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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 2, 1995 Commission file number 1-5901
FAB INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2581181
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
200 Madison Avenue, New York, NY 10016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-592-2700
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.20 par value American Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:Share Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate 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 to this Form 10-K [ ]
The aggregate market value at February 20, 1996 of shares of the
Registrant's Common Stock, $.20 par value (based upon the closing price per
share of such stock on the Composite Tape for issues listed on the American
Stock Exchange), held by non-affiliates of the registrant was approximately
$130,984,000. Solely for the purposes of this calculation, shares held by
directors and executive officers of the Registrant and members of their
respective immediate families sharing the same household have been excluded.
Such exclusion should not be deemed a determination or an admission by the
Registrant that such individuals are, in fact, affiliates of the Registrant.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date: At February 20,
1996, there were outstanding 5,897,259 shares of Common Stock, $.20 par value.
Documents Incorporated by Reference: Certain portions of the Registrant's
definitive proxy statement to be filed not later than April 1, 1996 pursuant to
Regulation 14A are incorporated by reference in Items 10 through 13 of Part III
of this Annual Report on Form 10-K.
FAB INDUSTRIES, INC.
INDEX TO FORM 10-K
Item Number Page
PART I...............................................................1
Item 1. Business............................................. 1
Item 2. Properties..............................................3
Item 3. Legal Proceedings.......................................4
Item 4. Submission of Matters to a Vote of Security-Holders.....4
PART II..............................................................6
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters...............................................6
Item 6. Selected Consolidated Financial Data....................7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................8
Item 8. Financial Statements and Supplementary Data............10
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................10
PART III............................................................11
Item 10. Directors and Executive Officers of the Registrant....11
Item 11. Executive Compensation................................11
Item 12. Security Ownership of Certain Beneficial Owners and
Management...........................................11
Item 13. Certain Relationships and Related Transactions........11
PART IV.............................................................12
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K..........................................12
SIGNATURES......................................................... 16
PART I
ITEM 1. BUSINESS
Fab Industries, Inc. and its subsidiaries (collectively, the
"Registrant") are engaged in the business of manufacturing and marketing warp
knit textile fabrics, raschel laces, circular knits, novelty knits, and
polyurethane coated bonded fabrics. In addition, the Registrant produces
comforters, sheets, blankets and other bedding products. The Registrant's
products are generally non-branded. The Registrant was incorporated under the
laws of the State of Delaware on April 21, 1966 and is a successor by merger to
previously existing businesses.
The Registrant's textile operations consist primarily of knitting and
finishing synthetic yarns on tricot and raschel warp knitting machines and
synthetic and natural yarns on circular double and single knit machines.
Products in which the Registrant's textile fabrics are used include a broad line
of ready to wear and intimate apparel for men, women and children; children's
sleepwear; activewear; recreational apparel; home furnishing applications;
over-the-counter fabrics sold to major fabric specialty chain stores; industrial
fabrics; upholstery fabrics for the residential and contract markets; and health
care and consumer product related applications.
The Registrant also utilizes its own textile fabrics in its Salisbury,
North Carolina manufacturing facility to produce flannel and satin sheets, as
well as blankets, comforters and other bedding products which the Registrant
sells to chain stores, department stores, specialty stores, catalogue and mail
order concerns, and domestic and foreign airlines. The Registrant also sells to
the institutional health-care markets.
The Registrant's Raval Lace Division manufactures raschel lace products
for sale to manufacturers of women's lingerie and women's and children's
apparel. There are also sales in the ribbon and craft, and home furnishings
trades. In addition, the Raval Lace Division produces over-the-counter lace
fabrics for sale to retailers.
Through its Raval Designer Lace Division, the Registrant produces a
more intricately designed lace on the Registrant's state-of-the-art, high-bar
electronic machinery. The Designer Lace products are used in women's better
designer lingerie, bridal wear, dresses, blouses and sportswear.
The Registrant's subsidiary, Gem Urethane Corporation, produces a line
of polyurethane coated fabrics and a variety of flame, adhesive and
ultrasonically bonded items. Products in which the Registrant's polyurethane
fabrics are used include shoes, luggage, apparel, accessories, women's handbags,
belts, health care, industrial and automotive products.
The Registrant engages in research and product development activities
which are directed to the creation of new fabrics and styles to meet the
continually changing demands of its customers. Direct expenditures in this area
aggregated $3,824,000, $4,347,000 and $4,184,000 in fiscal 1993, 1994 and 1995
respectively. Through these efforts, the Registrant has developed a full line of
proprietary knitted fabrics for sale to manufacturers of
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men's, women's and children's apparel, both domestically and in foreign markets.
Similarly, the Registrant has also developed a full line of proprietary sheets
and blankets, including specialty blankets for airlines.
While the Registrant utilizes various trademarks and trade names in
connection with the promotion and sale of its products, it does not believe that
the loss or expiration of any such trademark or trade name would have a material
adverse effect on its operations.
The Registrant's products are marketed primarily by its full-time sales
personnel, although the Registrant also utilizes the services of independent
representatives located throughout much of the United States and abroad.
Advertisements in various media, in cooperation with producers of yarn utilized
by the Registrant, are also employed as a marketing tool.
Historically, the Registrant's business reflects minor seasonal
variation. Somewhat higher sales are recorded in the second and third fiscal
quarters as a result of purchases by customers in anticipation of Fall and
Holiday apparel sales. The fourth and first fiscal quarter sales tend to be
lower as they are derived from apparel customer orders limited to those needed
to replenish smaller inventory requirements after Fall and Holiday sales and
prior to customer reorders for Spring and Summer fabrications.
The Registrant does not deem information relating to backlog of firm
orders to be material, as goods subject to such orders are shipped within a
relatively short time, usually two-to-ten weeks, depending on the availability
of yarn and other raw materials. On average, orders are filled within six weeks.
For fiscal 1995, the Registrant's aggregate sales to companies under
the common control of Sara Lee Corporation accounted for approximately 16% of
the Registrant's net sales. The receivables from this group of customers
represent approximately 22% of the Registrant's December 2, 1995 accounts
receivable balance. The Registrant's export sales are not material.
SUPPLIES OF RAW MATERIALS
The Registrant has not experienced difficulties in obtaining sufficient
chemicals, dyes and other raw materials and supplies required to maintain full
production; nor has it experienced difficulties in obtaining sufficient yarns.
The Registrant is not dependent upon any single source of supply and alternative
sources are available for most of the raw materials necessary to conduct its
business.
INVENTORIES
The Registrant is required to maintain adequate inventories of yarns
and other raw materials to insure an uninterrupted production flow. Greige and
finished goods must be maintained as inventory to meet varying customer demand
and delivery requirements. Credit terms available to customers normally exceed
credit terms extended by suppliers of raw materials, requiring the Registrant to
maintain adequate working capital.
2
COMPETITION
The Registrant is engaged in a highly competitive business which is
based largely upon product quality, service and price and upon general consumer
demand for the finished goods in which the Registrant's products are utilized.
The Registrant believes that there are in excess of 20 other manufacturers for
its products. The Registrant believes that it is one of the major warp and
circular knit, raschel lace and urethane product manufacturers in the United
States. The proportion of imported textile goods sold in the United States has
increased substantially in the past few years, and has had an adverse impact on
domestically manufactured textile products and the number of domestic
manufacturers of such products. The Registrant's strong financial position and
increased capacity (the result of significant expenditures for production
equipment) have enabled it to capture a larger share of the now smaller domestic
textile market.
EMPLOYEES
The Registrant's employees who number approximately 1,600 are not
represented by unions. The Registrant considers relations with its employees to
be satisfactory.
ITEM 2. PROPERTIES.
The Registrant's manufacturing operations are conducted in facilities
owned by the Registrant in Lincolnton, Maiden, Cherryville and Salisbury, which
are all in North Carolina, and in facilities leased by the Registrant in
Amsterdam, New York. All of the Registrant's facilities are generally utilized
on a full-time, five to six day-a-week basis.
Knitting, dyeing-finishing and printing operations are conducted at the
Registrant's Lincolnton facility. These include warp and raschel knitting,
various types of dyeing, framing, lace separating, sueding, shearing, napping,
calendaring and heat- transfer printing. Dyeing-finishing operations are also
conducted at the Cherryville facility. The Lincolnton and Cherryville facilities
also process and serve as warehouses for greige goods, manufactured and shipped
from the Registrant's Amsterdam and Maiden plants.
At the Maiden plant facility, the Registrant conducts a variety of
manufacturing operations, including warping for the tricot and lace machines and
single and double knitting of fabrics. The Salisbury facility is the site of the
Registrant's consumer products and institutional products manufacturing, retail
and over- the-counter operations. The Registrant's Amsterdam facilities are
devoted to tricot warping and tricot knitting operations and warehousing.
Approximately 106,000 square feet in one of the Registrant's Amsterdam plants is
utilized for the production of urethane coated fabrics and laminating
operations.
The following table sets forth in summary fashion the location of each
of the Registrant's manufacturing facilities, its principal use, approximate
floor space, and, where leased, the lease expiration date. No facility owned by
the Registrant is subject to any encumbrance.
3
APPROXIMATE LEASE
LOCATION PRINCIPAL USE FLOOR SPACE EXPIRATION DATE
Lincolnton, Dyeing and Finishing, 630,550 sq.ft. (1)
North Raschel and Tricot
Carolina Warp Knitting, Printing
and Warehouse
Lincolnton, Warehouse 55,000 sq. ft. (1)
North Carolina
Maiden, Warping, Circular Single 224,013 sq.ft. (1)
North Carolina and Double Knitting and
Warehouse
Salisbury, Manufacturing Finished 125,000 sq.ft. (1)
North Carolina Consumer Products and
Retail Over- the-Counter
Fabric
Amsterdam, Polyurethane Coating 106,000 sq.ft. 12/31/99 (2)
New York Manufacturing
Operations and Bonding
and Laminating
Amsterdam, Warping, Tricot Knitting 367,000 sq.ft. 12/31/06 (2)
New York and Warehouse
Cherryville, Dyeing and Finishing 197,000 sq. ft. (1)
North
Carolina
New York, Executive Offices and 33,000 sq. ft. 4/30/96 (3)
New York Showroom Facilities
- ------------------------
(1) Owned by the Registrant.
(2) Capitalized building lease - See note 5 of Notes to Consolidated Financial
Statements.
(3) Registrant is currently negotiating a new lease.
All of the Registrant's facilities are constructed of brick, steel or
concrete and are considered by the Registrant to be adequate and in good
operating condition and repair.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Registrant
or any of its subsidiaries is a party or of which any of their respective
properties are the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
Not Applicable
4
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning the
executive officers of the Registrant as of February 20, 1996.
NAME AGE POSITIONS AND OFFICES
Samson Bitensky...... 76 Chairman of the Board of Directors, President and
Chief Executive Officer
David A. Miller...... 58 Vice President-Finance and Treasurer
Stanley August....... 64 Vice President
Steven Myers......... 47 Vice President
Sherman S. Lawrence.. 77 Secretary and Director
Each of the Registrant's executive officers serves at the pleasure of
the Board of Directors and until his or her successor is duly elected and
qualifies.
SAMSON BITENSKY was among the founders of the Registrant in 1966 and
has served as Chairman of the Board of Directors and Chief Executive Officer of
the Registrant since such time. Mr. Bitensky has also served as President of the
Registrant since 1970.
DAVID A. MILLER has been employed by the Registrant since 1966 and has
served as its Controller from 1973 until December 7, 1995 and as Vice President
- - Finance and Treasurer since December 7, 1995. On December 6, 1995 Mr. Howard
Soren, Chief Financial Officer, Vice President-Finance and Treasurer of the
Registrant since 1972 retired from the Registrant.
STANLEY AUGUST has been employed by the Registrant since 1980 and
previously served as General Sales Manager of its Circular Knit Division and as
Vice President - Sales. Mr. August has served as Vice President - Fabric
Operations from 1987 until March 30, 1992 and as Vice President since March 30,
1992.
STEVEN MYERS, an attorney, has been employed by the Registrant in
various senior administrative and managerial capacities since 1982. He served as
Vice President - Sales for more than five years prior to May 1988 and has served
as Vice President since that time. Mr.
Myers is the son-in-law of Mr. Bitensky.
SHERMAN S. LAWRENCE has served as a Director of the Registrant since
1966 and as Secretary since 1968. Mr. Lawrence has been an attorney for in
excess of the past five years and also serves as co-counsel to the Registrant.
5
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Registrant's Common Stock is traded on the American Stock Exchange,
Inc. (ticker symbol - FIT). The table below sets forth the high and low sales
prices of the Common Stock during the past two fiscal years.
FISCAL 1995
First Quarter.................... $ 32 $30
Second Quarter................... $ 31 7/8 $ 29
Third Quarter.................... $ 32 3/4 $ 30 1/4
Fourth Quarter................... $ 31 3/4 $ 29
FISCAL 1994
First Quarter.................... $ 36 $ 33 3/8
Second Quarter................... $ 36 1/8 $ 33 7/8
Third Quarter.................... $ 34 7/8 $ 31 7/8
Fourth Quarter................... $ 32 3/4 $ 30 3/8
At February 20, 1996, there were approximately 736 holders of record
of Common Stock. For fiscal 1994, quarterly dividends of $.16 per share were
declared on March 18, 1994, June 16, 1994, August 18, 1994 and November 28,
1994. For fiscal 1995, a quarterly dividend of $.16 per share was declared on
February 13, 1995 and quarterly dividends of $.175 per share were declared on
May 22, 1995, August 21, 1995 and November 27, 1995. The payment of further cash
dividends will be at the discretion of the Board of Directors and will depend
upon, among other things, earnings, capital requirements and the financial
condition of the Registrant.
6
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
As at or for the fiscal year ended
December 2, December 3, November 27, November 28, November 30,
1995 1994(3) 1993 1992 1991
(In thousands, except share data)
Net Sales .......... $ 182,000 $ 189,753 $ 189,586 $ 189,288 $ 185,560
Income before taxes
on income ........ 13,760 22,428 25,531 25,767 23,088
Net income ......... 9,410 15,093 17,006 16,917 15,488
Earnings per ....... 1.57 2.44 2.75 2.65 2.52
share(1)
Total assets ....... 161,027 163,133 157,499 138,952 140,119
Long-term debt ..... 678 731 799 822 862
Stockholders' equity 132,932 129,533 124,326 109,172 109,450
Book value per
share (1) (2) .... 22.42 21.52 19.98 18.01 17.70
Cash dividends
per share(1) ..... .685 .64 .64 .50 .50
Weighted average
number of shares
outstanding(1) .... 5,981,690 6,189,831 6,181,186 6,390,706 6,141,495
- ---------------------
(1) Adjusted to give effect to a two-for-one stock split to holders of record as
of May 24, 1991.
(2) Computed by dividing stockholders' equity by the number of shares
outstanding at year-end.
(3) Fifty-three weeks.
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales for the 1995 fiscal year were $182,000,000 as compared to
$189,753,000 in 1994, a decrease of 4.1%. The decline reflected an industry wide
slowdown in demand for knit fabrics as a result of weak consumer purchasing of
apparel at the national retail level as well as highly competitive market
conditions. Fiscal 1995 included 52 weeks of operations as compared to 53 weeks
in 1994, also contributing to the sales decline.
Average gross profit margins were 14.9% in fiscal 1995, as compared to
19.7% in 1994. Increases in the cost of raw materials (primarily fiber prices),
a less favorable product mix, and highly competitive market conditions have all
exerted downward pressures on profit margins. Plant operations were adversely
impacted by the current product mix and operating rates at manufacturing
facilities declined from year-ago levels. In addition, because of higher unit
inventory costs resulting from material price increases, LIFO inventory reserves
increased $893,000 during fiscal 1995 (with a corresponding charge to earnings),
as compared to an increase of $98,000 in the 1994 period.
Selling, general and administrative expenses declined by $420,000, and
as a percentage of sales remained relatively level at 9.5% for fiscal 1995 and
9.4% for 1994. The decline relates primarily to lower incentive based
compensation.
Interest and dividend income increased by 7.8% to $3,676,000 as against
$3,410,000 in fiscal 1994, as higher comparative returns more than offset lower
average available investment balances.
The Registrant had realized gains from the sale of investment
securities of $511,000 in fiscal 1995 as against losses of $473,000 in the 1994
period, as a result of improved market conditions.
The effective income tax rate for the year was 31.6% as against 32.7%
in 1994. The decline was primarily attributable to higher tax exempt interest as
a percentage of pre-tax income in fiscal 1995.
As a result of these factors, net income declined to $9,410,000 or 5.2%
of sales, from $15,093,000, or 8.0% of sales in fiscal 1994. Earnings per share,
which are based on the weighted average number of shares outstanding (5,981,690
vs 6,189,831), were $1.57 as compared to $2.44 in fiscal 1994. There was no
stock option related dilution in either year.
FISCAL 1994 COMPARED TO FISCAL 1993
Net sales for the 1994 fiscal year were $189,753,000 as compared to
$189,586,000 in 1993. An increase of 11.2% in fourth quarter shipments offset
the sales decline for the first nine months of fiscal 1994. Mid-year customer
demand, which had been adversely
8
affected by postponement of scheduled deliveries by several large customers as
well as weak consumer purchasing at the retail level, strengthened in the final
quarter of fiscal 1994, which also contained an extra week. Improved comparative
shipments also continued into December and January of fiscal 1995.
Average profit margins declined from 20.4% in fiscal 1993 to 19.7% in
1994, primarily as a result of a less profitable product mix. Plant operations
were also adversely impacted by the changed product mix as operating rates at
certain related manufacturing facilities declined from fiscal 1993 levels. The
effect of changes in LIFO inventory reserves was negligible in both years.
Selling, general and administrative expenses, as a percentage of sales,
increased from 8.9% in fiscal 1993 to 9.4% as dollar expenditures rose 5.3% on
similar volume. The increase relates primarily to higher consulting fees as well
as sales associated expenses.
Other income decreased by $917,000 to $2,809,000. Although interest and
dividend income increased by 10% to $3,410,000 (mainly as a result of larger
balances available for investments), losses on marketable securities were
realized in the amount of $473,000 as compared to a gain of $738,000 in fiscal
1993. A series of increases in interest rates by the Federal Reserve Board as
well as expectations by financial markets of continued rising rates resulted in
declines in the market value of portions of the Registrant's investment
portfolio.
Notwithstanding a slight increase in the Federal statutory income tax
rate for fiscal 1994, the overall effective income tax rate declined to 32.7% as
against 33.4% for fiscal 1993. An increase in tax-exempt interest income
accounted for the decline.
As a result of these factors, net income declined by 11.2%, to
$15,093,000 from $17,006,000 in fiscal 1993. Earnings per share, which are based
on the average number of shares outstanding during the year, were $2.44 in
fiscal 1994 as compared to $2.75 in 1993. There was no stock option related
dilution in either year.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's principal source of funds continues to be cash flow
generated from operations. Net cash provided by operating activities in fiscal
1995 was $13,230,000 as compared to $18,587,000 in the comparative 1994 period.
This decrease relates principally to a decline of $5,683,000 in net income.
Capital expenditures for the current fiscal year were $5,215,000 as
against $7,364,000 in the 1994 comparable period. The Registrant purchased
additional high speed knitting machines and dyeing and finishing equipment to
increase manufacturing efficiencies and reduce unit costs, and also installed
energy conservation related equipment in its production facilities.
During fiscal 1995, the Registrant repurchased 144,931 shares of its
Common Stock at an average price of $31.18 per share, for a total outlay of
$4,519,000. Subsequent to the fiscal year-end, the Registrant repurchased an
additional 31,200 shares at an average price of $30.05 per share. The Registrant
intends to continue to purchase shares of its Common Stock from time-to-time as
market conditions warrant and price criteria are met.
9
During fiscal 1995, the Registrant declared regular quarterly dividends
totaling $0.685 per share. In addition, the Registrant declared a regular
quarterly dividend of $0.175 per share payable March 8, 1996, to stockholders of
record as of February 23, 1996.
Stockholders' equity rose to $132,932,000, or $22.42 book value per
share, from $129,533,000, or $21.52 per share, at the previous fiscal year-end.
Management believes that the current financial position of the
Registrant is adequate to internally fund any future expenditures to maintain,
modernize and expand its manufacturing facilities, pay dividends and make
acquisitions of textile related businesses if criteria relating to indebtedness,
market expansion and existing management are met.
INFLATION
The Registrant does not believe the effects of inflation have had a
significant impact on the consolidated financial statements.
RECENT ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standard Board issued Statement
of Financial Accounting Standard No. 121 "Accounting for Impairment of
Long-Lived Assets and for LongLived Assets to be Disposed of" ("SFAS No. 121").
SFAS No. 121 requires, among other things, impairment loss of assets to be held
and gains or losses from assets that are expected to be disposed of be included
as a component of income from continuing operations before taxes on income. The
Registrant will adopt SFAS No. 121 in fiscal 1996 and its implementation is not
expected to have a material effect on the consolidated financial statements.
In October 1995, the Financial Accounting Standards Board Issued
Statement of Financial Accounting Standard No. 123 "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 encourages entities to adopt that
method in place of the provisions of Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB No. 25"), for all arrangements
under which employees receive shares of stock or other equity instruments of the
employer or the employer incurs liabilities to employees in amounts based on the
price of its stock. The Registrant does not anticipate adopting SFAS No. 123 and
will continue to account for such transactions in accordance with APB No. 25.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages F-1 and S-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
See Part I, Item 4. "Executive Officers of the Registrant." Other
information required by this item is incorporated by reference from the
Registrant's definitive proxy statement to be filed not later than April 1, 1996
pursuant to Regulation 14A of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended ("Regulation 14A").
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item is incorporated by reference from
the Registrant's definitive proxy statement to be filed not later than April 1,
1996 pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is incorporated by reference from
the Registrant's definitive proxy statement to be filed not later than April 1,
1996 pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated by reference from
the Registrant's definitive proxy statement to be filed not later than April 1,
1996 pursuant to Regulation 14A.
11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements: See the Index to Consolidated
Financial Statements at page F-2.
(2) Financial Statement Schedules: See the Index to Financial
Statements Schedules at page S-2.
(3) Exhibits.
EXHIBIT DESCRIPTION OF EXHIBIT
3.1 - Restated Certificate of Incorporation, incorporated by
reference to Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
November 27, 1993 (the "1993 10-K").
3.2 - Amended and Restated By-laws, incorporated by
reference to Exhibit 3.2 to the 1993 10-K.
3.3 - Certificate of Amendment of Restated Certificate of
Incorporation, incorporated by reference to Exhibit 3.3
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 3, 1994 (the "1994 10-K").
4.1 - Specimen of Common Stock Certificate, incorporated by
reference to Exhibit 4-A to Registration Statement No.
2-30163, filed on November 4, 1968.
4.2 - Rights Agreement dated as of June 6, 1990 between
the Registrant and Manufacturers Hanover Trust
Company, as Rights Agent, which includes as Exhibit A
the form of Rights Certificate and as Exhibit B the
Summary of Rights to purchase Common Stock,
incorporated by reference to Exhibit 4.2 to the 1993
10-K
4.3 - Amendment to the Rights Agreement between the
Registrant and Manufacturers Hanover Trust Company
dated as of May 24, 1991, incorporated by reference to
Exhibit 4.3 to the 1993 10-K.
10.1 - 1987 Stock Option Plan of the Registrant, incorporated
by reference to Exhibit 10.1 to the 1993 10-K.
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10.2 - Employment Agreement dated as of March 1, 1993,
between the Registrant and Samson Bitensky, incor-
porated by reference to Exhibit 10.2 to the 1993 10 -K.
10.3 - Fab Industries, Inc. Hourly Employees Retirement Plan
(the "Retirement Plan"), incorporated by reference to
Exhibit 10.3 to the 1993 10-K.
10.4 - Amendment to the Retirement Plan effective December
11, 1978, incorporated by reference to Exhibit 10.4 to
the 1993 10-K.
10.5 - Amendment to the Retirement Plan effective December
1, 1981, incorporated by reference to Exhibit 10.5 to
the 1993 10-K.
10.6 - Amendment to the Retirement Plan dated November 21,
1983, incorporated by reference to Exhibit 10.6 to the
1993 10-K.
10.7 - Amendment to the Retirement Plan dated August 29,
1986, incorporated by reference to Exhibit 10.7 to the
1993 10-K.
10.8 - Amendment to the Retirement Plan effective as of
December 1, 1989, incorporated by reference to Exhibit
10.8 to the 1993 10-K.
*10.9 - Amendment to the Retirement Plan dated September
21, 1995.
10.10 - Fab Lace, Inc. Employees Profit Sharing Plan (the "Profit
Sharing Plan"), incorporated by reference to Exhibit
10.9 to the 1993 10-K.
10.11 - Amendment to the Profit Sharing Plan effective
December 1, 1978, incorporated by reference to Exhibit
10.10 to the 1993 10-K.
10.12 - Amendment dated December 1, 1985 to the Profit
Sharing Plan, incorporated by reference to Exhibit 10.11
to the 1993 10-K.
10.13 - Amendment dated February 5, 1987 to the Profit
Sharing Plan, incorporated by reference to Exhibit 10.12
to the 1993 10-K.
10.14 - Amendment dated December 24, 1987 to the Profit
Sharing Plan, incorporated by reference to Exhibit 10.13
to the 1993 10-K.
13
10.15 - Amendment dated June 30, 1989 to the Profit Sharing
Plan, incorporated by reference to Exhibit 10.14 to the
1993 10-K.
10.16 - Amendment dated February 1, 1991 to the Profit
Sharing Plan, incorporated by reference to Exhibit 10.15
to the 1993 10-K.
*10.17 - Amendment dated September 1, 1995 to the Profit
Sharing Plan.
10.18 - Lease dated as of December 8, 1988 between
Glockhurst Corporation, N.V. and the Registrant,
incorporated by reference to Exhibit 10.16 to the 1993
10-K.
10.19 - Lease Modification Agreement dated April 2, 1991
between Glockhurst Corporation, N.V. and the
Registrant, incorporated by reference to Exhibit 10.17
to the 1993 10-K.
10.20 - Lease dated as of March 1, 1979 between City of
Amsterdam Industrial Development Agency and Gem
Urethane Corp., incorporated by reference to Exhibit
10.18 to the 1993 10-K.
10.21 - Lease dated as of January 1, 1977 between City of
Amsterdam Industrial Development Agency and
Lamatronics Industries, Inc., incorporated by reference
to Exhibit 10.19 to the 1993 10-K.
10.22 - Form of indemnification agreement between the
Registrant and its officers and directors, incorporated by
reference to Exhibit 10.20 to the 1993 10-K.
10.23 - Restricted Share Agreement dated October 1, 1991
between the Registrant and Steven Myers, incorporated
by reference to Exhibit 10.21 to the 1993 10-K.
10.24 - Restricted Share Agreement dated October 1, 1991
between the Registrant and Howard Soren, incorporated
by reference to Exhibit 10.22 to the 1993 10-K.
10.25 - Restricted Share Agreement dated October 1, 1991
between the Registrant and Stanley August, incor-
porated by reference to Exhibit 10.23 to the 1993 10-K.
10.26 - Registrant's Employee Stock Ownership Plan effective
as of Nov. 25, 1991, incorporated by reference to
Exhibit 10.24 to the 1993 10-K.
14
*10.27 - Amendment dated September 21, 1995 to the
Employee Stock Ownership Plan.
10.28 - Registrant's Non-Qualified Executive Retirement Plan
dated as of November 30, 1990, incorporated by
reference to Exhibit 10.25 to the 1993 10-K.
21 - Subsidiaries of the Registrant incorporated by reference
to Exhibit 21 to the 1994 10-K.
*23 - Consent of BDO Seidman, LLP.
**27 - Financial Data Schedule pursuant to Article 5 of
Regulation S-X.
- -------------------------
* Filed herewith
** Filed with EDGAR version only
(b) Reports on Form 8-K: None
15
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FORM 10-K ITEM 8
FISCAL YEARS ENDED DECEMBER 2, 1995, DECEMBER 3, 1994
AND NOVEMBER 27, 1993
F-1
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONTENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED FINANCIAL STATEMENTS:
Balance sheets F-4
Statements of income F-5
Statements of stockholders' equity F-6
Statements of cash flows F-7
SUMMARY OF ACCOUNTING POLICIES F-8 - F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-10 - F-20
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Fab Industries, Inc.
New York, New York
We have audited the consolidated balance sheets of Fab Industries, Inc. and
subsidiaries as of December 2, 1995 and December 3, 1994 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three fiscal years in the period ended December 2, 1995. We have also
audited the schedule listed in the index on page S-2. These consolidated
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedule. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements and schedule. 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 Fab Industries, Inc.
and subsidiaries as of December 2, 1995 and December 3, 1994, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 2, 1995 in conformity with generally accepted accounting
principles.
Also, in our opinion, the schedule presents fairly, in all material respects,
the information set forth therein.
/s/ BDO Seidman, LLP
New York, New York
February 9, 1996
F-3
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 2, December 3,
1995 1994
ASSETS
CURRENT:
Cash and cash equivalents (Note 1) $ 7,883,000 $ 11,143,000
Investment securities available-for-sale (Note 2) 54,674,000 6,181,000
Investment securities held-to-maturity (Note 2) - 12,604,000
Accounts receivable, net of allowance of $500,000
and $950,000 for doubtful accounts (Note 13) 35,217,000 32,590,000
Inventories (Note 3) 27,267,000 29,994,000
Deferred income taxes (Note 9) - 274,000
Other current assets 1,970,000 2,355,000
---------- -------------
TOTAL CURRENT ASSETS 127,011,000 95,141,000
INVESTMENT SECURITIES HELD-TO-MATURITY,
DUE AFTER ONE YEAR (NOTE 2) - 33,873,000
PROPERTY, PLANT AND EQUIPMENT - NET (NOTE 4) 31,579,000 31,932,000
OTHER ASSETS 2,437,000 2,187,000
---------- -----------
$161,027,000 $163,133,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable $ 12,661,000 $ 14,289,000
Corporate income and other taxes 1,886,000 2,014,000
Payable to broker (purchase of treasury stock) - 3,798,000
Accrued payroll and related expenses 4,295,000 4,787,000
Dividends payable 1,038,000 963,000
Other current liabilities 470,000 412,000
Deferred income taxes (Note 9) 246,000 -
---------- ---------
TOTAL CURRENT LIABILITIES 20,596,000 26,263,000
OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT
MATURITIES (NOTE 5) 678,000 731,000
OTHER NONCURRENT LIABILITIES 1,961,000 1,469,000
DEFERRED INCOME TAXES (NOTE 9) 4,860,000 5,137,000
----------- -----------
TOTAL LIABILITIES 28,095,000 33,600,000
COMMITMENTS (NOTES 8 AND 10)
STOCKHOLDERS' EQUITY (NOTES 2, 6, 7, 8, 9 AND 10):
Preferred stock, $1 par value
- shares authorized
2,000,000; none issued - -
Common stock, $.20 par value - shares authorized
15,000,000; issued 6,549,894 and 6,493,494 1,309,000 1,298,000
Additional paid-in capital 6,150,000 5,214,000
Retained earnings 152,473,000 147,154,000
Loan to employee stock ownership plan (8,697,000) (9,487,000)
Net unrealized holding gain (loss) on investment
securities available-for-sale, net of taxes 224,000 (314,000)
Unearned restricted stock compensation (228,000) (552,000)
Cost of common stock held in treasury - 619,635
and 474,704 shares (18,299,000) (13,780,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 132,932,000 129,533,000
------------ ------------
$161,027,000 $163,133,000
============ ============
See accompanying summary of accounting
policies and notes to consolidated
financial statements.
F-4
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Fiscal year ended
December 2, December 3, November 27,
1995 1994 1993
NET SALES (NOTE 13) $ 182,000,000 $ 189,753,000 $ 189,586,000
COST OF GOODS SOLD 154,956,000 152,372,000 150,906,000
------------ ------------ ------------
GROSS PROFIT 27,044,000 37,381,000 38,680,000
SELLING, SHIPPING AND ADMINISTRATIVE
EXPENSES 17,342,000 17,762,000 16,875,000
----------- ----------- -----------
OPERATING INCOME 9,702,000 19,619,000 21,805,000
----------- ----------- -----------
OTHER INCOME (EXPENSES):
Interest and dividend income (Note 12) 3,676,000 3,410,000 3,099,000
Interest expense (129,000) (128,000) (111,000)
Net gain (loss) on investment securities (Note 2) 511,000 (473,000) 738,000
---------- ------------ ------------
TOTAL OTHER INCOME 4,058,000 2,809,000 3,726,000
---------- ---------- -----------
INCOME BEFORE TAXES 13,760,000 22,428,000 25,531,000
TAXES ON INCOME (NOTE 9) 4,350,000 7,335,000 8,525,000
---------- ---------- ----------
NET INCOME $ 9,410,000 $ 15,093,000 $ 17,006,000
========== =========== ===========
EARNINGS PER SHARE $ 1.57 $ 2.44 $ 2.75
========== ============= =============
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING 5,981,690 6,189,831 6,181,186
========== ============= =============
CASH DIVIDENDS DECLARED PER SHARE (NOTE 11) $ .685 $ .64 $ .64
========== ============== ===============
See accompanying summary of accounting
policies and notes to consolidated
financial statements.
F-5
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
Loan to Net
employee unrealized Unearned
Additional stock holding restricted
Number of paid-in Retained ownership gain stock
Total shares Amount capital earnings plan (loss) compensation
Balance, November 28,
1992 $109,172,000 6,231,394 $1,246,000 $1,163,000 $122,971,000 $(11,067,000) $ - $(1,144,000)
Net income -
fiscal 1993 17,006,000 - - - 17,006,000 - - -
Cash dividends,
$.64 per share (3,983,000) - - - (3,983,000) - - -
Exercise of stock
options 3,817,000 246,300 49,000 3,768,000 - - - -
Purchase of treasury
stock (2,788,000) - - - - - - -
Compensation under
restricted stock
plan (Note 6) 312,000 - - - - - - 312,000
Payment of loan from
ESOP (Note 8) 790,000 - - - - 790,000 - -
----------- ---------- --------- --------- ----------- ----------- ------ -----------
Balance, November 27,
1993 124,326,000 6,477,694 1,295,000 4,931,000 135,994,000 (10,277,000) - (832,000)
Net income -
fiscal 1994 15,093,000 - - - 15,093,000 - - -
Cash dividends,
$.64 per share (3,933,000) - - - (3,933,000) - - -
Exercise of stock
options 279,000 15,800 3,000 276,000 - - - -
Purchase of treasury
stock (7,023,000) - - - - - - -
Compensation under
restricted stock
plan (Note 6) 315,000 - - - - - - 315,000
Payment of loan from
ESOP (Note 8) 790,000 - - - - 790,000 - -
Issuance of treasury
stock under restricted
stock plan - - - 7,000 - - - (35,000)
Net unrealized holding
loss on investment
securities available-
for-sale, net of taxes (314,000) - - - - - (314,000) -
----------- ---------- --------- --------- ----------- ----------- ------ -----------
Balance, December 3,
1994 129,533,000 6,493,494 1,298,000 5,214,000 147,154,000 (9,487,000)(314,000) (552,000)
Net income -
fiscal 1995 9,410,000 - - - 9,410,000 - - -
Cash dividends,
$.685 per share (4,091,000) - - - (4,091,000) - - -
Exercise of stock
options 947,000 56,400 11,000 936,000 - - - -
Purchase of treasury
stock (4,519,000) - - - - - - -
Compensation under
restricted stock
plan (Note 6) 324,000 - - - - - - 324,000
Change in net unrealized
holding gain (loss) on
investment securities
available-for-sale,
net of taxes 538,000 - - - - - 538,000 -
Payment of loan from
ESOP (Note 8) 790,000 - - - - 790,000 - -
----------- ---------- --------- --------- ----------- ----------- ------ -----------
Balance, December 2,
1995 $132,932,000 6,549,894 $1,309,000 $6,150,000 $152,473,000 $ (8,697,000)$224,000 $ (228,000)
============ ========= ========= ========== =========== ============ ======= ==========
Note: The Company has 2,000,000 shares of authorized, but unissued preferred
stock.
See accompanying summary of accounting policies and notes to consolidated
financial statements.
Treasury Stock
Number of
shares Cost
Balance, November 28,
1992 (169,692) $ (3,997,000)
Net income -
fiscal 1993 - -
Cash dividends,
$.64 per share - -
Exercise of stock
options - -
Purchase of treasury
stock (84,169) (2,788,000)
Compensation under
restricted stock
plan (Note 6) - -
Payment of loan from
ESOP (Note 8) - -
------- ----------
Balance, November 27,
1993 (253,861) (6,785,000)
Net income -
fiscal 1994 - -
Cash dividends,
$.64 per share - -
Exercise of stock
options - -
Purchase of treasury
stock (221,843) (7,023,000)
Compensation under
restricted stock
plan (Note 6) - -
Payment of loan from
ESOP (Note 8) - -
Issuance of treasury
stock under restricted
stock plan 1,000 28,000
Net unrealized holding
loss on investment
securities available-
for-sale, net of taxes - -
------- ---------
Balance, December 3,
1994 (474,704) (13,780,000)
Net income -
fiscal 1995 - -
Cash dividends,
$.685 per share - -
Exercise of stock
options - -
Purchase of treasury
stock (144,931) (4,519,000)
Compensation under
restricted stock
plan (Note 6) - -
Change in net unrealized
holding gain (loss) on
investment securities
available-for-sale,
net of taxes - -
Payment of loan from
ESOP (Note 8) - -
-------- -----------
Balance, December 2,
1995 (619,635) $(18,299,000)
========= ===========
Note: The Company has 2,000,000 shares of authorized, but unissued preferred
stock.
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-6
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE 11)
Fiscal year ended
December 2, December 3, November 27,
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 9,410,000 $15,093,000 $17,006,000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for doubtful accounts 400,000 300,000 600,000
Depreciation and amortization 5,568,000 5,425,000 5,366,000
Deferred income taxes (121,000) 402,000 (696,000)
Compensation under restricted
stock plan 324,000 315,000 312,000
Net (gain) loss on investment
securities (511,000) 473,000 (738,000)
Decrease (increase) in:
Accounts receivable (3,027,000) 2,793,000 (5,928,000)
Inventories 2,727,000 (5,672,000) 128,000
Other current assets 385,000 (37,000) (624,000)
Other assets (250,000) (175,000) (547,000)
Increase (decrease) in:
Accounts payable (1,628,000) 777,000 2,330,000
Accruals and other liabilities (122,000) (1,107,000) 1,276,000
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,155,000 18,587,000 18,485,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (5,215,000) (7,364,000) (4,942,000)
Proceeds from sales of investment securities 9,746,000 7,110,000 4,760,000
Acquisition of investment securities (10,350,000) (8,429,000) (26,057,000)
NET CASH USED IN INVESTING ACTIVITIES (5,819,000) (8,683,000) (26,239,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (8,317,000) (3,225,000) (2,788,000)
Principal repayment on loan to employee
stock ownership plan 790,000 790,000 790,000
Dividends (4,016,000) (6,953,000) (3,983,000)
Exercise of stock options 947,000 279,000 3,817,000
NET CASH USED IN FINANCING ACTIVITIES (10,596,000) (9,109,000) (2,164,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,260,000) 795,000 (9,918,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,143,000 10,348,000 20,266,000
CASH AND CASH EQUIVALENTS, END OF YEAR $ 7,883,000 $11,143,000 $10,348,000
See accompanying summary of accounting policies and notes to consolidated
financial statements.
F-7
FAB INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
BUSINESS:
Fab Industries, Inc. (the "Company") is a major manufacturer of knitted
textile fabrics, laces and finished home products as well as polyurethane coated
fabrics. Sales of textile products comprised substantially all of the Company's
sales in fiscal 1995, 1994 and 1993, and such sales were primarily made to
United States customers. Accordingly, the Company considers itself to be
operating in a single segment business.
PRINCIPLES OF CONSOLIDATION:
The financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly owned. Significant intercompany
transactions and balances have been eliminated.
FISCAL YEAR:
The Company's fiscal year ends on the Saturday closest to November 30. Fiscal
1995 and 1993 had fifty- two weeks, and fiscal 1994 had fifty three weeks.
RISKS AND UNCERTAINTIES:
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.
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of cash and cash equivalents, investment
securities, and trade receivables. The Company places its cash and cash
equivalents with high credit quality financial institutions. By policy, the
Company limits the amount of credit exposure to any one financial institution
and determines that, with respect to investment securities, each custodian
maintains appropriate insurance coverage to protect the Company's investment
portfolio. Concentrations of credit risk with respect to trade receivables are
limited due to the diverse group of manufacturers, wholesalers and retailers to
whom the Company sells (see Note 13). The Company reviews a customer's credit
history before extending credit. The Company has established an allowance for
doubtful accounts based upon factors surrounding the credit risk of specific
customers, historical trends and other information.
CASH EQUIVALENTS:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.
INVESTMENTS:
Effective as of the fourth quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities". SFAS 115 addresses
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. Investments
in such securities are to be classified as either held-to-maturity, trading, or
available-for-sale.
F-8
FAB INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
Investment securities classified as available-for-sale are carried at fair
value with unrealized holding gains and losses, net of any tax effect, recorded
as a separate component of stockholders' equity. In fiscal 1994, the Company
classified certain investment securities as held-to-maturity. Due to changes in
management's investment philosophy during fiscal 1995, the Company has
transferred investment securities from the held-tomaturity to the
available-for-sale category. As a result, all investment securities are now
classified as available-for-sale. The effect of this change was to increase
stockholders' equity by $167,000, representing the net unrealized holding gain
on these securities, net of taxes, at the date of the change.
Gains and losses on sales of investment securities are computed using the
specific identification method.
The cumulative effect of adopting SFAS 115 was not material.
INVENTORIES:
Inventories are valued at the lower of cost or market. For a majority of the
inventories, cost is determined by the last-in, first-out (LIFO) method with the
balance being determined by the first-in, first-out (FIFO) method, which
approximates replacement cost (see Note 3).
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation is computed
using principally the straight-line method. The range of estimated useful lives
is 15 to 33 years for buildings and building improvements, 4 to 10 years for
machinery and equipment, 10 years for leasehold improvements and 5 years for
trucks (see Note 4).
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs are charged to expenses in the year incurred
and amounted to $4,184,000 $4,347,000 and $3,824,000 in fiscal 1995, 1994 and
1993, respectively.
TAXES ON INCOME:
The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS
109),"Accounting for Income Taxes".
Provision is made for deferred income taxes which result from various
temporary differences, mainly relating to the use of accelerated depreciation
for tax purposes (see Note 9).
EARNINGS PER SHARE:
Earnings per share has been computed by dividing net income by the weighted
average number of shares of common stock and common stock equivalents
outstanding during the period.
REVENUE RECOGNITION:
The Company recognizes substantially all of its revenues upon shipment of the
related goods. Allowances for estimated returns are provided when sales are
recorded.
RECLASSIFICATION:
Certain fiscal 1994 and 1993 balances were reclassified to conform with the
fiscal 1995 presentation.
F-9
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CASH AND CASH EQUIVALENTS
- --------------------------------------------------------------------------------
Cash and cash equivalents at December 2, 1995 and December 3, 1994 consisted
of the following (in thousands):
1995 1994
------ ------
Cash $1,335 $ 1,490
Tax-free short-term debt instruments 6,548 9,653
------ ------
$7,883 $11,143
====== =======
NOTE 2 - INVESTMENT SECURITIES
- --------------------------------------------------------------------------------
Investment securities available-for-sale at December 2, 1995 and December 3,
1994 consisted of the following (in thousands):
Gross Gross
Unrealized Unrealized
Cost Holding Gain Holding Loss Fair Value
1995:
Equities $ 1,814 $109 $(259) $ 1,664
U.S. Treasury obligations 52 - - 52
Tax-exempt obligations 47,769 578 (79) 48,268
Corporate bonds 4,665 116 (91) 4,690
------- ---- ----- -------
$54,300 $803 $(429) $54,674
======= ==== ===== =======
1994:
Equities $ 6,709 $313 $(841) $ 6,181
======= ==== ===== =======
At December 3, 1994, the carrying value and estimated fair values of
investment securities held-to-maturity were as follows:
Gross Gross
Amortized Unrealized Unrealized
Cost Gain Loss Fair Value
U.S. Government securities $ 69 $ - $ - $ 69
Corporate bonds 5,800 8 (346) 5,462
Tax exempt obligations 40,608 18 (617) 40,009
---------- ------ ------- --------
$46,477 $26 $(963) $45,540
======= === ====== =======
F-10
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The carrying values and approximate fair values of investments in debt
securities available-for-sale, at December 2, 1995, by contractual maturity are
as shown below:
Cost Fair Value
Maturing in one year or less $11,321 $11,333
Maturing after one year through five years 31,711 32,117
Maturing after five years through ten years 9,454 9,560
------- -------
$52,486 $53,010
======= =======
Gross and net realized gains and losses on sales of investment securities
were:
1995 1994
---- ----
Gross realized gains $762 $ 640
Gross realized losses (251) (1,113)
---- ------
Net realized gain (loss) $511 $ (473)
==== ======
NOTE 3 - INVENTORIES:
- --------------------------------------------------------------------------------
Inventories at December 2, 1995 and December 3, 1994 consisted of the
following (in thousands, except for percentages):
1995 1994
------- ------
Raw materials $11,753 $12,817
Work-in process 7,675 7,908
Finished goods 7,839 9,269
------- -------
$27,267 $29,994
======= =======
Approximate percentage of inventories
valued under LIFO method 66% 66%
=== ===
Excess of FIFO valuation over LIFO valuation $ 7,903 $ 7,010
======== =======
F-11
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
- --------------------------------------------------------------------------------
Property, plant and equipment at December 2, 1995 and December 3, 1994
consisted of the following (in thousands):
1995 1994
-------- ------
Owned by the Company:
Land and improvements $ 698 $ 673
Buildings and improvements 12,668 12,362
Machinery and equipment 86,405 81,561
Trucks and automobiles 1,538 1,498
Office equipment 656 656
Leasehold improvements 808 808
-------- -------
102,773 97,558
Property under capital leases:
Land 18 18
Buildings and improvements 1,432 1,432
-------- --------
104,223 99,008
Less: Accumulated depreciation and amortization 72,644 67,076
-------- --------
$ 31,579 $31,932
======== =======
F-12
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - OBLIGATIONS UNDER CAPITAL LEASES
- --------------------------------------------------------------------------------
Obligations under capital leases at December 2, 1995 and December 3, 1994
consisted of the following (in thousands):
1995 1994
---- ----
Obligations under capital leases through 2006 payable in monthly
installments of $11 including interest at 10% per annum $706 $759
Less: Current maturities (included with other current
liabilities) 28 28
---- ----
$678 $731
==== ====
Aggregate installments on obligations under capital leases maturing after one
year are as follows:
Fiscal year ending (in thousands):
1997 $ 61
1998 67
1999 73
2000 79
Thereafter 398
----
$678
NOTE 6 - STOCK COMPENSATION PLANS:
- --------------------------------------------------------------------------------
Stock Option Plan:
Under the Company's 1987 stock option plan, the Company may grant to key
employees either nonqualified or incentive stock options to purchase up to a
maximum of 650,000 shares of common stock at the fair market value at the date
of the grant.
During fiscal 1995 and 1993, no options were granted. During fiscal 1994,
options covering 10,000 shares were granted.
During fiscal 1995, 1994 and 1993 options covering 56,400, 15,800 and 246,300
shares, respectively, were exercised and during the same period options for
1,800, 13,400 and 1,700 shares were cancelled.
As of the end of fiscal 1995, 1994 and 1993, respectively, the Company had
outstanding incentive stock options for the purchase of 129,200, 187,400 and
206,600 shares; 168,800, 167,000 and 163,600 shares were still available for
future grants. The exercise prices range from $15.44 to $33.88 per share,
expiring at various dates from 1996 to 2003.
F-13
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Plan:
During fiscal 1991, the Company approved a restricted stock plan which
awarded 60,000 shares of common stock previously held in its treasury to key
employees. Shares are awarded in the name of the employee, who has all rights of
a shareholder, subject to certain restrictions or forfeiture. Vesting occurs
over a five-year period from the date the shares were awarded. Dividends
associated with the shares will be held by the Company and will vest over the
same five-year period.
The shares were recorded at their quoted market value at the date of grant of
$26 per share, or $1,560,000. The compensation element related to the awarding
of such shares is recognized ratably over the five-year restriction period.
During fiscal 1994, an additional 1,000 shares were awarded under terms
similar to those described above.
Compensation expense related to the above restricted shares for fiscal 1995,
1994 and 1993 was $324,000, $315,000 and $312,000, respectively.
NOTE 7 - STOCKHOLDER RIGHTS PLAN
- --------------------------------------------------------------------------------
During fiscal 1990, the Company's Board of Directors adopted a Stockholder
Rights Plan ("Rights Plan"). The Rights Plan was subsequently amended in May
1991, following a 2 for 1 stock split. In connection with the Rights Plan, as
amended, the Company declared a dividend of one-half share purchase right (a
"Right") on each of its common shares. Each Right entitles the holders to buy
from the Company one-half of a common share for every share owned at an exercise
price of $60 per share. The Rights have a term of ten years and can only become
exercisable upon Board of Directors' approval if a person or group acquires 20%
of more of the Company's common shares, or announces that it intends to commence
a tender offer which would result in the ownership of 30% or more of the common
shares as defined in the Rights Plan. Until they become exercisable, the Rights
will be evidenced by the Common Stock certificates and will be transferred only
with such certificates. The Company is entitled to redeem the Rights at $.01 per
Right at any time prior to the Rights' becoming exercisable. Upon an acquisition
or similar transaction, the Rights will become exercisable at a 50% discount for
Common Shares of an acquiring person. The Rights attach to all of the Company's
common shares outstanding as of June 6, 1990, or subsequently issued, and expire
on June 6, 2000.
NOTE 8 - BENEFIT PLANS
- --------------------------------------------------------------------------------
Profit Sharing Plans:
A qualified plan, which covers the majority of salaried employees, provides
for discretionary contributions up to a maximum of 15% of eligible salaries. The
distribution of the contribution to the Plan's participants is based upon their
annual base compensation. Contributions for fiscal 1995, 1994 and 1993 were
$415,000, $538,000 and $633,000, respectively.
The Company established in fiscal 1990 a nonqualified, defined contribution
retirement plan for key employees who are ineligible for the salaried employees
qualified profit sharing plan. Contributions for fiscal 1995, 1994 and 1993 were
$123,000, $156,000 and $189,000, respectively.
F-14
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Pension Plan:
The Company's defined benefit plan covers all eligible hourly production
employees. The benefits are based on years of service. Contributions are
intended to provide benefits attributable to both past and future services.
The net periodic pension cost of the defined benefit plan for fiscal 1995,
1994 and 1993 is as follows (in thousands):
1995 1994 1993
---- ---- ----
Service cost $ 160 $ 182 $ 152
Interest cost on projected benefit obligation 162 148 136
Actual return on plan assets (1,024) 213 (200)
Net amortization and deferral 768 (525) (58)
------ ----- -----
Net periodic pension cost $ 66 $ 18 $ 30
====== ====== =====
The following table presents a reconciliation of the funded status of the
Plan for fiscal 1995 and 1994 (in thousands):
1995 1994
Accumulated benefit obligations including ------- ------
vested benefits of ($2,242) and ($1,533) $(2,560) $(1,826)
======= =======
Projected benefit obligation for service
rendered to date $(2,560) $(1,826)
Plans assets at fair value,
primarily listed stocks 3,432 2,702
------- ------
Projected plan assets in excess of benefit
obligation 872 876
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions (930) (844)
Unrecognized prior service cost 41 45
Unrecognized net asset at transition being
recognized over 11 years (84) (112)
$ ------ ------
Accrued pension costs included in other
current liabilities (101) $ (35)
======== ========
F-15
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The average discount rate was 8% in fiscal 1995 and 7% in fiscal 1994, and
the expected rate of return on assets for both fiscal 1995 and 1994 was 8%.
Employee Stock Ownership Plan:
On November 25, 1991, the Company established an Employee Stock Ownership
Plan (ESOP) which covers all full time employees who have completed one year of
service. On December 18, 1991, the ESOP purchased 340,000 shares of common stock
from the Chairman of the Board of Directors and President of the Company for
$34.875 per share, which represented 5.5% of the Company's then outstanding
common stock. The ESOP was funded by the Company, pursuant to a loan pledge
agreement dated December 18, 1991 for $11,857,000. The loan is payable by the
ESOP to the Company from contributions to be made in fifteen equal annual
principal installments plus interest at the prime rate. Employee rights to the
common shares vest over a seven-year period and are payable at retirement,
death, disability or termination of employment.
Annual principal installments of $790,000 plus interest at prime were paid by
the ESOP to the Company on August 1, 1995, August 2, 1994 and August 2, 1993.
The balance on the ESOP indebtedness at December 2, 1995 of $8,697,000 is
reflected as a reduction of the Company's stockholders' equity in the
consolidated balance sheet.
ESOP contributions are recorded for financial reporting purposes as the ESOP
shares become allocable to the Plan participants. All ESOP shares are considered
outstanding in the determination of earnings per share.
The portion of the common stock dividends declared relating to ESOP shares
totaled $229,000, $216,000 and $217,000 for fiscal 1995, 1994 and 1993,
respectively. Of these amounts, $60,000, $50,000 and $33,000 for fiscal 1995,
1994 and 1993, respectively, related to allocated shares and $169,000, $166,000
and $184,000 for fiscal 1995, 1994 and 1993, respectively, related to
unallocated shares. The dividends related to the unallocated shares are being
applied towards the $790,000 annual principal installments referred to above.
As of December 2, 1995 and December 3, 1994, ESOP shares information was as
follows:
1995 1994
----- ----
Allocated 102,281 77,312
Committed to be released 27,113 27,975
In suspense 204,639 231,752
-------- --------
Total shares held by ESOP 334,033 337,039
======== ========
F-16
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net charges to earnings for fiscal 1995, 1994 and 1993 were as follows
(in thousands):
1995 1994 1993
---- ---- ----
Contribution to ESOP $1,513 $1,332 $1,252
Less: Interest income on loan to ESOP 840 708 646
------- ------- -------
Net charge to earnings $ 673 $ 624 $ 606
====== ======= ======
The contribution to the ESOP is allocated between costs of goods sold and
operating expenses; the interest income is included in interest and dividend
income.
NOTE 9 - INCOME TAXES
- --------------------------------------------------------------------------------
Provisions for Federal, state and local income taxes for fiscal 1995, 1994
and 1993 consisted of the following components (in thousands):
1995 1994 1993
---- ---- ----
Current:
Federal $3,924 $6,104 $8,279
State and local 547 829 1,037
------ ------ ------
4,471 6,933 9,316
Deferred:
Federal and state (121) 402 (791)
------ ------ -------
$4,350 $7,335 $8,525
====== ====== ======
The net deferred tax liability at December 2, 1995 and December 3, 1994
consisted of the following (in thousands):
1995 1994
---- ----
Long-term Portion:
Gross deferred tax liability (asset) for:
Excess depreciation for tax purposes $5,835 $5,728
Future tax deductions for employee benefit plans (933) (596)
Other (42) 5
------- -------
Net long-term liability 4,860 5,137
------ ------
Current Portion:
Gross deferred tax liability (asset) for:
Allowance for doubtful accounts (92) (175)
Net unrealized holding (gain) loss on investment
securities available-for-sale,
included in stockholders' equity 150 (214)
Other 188 115
------- -------
Net current liability (asset) 246 (274)
------- -------
Net deferred tax liability $5,106 $4,863
====== ======
F-17
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The differences between the Company's effective tax rate and Federal
statutory tax rate for fiscal 1995, 1994 and 1993 arose from the following:
1995 1994 1993
(% of pretax income)
Federal tax expense at statutory rate 35.0% 35.0% 34.9%
State and local income taxes,
net of Federal benefit 3.0 2.7 2.6
Tax-free interest income and
dividends received deduction (6.2) (3.3) (2.6)
Other (0.2) (1.7) (1.5)
---- ---- ----
Effective tax rate 31.6% 32.7% 33.4%
==== ==== ====
NOTE 10 - COMMITMENTS
- --------------------------------------------------------------------------------
Stock Repurchase:
In March 1993, the Company entered into a five year agreement with the
Chairman of the Board of Directors and President ("Chairman"). The agreement
provides that, in the event of the Chairman's death, his estate has the option
to sell, and the Company the obligation to purchase certain stock owned by the
Chairman. The amount of stock subject to purchase is equal to the lesser of $7
million or 10% of the book value of the Company at the end of the year
immediately following his death, plus the $3 million proceeds from insurance on
his life for which the Company is the beneficiary.
Lease:
The Company leases its New York City offices and showrooms at minimum annual
rentals of $487,000 plus escalation and other costs, until April 1996 . The
Company is presently negotiating a new lease.
Rental expense for operating leases in fiscal 1995, 1994 and 1993 aggregated
$671,000, $662,000 and $644,000, respectively.
NOTE 11 - STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
Cash outlays for corporate income taxes and interest for fiscal 1995, 1994
and 1993 were as follows (in thousands):
Corporate
income taxes Interest
1995 $4,634 $129
1994 7,865 128
1993 8,346 111
F-18
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-cash investing and financing activities:
In fiscal 1995, a net unrealized holding gain of $374,000, less related
income taxes of $150,000, on investment securities available-for-sale, was
recorded as an increase in stockholders' equity.
In fiscal 1994, a net unrealized holding loss of $528,000, less related
income taxes of $214,000, on investment securities available-for-sale, was
recorded as a reduction of stockholders' equity.
As of December 3, 1994, treasury stock costing $3,798,000 had been purchased
for which the broker was not paid until fiscal 1995.
NOTE 12 - INTEREST AND DIVIDEND INCOME
- --------------------------------------------------------------------------------
Interest and dividend income for the past three fiscal years were as follows
(in thousands):
Interest Dividend
income income Total
1995 $3,546 $130 $3,676
1994 3,112 298 3,410
1993 2,848 251 3,099
NOTE 13 - MAJOR CUSTOMER
- --------------------------------------------------------------------------------
For fiscal 1995, 1994 and 1993, sales to a group of customers affiliated
through common control accounted for approximately 16%, 10% and 10% of net
sales, respectively. The receivables from this group of customers represented
approximately 22% and 11% of the December 2, 1995 and December 3, 1994 accounts
receivable balances, respectively.
F-19
FAB INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
- --------------------------------------------------------------------------------
Quarterly earnings were as follows (in thousands, except for earnings per
share):
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
Fiscal 1995:
Net sales $41,433 $48,318 $44,879 $47,370 $182,000
Cost of goods sold 35,324 40,146 38,485 41,001 154,956
Net income 1,978 3,139 1,919 2,374 9,410
Earnings per share $.33 $.52 $.32 $.40 $1.57
Fiscal 1994:
Net sales $40,584 $49,733 $47,595 $51,841 $189,753
Cost of goods sold 32,909 40,078 38,328 41,057 152,372
Net income 2,624 3,772 3,841 4,856 15,093
Earnings per share $.42 $.61 $.62 $.79 $2.44
F-20
FAB INDUSTRIES, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS SCHEDULE
FORM 10-K ITEM 14
FISCAL YEARS ENDED DECEMBER 2, 1995, DECEMBER 3, 1994
AND NOVEMBER 27, 1993
S-1
FAB INDUSTRIES, INC. AND SUBSIDIARIES
CONTENTS
SCHEDULE:
II. Valuation and qualifying accounts S-3
S-2
SCHEDULE II
FAB INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
Col. A Col. B Col. C Col. D Col. E
- ------ ------ ------ ------ ------
Additions
(1) (2)
Balance at Charged Balance
beginning to costs Charged to at end
Description of year and expenses other accounts Deductions of year
Fiscal year ended December 2, 1995:
Allowance for doubtful accounts $ 950 $400 (i) - $(850)(ii) $500
==== ======== ======== ========== ====
Fiscal year ended December 3, 1994:
Allowance for doubtful accounts $1,600 $300 (i) - $(950)(ii) $950
====== ======== ======== ========== ====
Fiscal year ended November 27, 1993:
Allowance for doubtful accounts $1,400 $600 (i) - $(400)(ii) $1,600
====== ======== ======== ========== ======
(i) Current year's provision.
(ii) Accounts receivable written-off, net of recoveries.
S-3
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FAB INDUSTRIES, INC.
(Registrant)
By: /s/ Samson Bitensky
----------------------
Samson Bitensky
Chairman of the Board, Chief Executive
Officer and President
February 27, 1996
------------------
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE DATE Capacity in Which Signed
/s/ Samson Bitensky February 27, 1996 Chairman of the Board, Chief
- --------------------- Executive Officer, President and
Samson Bitensky Director (Principal Executive Officer)
/s/ David A. Miller February 27, 1996 Vice President-Finance and Treasurer
- --------------------- (Principal Financial and Accounting
David A. Miller Officer)
/s/ Sherman S.Lawrence February 27, 1996 Secretary and Director
- ----------------------
Sherman S.Lawrence
/s/ Lawrence Bober February 27, 1996 Director
- ------------------
Lawrence Bober
/s/ Richard Marlin February 27, 1996 Director
- --------------------
Richard Marlin
/s/ Louis Feil February 27, 1996 Director
- --------------------
Louis Feil
/s/ Oscar Kunreuther February 27, 1996 Director
- --------------------
Oscar Kunreuther
16