-----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, WxpiG6/KLiedhfH+J59asIMPCw5MOdwfhRmACL1W2CvgWFmBcz2OehYjS1qVmcPY OVYfD0LYowjRdS2Xnz5DxQ== 0000950168-99-001599.txt : 19990519 0000950168-99-001599.hdr.sgml : 19990519 ACCESSION NUMBER: 0000950168-99-001599 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPEIZMAN INDUSTRIES INC CENTRAL INDEX KEY: 0000092827 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-INDUSTRIAL MACHINERY & EQUIPMENT [5084] IRS NUMBER: 560901212 STATE OF INCORPORATION: DE FISCAL YEAR END: 0629 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08544 FILM NUMBER: 99629786 BUSINESS ADDRESS: STREET 1: 508 W. 5TH STREET CITY: CHARLOTTE STATE: NC ZIP: 28231 BUSINESS PHONE: 7043723751 MAIL ADDRESS: STREET 1: 508 W. 5TH STREET CITY: CHARLOTTE STATE: NC ZIP: 28231 10-Q 1 SPEIZMAN INDUSTRIES, INC. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - -------------------------------------------------------------------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 3, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----- ------ Commission File No. 0-8544 SPEIZMAN INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware 56-0901212 - ------------------------------ ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 701 Griffith Road 28217 ----------------- Charlotte, North Carolina (Zip Code) - ------------------------------ (Address of principal executive offices) (704)559-5777 ------------- (Registrant's telephone number, including area code) Not Applicable -------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Outstanding at Class of Common Stock May 12, 1999 --------------------- ------------ Par value $.10 per share 3,243,706 Page 1 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page No. -------- PART I. FINANCIAL INFORMATION: Item 1. Financial Statements: Consolidated Condensed Balance Sheets.................... 3-4 Consolidated Condensed Statements of Operations.......... 5 Consolidated Condensed Statements of Cash Flows.......... 6 Notes to Consolidated Condensed Financial Statements...... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 8-12 PART II. OTHER INFORMATION: Item 6. Exhibits and reports on Form 8-K................... 13 Page 2 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- April 3, June 27, 1999 1998 -------- -------- (Unaudited) (Unaudited) ASSETS ------ CURRENT: Cash and cash equivalents $ 442,885 $ 2,193,329 Accounts receivable, less allowances of $562,292 and $655,656 16,962,449 19,817,834 Inventories 16,806,268 15,934,745 Prepaid expenses and other current assets 4,601,564 3,372,266 ----------- ------------ TOTAL CURRENT ASSETS 38,813,166 41,318,174 PROPERTY AND EQUIPMENT: Leasehold improvements 556,187 552,655 Machinery and equipment 1,368,336 1,825,959 Furniture, fixtures and transportation equipment 1,239,168 1,341,728 Construction in progress 1,176,164 - ----------- ------------ Total 4,339,855 3,720,342 Less accumulated depreciation and amortization (1,722,075) (1,632,367) ----------- ------------ NET PROPERTY AND EQUIPMENT 2,617,780 2,087,975 ----------- ------------ OTHER LONG-TERM ASSETS 946,171 517,352 INTANGIBLES, NET OF ACCUMULATED AMORTIZATION 5,780,410 6,110,410 ----------- ------------ $48,157,527 $ 50,033,911 =========== ============ See accompanying notes to consolidated condensed financial statements. Page 3 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED CONDENSED BALANCE SHEETS ------------------------------------- April 3, June 27, 1999 1998 -------- -------- (Unaudited) (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Note payable -band line of credit $ 3,500,000 $ 4,000,000 Accounts payable 11,211,186 10,809,976 Customers' deposits 5,080,377 2,158,512 Accrued expenses 556,523 2,188,557 Current maturities of long-term debt 1,520,000 1,945,000 ----------- ------------ TOTAL CURRENT LIABILITIES 21,868,086 21,102,045 LONG-TERM DEBT 4,180,000 5,725,000 ----------- ------------ TOTAL LIABILITIES 26,048,086 26,827,045 ----------- ------------ STOCKHOLDERS' EQUITY: Common stock - par value $.10; authorized 20,000,000 shares, issued 3,369,506, outstanding 3,263,706; and issued 3,357,406, outstanding 3,319,806, respectively 336,951 335,741 Additional paid-in capital 12,935,886 12,889,546 Retained earnings 9,280,661 10,143,226 ----------- ------------ Total 22,553,498 23,368,513 Treasury stock, at cost, 105,800 and 37,600 common shares (444,057) (161,647) ----------- ------------ TOTAL STOCKHOLDERS' EQUITY 22,109,441 23,206,866 ----------- ------------ $ 48,157,527 $ 50,033,911 =========== ============ See accompanying notes to consolidated condensed financial statements. Page 4 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS -----------------------------------------------
(Unaudited) (Unaudited) For the Three Months Ended For the Nine Months Ended -------------------------- ------------------------- 04-03-99 03-28-98 04-03-99 03-28-98 (13 Weeks) (13 Weeks) (40 Weeks) (39 Weeks) -------- -------- -------- -------- REVENUES $ 22,714,726 $ 20,637,767 $ 71,391,446 $ 66,438,792 ------------ ------------ ------------ ------------- COST AND EXPENSES: Cost of sales 19,246,048 17,146,817 60,684,884 54,609,642 Selling expenses 1,751,802 1,658,143 5,408,522 5,100,399 General and administrative expenses 2,125,212 1,470,512 5,894,992 4,160,507 ------------ ------------ ------------ ------------- Total costs and expenses 23,123,062 20,275,472 71,988,398 63,870,548 ------------ ------------ ------------ ------------- (408,336) 362,295 (596,952) 2,568,244 NET INTEREST EXPENSE 268,867 199,323 766,613 531,057 ------------ ------------ ------------ ------------- INCOME (LOSS) BEFORE TAXES ON INCOME (677,203) 162,972 (1,363,565) 2,037,187 TAXES (BENEFIT) ON INCOME (233,000) 63,000 (501,000) 790,000 ------------ ------------ ------------ ------------- NET INCOME (LOSS) $ (444,203) $ 99,972 $ (862,565) $ 1,247,187 ============ ============ ============ ============= Basic earnings (loss) per share $ (0.14) $ 0.03 $ (0.26) $ 0.38 Diluted earnings (loss) per share (0.14) 0.03 (0.26) 0.36 Weighted average shares Outstanding: Basic 3,273,773 3,300,136 3,288,441 3,270,787 Diluted 3,273,773 3,430,674 3,288,441 3,426,928
See accompanying notes to consolidated condensed financial statements. Page 5 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS -----------------------------------------------
(Unaudited) --------------------------------- For the Nine Months Ended --------------------------------- 04-03-99 03-28-98 (40 Weeks) (39 Weeks) ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (862,565) $ 1,247,187 Adjustments to reconcile net income (loss) to cash used by operating activities: Depreciation and amortization 906,464 845,527 Provision for inventory obsolescence 225,000 200,000 Gain on disposal of assets (4,389) (19,904) Foreign currency translation adjustment - 11,000 (Increase) decrease in: Accounts receivable 2,855,385 5,938,225 Inventories (1,096,523) (315,596) Prepaid expenses and other current assets (1,229,298) 176,056 Other assets (428,819) 723,968 Increase (decrease) in: Accounts payable 401,210 (8,181,167) Customers' deposits 2,921,865 (644,136) Accrued expenses (1,632,034) (901,977) ------------- ------------ Net cash provided by (used in) operating activities 2,056,296 920,817 ------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of Wink Davis Equipment Company - (9,500,000) Acquisition of TMC Automation Company, Inc. - (1,841,304) Capital expenditures (1,418,905) (300,114) Proceeds on sale of assets 317,025 73,742 ------------- ------------ Net cash used in investing activities (1,101,880) (11,567,676) ------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) on line of credit agreement (500,000) 2,300,000 Payment on line of credit agreement of Wink Davis Equipment Company - (201,977) Proceeds from issuance of term note due to bank - 8,300,000 Principal payments on long-term debt (1,970,000) (266,215) Principal payments on debt assumed from TMC Automation Company - (524,202) Issuance of common stock for stock options 47,550 285,000 Purchase of treasury stock (282,410) - ------------- ----------- Net cash provided by (used in) financing activities (2,704,860) 9,892,606 ------------- ----------- NET DECREASE IN CASH (1,750,444) (2,595,887) CASH AND CASH EQUIVALENTS at beginning of period 2,193,329 3,832,534 ------------- ----------- CASH AND CASH EQUIVALENTS at end of period $ 442,885 $ 1,236,647 ============= =========== Supplemental Disclosures: Cash paid during period for: Interest 898,088 $ 510,658 Income taxes 371,100 1,087,223
See accompanying notes to consolidated condensed financial statements. Page 6 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- Note 1. Management Statement re Adjustments In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present the Registrant's financial position, the results of operations and changes in cash flow for the periods indicated. The accounting policies followed by the Registrant are set forth on page F-6 of the Registrant's Form 10-K for the fiscal year ended June 27, 1998, which is incorporated by reference. Note 2. Inventories Inventories consisted of the following: April 3, June 27, 1999 1998 ------------ ----------- (Unaudited) (Unaudited) Machines $ 10,950,937 $ 9,466,125 Parts and supplies 5,855,331 6,468,620 ------------ ----------- Total $ 16,806,268 $ 15,934,745 ============ =========== Note 3. Taxes on Income Taxes on income are allocated to interim periods on the basis of an estimated annual effective tax rate. Note 4. Net Income (Loss) Per Share Basic net income per share includes no dilution and is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution of securities that could share in the net income of the Company which consists of stock options (using the treasury stock method). In a period with a net loss, the weighted average shares outstanding will be the same. Note 5. Intangibles Goodwill is calculated as the excess cost of purchased businesses over the value of their underlying net assets and is being amortized on a straight-line basis over fifteen years. Page 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL ------- Speizman Industries, Inc. and subsidiaries (collectively the "Company") is a major distributor operating through four companies: Speizman Industries, Inc. ("Speizman" or "Speizman Industries"), Wink Davis Equipment Co., Inc. ("Wink Davis"), Todd Motion Controls, Inc. ("TMC"), and Speizman Yarn Equipment, Inc. ("Speizman Yarn"). Speizman distributes sock knitting machines, other knitting equipment and related parts. Wink Davis sells commercial and industrial laundry equipment, including the distribution of machines and parts as well as installation and after sales service. TMC manufactures automated boarding, finishing and packaging equipment used in the sock knitting industry. TMC'S products are sold through Speizman's distribution network. Speizman Yarn distributes equipment used in the yarn processing industry. NOTE: Wink Davis was acquired on August 1, 1997; TMC was acquired on February 6, 1998; Speizman Yarn began operations on August 1, 1998. Accordingly, these subsidiaries may contain different lengths of operations between periods of fiscal 1998 compared to the same periods of fiscal 1999. RESULTS OF OPERATIONS --------------------- Revenues increased by about $2.1 million in the 13-week period ended April 3, 1999. Yarn processing equipment, which was acquired in the current fiscal year, had revenues of about $2.1 million and knitted fabric equipment increased by approximately $4.0 million. These and other smaller increases from TMC and Wink Davis were offset by a $5.1 million decrease in revenues of hosiery equipment in the current fiscal quarter. Year-to-date revenues increased by approximately $5.0 million to $71.4 million. Yarn equipment revenues were approximately $7.3 million and knitted fabric equipment revenues increased by about $9.3 million. Year-to-date revenues for both TMC and Wink Davis each increased by about $2.3 million. These increases were offset by decreased hosiery equipment revenues of about $15.6 million. Cost of sales in the current third quarter were 84.7% of revenues. For the same period of the prior fiscal year, cost of sales were 83.1% of revenues. Similarly, cost of sales for the current nine-months increased to 85.2% from 82.2% compared to the same period last year. These unfavorable shifts result from lower sales volumes and margins on hosiery equipment and lower margins on new yarn processing equipment. Orders for this yarn processing equipment were on back order at the time Speizman assumed operations. These decreases were offset by higher margins and increased volumes on knitted fabric equipment and textile equipment parts. Page 8 Selling expenses for the current third quarter totaled approximately $1,752,000, an increase of approximately $100,000 compared to the same period of the prior fiscal year. Year-to-date selling expenses are approximately $5.4 million, an increase of $300,000 from the prior year. Substantially all of these increases result from the inclusion of TMC and yarn processing equipment, offset by lower commissions on hosiery related equipment. General and administrative expenses increased by approximately $655,000 in the third fiscal quarter of the current year as compared to the same period of the previous year. Components of the increase include increased rent, personnel and a full quarters' expenses of TMC and the yarn processing divisions. In the current fiscal year, general and administrative expenses were approximately $5.9 million, an increase of approximately $1.7 million over the nine month period ending March 28, 1998. Approximately $829,000 of the increase is directly related to the inclusion of longer operating periods of Wink Davis, TMC and yarn processing divisions. Other increases are due to increased rent expense and personnel. Interest expense is shown net of interest income. Net interest expense increased to approximately $269,000 and $767,000 in the current quarter and fiscal year, respectively. Increased interest expense results from higher borrow quarterly installments paid on the term loan. Net loss for the third quarter was $444,000 or $0.14 per share, as compared to net income of $100,000, or $0.03 basic and diluted per share for the same period of the prior fiscal year. For the current nine-month period, net loss is $863,000 or $0.26 per share, as compared to the prior year's income of $1,247,000 or $0.38 basic ($0.36 diluted). OUTLOOK ------- The outlook for sock machinery has become substantially stronger than in the prior quarter. Because sales of athletic socks at retail have been very strong, the producers of athletic socks have decided to purchase conventional non-closed toc machines. The Company currently has a backlog of more than 400 of the conventional machines. These machines should be delivered in the fourth quarter of fiscal 1999 and first quarter of fiscal 2000. Demand remains strong for large diameter circular knitting machines utilizing new technology in the production of seamless undergarments, action wear and swimsuits. The yarn processing industry is still in a state of uncertainty in North America. One of the industries' major trade shows will be held in early June, at which time, customers will evaluate new technologies offered in the circular knitting machine as well as yarn processing industries. The Wink Davis backlog continues to be at approximately the same level as it was in the prior quarter. Page 9 LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company's working capital was approximately $16.9 million at April 3, 1999, a decrease of $3.3 million from the Company's working capital at June 27, 1998. The current ratio at the end of the third quarter was 1.77 to 1.00. At the end of the prior fiscal year, this ratio was 1.96 to 1.00. Operating activities provided approximately $2.1 million of cash in the current nine-month period, as opposed to a usage of about $0.9 million in the same period of the prior fiscal year. In the current year, cash used in the net loss was offset by non-cash expenses including depreciation, amortization and inventory reserves. Additional cash was provided from decreases in accounts receivable and increases in customers' deposits offset by increases in inventories and prepaids and other current assets and decreases in accrued expenses. In the same period of the prior year cash was provided by net income and decreases in accounts receivable offset by decreases in accounts payable. For the nine months ended April 3, 1999, investing activities used about $1.1 million in cash, substantially all related to capital expenditures, including leasehold upfitting costs of the new facility for machinery warehousing and corporate offices. In the prior year, approximately $11.6 million in cash was used for the investments of Wink Davis and TMC. Financing activities used approximately $2.7 million in the current fiscal year, including principal payments of $1,970,000 on the Company's term loan. In the prior year financing activities provided about $9.9 million, which related substantially to the acquisitions of Wink Davis and TMC. Overall, net cash decreased by $1,750,000 in the current year as compared to a decrease of $2,596,000 for the same period of the prior fiscal year. SEASONALITY AND OTHER FACTORS - ----------------------------- There are certain seasonal factors that may affect the Company's business. Traditionally, manufacturing businesses in Italy close for the month of August, and the Company's hosiery customers close for one week in July. Consequently, no shipments or deliveries, as the case may be, of machines distributed by the Company that are manufactured in Italy are made during these periods which fall in the Company's first quarter. In addition, manufacturing businesses in Italy generally close for two weeks in December, during the Company's second quarter. Fluctuations of customer orders or other factors may result in quarterly variations in net revenues from year to year. Page 10 EFFECTS OF INFLATION AND CHANGING PRICES - --------------------------------------- Management believes that inflation has not had a material effect on the Company's operations. DISCLOSURE ABOUT FOREIGN CURRENCY RISK - --------------------------------------- Generally, the Company's purchases of foreign manufactured machinery for resale are denominated in Italian lira. In the ordinary course of business, the Company enters into foreign exchange forward contracts to mitigate the effect of foreign currency movements between the Italian lira and the U. S. dollar from the time of placing the Company's purchase order until final payment for the purchase is made. The contracts have maturity dates that do not generally exceed 12 months. Substantially all of the increase or decrease of the lira denominated purchase price is offset by the gains and losses of the foreign exchange contract. The unrealized gains and losses on these contracts are deferred and recognized in the results of operations in the period in which the hedged transaction is consummated. A substantial portion of the Company's textile machine and spare part purchases are denominated and payable in Italian lira. Currency flunctuations of the lira could result in substantial price level changes and therefore impede or promote import /export sales and substantially impact profits. However, to reduce exposure to adverse foreign currency fluctuations during the period from customer orders to payment for goods sold, the Company enters into forward exchange contracts. The Company is not able to assess the quantitative effect that such currency fluctuations could have upon the Company's operations. There can be no assurance that fluctuations in foreign currency exchange rates will not have a significant adverse effect on future operations. NOTE REGARDING PRIVATE SECURITIES LITIGATION REFORM ACT - ------------------------------------------------------- Statements made by the Company which are not historical facts are forward looking statements that involve risks and uncertainties. Actual results could differ materially from those expressed or implied in forward-looking statements. All such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. Important factors that could cause financial performance to differ materially from past results and from those expressed and implied in this document include, without limitation, the risks of acquisition of businesses (including limited knowledge of the businesses acquired and misrepresentations by sellers) availability of financing, competition, management's ability to manage growth, loss of customers, and a variety of other factors. YEAR 2000 COMPLIANCE - -------------------- The Company has reviewed its computer and business systems to identify those areas that could be adversely affected by Year 2000 software failures. The primary information system used by Speizman Industries and its three subsidiaries has been reviewed and all known issues related to the Year 2000 issues have been resolved. In May 1999, Wink Davis' information systems were integrated into this primary information system. Costs incurred were not significant. Page 11 A substantial portion of the equipment distributed by the Company has computerized controls and features. However, to the Company's knowledge, no operating features of the equipment are dependent on any time or date information, such as the Year 2000 issue. The Company is aware of one subsidiary's voice mail system and there may be other computer-based systems which may require upgrading to ensure operational continuity beyond December 31, 1999. The Company has substantially completed identification of all such systems and believes that all significant systems will be compliant in time to ensure no disruption to the Company's operations. The cost of bringing these minor systems into compliance is not anticipated to be material. Currently, the Company cannot predict the effect of the Year 2000 problem on entities with which it transacts business and there can be no assurance it will not have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. The Company will be formulating a contingency plan to address the possible effects of any of its customers experiencing Year 2000 problems. Page 12 PART II. OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K: None. Page 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SPEIZMAN INDUSTRIES, INC. (Registrant) Date: May 18, 1999 By: /s/ Robert S. Speizman ------------- ------------------------------------- Robert S. Speizman President Date: May 18, 1999 By: /s/ James H. McCorkle, III ------------- ------------------------------------- James H. McCorkle, III Secretary-Treasurer (Chief Financial Officer) Page 14 EX-27 2 FDS --
5 9-MOS JUL-03-1999 JUN-28-1998 APR-03-1999 442,885 0 17,524,741 562,292 16,806,268 38,813,166 4,339,855 1,722,075 48,157,527 21,868,086 0 336,951 0 0 22,216,547 48,157,527 71,391,446 71,391,446 60,834,884 71,988,398 0 0 766,613 (1,363,565) (501,000) (862,565) 0 0 0 (862,565) (0.26) (0.26)
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