinarias de tejido despues del 15 de Junio de 1995. Jumberca conviene a que si Speizman continua como distribuidor exclusivo en los Estados Unidos y Canada de las maquinarias de sueters despues del 31 de Diciembre de 1995, Speizman podra tener el derecho de exclusividad para operar los Servicios y Partes de Jumberca en los Estados Unidos y Canada en los terminos de venta que especificamente se acuerden. Speizman tambien tendra el derecho exclusivo, despues de consultar con Jumberca, para determinar que personnel de Jumberca Service and Parts-USA and Canada permanecera en sus cargos respectivos. Acuerdan el 16 de Marzo de 1995 SPEIZMAN INDUSTRIES, INC. JUMBERCA, S.A. (Signature of Robert S. (Signature of A. M. Pont Speizman appears here) appears here) Robert S. Speizman A. M. Pont CEO/President Director Marketing (Jumberca logo appears here) Exhibit A - March 16, 1995 2 Jumberca DJE-2, 28 cut*, 30" circular knitting machine, double knit jacquard, electronic selection, type of fabric: 2, 3 and 4 color double knit jacquard, Blister jacquard, Tubular jacquard, Tuck stitch, with all standard equipment as listed below: and 3 Jumberca DJE-2, 18* cut, 30" circular knitting machine, double knit jacquard, electronic selection, type of fabric: 2, 3 and 4 color double knit jacquard, Blister jacquard, Tubular jacquard, Tuck stitch, with all standard equipment as listed below: * Speizman Industries has the right to determine the exact cut of the DJE-2 machines by April 15, 1995. STANDARD EQUIPMENT - -Three legged frame - -Side creel. One cone with spare cone per feed, with yarn guide up to the feeder by means of tubes. Threading by compressed air. - -Selection system on dial by means of 5 position manually programmable selectors for positions of Knit-Miss or Tuck-Miss on each feed. - -1 needle track in cylinder with 1 type of needle and 3 positions per feed: Knit, Tuck and Miss (three-way technique). - -12 level selection boxes with double electronic selection on cylinder on each feed. - -Electronic controller for jacquard selection. - -Dial height control by means of clock indicator. - -Lint blower equipment for revolving fans. - -Rotative compressed-air lint blower on needles dial. - -Control stop-motions: Needles and remounting of the fabric. - -Spary oiler (antimist) for needles. - -Take-down: Positive pulling with manual adjustment. Fabric roller over central nucleus with adjustable tension for clutch. - -A.C. motor with electronic speed variator. - -Manual handles. - -Adjustable starting and variable braking intensity. - -Electrical control panel. - -Fabric winder central bar with lateral rings. - -36 cams for single and double blister. - -Equipment necessary to install lycra feeders on all feeds (lycra feeders to be supplied by customer.) 5 machines @ $116,000 $580,000.00 1 Scorpio software 6,000.00 Total $586,000.00 Speizman has the option to cancel this order in its entirety should Richland not approve of the first machine currently in their factory. Such approval and cancellation must be given by Speizman no later than April 15, 1995. Shipment via sea freight leaving the Jumberca factory no later than July 15, 1995. Payment: 15% with order ($87,900.00). Balance by irrevocable letter of credit payable 90 days from date of on-board bill of lading. 5 Jumberca DIB, 60 feed, 30", 14 cut complete with side 2 creel, double feed Memminger feeders with all standard cams @ $37,000 each $185,000.00 2 sets of thermal cams (35 cams of "work" in the plate 21 cams of "loaded knit" in the plate 4 cams of "voiding" in the plate 35 cams of "work" in the cylinder 21 cams of "loaded knit" in the cylinder 4 cams of "voiding" in the cylinder Total of cams in the plate = 60 Total of cams in the cylinder = 60) Price for kit $2,863.20 x 2 5,726.40 Total $190,726.40 Shipment from Jumberca factory: 1 by May 31, 1995; 4 by June 25, 1995. Shipped to Speizman Industries, 508 W. Fifth Street. Please notify Speizman prior to shipment. Terms: 15% deposit ($28,608.90) with confirmation of order. Balance by irrevocable letter of credit payable 90 days from date of on-board bill of lading. GRAND TOTAL OF EXHIBIT A 10 machines $776,726.40 Total of 15% downpayment 116,508.90 85%-90 day letter of credit 660,217.10 (Jumberca letterhead appears here) SERVICIO TELEFAX DESTINO : SPEIZMAN INDUSTRIES, INC. ATENCION: Mr. Robert Speizman FAX NR. : 53.903 FECHA : 06.03.95 NUMERO DE PAGINAS INCLUIDA ESTA 2 TEXTO: Asunto: Nuestro fax 53.852 del 03.03.95 Su fax dle 1338/95 del 06.03.95 Apreciado Mr. Speizman En el meeting de la proxima semana definiremos exactamente los detalles de la nueva etapa en nuestro relacionamiento comercial. Entretanto, por los resultados obtenidos y atendiendo a sus comentarios: - -Consideramos terminada la distribucion de maquinas de Pieza Continua por SPEIZMAN. - -El contrato para Sweaters debe finalizar a 31 Diciembre 1995. - -Quedan sin efecto los minimos establecidos de venta de maquinas. Para ser coherentes con su propuesta, estos puntos anteriores van ligados a la compra de las 10 maquinas y demas compromisos de su fax 1318 de fecha 1 de Marzo 1995. En dia de hoy, el programa de maquinas de Sweaters disponibles para suministro es el siguiente: ABRIL MAYO 1a quincena 3 DWN-3E gg 7 3 DWN-3E gg 4 1 DWN-3E gg 12 2 TLJ-5E gg 7 2a quincena 2 DWN-3E gg 7 1 DWN-3E gg 12 Podran observar que las maquinas disponibles varian progresivamente, por lo cual rogamos nos envien sus ordenes de forma inmediata. Tambien pueden transferir y los 200.000 - US $. Atentamente, JUMBERCA, S.A. A. M. Pont Director Marketing COMPANY : SPEIZMAN INDUSTRIES ATTN : MR. ROBERT SPEIZMAN FAX NO. : 53.903 DATE : MARCH 6, 1995 RE: Our fax 53.852 dated 3/3/95 Your fax 1338/95 dated 3/6/95 Dear Mr. Speizman: In the meeting next week we will define exactly the details of the new stage in our commercial relationship. Meanwhile, due to the results obtained and complying to your comments: - -We consider Speizman's distribution of Pieza Continua (Continuous Piece) machines finished. - -The contract for Sweaters should finalize December 31, 1995. - -The established minimum sales of machines is no longer in effect. To be coherent with your proposal, the above mentioned points go along with the purchase of the 10 machines and other agreements according to your fax 1318 dated March 1, 1995. As of today, the program of Sweater machines available for supply is the following: ABRIL MAYO 1st half of the month 3 DWN-3E gg 7 3 DWN-3E gg 4 1 DWN-3E gg 12 2 TLJ-5E gg 7 2nd half of the month 2 DWN-3E gg 7 1 DWN-3E gg 12 You may observe that the machines available differ progressively, this is the reason why we ask to please send your orders immediately. You may now transfer as well the $200,000.00. Sincerely, JUMBERCA, S.A. A. M. Pont Marketing Director EX-10 3 EXHIBIT 10.11 * * * F A X * * * SPEIZMAN INDUSTRIES, INC. P.O. Box 31215, Charlotte, NC 28231 Phone: 704/372-3751 Fax: 704/376-3153 COMPANY: Jumberca TOTAL NO. PAGES 1 ATTN: Mr. Pont If you do not receive the Mr. Torres indicated number of pages, please contact us at FROM: Bob Speizman 704/372-3751. DATE: July 28, 1995 SUBJECT: FABRIC MACHINES FAX NO: 1839/95 ************************************************************************* Dear Mr. Pont and Mr. Torres: This is to inform you that Speizman Industries has decided not to continue the sale of Jumberca fabric machines as of July 31, 1995. This is per our agreement of June 15, 1995. We hope to cooperate with you in every way and will certainly be willing to work with your new agent. We would be delighted to sell your new agent our inventory of DJE-2 and DIB machines, or work with him in the sale of same. Very truly yours, SPEIZMAN INDUSTRIES, INC. (Signature of Robert S. Speizman appears here) Robert S. Speizman President EX-10 4 EXHIBIT 10.12 * * * F A X * * * SPEIZMAN INDUSTRIES, INC. P.O. Box 31215, Charlotte, NC 28231 Phone: 704/372-3751 Fax: 704/376-3153 COMPANY: Jumberca TOTAL NO. PAGES 1 ATTN: Mr. A.M. Pont If you do not receive the indicated number of pages, FROM: Bob Speizman please contact us at 704/372-3751. DATE: August 22, 1995 SUBJECT: FAX NO: 1862/95 ***************************************************************************** Dear Mr. Pont: We have decided that we do not want to make an offer to continue our contract for the sweater machines after our contract expires on December 31, 1995. We will certainly cooperate in every reasonable way to make the transition to your new agent as smooth as possible. For market stability, we hope that you and your new agent can assist us in disposing of our inventory of new Jumberca sweater and fabric machines. All of us at Speizman appreciate the time we have worked together and wish you the best for the future. Sincerely, (Signature appears here) EX-10 5 EXHIBIT 10.15 July 18, 1995 Robert S. Speizman, President Speizman Industries, Inc. P.O. Box 31215 Charlotte, NC 28231 Dear Bob: This will confirm the appointment of Speizman Industries as our exclusive distributor in the United States for a period of two years commencing August 1, 1995. Speizman will have the exclusive rights to sell our equipment in the United States, its territories and possessions. In addition, effective January 1, 1996, through July 31, 1997, Speizman Industries will have the exclusive right to service and sell spare parts for our equipment in the United States. It is understood that HTS Services will continue to act on our behalf for our service and spare parts of new Orizio machines in your territory until December 31, 1995. I will send you all of the details of the method of payment, warranty on our equipment and other details in the next week to ten days followed by the official contract. Sincerely, ORIZIO PAOLO, S.p.A. IN ACCEPTANCE: (Signature of Alberto Orizio appears here) (Signature appears here) Alberto Orizio Speizman Industries, Inc. EX-10 6 EXHIBIT 10.18 STATE OF NORTH CAROLINA LEASE AMENDMENT AND COUNTY OF MECKLENBURG EXTENSION AGREEMENT This LEASE AMENDMENT AND EXTENSION AGREEMENT (the "Agreement"), is made effective the 1st day of April, 1995, by and between SPEIZMAN BROTHERS PARTNERSHIP ("Lessor" herein) and SPEIZMAN INDUSTRIES, INC. ("Tenant" herein). STATEMENT OF PURPOSE A. Lessor entered into a written lease agreement with Tenant dated December 12, 1990 (the "Lease"), pursuant to which Lessor leased to Tenant and the Tenant leased from Lessor the Leased Premises described therein which are located at 508 West Fifth Street, Charlotte, North Carolina. B. The parties now wish to amend the Lease to extend the Lease Term and modify the rents payable thereunder. C. The parties enter into this Agreement in order to document their understandings and undertakings in respect to the desired extension and amendments to the Lease. NOW, THEREFORE, in consideration of the Statement of Purpose (which by this reference is made a substantive part of this Lease Amendment and Extension Agreement) and other valuable considation exchanged, the adequacy, sufficiency and delivery of which are acknowledged by the parties, Lessor and Tenant mutually agree: 1. Incorporation of Statement of Purpose. The parties hereto ratify and incorporate by reference the Statement of Purpose set forth above. 2. Additional Term. Lessor hereby leases and demises to Tenant, and Tenant hereby rents and takes from Lessor the Leased Premises for an additional term of one (1) year, commencing at midnight on the 1st day of April, 1995, and ending on March 31, 1996, upon the same terms and conditions as set forth in the Lease, except as herein modified. 3. Rental During Additional Term. The rent amount during the Additional Term shall be the sum of THREE HUNDRED ELEVEN THOUSAND FIVE HUNDRED TWENTY and NO/100 ($311,520.00) per year, in monthly installments of TWENTY-FIVE THOUSAND NINE HUNDRED SIXTY and NO/100 DOLLARS ($25,960.00) payable on the first day of each month during the term hereof, commencing on the 1st day of April, 1995. 4. Ratification of Lease. Except as herein amended and extended, the parties ratify and confirm the Lease. Further, as of the date of this Agreement, Tenant hereby certifies to Lessor that: (a) the Lease, as amended, is in full force and effect; (b) Lessor has performed all of its obligations and satisfied all of its conditions arising under the Lease; and (c) Tenant has not assigned, sublet or encumbered its interest in the Lease. 5. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of Lessor and the Parties constituting the Tenant, jointly and severally, and their respective personal representatives, heirs, successors and permitted assigns. 6. Entire Agreement. This Agreement contains the entire agreement of the parties hereto, and no change, qualification or cancellation hereof shall be effective unless set forth in a writing signed by the parties hereto. 7. Notices. All notices, requests, consents and other communications in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed in the United States Mail, First Class, postage prepaid and addressed as follows: As to Seller: Speizman Brothers Partnership c/o Robert S. Speizman 508 West 5th Street P.O. Box 31215 Charlotte, North Carolina 28231 As to Tenant: Speizman Industries, Inc. 508 West 5th Street P.O. Box 31215 Charlotte, North Carolina 28231 8. Severability. In the event that any portion of this Agreement is found to be in violation of or conflict with any federal or state law, the parties agree that the invalidity or unenforceability of such provision shall be in no way render invalid or unenforceable any other part of provision hereof. 9. Governing Law. This Agreement shall be construed and enforced in accordance with the applicable provisions of North Carolina law, and the parties hereto do further agree and stipulate that any dispute hereunder shall be brought in the court of proper jurisdiction (State or Federal) in Charlotte, Mecklenburg County, North Carolina. -2- IN WITNESS WHEREOF, the Lessor and Tenant have each executed this Agreement as of the day and year set forth above. SPEIZMAN BROTHERS PARTNERSHIP (Signature of Robert S. Speizman appears here) Robert S. Speizman (Signature of Lawrence J. Speizman appears here) Lawrence J. Speizman SPEIZMAN INDUSTRIES, INC. (Signature of Robert S. Speizman appears here) Robert S. Speizman, President ATTEST: (Signature appears here) Secretary [CORPORATE SEAL] (Corporate Seal appears here) -3- STATE OF NORTH CAROLINA COUNTY OF MECKLENBURG I, Dana Gail Russell a Notary Public in and for said County and State do hereby certify that Robert S. Speizman, personally appeared before me this day and acknowledged the due execution of the foregoing instrument. Witness my hand and notarial seal, this the 28th day of March, 1995. (SIGNATURE OF DANA GAIL RUSSELL APPEARS HERE) NOTARY PUBLIC MY COMMISSION MY COMMISSION EXPIRES: EXPIRES JUNE 25, 1996 [SEAL] STATE OF FLORIDA COUNTY OF PALM BEACH I, Norma W. Gearing a Notary Public in and for said County and State do hereby certify that Lawrence J. Speizman, personally appeared before me this day and acknowledged the due execution of the foregoing instrument. Witness my hand and notarial seal, this the 3 day of April, 1995. (Signature of Norma W. Gearing appears here) Notary Public My Commission Expires: 7/18/98 [SEAL] (Official Notary Public Seal NORMA W. GEARING (Logo of the Notary COMMISSION NUMBER Public State of CC381769 Florida MY COMMISSION EXP. appears here) JULY 18, 1998) -4- EX-10 7 EXHIBIT 10.20 (Logo appears here) GESTION SAMIJO INC./SAMIJO MANAGEMENT INC. 8300 PIE IX, MONTREAL, QUE HIZ 4E8 BY TELECOPIER: 321-7843 October 21, 1994 Speizman Canada Inc. 5205 Metropolitain East Montreal, Quebec H1R 127 Attention: Mrs. Bruna Dilrancesch Re: Lease extension respecting premises located at 5205 Metropolitain East ("Leased Premises") Dear Madam: This is to confirm our recent agreement with respect to the above-captioned Leased Premises. WHEREAS SPEIZMAN CANADA INC. ("Lessee") is desirous of renewing its Lease commencing on the 1st day of March 1989 and terminating on the last day of February 1992 for those certain premises of the building bearing civic address 5205 Metropolitain East and Samijo Management Inc. acting on behalf of the owners of the building ("Lessor") agrees to same; WHEREFORE THE PARTIES AGREE AS FOLLOWS: 1. That said renewal shall be for a period of one (1) year commencing on March 1st, 1995 and terminating on the last day of February 1996; 2. That said renewal shall be upon the same terms and conditions as the presently existing Leased Premises, including the rental rate which shall be $315.00 gross per month, save and except for its proportion of the non-residential municipal surtax. (Logo appears here) /...2 3. That in all other respects said presently existing Lease is affirmed. 4. That the parties declare that they have requested that this agreement be drawn up in the English Language; Les parties declarent par les presentes qu ils exigent que catte entenie soit redigee dans la languc anglaisc. 5. This agreement may be executed in several counterparts, each of which so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument. SIGNED AND ACCEPTED THIS 24 DAY OF OCT 1994. SAMIJO MANAGEMENT INC., acting on behalf of the owners of the building (Lessor) (Signature appears here) Per: Witness SPEIZMAN CANADA INC. (Lessee) (Signature appears here) (Signature appears here) Per: Witness VP Finance EX-10 8 EXHIBIT 10.24 STATE OF NORTH CAROLINA MODIFICATION AND EXTENSION OF LEASE COUNTY OF MECKLENBURG THIS MODIFICATION AND EXTENSION OF LEASE made this 17 day of October, 1994, by and between B.F. Knott (LANDLORD), and Speizman Industries, Inc. (TENANT): WITNESSETH The parties hereto do hereby ratify and affirm the provisions of that LEASE AGREEMENT, dated May 10, 1993, by and between the parties for the premises known as 1306 Berryhill Road, and the MODIFICATION AND EXTENSION OF LEASE through January 31, 1995, which are hereby fully incorporated herein except for the following: 1. The parties extend this LEASE AGREEMENT for an additional six (6) months beginning February 1, 1995 and ending July 31, 1995. 2. During this extension, Tenant shall pay to Landlord rental of $34,375.02 in six (6) monthly installments of $5,729.17 each. 3. Landlord will be able to take possession of the premises on or before August 1, 1995. From the date of this Modification and Extension through July 31, 1995, Landlord may place signs on the property for sale or lease and Landlord may show the premises to prospective purchasers or tenants during all reasonable hours upon reasonable notice to Tenant. 4. Upon departure from the premises Tenant will clean all warehouse floors and leave them free of grease, oil, dirt and other foreign material and Tenant will clean all carpeting in the offices. IN WITNESS WHEREOF, this Modification and Extension of Lease has been duly executed by the Landlord and Tenant as of the day and year first above written. LESSOR: B.F. KNOTT By: [signature] LESSEE: SPEIZMAN INDUSTRIES, INC. By: Josef Sklut VP FINANCE EX-10 9 EXHIBIT 10.25 STATE OF NORTH CAROLINA MODIFICATION AND EXTENSION OF LEASE COUNTY OF MECKLENBURG THIS MODIFICATION AND EXTENSION OF LEASE made this 13 day of February, 1995, by and between B.F. Knott (LANDLORD), and Speizman Industries, Inc. (TENANT): WITNESSETH __________ The parties hereto do hereby ratify and affirm the provisions of that LEASE AGREEMENT, dated May 10, 1993 by and between the parties for the premises known as 1306 Berryhill Road, and the MODIFICATION AND EXTENSION OF LEASE through January 31, 1995 and the MODIFICATION AND EXTENSION OF LEASE through July 31, 1995, which are hereby fully incorporated herein except for the following: 1. The parties extend this LEASE AGREEMENT for an additional nine (9) months beginning August 1, 1995 and ending April 30, 1996. 2. During this extension, Tenant shall pay to Landlord rental of $51,562.53 in nine (9) monthly installments of $5,729.17 each. 3. Landlord will be able to take possession of the premises on May 1, 1996. From the date of this Modification and Extension through April 30, 1996, Landlord may place signs on the property for sale or lease and Landlord may show the premises to prospective purchasers or tenants all reasonable hours upon reasonable notice to Tenant. 4. Upon Departure from the premises, Tenant will clean all warehouse floors and leave them free of grease, oil, dirt and other foreign material and Tenant will clean all carpeting in the offices. IN WITNESS WHEREOF, this Modification and Extension of Lease has been duly executed by the Landlord and Tenants as of the day and year first above written. LESSOR: B.F. KNOTT By: (Signature of B.F. Knott Goes Here __________________________________ LESSEE: SPEIZMAN INDUSTRIES, INC. By: (Signature of Robert S. Speizman, Pres. Here) ________________________________ EX-10 10 EXHIBIT 10.26 COMMERCIAL LEASE - RENEWAL This lease is made between Daniel H Porter 8620 Wilkinson Blvd. Charlotte, NC 28214 herein called Lessor and Speizman Industries, Inc. 508 West 5th St. Charlotte, NC 28202 herein called Lessee Lessee hereby offers to lease from Lessor the premises situated at 8600 Wilkinson Blvd. Charlotte, NC 28124, upon the following Terms and Conditions: Lessee will lease the premises for a term of one (1) year, commencing October 1, 1995 and terminating September 30, 1996 for an annual rental of $48,000 payable in equal installments of $4,000.00 payable by the tenth day of each month for that month's rental, during the term of this lease. A security bond of $8,000.00 paid in advance for the predecessor lease on these same premises is acknowledged by the lessor. The lessee shall be responsible for damages to buildings or fixtures caused by Lessee. Lessee shall be responsible for normal light bulb replacement and plumbing repairs necessary as a result of negligence. Lessee shall replace any light or plumbing fixtures damaged as a result of negligence. Lessor will replace or repair light and plumbing fixtures as necessary other than damaged by negligence. Lessee shall be responsible for all utility and water bills. Lessee shall be responsible for maintaining the alarm system. Lessor will answer alarm calls. Lessee shall be responsible for all content insurance. Lessor will carry fire insurance on the building. Lessor will maintain the yard. SIGNED THIS 17 DAY OF Aug , 1995 ___ ___ __ BY: (Signature of Josef Sklut Here) BY: (Signature of Daniel H. Porter Here) _____________________________ ____________________________________ Lessee Lessor EX-10 11 EXHIBIT 10.34 Exhibit 10.34 SPEIZMAN INDUSTRIES, INC. November 15, 1994 RESOLUTION FURTHER RESOLVED: That, pursuant to the recommendation of the Compensation Committee, the Board of Directors of this Corporation does hereby extend the present bonus plan and order that it be continued in the current fiscal year. (Signature of Josef Sklut) ____________________________________ JOSEF SKLUT, Secretary APPROVED: (Signature of Robert S. Speizman) ___________________________________ ROBERT S. SPEIZMAN, Chairman SPEIZMAN INDUSTRIES, INC. SECRETARY'S CERTIFICATE I, Josef Sklut, hereby certify that I am a duly elected and qualified Secretary of Speizman Industries, Inc., a Delaware corporation (the "Company"), and that attached hereto is a true and correct copy of a resolution of the Board of Directors of the Company duly adopted by the Board of Directors of the Company in accordance with the bylaws of the Company and the laws of the State of Delaware on the 15th day of November, 1994. This resolution has not been amended, rescinded or modified since its adoption and remains in full force and effect as of the date hereof. This 27th day of September, 1995. (Signature of Josef Sklut) ___________________________________ Josef Sklut, Secretary [CORPORATE SEAL] EX-10 12 EXHIBIT 10.36 STATE OF NORTH CAROLINA FOURTH MODIFIED REDEMPTION AGREEMENT COUNTY OF MECKLENBURG THIS FOURTH MODIFIED REDEMPTION AGREEMENT is dated September 14, 1994, by and between ROBERT S. SPEIZMAN (the "Stockholder") and SPEIZMAN INDUSTRIES, INC. (the "Company"). W I T N E S S E T H: The parties hereto have previously entered into a Redemption Agreement dated May 31, 1974, that was mutually terminated by Agreement dated March 6, 1980, reinstated and modified by Modified Agreement dated April 14, 1987 and thereafter further modified by a Second Modified Redemption Agreement dated September 30, 1991, and by a Third Modified Redemption Agreement dated July 14, 1993 (all collectively known as the "Redemption Agreement"); and The parties desire to further modify the Redemption Agreement in certain respects, mainly to reduce the amount to be set aside for the costs of transition and management upon the death of the Stockholder, to remove surplus language, and to restate the Agreement in its entirety, to enhance its readability; NOW, THEREFORE, the restated Agreement reads as follows: WHEREAS, the Stockholder owns a substantial portion of the outstanding common stock of the Company; and WHEREAS, the Stockholder desires assurance that if he should pass away his Estate will have sufficient funds to pay estate and inheritance taxes and expenses incident to the transfer of his Estate; and WHEREAS, it is in the interest of the Company and its stockholders that arrangements be made for redemption of all or a portion of the common stock of Stockholder in the event of his decease; and WHEREAS, the Company has secured ordinary life insurance policies on the life of the Stockholder in the principal sum of $1,150,000, the proceeds of which are payable to the Company; It is therefore agreed: 1. Purchase of Securities. Upon the decease of the Stockholder, the Company, upon written demand made by the legal representatives of the Estate of the Stockholder at any time within two (2) years after decease, will purchase all or a portion of the common stock of the Company owned by the Stockholder on the date of his death (the common stock being hereinafter referred to as the Securities) in accordance with the terms and conditions hereinafter set forth. 2. Purchase Price. The "purchase price" for each share of common stock sold hereunder shall be equal to the fair market value per share less a discount of 5% from said fair market value. Said purchase price shall be determined as of the date the option granted the legal representatives of the Estate of the Stockholder is exercised by written notice to the Company under paragraph 1 hereof. For the purpose hereof, the term "fair market value" per share shall mean the last sale price in the over-the-counter market reported on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") on such date, or the last sale price reported on the NASDAQ National Market System on such date, whichever is applicable, or, if no sale of the common stock takes place on such date, the average of the closing high bid and low asked price in the over-the-counter market reported on NASDAQ on such date or the average of such prices reported on the NASDAQ National Market System on such date, whichever is applicable. If there is no such last sale price or closing high bid and low asked prices reported on such date, then the fair market value per share shall be determined by the Board of Directors in accordance with the regulations promulgated under Section 2031 of the Internal Revenue Code of 1986, as amended, or by any appropriate method selected by the Board of Directors. However, notwithstanding any provision of this agreement to the contrary, in no event shall the total purchase price to be received by the Estate of the Stockholder exceed the proceeds of life insurance, including double indemnity in the event of accidental death, paid to the Company by reason of the Stockholder's death under the policy or policies carried by the Company on the life of the Stockholder under paragraph 3 hereof. 3. Insurance. The Company will, from the date of this agreement to the date of Stockholder's death, except and to the extent otherwise consented or agreed to by Stockholder, maintain in effect at all times the $1,150,000 of life insurance for its benefit now carried on the life of the Stockholder to provide to the Company on the death of the Stockholder available funds for the purchase price of the Securities to be purchased by the Company hereunder. A. Description of Policies. Notwithstanding any provision of this Redemption Agreement to the contrary, the Stockholder and the Company hereby agree that the $1,150,000 of life insurance maintained by the Company under paragraph 3 hereof consists of Crown Life Insurance Company Policy No. 1983892 in the amount of $400,000 and Sun Life Assurance Company of Canada Policy No. UB8126194R in the amount of $750,000. All references in the Redemption Agreement or any exhibit thereto to Phoenix Mutual Life Insurance Co. Policy No. 2060237 in the amount of $1,150,000 and Sun Life Assurance 2 Company of Canada Policy No. UB8126193V in the amount of $2,000,000 are hereby deleted. 4. Priority for Application of Insurance Proceeds. The obligation of the Company hereunder is subject to the following payments which will be the priority for disbursement of the proceeds of the policies owned by the Company on the life of the Stockholder: A. To repay policy loans. B. To the extent possible, to use the balance of such insurance proceeds to redeem the stock of the Stockholder. 5. Limitations on Obligation of Company. The fulfillment of the obligations of the Company herein is subject to the compliance with the statutes of the state of incorporating of the Company, and the Company agrees to take all appropriate steps to comply with applicable statutes. 6. Closing. Upon receipt by the Company of a written demand by the legal representatives of the Estate of the Stockholder that the Company purchase the Securities, the Company shall notify the legal representatives that such purchase and sale of the Securities shall take place at a specified time and place within 60 days after its receipt of such written demand at the principal office of the Company or at such other time and place as is mutually agreed upon by the Company and the legal representatives. At the closing of the purchase and sale of the Securities, upon delivery to the Company by the legal representatives of the Estate of the Stockholder of the Securities to be redeemed in proper form, from and clear of all encumbrances, and duly endorsed for transfer to the Company, the Company shall deliver to the representatives the purchase price of such securities. 7. Notices. All notices and demands under this Agreement shall be in writing, and if to the Company will be duly given if delivered by hand to an officer, or if addressed and mailed by Certified Mail, return receipt requested, to the Company at 508 West 5th Street, Charlotte, North Carolina 28202, or at such other address as the Company may hereafter designate by notice, or, if to the Stockholder, will be duly given if delivery by hand by an officer of the Company, or if addressed and mailed, by Certified Mail, return receipt requested, to the Stockholder or to his legal representative at 8347 Providence Road, Charlotte, North Carolina 28277, or at such other address as may appear as the home address of the Stockholder in the records of the Company. 8. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company, its successors, and assigns, including but not limited to any corporation or entity which may acquire all or substantially all of the Company's assets 3 and business or with or into which the Company may be consolidated or merged. This Agreement shall inure to the benefit of and be binding upon the Stockholder, his executors and administrators, but may not be assigned by the Stockholder except to his executors and administrators. 9. Entire Agreement. This instrument contains the entire agreement of the parties. It may not be amended or terminated orally, but may be amended only be an agreement in writing signed by the parities. This Agreement will be governed by the laws of the state of incorporation of the Company. IN WITNESS WHEREOF, the parties have executed this Agreement pursuant to authority duly given, this 14 day of September, 1994. SPEIZMAN INDUSTRIES, INC. [CORPORATE SEAL] Signature of Robert S. Speizman ATTEST: By: [Signature] President [Signature of Josef Sklut] [Signature] [Signature] [SEAL] Robert S. Speizman EX-10 13 EXHIBIT 10.38 1995 CONSOLIDATED AMENDMENT AGREEMENT TO LOAN AGREEMENT AND RELATED DOCUMENTS THIS AMENDMENT AGREEMENT, made and entered into as of this 31st day of May, 1995, by and between SPEIZMAN INDUSTRIES, INC., a Delaware corporation (the "Borrower") and NATIONSBANK, NATIONAL ASSOCIATION (CAROLINAS), a national banking association (the "Lender"); W I T N E S S E T H: WHEREAS, pursuant to a Loan Agreement dated as of April 19, 1994 between the Borrower and the Lender (the "Loan Agreement"), arrangements were made for the extension by the Lender to the Borrower of credit on the terms and conditions thereof; WHEREAS, under the Loan Agreement, the Borrower has issued to the Lender its Revolving Credit Note dated April 19, 1994 in the principal amount of $2,000,000 (the "Note"); WHEREAS, under the Loan Agreement, the Borrower has obtained a letter of credit facility of up to $12,000,000 for the issuance of documentary letters of credit for the purposes set forth in the Loan Agreement (the "Letter of Credit Facility"); WHEREAS, collateral for the indebtedness and obligations of the Borrower in respect of the Loan Agreement, Note and Letter of Credit Facility is provided under a Security Agreement dated April 19, 1994 (the "Security Agreement") between the Borrower and the Lender; WHEREAS, the Borrower has requested that the Lender increase the Letter of Credit Facility from $12,000,000 to $14,000,000, modify the Borrowing Base and extend the maturity date, all as provided herein; 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. (i) The number "$12,000,000" as it appears in the following places in the Loan Agreement is hereby deleted and the number "$14,000,000" placed in its stead: (a) First paragraph on page 1 under WITNESSETH; (b) Sections 1.51, 2.1, 3.1 and 3.5(iv). (ii) The number "$5,000,000" as it appears in Section 1.10 "Borrowing Base" is hereby deleted and the number "$7,000,000" placed in its stead and subparagraph (ii) of Section 1.10 is hereby amended to read as follows: "(ii) until August 31, 1995 the lesser of (x) Eligible Inventory multiplied by 30% or (y) $750,000". (iii) The date "October 31, 1995" in Section 1.52 "Letter of Credit Facility Termination Date" and Section 1.73 "Termination Date" is hereby deleted and the date "October 31, 1996" placed in its stead. (iv) The number "$2,500,000" as it appears in the ninth line of Section 3.1 is hereby deleted and the number "$3,500,000" placed in its stead. (v) The Borrowing Base Certificate attached as Exhibit A to the Loan Agreement is deleted and a new Borrowing Base Certificate, in the form of Exhibit 1-A attached hereto, is placed in its stead to be effective until August 31, 1995 and a new Borrowing Base Certificate, in the form of Exhibit 1-B attached hereto, is placed in its stead to be effective after August 31, 1995. 3. Representations and Warranties. The Borrower hereby represents and warrants that: 2 (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. (B) There has been no change, and there exists no prospective change, in the condition, financial or otherwise, of the Borrower 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 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 to the Lender under the Security Agreement and other collateral documents of the Borrower in favor of the Lender are subject to no liens or encumbrances except Permitted Liens; (F) The execution, delivery and performance by the Borrower 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; and (G) The Borrower has the requisite corporate power and authority to execute, deliver and perform this Amendment 3 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, 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. Two fully executed originals of this Amendment Agreement. (B) Resolutions of Borrower. Resolutions of the Borrower certified by its secretary or assistant secretary as of the date hereof, approving and adopting this Amendment Agreement and the other documents to be executed by the Borrower. (C) Opinions. An opinion of counsel to the Borrower covering the matters covered by its prior opinion on the Loan Agreement. (D) Uniform Commercial Code Financing Statements. Uniform Commercial Code Financing Statements covering the property described in the Security Agreement. (E) Charter Documents. Copy of a Good Standing Certificate of the State of Delaware concerning Borrower and the Articles of Incorporation of Borrower certified by the Secretary of State of Delaware to be a true and correct copy as currently in effect and a copy of the Bylaws certified by the Secretary of the Borrower to be a true and correct copy as currently in effect. (F) Certificate of Authority. Certificate of a recent date of the Secretary of State of North Carolina as to the authority of the Borrower to do business in North Carolina and the good standing of the Borrower. 4 (G) No Litigation Certificate. Certificate of the chief financial officer of the Borrower to the effect that no litigation or proceedings are pending or threatened which might reasonably be expected to adversely affect the Borrower's ability to perform its obligations under this Agreement or operation of the Borrower's business. (H) Amendment Fee. An amendment fee of $5,000 payable by Borrower. (I) Other Documents, Etc. Such other documents, instruments and certificates as the Lender may reasonably request. 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 5 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 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. [Signatures appear on following page] 6 IN WITNESS WHEREOF, this Agreement has been duly executed as of the date hereof by the Company and the Lender. ATTEST: SPEIZMAN INDUSTRIES, INC. R.A. Bigger (sig) By: Josef Sklut (sig) Assistant Secretary Name: Josef Sklut Title: Vice President - Finance NATIONSBANK, NATIONAL ASSOCIATION (CAROLINAS) By: John R. Clemens (sig) Name: John R. Clemens Title: SVP 7 EXHIBIT 1-A (Prior to August 31, 1995) BORROWING BASE CERTIFICATE
Speizman Industries, Inc. Borrowing Base Certificate For the Week Ended I. Accounts Receivable Gross Receivables $0 Less: Amounts over 90 days $0 from invoice Less: Commissions and expenses $0 receivable Less: Foreign accounts receivable $0 Less: Accounts receivable of an $0 account debtor for which more than 25% of its total balance is more than 90 days past due Less: Other ineligible accounts $0 receivable including "consigned inventories" Net Eligible Receivables $0 A/R Availability (A) 80.00% $0 II. Inventories Gross Inventories $0 Less: Work in process, Supplies, $0 etc. Less: Other ineligible $0 inventories Net Eligible Inventories $0 Inventory Availability (B) 30.00% $0 (Limit $750,000) Plus: Outstanding Documentary $0 L/C's L/C Availability (C) 50.00% $0 L/C + Inventory Avail. (D) (B)+(C) $0 8 (Limit $7,000,000) III. Cash Collateral (E) Certificates of Deposit Pledged $0 to Lender IV. Calculation of A/R Availability (A) $0 Total Borrowing L/C+Inventory Availability (D) $0 Base Availability Cash Collateral (E) $0 (F) Total Borrowing Base Availability $0 Credit Facility Usage: Direct Borrowings $0 O/S Documentary L/C's $0 (G) Total Usage $0 Net Excess (F-G) $0
The aggregate face amount of letters of credit outstanding in respect of textile machinery held as inventory for sale does not exceed $3,500,000. 9 EXHIBIT 1-B BORROWING BASE CERTIFICATE
Speizman Industries, Inc. Borrowing Base Certificate For the Week Ended I. Accounts Receivable Gross Receivables $0 Less: Amounts over 90 days $0 from invoice Less: Commissions and expenses $0 receivable Less: Foreign accounts receivable $0 Less: Accounts receivable of an $0 account debtor for which more than 25% of its total balance is more than 90 days past due Less: Other ineligible accounts $0 receivable including "consigned inventories" Net Eligible Receivables $0 A/R Availability (A) 80.00% $0 II. L/C Availability (B) 50.00% $0 (Limit $7,000,000) III. Cash Collateral (C) Certificates of Deposit Pledged $0 to Lender IV. Calculation of A/R Availability (A) $0 Total Borrowing L/C Availability (B) $0 Base Availability Cash Collateral (C) $0 (D) Total Borrowing Base Availability $0 Credit Facility Usage: Direct Borrowings $0 O/S Documentary L/C's $0 (E) Total Usage $0 Net Excess (D-E) $0
The aggregate face amount of letters of credit outstanding in respect of textile machinery held as inventory for sale does not exceed $3,500,000. 10 EX-11 14 EXHIBIT 11 Exhibit 11 NET INCOME PER SHARE The following table presents the information needed to compute primary income per common share: Year Ended July 1, July 2, July 3, 1995 1994 1993 Net income applicable to common stock $1,293,815 $3,256,091 $2,418,756 Weighted average shares outstanding 3,236,199 2,826,279 1,996,081 Less: Treasury shares (27,600) (27,600) (27,600) Add: Assumed conversion of Senior Preferred Stock - - 240,766 Add: Exercise of options reduced by the number of shares purchased with proceeds 62,865 105,846 150,507 Adjusted weighted average shares outstanding 3,271,464 2,904,525 2,359,754 Net income per share $ 0.40 $ 1.12 $ 1.03 EX-23 15 EXHIBIT 23 Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 2-77747 and No. 33-43042 of Speizman Industries, Inc. on Form S-8 of our report dated September 1, 1995, appearing in this Annual Report on Form 10-K of Speizman Industries, Inc. for the year ended July 1, 1995. BDO SEIDMAN Charlotte, North Carolina September 1, 1995 EX-27 16 EXHIBIT 27
5 YEAR JUL-01-1995 JUL-03-1994 JUL-01-1995 2,436,859 0 16,275,841 207,158 13,428,014 34,401,911 2,254,626 1,440,688 35,704,458 16,788,884 0 323,620 0 0 18,455,325 35,704,458 61,596,833 61,596,833 53,986,242 59,463,876 0 0 (14,858) 2,147,815 854,000 0 0 0 0 1,293,815 0.40 0.40
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