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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
[Fee Required]
For the fiscal year ended June 28, 1997
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.
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(Exact name of registrant as specified in its charter)
DELAWARE 56-0901212
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
508 West Fifth Street, Charlotte, North Carolina 28202
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(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 |X| 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 12, 1997, was $23,253,474 based on the last
sale price of $7.19 per share reported by the NASDAQ National Market System on
that date.
As of September 12, 1997, there were 3,235,266 shares of the
registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on November 19, 1997 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.p.A., 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 and in Mexico. In addition, through sales
arrangements with other European textile machinery manufacturers, the Company
distributes other sock knitting machines, knitting machines for underwear and
other knitted fabrics and other equipment related to the manufacture of socks,
sheer hosiery and other textile products, 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 in a number of foreign countries.
ALL REFERENCES HEREIN ARE TO THE COMPANY'S 52-OR-53 WEEK FISCAL YEAR ENDING
ON THE SATURDAY CLOSEST TO JUNE 30. FISCAL 1997, 1996, 1995, AND 1994, EACH
CONTAINED 52 WEEKS AND ENDED ON JUNE 28, 1997, JUNE 29, 1996, JULY, 1, 1995 AND
JULY 2, 1994. 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.
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 relating to the
Company's distribution of Lonati sock and sheer hosiery knitting machines in
Canada in January 1992 and in Mexico in January 1997. 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 and related spare parts as of
the date of the Lonati Agreement. 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. The Lonati Agreement
extended 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 relating to the Company's distribution of Lonati sock
and sheer hosiery knitting machines in Canada in January 1992 and in Mexico in
January 1997.
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.
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,
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
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distributes these sock knitting machines as well as Lonati sheer hosiery
knitting machines in Canada and in Mexico. 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, Canada
and Mexico. Sales by the Company in the United States, Canada and Mexico of
machines manufactured by Lonati, S.p.A., generated the following percentages of
the Company's net revenues: 60.1% in fiscal 1997, 46.2% in fiscal 1996 and 44.4%
in fiscal 1995. In addition, sales of Santoni machines in the United States,
Canada and Mexico generated 7.0%, 4.8% and 9.3% of the Company's net revenues in
fiscal 1997, 1996 and 1995, 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 underwear, United States, Canada and
Brescia, Italy men's socks and women's sheer hosiery and Mexico
surgical support hose
Conti Complett, S.p.A., Sock toe closing machines and sock United States and Canada
Milan, Italy turning devices
Sperotto Rimar, S.p.A., Fabric processing and finishing machines United States
Malo, Italy
Corino Macchine, 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
Tonello, S.r.l., Garment wet processing equipment United States, Canada and Mexico
Sarcedo, Italy
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
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 any other foreign manufacturer) or obtain an
adequate remedy for a breach of any such provision, due principally to the fact
that Lonati (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
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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. The Company also produces, at
its own expense, training videos for its major lines of equipment. At September
8, 1997, the Company employed approximately 11 salespersons and 30 technical
representatives. In addition to its sales staff, the Company uses over 40
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 30-60 days.
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. Substantially 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 frequently distributes lists throughout the industry of used
machines that the Company has for sale. Additionally, the Company updates its
Internet web site listing used machines available for sale.
The Company exports certain new and used machines and parts for sale in
Canada, Mexico 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 1997, 1996 and 1995.
CUSTOMERS
The Company's customers consist primarily of the major sock manufacturers in
the United States and Canada. In fiscal 1997, the Company's two largest
customers, Manufactuier De Bas Iris Hosiery, Inc. (Canada) and Sara Lee Company,
accounted for 10.5% and 9.9%, respectively, of the Company's revenues. In fiscal
1996, the Company's two largest customers, Renfro Corporation and Manufacturier
De Bas Iris Hosiery, Inc. (Canada), accounted for 8.8% and 5.8%, respectively,
of the Company's revenues. 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. 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.
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BACKLOG
The Company's backlog of unfilled orders for new and used machines was $16.8
million at June 28, 1997 as compared to $19.3 million at June 29, 1996 and $4.1
million at July 1, 1995. Management believes that all the Company's unfilled
orders at June 28, 1997 will be filled by the end of fiscal 1998. The period of
time required to fill orders varies depending on the machine ordered.
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 with companies selling used machines. The principal competitive factors in
the distribution of sock knitting machines are technology, price, service, and
allowance of trade-ins and delivery. Management 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. Management 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 for sale 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 July 28, 1997, the Company had 83 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.
ACQUISITION OF WINK DAVIS EQUIPMENT COMPANY, INC.
On August 1, 1997, the Company acquired all of the outstanding common stock
of Wink Davis Equipment Company, Inc. ("Wink Davis"), pursuant to a Stock
Purchase Agreement dated July 31, 1997. The Company paid $9.5 million in cash
with additional conditional payments of up to an aggregate of $1.5 million in
cash to certain former
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shareholders over a five-year period based on certain pre-tax earnings
calculations. The purchase was financed with a new credit facility with
NationsBank entered into August 1, 1997. This facility replaces a former loan
agreement originally due to expire October 31, 1999. This facility provides up
to $37.0 million comprised of (a) a $7.0 million term loan with quarterly
principal payments of $250,000 beginning December 31, 1997, the balance due July
31, 2000; and (b) up to $30.0 million for letters of credit, including up to
$8.5 million in revolving funds. 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%
for LIBOR loans. In connection with this line of credit, the Company granted a
security interest in accounts receivable and inventory.
Wink Davis is based in Atlanta, Georgia and distributes laundry equipment
and parts, principally in the southeastern United States and in the Chicago,
Illinois area. Wink Davis has exclusive distributorships for certain territories
with the following suppliers: Pellerin Milnor for washer extractor equipment and
Chicago Dryer for commercial dryers. Wink Davis also sells laundry machine parts
and offers various equipment repair services. In addition, Wink Davis has
distributorships with other suppliers of laundry-related equipment. Both of
these distributorships are renewed on an annual basis; however, Wink Davis has
in fact maintained relationships with both suppliers for over 25 years.
The primary customers include, but are not limited to, hotels, hospitals,
prisons and other institutional laundry service providers. Net revenues of Wink
Davis for the twelve months ended June 30, 1997 are approximately $32.6 million.
At September 8, 1997, Wink Davis employed 94 people, including 11 sales persons
and 43 technical representatives.
Since the acquisition occurred August 1, 1997, the results of operations of
Wink Davis have not been included in the Company's consolidated financial
statements.
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, 1998. The annual rent thereunder was $168,400
from January 1, 1993 to March 31, 1995 and $311,500 from April 1995 through
March 1996. Annual rent is $356,000 from April 1996 through March 1998. The
Company also leases approximately 41,000 square feet of additional warehouse
space for approximately $116,000 per year under a lease agreement that expires
December 1997, approximately 20,000 square feet of additional warehouse space
under a lease that expires December 1997 for an annual rental of $48,000, 45,000
square feet of additional warehouse space under a lease that expires in March
1998 for an annual rental of $112,000, 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 250 square feet of
office space, in which the headquarters of its Canadian subsidiary are located,
in Montreal, Canada, for approximately $315 per month.
Wink Davis leases properties from a partnership owned by C. Alexander Davis, a
former shareholder and current President of Wink Davis, and his brother. The
table below summarizes the key components of each lease:
Lease Origination Monthly Rental Rental Square
Location Use Date Lease Term Rate Footage
Atlanta, Georgia Corporate office July 30, 1997 24 months $ 7,651 23,700
and warehouse
Charlotte, North Sales Office and July 30, 1997 24 months $ 2,012 6,045
Carolina warehouse
Wooddale, Illinois Sales Office and July 30, 1997 24 months $ 6,099 6,500
warehouse
Chester, Virginia Sales Office and July 30, 1997 24 months $ 1,982 6,000
warehouse
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ITEM 3. LEGAL PROCEEDINGS.
None.
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 1997.
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............. 57 Chairman of the Board, President and Director
Josef Sklut.................... 68 Vice President-Finance, Secretary, Treasurer and Director
C. Alexander Davis............. 49 President, Wink Davis Equipment Company, Inc.
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.
C. Alexander Davis has served as President, Wink Davis Equipment Company,
Inc., since August 1, 1997, as Executive Vice President, Wink Davis Equipment
Co., Inc., from 1973 to July 31, 1997 and as a director of Wink Davis Equipment
Company, Inc., from 1973 to July 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock has been included for quotation on the NASDAQ
National Market System under the NASDAQ symbol "SPZN" since October 1993. The
following table sets forth, for the periods indicated, the high and low sale
prices as reported by the NASDAQ National Market System.
FISCAL 1996 HIGH LOW
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First Quarter (ended September 30, 1995) .. 5.12 3.50
Second Quarter (ended December 30, 1995)... 3.88 2.62
Third Quarter (ended March 30, 1996)....... 4.50 2.50
Fourth Quarter (ended June 29, 1996)....... 5.62 3.50
FISCAL 1997
First Quarter (ended September 28, 1996) .. 5.75 3.75
Second Quarter (ended December 28, 1996)... 6.88 4.38
Third Quarter (ended March 29, 1997)....... 7.13 4.50
Fourth Quarter (ended June 28, 1997)....... 6.25 3.88
As of June 28, 1997, there were approximately 271 stockholders of record of
the Common Stock.
The Company has never declared or paid any dividends on its Common Stock.
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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
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June 28, June 29, July 1, July 2, July 3,
1997 1996 1995 1994 1993
(IN THOUSANDS, EXCEPT NET INCOME PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net revenues ................................. $ 79,103 $ 46,280 $ 61,597 $ 69,526 $ 39,552
Cost of sales ................................ 65,935 40,547 53,986 60,004 32,635
-------- -------- -------- -------- --------
Gross profit ................................. 13,168 5,733 7,611 9,522 6,917
Selling, general and administrative expenses . 8,855 6,577 5,478 4,350 3,651
-------- -------- -------- -------- --------
Operating income (loss) ...................... 4,313 (844) 2,133 5,172 3,266
Interest (income) expense, net ............... (18) (43) (15) 6 186
-------- -------- -------- -------- --------
Income (loss) before taxes on income ......... 4,331 (801) 2,148 5,166 3,080
Taxes (benefit) on income .................... 1,645 (228) 854 1,869 661
-------- -------- -------- -------- --------
Net income (loss) ............................ 2,686 (573) 1,294 3,297 2,419
Preferred stock dividends .................... -- -- 41 -- --
-------- -------- -------- -------- --------
Net income (loss) applicable to common stock.. $ 2,686 $ (573) $ 1,294 $ 3,256 $ 2,419
======== ======== ======== ======== ========
PER SHARE DATA:
Net income (loss) per share .................. $ .80 $ (.17) $ .40 $1.12 $ 1.03
Weighted average number of shares ............ 3,354 3,284 3,271 2,905 2,360
BALANCE SHEET DATA:
Working capital .............................. $ 18,741 $ 16,313 $ 17,613 $ 16,579 $ 4,553
Total assets ................................. 43,174 36,149 35,704 30,160 18,145
Short-term debt .............................. -- -- -- -- 175
Long-term debt, including current maturity ... 112 148 147 293 1,060
Stockholders' equity ......................... 20,938 18,203 18,782 17,483 5,137
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 JUNE 28, 1997 COMPARED TO YEAR ENDED JUNE 29, 1996
NET REVENUES. Net revenues in fiscal 1997 were $79.1 million as compared to
$46.3 million in fiscal 1996, an increase of $32.8 million or 70.9%. This
increase is due to a combination of price and volume increases. This increase
reflects a $32.2 million increase in sales of hosiery equipment, a $0.7 million
increase in sales of dyeing and finishing equipment, a $0.6 million increase in
sales of garment wet processing equipment, a $1.2 million increase in parts and
other sales activities partially offset by a $1.9 million decrease in sales of
sweater manufacturing and related equipment. The market for hosiery equipment
is influenced by the retail sector, changes in technology and general economic
conditions affecting the Company's customers.
COST OF SALES. In fiscal 1997, cost of sales was $65.9 million as compared
to $40.5 million in fiscal 1996, an increase of $25.4 million or 62.6%. Cost of
sales as a percent of revenue decreased to 83.4% in fiscal 1997 from 87.6% in
fiscal 1996. This decrease results from increased demand for hosiery equipment
resulting in increased sales prices and increased field service efficiency
arising from increased volume. Management cannot predict whether these increased
gross profit margins will continue in the future as they are dependent on the
market for hosiery equipment.
7
SELLING EXPENSES. Selling expenses increased to $5.8 million in fiscal 1997
from $4.7 million in fiscal 1996, an increase of 23.6%. The increase results
from overall increased selling activity, including salaries, sales commissions,
exhibition expenses and letter of credit expenses. These increases are partially
offset by elimination of expenses of the CopyGuard division, which was disposed
in fiscal 1996.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for
fiscal 1997 totaled $3.0 million, an increase of $1.1 million from $1.9 million
in fiscal 1996. The increase results primarily from additional salaries and
management bonuses.
INTEREST INCOME. Interest income is expressed net of interest expense. In
fiscal 1997, interest income exceeded interest expense by $18,000. Net interest
income was $43,000 in fiscal 1996.
TAXES (BENEFIT) ON INCOME (LOSS). The provision for income taxes in fiscal
1997 is $1,645,000 or 38.0% of income before taxes. In fiscal 1996 the provision
for income taxes is a tax benefit of $228,000 or 28.5% of loss before taxes. The
higher effective tax rate in fiscal 1997 results from the combined effects of
non-deductible entertainment and life insurance expenses and U.S. profits taxed
at rates higher than foreign tax rates.
NET INCOME (LOSS). Net income for fiscal 1997 increased to $2.7 million
compared to a net loss of $0.6 million for fiscal 1996. Net income per share
increased to $0.80 per share in fiscal 1997 compared to a net loss per share of
$0.17 for fiscal 1996.
YEAR ENDED JUNE 29, 1996 COMPARED TO YEAR ENDED JULY 1, 1995
NET REVENUES. Net revenues in fiscal 1996 were $46.3 million as compared to
$61.6 million in fiscal 1995, a decrease of $15.3 million, or 24.9%. This
decrease reflects a $11.3 million decline in sales of hosiery equipment, a $7.3
million decline in sales of sweater manufacturing and related equipment, a $0.5
million decline in parts and other sales activities partially offset by a $3.8
million increase in sales of knitted fabric machines. The Company's backlog of
unfilled orders for new and used machines at June 29, 1996, was $19.3 million as
compared to $4.1 million at July 1, 1995. The improved level of backlog in 1996
results from substantially increased demand for sock knitting machines.
COST OF SALES. In fiscal 1996, cost of sales was $40.5 million as compared
to $54.0 million in fiscal 1995, a decrease of $13.5 million, or 24.9%, matching
the relative decline in revenues. Cost of sales as a percent of revenues was
87.6% in fiscal 1996, unchanged from fiscal 1995.
SELLING EXPENSES. Selling expenses increased to $4.7 million in fiscal 1996
from $3.6 million in fiscal 1995, an increase of 31.2%. A significant element of
the increase was disposal of the CopyGuard sales division. During the third
quarter of fiscal 1996, management decided to dispose of the Company's CopyGuard
division. CopyGuard was developing a computer-generated matrix to invisibly mark
garments to prevent counterfeiting. However, its continuing cash requirements
were diverting funds from the Company's core business while prospects of
bringing the system to market, successfully, were diminishing. Although the
system developed by CopyGuard functioned successfully from a technical point of
view, the system had not proven to be commercially feasible for the prospective
users. Other elements in the increase were salespersons' salaries and
commissions, warehouse and office space costs, travel, insurance,
telecommunications, and insurance, partially offset by a decrease in letter of
credit expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
totaled $1,878,000, down by $17,000 from $1,895,000 in fiscal 1995. This small
decrease resulted from declines in salaries and bonuses and bad debt provisions,
partially offset by increases in professional fees and in life insurance
expenses.
INTEREST INCOME. Interest income is expressed net of interest expense. In
fiscal 1996, interest income exceeded interest expense by $43,000. Net interest
income was $15,000 in fiscal 1995.
TAXES (BENEFIT) ON INCOME (LOSS). The provision for income taxes in fiscal
1996 is a tax benefit of $228,000 on the $801,000 loss from operations, or 28.5%
of the loss. In the prior year, the tax provision was 39.8% of income before
8
taxes. The current year effective rate reflects the combined effects of
non-deductible entertainment and life insurance expenses.
NET INCOME (LOSS). Net income applicable to common stock declined from $1.3
million in fiscal 1995 to a loss of $0.6 million. Net loss per share in fiscal
1996 was $0.17. This compares to $0.40 per share net income in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
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
acqusition 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.
The Company's operations require a substantial line of letters of credit to
cover its customers' orders. At June 28, 1997, the Company's credit facility
provides for an overall facility of $ 25.0 million for letters of credit,
including up to $4.0 million in revolving funds. This facility, originally due
to expire on October 31, 1999, has been refinanced in conjunction with the
purchase of all of the outstanding common stock of Wink Davis Equipment Company.
The Company entered into a new credit facility on August 1, 1997. This
facility provides up to $37.0 million comprised of (a) a $7.0 million term loan
with quarterly principal payments of $250,000 beginning December 31, 1997, the
balance due July 31, 2000; and (b) up to $30.0 million for letters of credit,
including up to $8.5 million in revolving funds. 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% for LIBOR loans. In connection with this line of credit, the
Company granted a security interest in accounts receivable and inventory.
Working capital at June 28, 1997 was $18.7 million as compared to $ 16.3
million at June 29, 1996, an increase of $2.4 million. Operating activities in
fiscal 1997 used $3.4 million in funds. In fiscal 1996, such activities provided
$6.4 million in funds. This decrease in cash flow from operations resulted
primarily from substantial increases in accounts receivable and inventory. In
fiscal 1997, investing activities used $820,000 as compared to usage of $812,000
in the prior year. As a result cash and cash equivalents decreased by $4.2
million to total 3.8 million at June 28, 1997 as compared to $8.0 million at
June 29, 1996.
SEASONALITY AND OTHER FACTORS
There are certain seasonal factors that may affect the Company's business.
Traditionally, manufacturing businesses in Italy close for the month of August,
and the Company's customers close for one week in July. Consequently, no
shipments or deliveries, as the case may be, of machines distributed by the
Company that are manufactured in Italy are made during these periods which fall
in the Company's first quarter. In addition, manufacturing businesses in Italy
generally close for two weeks in December, during the Company's second quarter.
Fluctuations of customer orders or other factors may result in quarterly
variations in net revenues from year to year.
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
9
exchange contracts. The Company is not able to assess the quantitative effect
that such currency fluctuations could have upon the Company's operations. There
can be no assurance that fluctuations in foreign currency exchange rates will
not have a significant adverse effect on future operations.
DISCLOSURE ABOUT FOREIGN CURRENCY RISK
A significant number of the Company's purchases of machinery for resale is
denominated in Italian Lira. In the ordinary course of business, the Company
enters into foreign exchange forward contracts to mitigate the effect of foreign
currency movements between the Italian Lira and the US dollar from the time of
placing the Company's purchase order until final payment for the purchase is
made. The contracts have maturity dates that do not exceed 12 months.
Substantially all of the increase or decrease of the Lira denominated purchased
price is offset by the gains and losses of the foreign exchange contract. The
unrealized gains and losses on these contracts are deferred and recognized in
the results of operations in the period in which the hedged transaction is
consummated.
At June 28, 1997, the Company had contracts maturing through April 1998 to
purchase approximately 27.4 billion Lira for approximately $16.2 million, which
approximates the spot rate on that date.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
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-13 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 Stockholders to be held November 19, 1997 (the "1997 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 1997 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 1997 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 1997 Proxy Statement under
the section captioned "Certain Transactions," which section is incorporated
herein by reference.
10
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 - June 28, 1997 and June 29, 1996.......... F-2
Consolidated Financial Statements for each of the three years in the
periods ended June 28, 1997, June 29, 1996 and July 1, 1995:
Consolidated Statements of Operations.................................. 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-8
2. FINANCIAL STATEMENT SCHEDULES:
Report of Independent Certified Public Accountants...................... S-1
Schedule II - Valuation and Qualifying Accounts......................... S-2
11
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
On August 14, 1997, the Company filed a Current Report on Form 8-K
pursuant to Item 2 thereof reporting that on August 1, 1997, the Company
purchased all of the outstanding common stock of Wink Davis Equipment Co., Inc.
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 25, 1997
By: /s/ Robert S. Speizman
___________________________
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
/s/ Robert S. Speizman
_____________________________ President and Director September 25, 1997
Robert S. Speizman (Principal Executive Officer)
/s/ Josef Sklut
_____________________________ Vice President-Finance, Secretary, September 25, 1997
Josef Sklut Treasurer and Director
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Steven P. Berkowitz
_____________________________ Director September 22, 1997
Steven P. Berkowitz
/s/ William Gorelick
_____________________________ Director September 22, 1997
William Gorelick
/s/ Scott C. Lea
_____________________________ Director September 25, 1997
Scott C. Lea
13
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 June 28, 1997 and June 29, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 28, 1997. 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 audits 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 June 28, 1997 and June 29, 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended June 28, 1997, in conformity with generally accepted accounting
principles.
Charlotte, North Carolina BDO Seidman, LLP
September 9, 1997
F-1
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 28, June 29,
1997 1996
ASSETS
Current:
Cash and cash equivalents.................................$ 3,832,534 $ 7,981,723
Accounts receivable (Notes 2 and 6) ....................... 21,075,138 12,160,449
Inventories (Notes 3 and 6) ............................... 12,970,134 11,639,552
Prepaid expenses and other current assets ................. 2,988,786 2,340,111
------------ ------------
TOTAL CURRENT ASSETS ................................... 40,866,592 34,121,835
------------ ------------
Property and Equipment : (Notes 4 and 7)
Leasehold improvements .................................... 750,140 550,684
Machinery and equipment ................................... 1,770,886 1,208,508
Furniture, fixtures and transportation equipment .......... 1,078,429 1,218,570
------------ ------------
3,599,455 2,977,762
Less accumulated depreciation and amortization ............ (1,811,183) (1,525,058)
------------ ------------
NET PROPERTY AND EQUIPMENT ............................. 1,788,272 1,452,704
------------ ------------
Other ......................................................... 518,957 574,685
------------ ------------
$ 43,173,821 $ 36,149,224
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable .......................................... $ 19,075,766 $ 14,864,567
Customers' deposits ....................................... 1,380,621 2,723,466
Accrued expenses .......................................... 1,667,621 209,881
Current maturities of long-term debt (Note 7) ............. 1,769 11,051
------------ ------------
TOTAL CURRENT LIABILITIES .............................. 22,125,777 17,808,965
Long-Term Debt (Note 7) ....................................... 110,344 137,334
------------ ------------
TOTAL LIABILITIES ...................................... 22,236,121 17,946,299
------------ ------------
Commitments and Contingencies (Notes 4, 9, 10, 11 and 12)
Stockholders' Equity (Notes 8 and 9):
Common Stock - par value $.10; authorized 20,000,000
shares, issued 3,262,866, outstanding 3,235,266; and
authorized 6,000,000 shares, issued 3,236,199,
outstanding 3,208,599 ............................... 326,287 323,620
Additional paid-in capital ................................ 12,512,299 12,459,965
Retained earnings ......................................... 8,209,911 5,524,360
Foreign currency translation adjustment ................... (11,000) (5,223)
------------ ------------
Total .................................................. 21,037,497 18,302,722
Treasury stock, at cost, 27,600 common shares ............. (99,797) (99,797)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ............................. 20,937,700 18,202,925
------------ ------------
$ 43,173,821 $ 36,149,224
============ ============
See accompanying summary of accounting policies and notes
to consolidated financial statements.
F-2
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
------------------------------------------
June 28, June 29, July 1,
1997 1996 1995
NET REVENUES (Note 1)........... $79,103,225 $ 46,279,969 $ 61,596,833
---------- ------------ ----------
COSTS AND EXPENSES:
Cost of sales................. 65,934,696 40,546,962 53,986,242
Selling expenses.............. 5,810,360 4,699,280 3,582,719
General and administrative
expenses.................... 3,045,269 1,878,193 1,894,915
----------- ---------- -----------
Total costs and expenses... 74,790,325 47,124,435 59,463,876
----------- ---------- -----------
4,312,900 (844,466) 2,132,957
INTEREST (INCOME) EXPENSE, net
of interest income of $113,137,
$126,522 and $101,562........ (17,651) (43,400) (14,858)
--------- --------- -------------
NET INCOME (LOSS) BEFORE TAXES.. 4,330,551 (801,066) 2,147,815
TAXES (BENEFIT) ON INCOME
(Note 5)..................... 1,645,000 (228,000) 854,000
------------- ---------- -------------
NET INCOME (LOSS).............. $2,685,551 $(573,066) $1,293,815
========== ========== ===============
NET INCOME (LOSS) PER SHARE.... $0.80 $(0.17) $0.40
========== ========== ==============
Weighted average number of
common and equivalent
shares....................... 3,353,786 3,283,828 3,271,464
========== ========== ==============
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 Currency
Common Common Paid-In Retained Translation Treasury Stockholders'
Shares Stock Capital Earnings Adjustment Stock Equity
------ ---------- ----------- -------- ---------- -----------------------
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
Net Loss.................... - - - ( 573,066) - - (573,066)
Foreign currency translation
adjustment.............. - - - - (5,954) - (5,954)
--------- --------- ---------- ------------ ------ --------- ---------
BALANCE, JUNE 29, 1996 3,236,199 323,620 12,459,965 5,524,360 (5,223) (99,797) 18,202,925
Net income................. - - - 2,685,551 - - 2,685,551
Exercise of stock options... 26,667 2,667 52,334 - - - 55,001
Foreign currency translation
adjustment.............. - - - - (5,777) - (5,777)
--------- ----------- ---------- ------------ --------- ---------- -------
BALANCE, JUNE 28, 1997..... 3,262,866 $ 326,287 $12,512,299 $ 8,209,911 $ (11,000) $ (99,797) $20,937,700
========= ========= ========== ========== ========== ========= ==========
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
-----------------------------
June 28, June 29, July 1,
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................. $ 2,685,551 $ (573,066) $ 1,293,815
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ...................... 484,152 173,336 166,965
Provision for losses on accounts receivable ........ 214,521 113,500 171,477
Provision for inventory obsolescence ............... 154,133 139,436 200,000
Provision for deferred income taxes ................ (121,000) (58,000) (75,000)
Provision for deferred compensation ................ (25,220) 6,782 (6)
Foreign currency translation adjustment ............ (5,777) (5,954) 731
(Increase) decrease in:
Accounts receivable .............................. (9,129,210) 3,804,734 (1,079,970)
Inventories ...................................... (1,484,715) 1,649,026 (6,331,178)
Prepaid expenses ................................. (701,675) 159,244 (1,176,461)
Other assets ..................................... 229,728 (69,076) 43,662
Increase (decrease) in:
Accounts payable ............................. 4,211,199 (192,360) 5,015,062
Accrued expenses and customers' deposits...... 114,895 1,214,580 (623,547)
----------- ----------- -----------
Net cash provided by (used in) operating activities (3,373,418) 6,362,182 (2,394,450)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................. (846,845) (1,159,659) (520,274)
Proceeds from property and equipment disposals..... 27,125 347,557 59,377
----------- ----------- -----------
Net cash used in investing activities............... 43,949 (812,102) (460,897)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long term debt................. (11,052) (5,216) (145,958)
Issuance of common stock upon exercise of stock
options .......................................... 55,001 -- 4,500
----------- ----------- -----------
Net cash provided by (used in) financing
activities ..................................... 43,949 (5,216) (141,458)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ................................... (4,149,189) 5,544,864 (2,996,805)
CASH AND CASH EQUIVALENTS, at beginning of year..... 7,981,723 2,436,859 5,433,664
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, at end of year ......... $ 3,832,534 $ 7,981,723 $ 2,436,859
============ ============ ============
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.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with an original maturity of three months or less
to be cash equivalents. The carrying amount of cash and cash equivalents
approximates fair value because of the short-term maturity of these instruments.
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 a 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 June 28, 1997, the
Company had contracts maturing through April 1998 to purchase approximately 27.4
billion Lira for approximately $16.2 million, which approximates the spot rate
on that date.
TAXES ON INCOME
The Company has adopted the FAS Statement No. 109, "Accounting for Income
Taxes". Accordingly, deferred tax liabilities or assets at the end of each
period are determined using the tax rate expected to be in effect when taxes are
actually paid or recovered. Income tax expense will increase or decrease in the
same period in which a change in tax rates is enacted.
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 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 June 28,
1997, June 29, 1996 and July 1, 1995 included 52 weeks.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-6
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES - (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued FAS No.
128, "Earnings per Share", which established new standards for computations of
earnings per share. Statement No. 128 will be effective for periods ending after
December 15, 1997 and will require presentation of: (1) "Basic Earnings per
Share", computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding during the period and (2)
"Diluted Earnings per Share", which gives effect to all dilutive potential
common shares that were outstanding during the period, by increasing the
denominator to include the number of additional common shares that would have
been outstanding if the dilutive potential common shares had been issued. Had
FAS 128 been effective for the years ended June 28, 1997 and June 29, 1996,
basic and diluted earnings per share would have been as follows:
June 28, 1997 June 29, 1996
Basic earnings per share.............. $0.83 $(0.17)
Diluted earnings pe share............. $0.82 $(0.17)
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME (SFAS
130), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.
SFAS 130 is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Because of the recent issuance of this standard,
management has been unable to fully evaluate the impact, if any, the standard
may have on future financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementations of this
standard.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, Disclosures about SEGMENTS OF AN ENTERPRISE and RELATED INFORMATION, (SFAS
131) which supersedes SFAS No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A
BUSINESS ENTERPRISE. SFAS 131 establishes standards for the way that public
companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
SFAS 131 is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Because of the recent issuance of this standard,
management has been unable to fully evaluate the impact, if any, it may have on
future financial statement disclosures. Results of operations and financial
position, however, will be unaffected by implementation of this standard.
F-7
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 $12,433,000, $7,196,000
and $8,547,000 during fiscal 1997, 1996 and 1995, respectively. There were no
export sales by the Canadian operations. Sales of the Company's United Kingdom
subsidiary amounted to approximately $1,901,000 in 1997, essentially all of
which were to customers in the United Kingdom. This operation was closed
during fiscal 1997 with no significant current or on-going impact to the
Company's operations.
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.p.A. and one
of its wholly owned subsidiaries (Santoni). Sales by the Company in the United
States and Canada of machines manufactured by Lonati, S.p.A., generated the
following percentages of the Company's net revenues: 60.1% in 1997, 46.2% in
1996 and 44.4% in 1995. In addition, sales of Santoni machines in the United
States and Canada generated 7.0%, 4.8% and 9.3% of the Company's net revenues in
fiscal 1997, 1996 and 1995, respectively. In 1997, approximately 11% and 10% of
revenues consisted of sales to the Company's two largest customers. In 1996,
approximately 9% and 6% of revenues consisted of sales to the Company's two
largest customers. In 1995, approximately 7% and 5% 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:
June 28, 1997 June 29, 1996
Trade $ 21,549,61 $12,420,405
Less allowance for doubtful accounts (474,477) (259,956)
---------- ------------
Net accounts receivable $ 21,075,138 $12,160,449
=========== ============
NOTE 3 -- INVENTORIES
Inventories are summarized as follows:
June 28, 1997 June 29, 1996
Machines
New $ 3,961,362 $ 1,645,825
Used 4,807,479 6,565,310
Parts and supplies 4,201,293 3,428,310
------------- -----------
Total 12,970,134 $11,639,552
============= ===========
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. The lease extends through March 1998. Lease payments to the
partnership approximated $356,000, $323,000, and $204,000 in fiscal years 1997,
1996 and 1995, respectively.
The Company leases furniture and fixtures under noncancelable capital
lease agreements which expire at various dates through 1998.
F-8
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Capitalized leases included in property and equipment are summarized as
follows:
June 28, 1997 June 29, 1996
-------------- --------------
Furniture, fixtures and transportation equipment $ 6,568 $ 105,264
Less accumulated amortization..................................... (2,069) (89,037)
-------------- --------------
Net leased property............................................... $ 4,499 $ 16,227
============== ==============
As of June 28, 1997, 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
------- ---------
1998.............................................................. $ 2,180 $ 605,193
1999.............................................................. - 181,102
2000.............................................................. - 69,719
2001.............................................................. - 4,936
2002.............................................................. - 4,936
Beyond............................................................ - 9,873
-------------- ----------
Total minimum lease payments ................................ $ 2,180 $ 875,759
========
Less amount representing interest............................ (411)
-----------
Present value of net minimum lease payments $ 1,769
==========
Total rent expense for operating leases approximated $1,021,600, $791,400
and $515,800 for fiscal years 1997, 1996 and 1995, respectively.
NOTE 5 -- TAXES ON INCOME
Provisions for federal and state income taxes in the consolidated
statements of operations are made up of the following components:
1997 1996 1995
---- ---- ----
Current:
Federal...................................... $ 1,482,000 $ (70,000) $ 673,000
Foreign...................................... 2,000 (85,000) 74,000
State........................................ 282,000 (15,000) 182,000
------------ ------------ ---------
1,766,000 (170,000) 929,000
------------ ------------ ---------
Deferred:
Federal...................................... (87,000) (50,000) $ (54,000)
State........................................ (34,000) (8,000) (21,000)
------------ ------------ ---------
(121,000) (58,000) (75,000)
------------ ------------ ---------
Total taxes (benefit) on income.................. $ 1,645,000 $ (228,000) $ 854,000
========= ============ =========
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:
June 28, 1997 June 29, 1996
Net current assets................................................ $ 383,000 $ 436,000
Net noncurrent assets (liabilities)............................... 152,000 (22,000)
----------- -----------
$ 535,000 $ 414,000
=========== ===========
F-9
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
-----------------------------------------
June 28, June 29,
1997 1996
Inventory valuation reserves................................. $ 162,000 $ 191,000
Depreciation................................................. (107,000) (78,000)
Deferred charges............................................. 107,000 69,000
Capitalized leases........................................... - 4,000
Inventory capitalization .................................... 191,000 130,000
Accounts receivable reserves................................. 182,000 97,000
Other......................................................... - 1,000
----------- ----------
Net deferred tax asset................................... $ 535,000 $ 414,000
========== =========
The Company's effective income tax rates were different than the U.S.
Federal statutory tax rate for the following reasons:
1997 1996 1995
---- ---- ----
U.S. Federal statutory tax rate................................... 34.0% 34.0% 34.0%
State income taxes, net of Federal income tax benefit 4.3 3.6 3.5
Non-deductible expenses........................................... 1.5 (5.3) 1.7
Foreign tax rates................................................. (0.8) (4.9) 1.2
Net tax effect of prior year adjustments.......................... - 2.5 -
Other............................................................. (1.0) (1.4) (0.6)
----- ----- -----
Effective tax rate................................................ 38.0% 28.5% 39.8%
==== ==== ====
NOTE 6 -- LINE OF CREDIT
The Company has a credit facility with NationsBank, expiring October
31, 1999. This facility provides $25.0 million including up to a maximum of $4.0
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 12)
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, restrictions on dividends and certain fixed charge coverage. As of June
28, 1997, the Company was in compliance with such covenants.
This credit facility was refinanced on August 1, 1997 in conjunction
with the purchase of Wink Davis Equipment Company. (See Note 13)
NOTE 7 -- LONG-TERM DEBT
Long-term debt consists of:
June 28, 1997 June 29, 1996
Total Current Total Current
Capital lease obligations (Note 4) $ 1,769 $ 1,769 $ 12,821 $ 11,051
Other.......................................... 110,344 - 135,564 -
------- ------------ -------- ---------
Total.......................................... 112,113 $ 1,769 148,385 $ 11,051
=========== =========
Current maturities............................. ( 1,769) (11,051)
--------- --------
$ 110,344 $ 137,334
======= =======
Annual maturities of long-term debt are 1998, $1,769; 1999, $0; 2000,
$0; 2001, $0; 2002, $0; thereafter, $110,344.
F-10
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 8 -- STOCK OPTIONS
The Company has reserved 125,000, 250,000, 145,000 and 145,000 shares
of Common Stock under four employee stock plans, adopted in 1981, 1991, 1995 and
1996, respectively. As of June 28, 1997, options to purchase 11,522, 165,403,
145,000 and 145,000 were outstanding under the 1981, 1991, 1995 and 1996 Plans,
respectively. Each option granted under the 1981, 1991 and 1995 Plans 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. Each
option granted under the 1996 Plan becomes exercisable in cumulative increments
of 50 and 100% on the first and second anniversaries of the date of grant
respectively. All options, subject to certain exceptions with regard to
termination of employment and the percentage of outstanding shares of common
stock owned, must be exercised within ten (10) years from the date of the grant.
The option price under the 1981 and 1991 Plans, 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
the grant. The option price under the 1995 and 1996 Plans is not limited and may
be less than 100% of the fair market value on the date of the grant. A summary
of employee stock option transactions and other information for 1997, 1996, and
1995 follows:
Year Ended
-------------------------------------------------------------------------------
Weighted Weighted Weighted
June 28, Average June 29, Average July 1, Average
1997 Price/Sh. 1996 Price/Sh. 1995 Price/Sh.
Shares under option, beginning of year 334,092 $3.13 150,429 $3.15 124,957 $2.71
Options granted................................ 159,500 6.00 183,663 3.10 29,722 4.84
Options exercised.............................. (26,667) 2.06 - - (1,250) 1.88
Options expired................................ - - - - (3,000) 1.88
----------- --------- ----------- ------- ---------- -----
Shares under option, end of year............... 466,925 $ 4.17 334,092 $ 3.13 150,429 $ 3.15
=========== ========= =========== ====== =========== ======
Options exercisable............................ 141,668 117,086 78,521
=========== =========== ===========
Prices of options exercised.................... $2.063 - $.75 to
- $1.875
Prices of options outstanding, end of year $.75 to $.75 to $.75 to
$6.00 $5.50 $5.50
The Company has reserved 15,000 shares of Common Stock under a
non-employee directors stock option plan adopted in 1995. Each option granted
under the Plan becomes exercisable in cumulative increments of 50% and 100% on
the first and second anniversaries of the date of the grant, respectively, and
subject to certain exceptions must be exercised within ten (10) years from the
date of the grant. The option price equals the fair market value per share of
Common Stock on the date of the grant. Options to purchase 6,000 shares were
granted and outstanding at the end of the year at a price of $2.875 to $5.4375.
A summary of non-employee directors stock option and other information
for 1997 and 1997 follows:
Year Ended
--------------------------------------------------------
Weighted Weighted
June 28, Average June 29, Average
1997 Price/Sh. 1996 Price/Sh.
Shares under option, beginning of year....................... 3,000 $2.88 - $ -
Options granted.............................................. 3,000 5.44 3,000 2.88
Options exercised............................................ - - - -
Options expired.............................................. - - - -
----------- ------- ------------- -------
Shares under option, end of year............................. 6,000 $ 4.16 3,000 $ 2.88
=========== ========= ============= ========
Options exercisable.......................................... 1,500 -
=========== =============
Prices of options exercised.................................. - -
Prices of options outstanding, end of year .................. $2.875 to $2.875
$5.4375
F-11
SPEIZMAN INDUSTRIES INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plans. The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants: expected lives of 9.2 years, expected
volatility of 0.578, risk-free interest rate of 6.5% and dividend yield of
0.0%.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. Had
compensation cost for the Company's stock option plans been determined based on
the fair value at the grant date for awards consistent with the provisions of
SFAS No. 123, the Company's net earnings and earnings per share would have been
changed to the pro forma amounts indicated below:
Year Ended Year Ended
June 28, 1997 June 29, 1996
Pro forma net income ......................................... $ 2,512,366 $ (627,969)
Pro forma earnings per share ................................. $ 0.75 $ (0.19)
The following table summarizes information about stock options
outstanding at June 28, 1997:
RANGE OF EXERCISE PRICES $0.75 to $6.00
Outstanding options
Number outstanding at June 28, 1997 472,925
Weighted average remaining contractual life (years) 7.8
Weighted average exercise price $ 4.17
Exercisable options
Number outstanding at June 28, 1997 143,168
Weighted average exercise price $ 3.06
The Weighted-average fair value of options granted during the year was
$4.47.
NOTE 9 -- STOCK REDEMPTION AGREEMENT
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 June 28, 1997, there were 635,649 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 -- 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
$48,885, $53,885 and $43,885 for the fiscal years 1997, 1996 and 1995,
respectively.
NOTE 11 -- EMPLOYEES' RETIREMENT PLAN
The Company adopted 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 50% (25% prior to September 13, 1996) of each
employee's contribution up to 4% of pretax eligible compensation. The Company's
matching contributions totaled approximately $47,000, $21,000 and $17,000 in
fiscal years 1997, 1996 and 1995, respectively.
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
The Company had outstanding commitments backed by letters of credit of
approximately $16,631,000 and $13,244,000 at June 28, 1997 and June 29, 1996,
respectively, relating to the purchase of machine inventory for delivery to
customers.
F-12
SPEIZMAN INDUSTRIES INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 13 -- SUBSEQUENT EVENT
On August 1, 1997, the Company purchased all of the outstanding common
stock of Wink Davis Equipment Company, Inc. ("Wink Davis"), pursuant to a Stock
Purchase Agreement dated July 31, 1997. The Company paid $9.5 million. There is
an additional conditional payment of up to $1.5 million in cash over a five-year
period based on certain pre-tax earnings calculations. Wink Davis is based in
Atlanta, Georgia and distributes laundry equipment and parts, principally in the
southeastern United States, as well as in the Chicago, Illinois area. The
acquisition has been accounted for by the purchase method at August 1, 1997.
Since the acquisition was accounted for at August 1, 1997, the results of
operations of Wink Davis have not been included in the Company's consolidated
financial statements. Net revenues of Wink Davis for the twelve months ended
June 30, 1997 were approximately $32.6 million.
NOTE 14 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Year Ended
--------------------------------------------------------------------
June 28, June 29, July 1,
1997 1996 1995
Cash paid during year for:
Interest................................................... $ 101,315 $ 81,578 $ 86,704
Income taxes............................................... 1,440,696 120,086 524,464
F-13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
SPEIZMAN INDUSTRIES, INC.
The audits referred to in our report dated September 9, 1997, relating to the
consolidated financial statements of Speizman Industries, Inc. and subsidiaries
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.
Charlotte, North Carolina BDO Seidman, LLP
September 9, 1997
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 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
Fiscal year ended June 29, 1996:
Reserve for doubtful accounts ..........$207,158 $113,500 $ - $ 60,702 $259,956
Reserve for inventory obsolescence .....$595,990 $139,436 $ - $226,456 $508,970
Fiscal year ended June 28, 1997:
Reserve for doubtful accounts ..........$259,956 $233,671 $ - $ 19,150 $474,477
Reserve for inventory obsolescence .....$508,970 $154,133 $ - $241,629 $421,474
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 (the "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 Amendment of Certificate of Incorporation of the
Company, dated January 31, 1997.
3.5 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 Distribution Agreement by and between Company and Lonati, dated
January 2, 1997, relating to the Company's distribution of
circular knitting machines, ladies and men in Mexico.
10.4 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.)
10.5 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.)
10.6 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.)
10.7 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 Annual Report
on Form 10-K for the fiscal year ended July 2, 1994, File No.
0-8544, filed with the Commission on September 30, 1994 (the "1994
Form 10-K").)
10.8 Letter from Orizio Paolo, S.p.A., Brescia, Italy, dated July 18,
1995, appointing Company as its exclusive distributor.
(Incorporated by reference to Exhibit 10.15 contained in the
Company's Annual Report on Form 10-K for the fiscal year ended July
1, 1995, File No. 0-8544, filed with the Commission on September
29, 1995 (the "1995 Form 10-K").)
10.9 Independent Distributor Agreement between the Company and Orizio
Paolo, S.p.A., dated August 1, 1995. (Incorporated by reference to
Exhibit 10.15.1 contained in the Company's Annual Report on Form
10-K for fiscal year ended June 29, 1996, File No. 0-8544, filed
with the Commission on September 25, 1996 (the "1996 Form 10-K").)
10.10 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.)
10.11 First Amendment to Split Dollar Insurance Agreement, dated
September 4, 1996, between the Company and Richard A. Bigger,
Jr., Successor Trustee of the Robert S. Speizman Irrevocable
Insurance Trust. (Incorporated by reference to Exhibit 10.16.1
contained in the Company's 1996 Form 10-K.)
10.12 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 Company and
Speizman Brothers Partnership dated April 1, 1995. (Incorporated by
reference to Exhibit 10.18 contained in the Company's 1995 Form
10-K.)
10.13 Second Lease Amendment and Extension Agreement between the Company
and Speizman Brothers Fifth Street Partnership (formerly Speizman
Brothers Partnership), dated April 1, 1996. (Incorporated by
reference to Exhibit 10.18.1 contained in the Company's 1996 Form
10-K.)
10.14 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.)
10.15 Letter Agreement extending lease between Speizman Canada, Inc., and
Metro II & III, dated October 21, 1994. (Incorporated by reference
to Exhibit 10.20 contained in the Company's 1995 Form 10-K.)
10.16 Memorandum of Agreement of Extension of Lease between Speizman
Canada, Inc., and Metro II & III, dated November 21, 1995.
(Incorporated by reference to Exhibit 10.20.1 contained in the
Company's 1996 Form 10-K.)
10.17 Memorandum of Agreement of Extension of Lease between Speizman
Canada, Inc., and Metro II & III, dated January 29, 1997.
10.18 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.)
10.19 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.)
10.20 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.)
10.21 Modification and Extension of Lease between the Company and B.F.
Knott, dated October 17, 1994. (Incorporated by reference to
Exhibit 10.24 contained in the Company's 1995 Form 10-K.)
10.22 Modification and Extension of Lease between the Company and B.F.
Knott, dated February 13, 1995. (Incorporated by reference to
Exhibit 10.25 contained in the Company's 1995 Form 10-K.)
10.23 Modification and Extension of Lease between the Company and
Berryhill Investment Company, LLC, dated September 27, 1995.
(Incorporated by reference to Exhibit 10.25.1 contained in the
Company's 1996 Form 10-K.)
10.24 Lease Agreement between the Company and Daniel H. Porter, dated
August 17, 1995. (Incorporated by reference to Exhibit 10.26
contained in the Company's 1995 Form 10-K.)
10.25 Extension of Lease Agreement between the Company and Daniel H.
Porter, dated May 14, 1997.
10.26 Lease Agreement between the Company and Kathryn B. Godley, dated
March 5, 1996. (Incorporated by reference to Exhibit 10.27
contained in the Company's 1996 Form 10-K.)
10.27 Lease Agreement between the Company and Hans L. Lengers, LLC,
dated February 15, 1996. (Incorporated by reference to Exhibit
10.28 contained in the Company's 1996 Form 10-K.)
10.28* 1981 Incentive Stock Option Plan of the Company. (Incorporated by
reference to Exhibit 10.19 contained in the 1993 Form S-1.)
10.29* 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.)
10.30* 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.)
10.31* Speizman Industries, Inc. Nonqualified Stock Option Plan as
amended on October 4, 1996. (Incorporated by reference to Exhibit
99.1 to the Company's Registration Statement on Form S-8,
registration no. 333-23503, filed with the Commission on March
18, 1997.)
10.32* Speizman Industries, Inc. 1995 Stock Option Plan. (Incorporated
by reference to Exhibit 4 to the Company's Registration Statement
on Form S-8, registration number 333-06287, filed with the
Commission on June 19, 1996.)
10.33* 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.)
10.34* 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.)
10.35* 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.)
10.36* Executive Bonus Plan of the Company, adopted July 20, 1993.
(Incorporated by reference to Exhibit 10.30 contained in the 1993
Form S-1.)
10.37* Resolutions of the Company's Board of Directors dated November 15,
1995, extending Executive Bonus Plan adopted July 20, 1993.
(Incorporated by reference to Exhibit 10.34 contained in the
Company's 1995 Form 10-K).
10.38 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.)
10.39 Fourth Modified Redemption Agreement between the Company and
Robert S. Speizman, dated September 14, 1994. (Incorporated by
reference to Exhibit 10.36 contained in the Company's 1995 Form
10-K).
10.40 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.)
10.41 1995 Consolidated Amendment Agreement to Loan Agreement and
Related Documents dated May, 1995. (Incorporated by reference to
Exhibit 10.38 contained in the Company's 1995 Form 10-K).
10.42 1995 Second Consolidated Amendment Agreement to Loan Agreement
and Related Documents, dated September 1, 1995. (Incorporated by
reference to Exhibit 10.43 contained in the Company's 1996 Form
10-K.)
10.43 1995 Third Consolidated Amendment Agreement to Loan Agreement and
Related Documents, dated October 31, 1995. (Incorporated by
reference to Exhibit 10.44 contained in the Company's 1996 Form
10-K.)
10.44 1996 First Consolidated Amendment Agreement to Loan Agreement and
Related Documents, dated May 15, 1996. (Incorporated by reference
to Exhibit 10.45 contained in the Company's 1996 Form 10-K.)
10.45 1996 Second Consolidated Amendment Agreement to Loan Agreement
and Related Documents, dated June 26, 1996. (Incorporated by
reference to Exhibit 10.46 contained in the Company's 1996 Form
10-K.)
10.46 1996 Third Consolidated Amendment Agreement to Loan Agreement and
Related Documents, dated August 26, 1996. (Incorporated by
reference to Exhibit 10.47 contained in the Company's 1996 Form
10-K.)
10.47 Nationsbank $25,000,000 amended and restated credit facility,
dated December 19, 1996.
10.48 Nationsbank $37,000,000 amended and restated credit facility,
dated July 31, 1997.
10.49 Stock Purchase Agreement, dated as of July 31, 1997, by and among
Speizman Industries, Inc. and Wink Davis, Jr., C. Alexander
Davis, Wingfield Austin Davis IIII, Taylor Ferrell Davis, Allison
Davis Jabaley, Matthew Worley Davis, Amy Butler Davis and Kyle
Alexander Davis. (Incorporated by reference to Exhibit 3
contained in the Company's Current Report on Form 8-K, File No.
0-8544, filed on August 14, 1997.)
10.50 Dealer Agreement by and between Pellerin Milnor Corporation and
Wink Davis Equipment Company, Inc. ("Wink Davis"), dated July 1,
1989, relating to the Company's distribution of machines
primarily in the southeastern United States and the Chicago,
Illinois area.
10.51 Distributor Agreement by and between Chicago Dryer Corporation
("CDC") and Wink Davis, dated January 1, 1994, relating to the
distribution of certain items of CDC'S commercial laundry
equipment.
10.52 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis, dated
July 31, 1997 relating to the Atlanta, Georgia area.
10.53 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Charlotte, North Carolina
area.
10.54 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Wooddale, Illinois area.
10.55 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Chester, Virginia area.
10.56 Earnout Agreement by and among Speizman Industries, Inc. and C.
Alexander Davis, Amy Butler Davis, Taylor Ferrell Davis and Kyle
Alexander Davis, dated July 31, 1997.
11 Statement re: Computation of Net Income per Share
21 List of Subsidiaries
23 Consent of BDO Seidman
27 Financial Data Schedule
* Represents a management contract or compensatory plan or arrangement of the Registrant.