-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESK1QczpQJSEMJHHnv0b5p3TBT6BGO0R/AUmzRiF05zAVVL57Uqnz27QWK5AdJYA xGYcL3PapHbxRQKtLI8adw== 0000922423-97-000174.txt : 19970303 0000922423-97-000174.hdr.sgml : 19970303 ACCESSION NUMBER: 0000922423-97-000174 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970228 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAB INDUSTRIES INC CENTRAL INDEX KEY: 0000034136 STANDARD INDUSTRIAL CLASSIFICATION: KNITTING MILLS [2250] IRS NUMBER: 132581181 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05901 FILM NUMBER: 97548294 BUSINESS ADDRESS: STREET 1: 200 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2122799000 MAIL ADDRESS: STREET 1: 200 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10016 10-K 1 ANNUAL REPORT 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 November 30, 1996 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 [x] The aggregate market value at February 20, 1997 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 $116,058,000. 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, 1997, there were outstanding 5,751,055 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 March 31, 1997 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. (together with its subsidiaries, the "Company") is a major manufacturer of warp knit textile fabrics, raschel laces, circular knits, novelty knits, and polyurethane coated bonded fabrics. In addition, the Company produces comforters, sheets, blankets and other bedding products. The Company was incorporated on April 21, 1966, under the laws of the State of Delaware and is a successor by merger to previously existing businesses. The Company's textile fabrics are sold to a wide variety of manufacturers of ready to wear and intimate apparel for men, women and children. Applications include children's sleepwear, activewear, recreational apparel, home furnishings, over-the-counter fabrics, industrial fabrics, upholstery fabrics for residential and contract markets, and health care and consumer products. While sales are primarily to manufacturers of finished goods, the Company also uses its own textile fabrics to produce 100% cotton jersey (T-shirt) sheets, flannel and satin sheets, as well as blankets, comforters and other bedding products which the Company sells to chain, department and specialty stores, catalogue and mail order companies, as well as airlines and health-care institutions. The Company's Raval Lace Division manufactures raschel lace products for sale to manufacturers of lingerie and apparel, ribbon, craft and home furnishings industries, and over-the-counter retailers. Its Raval Designer Lace Division produces more intricately designed laces for designer lingerie, bridal wear, dresses, blouses and sportswear. The Company's subsidiary, Gem Urethane Corporation, produces a line of polyurethane coated fabrics and a variety of flame, adhesive and ultrasonically bonded items for apparel, accessories, health care, environmental and industrial products. The Company engages in research and product development activities to create new fabrics and styles to meet the continually changing demands of its customers. Direct expenditures in this area aggregated $4,347,000 in fiscal 1994, $4,184,000 in fiscal 1995 and $3,875,000 in fiscal 1996. Through these efforts, the Company has developed a full line of proprietary knitted fabrics for sale to manufacturers of men's, women's and children's apparel in both domestic and foreign markets. Similarly, the Company has also developed a full line of proprietary sheets and blankets, including specialty blankets for the airline industry. While the Company uses various trademarks and trade names in 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. 1 The Company markets its products primarily through its full-time sales personnel, as well as independent representatives located throughout the United States and abroad. In cooperation with yarn producers, it employs advertisements in various media as a marketing tool. The Company also markets its products on its web site: www.fab-industries.com. Historically, the Company's business reflects minor seasonal fluctuations. Somewhat higher sales occur in the second and third fiscal quarters, as a result of purchases by customers in anticipation of Fall and Holiday apparel sales. First and fourth fiscal quarter sales tend to be lower as apparel customers limit their orders to refilling smaller inventory requirements after Fall and Holiday sales and forecasting customer reorders for Spring and Summer fabrications. The Company does not believe its backlog of firm orders is a material indicator of future business trends, because goods subject to such orders are shipped within two to ten weeks, depending on the availability of yarn and other raw materials. On average, orders are filled within six weeks. For fiscal 1996, the Company's aggregate sales to companies under the common control of Sara Lee Corporation accounted for approximately 12% of the Company's net sales. The receivables from this group of customers represent approximately 13% of the Company's November 30, 1996 accounts receivable balance. The Company's export sales are not material. Supplies of Raw Materials The Company has not experienced difficulties in obtaining sufficient yarns, chemicals, dyes and other raw materials and supplies to maintain full production. The Company does not depend upon any single source of supply, and alternative sources are available for most of the raw materials used in its business. Inventories The Company maintains adequate inventories of yarns and other raw materials to insure an uninterrupted production flow. Greige and finished goods are maintained as inventory to meet varying customer demand and delivery requirements. The Company must maintain adequate working capital, because credit terms available to customers normally exceed credit terms extended to the Company by suppliers of raw materials. Competition The Company is engaged in a highly competitive business which is based largely upon product quality, service and price and general consumer demand for the finished goods utilizing the Company's products. There are more than 20 other manufacturers for its products. The Company believes that it is one of the major manufacturers of warp and circular knit, raschel lace and urethane product in the United States. The proportion of imported textile goods sold in the United States has increased substantially in the past few years, adversely impacting domestically manufactured textile products and the number of domestic manufacturers of such products. As a result of significant expenditures on 2 production equipment, the Company's strong financial position and increased capacity have enabled it to capture a larger share of the now smaller domestic textile market. Employees The Company employs approximately 1,500 people, who are not represented by unions. The Company considers relations with its employees to be satisfactory. Item 2. Properties. The Company conducts its manufacturing operations in owned facilities located in Lincolnton, Maiden, Cherryville and Salisbury, North Carolina, and in leased facilities located in Amsterdam, New York. All of the Company's facilities are operated mostly on a five day-a-week basis. The Company's knitting, dyeing-finishing and printing operations are conducted at the Lincolnton facility. These operations 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 Company's Amsterdam and Maiden plants. At the Maiden plant facility, the Company 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 Company's consumer and institutional products manufacturing, retail and over- the-counter operations. The Company's Amsterdam facilities are devoted to tricot warping and knitting and warehousing. Approximately 106,000 square feet in one of the Company's Amsterdam plants is used for the production of a line of polyurethane coated fabrics and a variety of flame, adhesive and ultrasonically bonded items. The following table sets forth the location of each of the Company's manufacturing facilities, its principal use, approximate floor space, and, where leased, the lease expiration date. No facility owned by the Company is subject to any encumbrance. 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 3 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. 4/30/06 New York Showroom Facilities - ------------------------ (1) Owned by the Company. (2) Capitalized building lease - See note 5 of Notes to Consolidated Financial Statements. All of the Company's facilities are constructed of brick, steel or concrete, and the Company considers all facilities to be adequate and in good operating condition and repair. Item 3. Legal Proceedings. Neither the Company nor any of its subsidiaries or properties is subject to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Security-Holders. Not Applicable Executive Officers of the Company The following table sets forth certain information concerning the executive officers of the Company as of February 20, 1997. Name Age Positions and Offices Samson Bitensky............... 77 Chairman of the Board of Directors, President and Chief Executive Officer David A. Miller............... 59 Vice President-Finance and Treasurer 4 Stanley August.................. 65 Vice President Steven Myers.................... 48 Vice President Sherman S. Lawrence............. 78 Secretary and Director Each of the Company'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 Company in 1966 and has served as Chairman of the Board of Directors and Chief Executive Officer of the Company since such time. Mr. Bitensky has also served as President of the Company since 1970. David A. Miller has been employed by the Company 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. Stanley August has been employed by the Company 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 1992 and as Vice President since March 30, 1992. Steven Myers, an attorney, has been employed by the Company 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 Company since 1966 and as Secretary since 1968. Mr. Lawrence has been a practicing attorney since 1942 and has served as co-counsel to the Company since 1966. 5 PART II Item 5. Market for Company's Common Equity and Related Stockholder Matters. The Company'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 1996 First Quarter....................................... $ 31 7/8 $ 29 1/2 Second Quarter...................................... $ 29 7/8 $ 26 7/8 Third Quarter....................................... $ 28 7/8 $ 24 3/4 Fourth Quarter...................................... $ 28 3/8 $ 25 7/8 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 At February 20, 1997, there were approximately 598 holders of record of Common Stock. 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. For fiscal 1996, quarterly dividends of $.175 per share were declared on February 12, 1996, May 20, 1996, August 14, 1996 and November 24, 1996. 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 Company. 6 Item 6. Selected Consolidated Financial Data.
As at or for the fiscal year ended --------------------------------------------------------------------- November 30, December 2, December 3, November 27, November 28, 1996 1995 1994 (2) 1993 1992 (In thousands, except share data) Net Sales $156,136 $182,000 $189,753 $189,586 $189,288 Income before taxes on income 12,596 13,760 22,428 25,531 25,767 Net income 8,796 9,410 15,093 17,006 16,917 Earnings per share 1.52 1.57 2.44 2.75 2.65 Total assets 160,980 161,027 163,133 157,499 138,952 Long-term debt 620 678 731 799 822 Stockholders' equity 133,888 132,932 129,533 124,326 109,172 Book value per share (1) 23.25 22.42 21.52 19.98 18.01 Cash dividends per share .70 .685 .64 .64 .50 Weighted average number of shares outstanding 5,797,228 5,981,690 6,189,831 6,181,186 6,390,706
- --------------------- (1) Computed by dividing stockholders' equity by the number of shares outstanding at year-end. (2) Fifty-three weeks. 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Fiscal 1996 Compared to Fiscal 1995 Net sales for the 1996 fiscal year were $156,136,000 as compared to $182,000,000 in 1995, a decrease of 14.2%. Business conditions within the textile industry remained under pressure as a result of sluggish consumer demand, as well as highly competitive market conditions and foreign competition. Gross margins as a percentage of sales declined from 14.9% to 14.5%. Lower sales volume reduced operating schedules at manufacturing plants, and a less profitable mix also exerted unfavorable pressures on profit margins. Margins were benefited by cost control programs and favorable LIFO inventory levels. In fiscal 1995, an addition to LIFO inventory reserves in the amount of $893,000 was made as a result of higher raw material prices (primarily fiber), as compared to a decrease of $742,000 in reserves in fiscal 1996 due to lower average FIFO cost levels. Selling, general and administrative expenses declined by $3,192,000, or 18.4%, and as a percentage of sales declined to 9.1% from 9.5% last year. The decline relates primarily to lower incentive-based compensation and lower related salaries and commissions. In addition, other selling, general and administrative expenses decreased as a result of the continued effectiveness of the Company's expense containment program, which began in fiscal 1995. Interest and dividend income remained at approximately $3.7 million for both years. The effective income tax rate for the year was 30.2% as against 31.6% in fiscal 1995. The decline was primarily attributable to a proportionately higher percentage of tax exempt interest in fiscal 1996. As a result of these factors, net income declined to $8,796,000 from $9,410,000 but as a percentage of sales increased to 5.6% from 5.2%. Earnings per share, which are based upon the weighted average number of shares outstanding (5,797,228 vs. 5,981,690), were $1.52 as compared to $1.57 in fiscal 1995. There was no stock option related dilution in either year. 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. 8 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 Company 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. Liquidity and Capital Resources The Company's principal source of funds continues to be cash flow generated from operations. Net cash provided by operating activities in fiscal 1996 was $17,223,000 as compared to $13,155,000 in the comparative 1995 period. Of this increase, $9,047,000 relates to a comparative decline in accounts receivable, which was offset by $4,407,000 related to a comparative increase in inventories. Capital expenditures for the current fiscal year were $4,101,000 as against $5,215,000 in the comparable 1995 period. In fiscal 1996, the Company purchased additional knitting and warping machines for two of its knitting mills. During fiscal 1996, the Company repurchased 186,804 shares of its common stock at a cost of $5,401,000 (an average price of $28.91). The Company intends to continue to purchase its shares of common stock from time-to-time, as market conditions warrant and price criteria are met. During fiscal 1996, the Company declared regular quarterly dividends totaling $0.70 per share. 9 Stockholders' equity rose to $133,888,000, or $23.25 book value per share, from $132,932,000, or $22.42 per share, at the previous fiscal year-end. Management believes that the current financial position of the Company is more than 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 Company 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 Standards Board issued Statement of Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived Assets and for Long- Lived 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 Company adopted SFAS No. 121 in fiscal 1996 and its implementation did not have a material effect on the consolidated financial statements. In October 1995, the Financial Accounting Standards Board Issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which allows either the intrinsic or fair value method. SFAS No. 123 encourages, but does not require, entities to adopt the fair value method in place of the intrinsic value method as provided for in 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 Company anticipates retaining the intrinsic value method when it adopts SFAS No. 123 in fiscal 1997. 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 Company. See Part I, Item 4. "Executive Officers of the Company." Other information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than March 31, 1997 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 Company's definitive proxy statement to be filed not later than March 31, 1997 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 Company's definitive proxy statement to be filed not later than March 31, 1997 pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions. The information required by this item is incorporated by reference from the Company's definitive proxy statement to be filed not later than March 31, 1997 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. 3.1 - Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Company'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 Company'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 Company 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 Company 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 Company, incorporated by reference to Exhibit 10.1 to the 1993 10-K. 12 10.2 - Employment Agreement dated as of March 1, 1993, between the Company and Samson Bitensky, incorporated 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 10.9 to the 1993 10-K. 10.9 - Amendment to the Retirement Plan dated September 21, 1995, incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 2, 1995 (the "1995 10-K"). 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 as of 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. 13 10.14 - Amendment dated December 24, 1987 to the Profit Sharing Plan, incorporated by reference to Exhibit 10.13 to the 1993 10-K. 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, incorporated by reference to Exhibit 10.17 to the 1995 10-K. 10.18 - Lease dated as of December 8, 1988 between Glockhurst Corporation N.V. and the Company, incorporated by reference to Exhibit 10.16 to the 1993 10-K. 10.19 - Lease Modification Agreement dated as of April 8, 1991 between Glockhurst Corporation N.V. and the Company, incorporated by reference to Exhibit 10.17 to the 1993 10-K. *10.20 - Second Lease Modification Agreement dated May 23, 1996 between 200 Madison Associates, L.P., and the Company. 10.21 - 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. 10.22 - Lease dated as of January 1, 1977 between City of Amsterdam Industrial Development by reference to Exhibit 10.19 to the 1993 10- K. 10.23 - Form of Indemnification agreement between Company and its officers and directors, incorporated by reference to Exhibit 10.20 to the 1993 10-K. 10.24 - Company's Employee Stock Ownership Plan effective as of November 25, 1991, incorporated by reference to Exhibit 10.24 to the 1993 10- K. 12 10.25 - Amendment dated September 21, 1995 to the Employee Stock Ownership Plan, incorporated by reference to Exhibit 10.27 to the 1995 10-K. 10.26 - Company'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 Company 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 NOVEMBER 30, 1996, DECEMBER 2, 1995 AND DECEMBER 3, 1994 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 November 30, 1996 and December 2, 1995 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three fiscal years in the period ended November 30, 1996. 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 November 30, 1996 and December 2, 1995, and the results of their operations and their cash flows for each of the three fiscal years in the period ended November 30, 1996 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 BDO Seidman, LLP February 6, 1997 F-3 FAB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
November 30, December 2, 1996 1995 ---- ---- ASSETS Current: Cash and cash equivalents (Note 1) $ 7,518,000 $ 7,883,000 Investment securities available-for-sale (Note 2) 60,880,000 54,674,000 Accounts receivable, net of allowance of $600,000 and $500,000 for doubtful accounts (Note 13) 28,797,000 35,217,000 Inventories (Note 3) 28,947,000 27,267,000 Other current assets 1,944,000 1,970,000 ------------- ------------- Total current assets 128,086,000 127,011,000 Property, plant and equipment - net (Note 4) 30,203,000 31,579,000 Other assets 2,691,000 2,437,000 $ 160,980,000 $ 161,027,000 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current: Accounts payable $ 12,076,000 $ 12,661,000 Corporate income and other taxes 1,667,000 1,886,000 Accrued payroll and related expenses 3,403,000 4,295,000 Dividends payable 1,007,000 1,038,000 Other current liabilities 532,000 470,000 Deferred income taxes (Note 9) 761,000 246,000 ------------- ------------- Total current liabilities 19,446,000 20,596,000 Obligations under capital leases, net of current maturities (Note 5) 620,000 678,000 Other noncurrent liabilities 2,364,000 1,961,000 Deferred income taxes (Note 9) 4,662,000 4,860,000 ------------- ------------- Total liabilities 27,092,000 28,095,000 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 6,564,194 and 6,549,894 1,313,000 1,309,000 Additional paid-in capital 6,410,000 6,150,000 Retained earnings 157,223,000 152,473,000 Loan to employee stock ownership plan (7,907,000) (8,697,000) Net unrealized holding gain on investment securities available-for-sale, net of taxes 607,000 224,000 Unearned restricted stock compensation (58,000) (228,000) Cost of common stock held in treasury - 806,439 and 619,635 shares (23,700,000) (18,299,000) ------------- ------------- Total stockholders' equity 133,888,000 132,932,000 ------------- ------------- $ 160,980,000 $ 161,027,000 ============= =============
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 ----------------- November 30, December 2, December 3, 1996 1995 1994 ---- ---- ---- Net sales (Note 13) $ 156,136,000 $ 182,000,000 $ 189,753,000 Cost of goods sold 133,466,000 154,956,000 152,372,000 ----------- ----------- ------------- Gross profit 22,670,000 27,044,000 37,381,000 Selling, shipping and administrative expenses 14,150,000 17,342,000 17,762,000 ---------- ---------- ---------- Operating income 8,520,000 9,702,000 19,619,000 --------- --------- ---------- Other income (expenses): Interest and dividend income (Note 12) 3,660,000 3,676,000 3,410,000 Interest expense (124,000) (129,000) (128,000) Net gain (loss) on investment securities (Note 2) 540,000 511,000 (473,000) --------- --------- ------------- Total other income 4,076,000 4,058,000 2,809,000 --------- --------- ------------- Income before taxes 12,596,000 13,760,000 22,428,000 Taxes on income (Note 9) 3,800,000 4,350,000 7,335,000 --------- --------- ------------- Net income $ 8,796,000 $ 9,410,000 $ 15,093,000 ============= ============= ============= Earnings per share $ 1.52 $ 1.57 $ 2.44 ============= ============= ============= Weighted average number of shares of common stock outstanding 5,797,228 5,981,690 6,189,831 ============= ============ ============= Cash dividends declared per share (Note 11) $ .70 $ .685 $ .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 Additional stock holding Number of paid-in Retained ownership gain Total shares Amount capital earnings plan (loss) ----- ------ ------ ------- -------- ---- ------ Balance, November 27, 1993 $ 124,326,000 6,477,694 $1,295,000 $4,931,000 $ 135,994,000 $(10,277,000) $ -- Net income - fiscal 1994 15,093,000 -- -- -- 15,093,000 -- -- Cash dividends (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 -- -- -- -- -- -- Payment of loan from ESOP (Note 8) 790,000 -- -- -- -- 790,000 -- Issuance of treasury stock under restricted stock plan -- -- -- 7,000 -- -- -- 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) Net income - fiscal 1995 9,410,000 -- -- -- 9,410,000 -- -- Cash dividends (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 -- -- -- -- -- -- 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 Net income - fiscal 1996 8,796,000 -- -- -- 8,796,000 -- -- Cash dividends (4,046,000) -- -- -- (4,046,000) -- -- Exercise of stock options 228,000 14,300 4,000 224,000 -- -- -- Purchase of treasury stock (5,401,000) -- -- -- -- -- -- Compensation under restricted stock plan (Note 6) 206,000 -- -- 36,000 -- -- -- Change in net unrealized holding gain(loss) on investment securities available-for-sale, net of taxes 383,000 -- -- -- -- -- 383,000 Payment of loan from ESOP (Note 8) 790,000 -- -- -- -- 790,000 -- ------------- --------- ---------- --------- ------------ ------------ ------- Balance, November 30, 1996 $ 133,888,000 6,564,194 $1,313,000 $6,410,000 $ 157,223,000 $ (7,907,000) $ 607,000 ============= ========= ========== ========== ============= ============ ========= 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 -------------- Unearned restricted stock Number of compensation shares Cost ------------ ------ ---- Balance, November 27, 1993 $(832,000) (253,861) $ (6,785,000) Net income - fiscal 1994 -- -- -- Cash dividends -- -- -- Exercise of stock options -- -- -- Purchase of treasury stock -- (221,843) (7,023,000) Compensation under restricted stock plan (Note 6) 315,000 -- -- Payment of loan from ESOP (Note 8) -- -- -- Issuance of treasury stock under restricted stock plan (35,000) 1,000 28,000 Net unrealized holding loss on investment securities available- for-sale, net of taxes -- -- -- -------- -------- ----------- Balance, December 3, 1994 (552,000) (474,704) (13,780,000) Net income - fiscal 1995 -- -- -- Cash dividends -- -- -- Exercise of stock options -- -- -- Purchase of treasury stock -- (144,931) (4,519,000) Compensation under restricted stock plan (Note 6) 324,000 -- -- 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 (228,000) (619,635) (18,299,000) Net income - fiscal 1996 -- -- -- Cash dividends -- -- -- Exercise of stock options -- -- -- Purchase of treasury stock -- (186,804) (5,401,000) Compensation under restricted stock plan (Note 6) 170,000 -- -- Change in net unrealized holding gain(loss) on investment securities available-for-sale, net of taxes -- -- -- Payment of loan from ESOP (Note 8) -- -- -- --------- -------- ------------ Balance, November 30, 1996 $ (58,000) (806,439) $(23,700,000) ========= ======== ============
F-6 FAB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (NOTE 11)
Fiscal year ended ----------------- November 30, December 2, December 3, 1996 1995 1994 ---- ---- ---- Cash flows from operating activities: Net income $ 8,796,000 $ 9,410,000 $ 15,093,000 Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts 400,000 400,000 300,000 Depreciation and amortization 5,477,000 5,568,000 5,425,000 Deferred income taxes 61,000 (121,000) 402,000 Compensation under restricted stock plan 206,000 324,000 315,000 Net (gain) loss on investment securities (540,000) (511,000) 473,000 Decrease (increase) in: Accounts receivable 6,020,000 (3,027,000) 2,793,000 Inventories (1,680,000) 2,727,000 (5,672,000) Other current assets 26,000 385,000 (37,000) Other assets (254,000) (250,000) (175,000) Increase (decrease) in: Accounts payable (585,000) (1,628,000) 777,000 Accruals and other liabilities (704,000) (122,000) (1,107,000) ------------ ------------ ------------ Net cash provided by operating activities 17,223,000 13,155,000 18,587,000 ------------ ------------ ------------ Cash flows from investing activities: Purchases of property, plant and equipment (4,101,000) (5,215,000) (7,364,000) Proceeds from sales of investment securities 9,660,000 9,746,000 7,110,000 Acquisition of investment securities (14,687,000) (10,350,000) (8,429,000) ------------ ------------ ------------ Net cash used in investing activities (9,128,000) (5,819,000) (8,683,000) ------------ ------------ ------------ Cash flows from financing activities: Purchase of treasury stock (5,401,000) (8,317,000) (3,225,000) Principal repayment on loan to employee stock ownership plan 790,000 790,000 790,000 Dividends (4,077,000) (4,016,000) (6,953,000) Exercise of stock options 228,000 947,000 279,000 ------------ ------------ ------------ Net cash used in financing activities (8,460,000) (10,596,000) (9,109,000) ------------ ------------ ------------ Increase (decrease) in cash and cash equivalents (365,000) (3,260,000) 795,000 Cash and cash equivalents, beginning of year 7,883,000 11,143,000 10,348,000 ------------ ------------ ------------ Cash and cash equivalents, end of year $ 7,518,000 $ 7,883,000 $ 11,143,000 ============ ============ ============
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 1996, 1995 and 1994, 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 1996 and 1995 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: The Company has 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. The Company classifies all of its investments as available-for-sale. The investments are recorded at their fair value and the unrealized gain or loss, net of income taxes, is recorded in stockholders' equity. Gains and losses on sales of investment securities are computed using the specific identification method. F-8 FAB INDUSTRIES, INC. AND SUBSIDIARIES SUMMARY OF ACCOUNTING POLICIES 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 $3,875,000, $4,184,000 and $4,347,000 in fiscal 1996, 1995 and 1994, 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, principally 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. RECENT ACCOUNTING STANDARDS: In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived 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 Company adopted SFAS No. 121 in fiscal 1996 and its implementation did not have a material effect on the consolidated financial statements. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which allows either the intrinsic or fair value method. SFAS No. 123 encourages, but does not require, entities to adopt the fair value method in place of the intrinsic value method as provided for in 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 Company anticipates retaining the intrinsic value method when it adopts SFAS No. 123 in fiscal 1997. F-9 FAB INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Cash and Cash Equivalents - ------------------------------------------------------------------------------- Cash and cash equivalents at November 30, 1996 and December 2, 1995 consisted of the following (in thousands): 1996 1995 ------ ------- Cash $1,700 $ 1,335 Tax-free short-term debt instruments 5,818 6,548 ------ ------- $7,518 $ 7,883 ====== ======= Note 2 - Investment Securities - ------------------------------------------------------------------------------- Investment securities available-for-sale at November 30, 1996 and December 2, 1995 consisted of the following (in thousands): Gross Gross Unrealized Unrealized Cost Holding Gain Holding Loss Fair Value ---- ------------ ------------ ---------- 1996: ----- Equities $ 7,251 $ 624 $ (218) $ 7,657 U.S. Treasury obligations 37 -- -- 37 Tax-exempt obligations 46,891 513 (25) 47,379 Corporate bonds 5,689 155 (37) 5,807 ------- ------- --------- ------- $59,868 $ 1,292 $ (280) $60,880 ======= ======= ======== ======= 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 ======= ======= ======== ======= 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 November 30, 1996 and December 2, 1995, by contractual maturity are as shown below:
November 30, 1996 December 2, 1995 ----------------- ---------------- Cost Fair Value Cost Fair Value ---- ---------- ---- ---------- Maturing in one year or less $ 4,995 $ 5,030 $11,321 $11,333 Maturing after one year through five years 45,853 46,402 31,711 32,117 Maturing after five years through ten years 1,769 1,791 9,454 9,560 ------- ------- ------- ------- $52,617 $53,223 $52,486 $53,010 ======= ======= ======= =======
Gross and net realized gains and losses on sales of investment securities were: 1996 1995 1994 ---- ---- ---- Gross realized gains $ 1,518 $ 762 $ 640 Gross realized losses (978) (251) (1,113) ------- ----- ------- Net realized gain (loss) $ 540 $ 511 $ (473) ======= ===== ======= Note 3 - Inventories - ------------------------------------------------------------------------------- Inventories at November 30, 1996 and December 2, 1995 consisted of the following (in thousands, except for percentages): 1996 1995 -------- ------ Raw materials $10,504 $11,753 Work-in process 10,087 7,675 Finished goods 8,356 7,839 ------- ------- $28,947 $27,267 ======= ======= Approximate percentage of inventories valued under LIFO method 65% 66% ======= ======= Excess of FIFO valuation over LIFO valuation $ 7,161 $ 7,903 ======= ======= F-11 FAB INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Property, Plant and Equipment - ------------------------------------------------------------------------------- Property, plant and equipment at November 30, 1996 and December 2, 1995 consisted of the following (in thousands): 1996 1995 ------- ----- Owned by the Company: Land and improvements $ 698 $ 698 Buildings and improvements 12,703 12,668 Machinery and equipment 90,459 86,405 Trucks and automobiles 1,547 1,538 Office equipment 659 656 Leasehold improvements 808 808 -------- -------- 106,874 102,773 Property under capital leases: Land 18 18 Buildings and improvements 1,432 1,432 -------- -------- 108,324 104,223 Less: Accumulated depreciation and amortization 78,121 72,644 -------- -------- $ 30,203 $ 31,579 ======== ======== F-12 FAB INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 5 - Obligations Under Capital Leases - ------------------------------------------------------------------------------- Obligations under capital leases at November 30, 1996 and December 2, 1995 consisted of the following (in thousands):
1996 1995 ---- ---- Obligations under capital leases through 2006 payable in monthly installments of $11 including interest at 10% per annum $648 $706 Less: Current maturities (included with other current liabilities) 28 28 --- --- $620 $678 ==== ====
Aggregate installments on obligations under capital leases maturing after one year are as follows: Fiscal year ending (in thousands): 1998 $ 67 1999 73 2000 79 2001 85 Thereafter 316 --- $620 ==== 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 1996 and fiscal 1994, options covering 50,000 shares and 10,000 shares, respectively were granted. During fiscal 1995, no options were granted. During fiscal 1996, 1995 and 1994, options covering 14,300, 56,400 and 15,800 shares, respectively, were exercised and during the same periods options for 10,000, 1,800 and 13,400 shares were cancelled. As of the end of fiscal 1996, 1995 and 1994, respectively, the Company had outstanding incentive stock options for the purchase of 154,900, 129,200 and 187,400 shares; 128,800, 168,800 and 167,000 shares were still available for future grants; and 113,700, 127,400 and 173,720 were exercisable. The exercise prices range from $15.44 to $33.88 per share, expiring at various dates from 1996 to 2006. 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. 3,000 shares were forfeited in fiscal 1996 and the balance became fully vested. 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 1996 and 1994, an additional 2,400 shares and 1,000 shares, respectively, were awarded under terms similar to those described above. Compensation expense related to the above restricted shares for fiscal 1996, 1995 and 1994 was $181,000, $324,000 and $315,000, 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% or 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 1996, 1995 and 1994 were $439,000, $415,000 and $538,000, 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 1996, 1995 and 1994 were $98,000, $123,000 and $156,000, 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 1996, 1995 and 1994 is as follows (in thousands):
1996 1995 1994 ---- ---- ---- Service cost $ 178 $ 160 $ 182 Interest cost on projected benefit obligation 161 162 148 Actual return on plan assets (1,267) (1,024) 213 Net amortization and deferral 924 768 (525) ------- ------- ----- Net periodic pension cost $ (4) $ 66 $ 18 ======= ======= =====
The following table presents a reconciliation of the funded status of the Plan for fiscal 1996 and 1995 (in thousands):
1996 1995 ------ ----- Accumulated benefit obligations including vested benefits of ($2,080) and ($2,242) $(2,235) $(2,560) ======= ======= Projected benefit obligation for service rendered to date $(2,235) $(2,560) Plans assets at fair value, primarily listed stocks 4,350 3,432 ------- ------- Projected plan assets in excess of benefit obligation 2,115 872 Unrecognized net gain from past experience different from that assumed and effects of changes in assumptions (2,194) (930) Unrecognized prior service cost 37 41 Unrecognized net asset at transition being recognized over 11 years (56) (84) ------- ------- Accrued pension costs included in other current liabilities $ (98) $ (101) ======= =======
The average discount rate was 7 1/2% in fiscal 1996 and 8% in fiscal 1995, and the expected rate of return on assets for both fiscal 1996 and 1995 was 8%. F-15 FAB INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 are paid by the ESOP to the Company. The balance on the ESOP indebtedness at November 30, 1996 of $7,907,000 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 $232,000, $229,000 and $216,000 for fiscal 1996, 1995 and 1994, respectively. Of these amounts, $75,000, $60,000 and $50,000 for fiscal 1996, 1995 and 1994, respectively, related to allocated shares and $157,000, $169,000 and $166,000 for fiscal 1996, 1995 and 1994, 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 November 30, 1996 and December 2, 1995, ESOP shares information was as follows: 1996 1995 ----- ---- Allocated 123,694 102,281 Committed to be released 25,693 27,113 In suspense 178,965 204,639 -------- -------- Total shares held by ESOP 328,352 334,033 ======== ======== F-16 FAB INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The net charges to earnings for fiscal 1996, 1995 and 1994 were as follows (in thousands): 1996 1995 1994 ---- ---- ---- Contribution to ESOP $1,297 $1,513 $1,332 Less: Interest income on loan to ESOP 738 840 708 ------ ------ ------ Net charge to earnings $ 559 $ 673 $ 624 ====== ====== ====== 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 1996, 1995 and 1994 consisted of the following components (in thousands): 1996 1995 1994 ---- ---- ---- Current: Federal $3,415 $ 3,924 $6,104 State and local 324 547 829 ------ ------- ------ 3,739 4,471 6,933 Deferred: Federal and state 61 (121) 402 ------ ------- ------ $3,800 $ 4,350 $7,335 ====== ======= ====== The net deferred tax liability at November 30, 1996 and December 2, 1995 consisted of the following (in thousands):
1996 1995 ---- ---- Long-term Portion: Gross deferred tax liability (asset) for: Excess depreciation for tax purposes $ 5,738 $ 5,835 Future tax deductions for employee benefit plans (1,076) (933) Other - (42) ------- ------- Net long-term liability 4,662 4,860 ------- ------- Current Portion: Gross deferred tax liability (asset) for: Allowance for doubtful accounts (108) (92) Net unrealized holding gain on investment securities available-for-sale, included in stockholders' equity 405 150 ESOP contribution accrued for tax purposes 417 416 Other 47 (228) ------- ------- Net current liability 761 246 ------- ------- Net deferred tax liability $ 5,423 $ 5,106 ======= =======
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 1996, 1995 and 1994 arose from the following:
1996 1995 1994 ---- ---- ---- (% of pretax income) Federal tax expense at statutory rate 35.0% 35.0% 35.0% State and local income taxes, net of Federal benefit 2.4 3.0 2.7 Tax-free interest income and dividends received deduction (6.4) (6.2) (3.3) Other (0.8) (0.2) (1.7) ---- ---- ---- Effective tax rate 30.2% 31.6% 32.7% ==== ==== ====
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 until 2006, at average minimum annual rentals of $503,000 until April 2001 and $660,000 thereafter until April 2006, plus escalation and other costs. The Company has the option to cancel the lease effective April 2001. Rental expense for operating leases in fiscal 1996, 1995 and 1994 aggregated $643,000, $671,000 and $662,000, respectively. Future minimum annual payments over the remaining noncancelable term of the Company's New York City operating lease are as follows: Fiscal year ending (in thousands): 1997 $ 487 1998 494 1999 530 2000 559 2001 235 ------ $2,305 ====== F-18 FAB INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11 - Statement of Cash Flows - ------------------------------------------------------------------------------- Cash outlays for corporate income taxes and interest for fiscal 1996, 1995 and 1994 were as follows (in thousands): Corporate income taxes Interest ------------ -------- 1996 $3,840 $ 124 1995 4,634 129 1994 7,865 128 Non-cash investing and financing activities: In fiscal 1996, a net unrealized holding gain of $639,000, less related income taxes of $256,000, on investment securities available-for-sale, was recorded as an increase in stockholders' equity. In fiscal 1995, a net unrealized holding gain of $902,000, less related income taxes of $364,000, 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. 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 ------ ------ ----- 1996 $3,505 $ 155 $3,660 1995 3,546 130 3,676 1994 3,112 298 3,410 Note 13 - Major Customer - ------------------------------------------------------------------------------- For fiscal 1996, 1995 and 1994, sales to a group of customers affiliated through common control accounted for approximately 12%, 16% and 10% of net sales, respectively. The receivables from this group of customers represented approximately 13% and 22% of the November 30, 1996 and December 2, 1995 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 1996: Net sales $35,588 $40,768 $40,016 $39,764 $156,136 Cost of goods sold 31,040 34,753 33,704 33,969 133,466 Net income 1,594 2,156 2,420 2,626 8,796 Earnings per share $.27 $.37 $.42 $.46 $1.52 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
F-20 FAB INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------- FINANCIAL STATEMENTS SCHEDULE FORM 10-K ITEM 14 ----------------- FISCAL YEARS ENDED NOVEMBER 30, 1996, DECEMBER 2, 1995 ------------------------------------------------------ AND DECEMBER 3, 1994 -------------------- 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 November 30, 1996: Allowance for doubtful accounts $ 500 $400 (i) - $(300)(ii) $ 600 ====== ========= ======== ========== ====== 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 ====== ======== ======== ========== =====
(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 Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FAB INDUSTRIES, INC. (Company) By:/s/ Samson Bitensky --------------------- Samson Bitensky Chairman of the Board, Chief Executive Officer and President February 27, 1997 ----------------- 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 Company and in the capacities and on the dates indicated. Signature Date Capacity in Which Signed - --------- ---- ------------------------ /s/Samson Bitensky - --------------------- Samson Bitensky February 27, 1997 Chairman of the Board, Chief Executive Officer, President and Director (Principal Executive Officer) /s/David A. Miller - --------------------- David A. Miller February 27, 1997 Vice President-Finance and Treasurer (Principal Financial and Accounting Officer) /s/Sherman S. Lawrence - ---------------------- Sherman S. Lawrence February 27, 1997 Secretary and Director /s/Lawrence Bober - ---------------------- Lawrence Bober February 27, 1997 Director /s/Richard Marlin - ---------------------- Richard Marlin February 27, 1997 Director /s/Louis Feil - ---------------------- Louis Feil February 27, 1997 Director /s/Oscar Kunreuther - ---------------------- Oscar Kunreuther February 27, 1997 Director 16 INDEX TO EXHIBITS
Page Number In Sequentially Exhibit Description of Exhibit Numbered Copy 3.1 - Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Company'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 Company'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 Company 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 Company 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 Company, incorporated by reference to Exhibit 10.1 to the 1993 10-K. 10.2 - Employment Agreement dated as of March 1, 1993, between the Company and Samson Bitensky, incorporated 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.
17
Page Number In Sequentially Exhibit Description of Exhibit Numbered Copy 10.8 - Amendment to the Retirement Plan effective as of December 1, 1989, incorporated by reference to Exhibit 10.9 to the 1993 10-K. 10.9 - Amendment to the Retirement Plan dated September 21, 1995, incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 2, 1995 (the "1995 10-K"). 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 as of 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. 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, incorporated by reference to Exhibit 10.17 to the 1995 10-K. 10.18 - Lease dated as of December 8, 1988 between Glockhurst Corporation N.V. and the Company, incorporated by reference to Exhibit 10.16 to the 1993 10-K. 10.19 - Lease Modification Agreement dated as of April 8, 1991 between Glockhurst Corporation N.V. and the Company, incorporated by reference to Exhibit 10.17 to the 1993 10-K. *10.20 - Second Lease Modification Agreement dated May 23, 1996 between 200 Madison Associates, L.P., and the Company. 10.21 - 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. 10.22 - Lease dated as of January 1, 1977 between City of Amsterdam Industrial Development by reference to Exhibit 10.19 to the 1993 10- K. 10.23 - Form of Indemnification agreement between Company and its officers and directors, incorporated by reference to Exhibit 10.20 to the 1993 10-K.
18
Page Number In Sequentially Exhibit Description of Exhibit Numbered Copy 10.24 - Company's Employee Stock Ownership Plan effective as of November 25, 1991, incorporated by reference to Exhibit 10.24 to the 1993 10- K. 10.25 - Amendment dated September 21, 1995 to the Employee Stock Ownership Plan, incorporated by reference to Exhibit 10.27 to the 1995 10-K. 10.26 - Company'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 Company 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. 19 EX-10.20 2 SECOND LEASE MODIFICATION AGREEMENT SECOND LEASE MODIFICATION AGREEMENT Agreement made this 23 day of May 1996 between 200 Madison Associates, L.P., c/o George Comfort & Sons, Inc., 200 Madison Avenue, New York, New York (hereinafter called "Landlord") and FAB INDUSTRIES, INC., a New York Corporation with an office at 200 Madison Avenue, New York, New York 10016 (hereinafter called "Tenant"). WITNESSETH ---------- WHEREAS, Landlord as successors in interest to Glockhurst Corporation, N.V., and Tenant entered into a lease, dated as of December 8, 1988 for Part 7th Floor as modified by Agreement dated April 2nd, 1991 ("the Lease") in the building known as 200 Madison Avenue, New York, New York (hereinafter called the "building"); and WHEREAS, Landlord and Tenant wish to further modify the foregoing lease in respect set forth. NOW, THEREFORE, in consideration of the premises and of the mutual promises herein contained, the receipt and sufficiency of which is hereby acknowledged, it is agreed that the foregoing lease be, and same hereby is, modified as follows: 1. The term shall be extended for an additional period of ten (10) years to commence on May 1, 1996 and to expire on April 30, 2006. 2. The "fixed annual rental" for said additional period shall be: a) For the period of May 1, 1996 through April 30, 1999, Six Hundred Ninety Three Thousand and 00/100 ($693,000.00) Dollars. b) For the period of May 1, 1999 through April 30, 2002 shall be Seven Hundred Forty Two Thousand Five Hundred and 00/100 ($742,500.00) Dollars. c) For the period of May 1, 2002 through April 30, 2006, shall be Eight Hundred Eight Thousand Five Hundred and 00/100 ($808,500.00) Dollars. 2. Provided that Tenant is not in default of any of the terms or conditions of the as modified beyond any applicable grace, notice and cure periods, Tenant shall receive credits against the payment of fixed annual rental as follows: a) For the period of May 1, 1996 through April 30, 2001, Two Hundred Ten Thousand and 00/100 ($210,000.00) Dollars per annum in monthly installments of Seventeen Thousand Five Hundred and 00/100 (17,500.00) dollars per month. b) For the period of May 1, 2001 through April 30, 2002, Two Hundred Seventy Five Thousand and 00/100 ($275,000.00) Dollars per annum in monthly installments of Twenty Two Thousand Nine Hundred Sixteen and 67/100 (22,916.67) Dollars per month. c) For the period of May 1, 2002 through April 30, 2006, One Hundred Thousand and 00/100 ($100,000.00) Dollars per annum in monthly installments of Eight Thousand Three Hundred Thirty Three and 33/100 ($8,333.33) Dollars per month. 3. Provided Tenant is not in default of any of the terms and conditions of the Lease as modified beyond any applicable grace periods, Tenant shall have the right to cancel the Lease - 2 - effective April 30, 2001 provided prior written notice is given to Landlord by July 31, 2000, time being of the essence. 4. Effective as of May 1, 1996, Article 33 and 56 of the Lease shall be replaced by the following new Article 33 on May 1, 1996; ELECTRICITY A. Landlord agrees to furnish up to six (6) watts of electric current per rentable square foot for Tenant's use in the demised premises (exclusive of the currently existing building air conditioning system), upon and subject to the terms and conditions set forth in this Article 33. Tenant is to be responsible for the distribution of such electricity throughout the demised premises. From and after the Commencement Date, Tenant shall purchase all electric current consumed in the demised premises from Landlord or Landlord's designated agent on the basis of Consolidated Edison Company of New York rate schedule for which Landlord purchases electricity (or the rate schedule closest thereto if such rate schedule no longer exists), as applied to all electricity consumed in the demised premises during the applicable billing period. Tenant's consumption of electrical energy at the demised premises will be measured by submeters installed by Landlord at Landlord's expense. Tenant also shall pay Landlord an administrative charge, as additional rent, of five (5%) percent of each bill to reimburse Landlord for the costs incurred in reading such submeters and the billing and collection of amounts payable by Tenant pursuant to this Article 33. B. Where more than one submeter measures Tenant's electric service (including such electric energy as is consumed in connection with the operation of the ventilation and air conditioning equipment servicing the demised premises), the service rendered through each submeter may be computed and billed at Landlord's option separately as above set forth or as an aggregate total in accordance with the provisions hereof. Bills therefor any be rendered monthly and shall be payable on demand as additional rent. In the event that such bills are not paid within sixty (60) days after the same are rendered, Landlord may, without further notice, discontinue the service of electric current to the demised premises without releasing Tenant from any liability under this lease and without Landlord's agent incurring - 3 - any liability for any damage or loss sustained by Tenant by such discontinuance of service. C. Landlord is not in any way liable or responsible to Tenant for any loss, damage or expense which Tenant may sustain or incur if either the quantity or character of electric service is changed or is no longer available or suitable for Tenant's requirements. Any riser or risers necessary to supply Tenant's electrical requirements in excess of those specified in Paragraph A will, upon written request of Tenant, be installed by landlord at the sole cost and expense of Tenant if, in Landlord's reasonable judgment, the same are necessary and will not cause adverse damage or injury to the building or the operation thereof or the demised premises, cause or create a dangerous or hazardous condition, entail excessive or unreasonable alterations, repairs or expense or interfere with or disturb other tenants or occupants. Landlord will not, nor will it be required to, commence such installation unless and until Tenant approves in writing all costs in connection therewith. In addition to the installation of such riser or risers, Landlord will also, at the sole cost and expense of Tenant, install all other equipment proper and necessary in connection therewith subject to the aforesaid terms and conditions. Tenant's use of electric current shall never exceed the capacity of existing feeders or risers to, or wiring installations in, the building and the demised premises. All of such costs and expense shall be paid by Tenant to Landlord within thirty (30) days after rendition of any bill or statement to Tenant therefor. D. Provided Landlord is discontinuing such service of electrical current to a majority of tenants in the building, Landlord may discontinue such service of electric current upon thirty (30) days notice to Tenant (or such longer period of time as is necessary for Tenant to obtain electric current directly from another source provided Tenant diligently makes application for the same) without being liable to Tenant therefor and without in any way affecting this lease or the liability of Tenant hereunder or causing a diminution of fixed rent. Such discontinuance is not to be deemed to be a lessening or diminution of service within the meaning of any law, rule or regulation now or hereafter enacted, promulgated or issued. If Landlord so discontinues furnishing electric current to Tenant, Tenant shall arrange to obtain electric current directly from the public utility company servicing the building (the "Utility Company"). Such electric current may be furnished to Tenant by means of the then existing building system feeders, risers and wiring to the extent that the same are available, suitable and safe for such purposes. All meters and additional panel boards, feeders, risers, wiring and other conductors and equipment that may be required to obtain electric current directly from the - 4 - Utility Company shall be installed and maintained by Landlord, at Tenant's expense. E. Tenant agrees not to make any alterations or additions to the electric equipment and/or appliances presently installed in the demised premises without the prior written consent of Landlord in each instance. Rigid conduit only will be allowed. F. If any tax is imposed upon Landlord's receipt from the sale or resale of electric energy to Tenant by any federal, state or municipal authority, where permitted by law, Tenant agrees to pay Landlord on demand Tenant's pro-rata share of such taxes, as additional rent G. Anything in Paragraph B to the contrary notwithstanding, if the Commencement Date occurs prior to the installation and property calibration of the submeters, then Tenant shall pay Landlord for Tenant's consumption of electricity in the demised premises at rates reasonably estimated by Landlord's electrical consultant that Tenant would pay if such meters were fully operational. In addition, if during any time during the Term, it is determined that the submeters servicing the demised premises are or were malfunctioning, Tenant shall pay Landlord an amount reasonably estimated by Landlord's electrical consultant to be the amount that would have been payable by Tenant had such malfunction not occurred. 5. Effective as of May 1, 1996, the "Base Tax Year" as provided for in Article 40 section A.2. shall become the New York City Tax Year commencing July 1, 1996 and ending on June 30, 1997. Notwithstanding the foregoing, no additional rent shall be due by Tenant for increase in Real Estate Taxes prior to January 1, 1998. 6. Effective as of May 1, 1996, Article 40 C. of the Lease is to be removed in its entirety and replaced with the following new Article 40.C. In lieu of paying additional rents related to increases in the Labor Rate, Tenant agrees to pay the following to Landlord: - 5 - 1. For the period of May 1, 1996 through April 30, 1997, none. 2. For the period of May 1, 1997 through April 30, 1998, Six Thousand Six Hundred and 00/100 ($6,600.00) Dollars per annum, Five Hundred Fifty and 00/100 ($550.00) Dollars per month. 3. For the period of May 1, 1998 through April 30, 1999, Thirteen Thousand Eight Hundred Sixty and 00/100 ($13,860.00) Dollars per annum, One Thousand One Hundred Fifty Five and 00/100 ($1,155.00) Dollars per month. 4. For the period of May 1, 1999 through April 30, 2000, Twenty One Thousand Seven Hundred Eighty and 00/100 ($21,780.00) Dollars per annum, One Thousand Eight Hundred Fifteen Dollars and 00/100 ($1,815.00) Dollars per month. 5. For the period of May 1, 2000 through April 30, 2001, Thirty Thousand Three Hundred Sixty and 00/100 ($30,360.00) Dollars per annum, Two Thousand Five Hundred Thirty and 00/100 ($2,530.00) Dollars per month. 6. For the period of May 1, 2001 through April 30, 2002, Thirty Nine Thousand Six Hundred and 00/100 ($39,600.00) Dollars per annum, Three Thousand Three Hundred and 00/100 ($3,300.00) Dollars per month. 7. For the period of May 1, 2002 through April 30, 2003, Forty Nine Thousand Five Hundred and 00/100 ($49,500.00) Dollars per annum, Four Thousand One Hundred Twenty Five and 00/100 ($4,125.00) Dollars per month. 8. For the period of May 1, 2003 through April 30, 2004, Sixty Thousand Sixty and (00/100) ($60,060.00) Dollars per annum, Five Thousand Five and 00/100 ($5,005.00) Dollars per month. 9. For the period of May 1, 2004 through April 30, 2005, Seventy One Thousand Two Hundred Eighty and 00/100 ($71,280.00) Dollars per annum, Five Thousand Nine Hundred Forty and 00/100 ($5,940.00) Dollars per month. 10. For the period of May 1, 2005 through April 30, 2006, Eighty Three Thousand One Hundred Sixty and 00/100 - 6 - ($83,160.00) Dollars per annum, Six Thousand Nine Hundred Thirty and 00/100 ($6,930.00) Dollars per month. 7. Effective as of May 1, 1996, Article 45 of the Lease as modified is replaced with the following new Article 45: BROKER: Tenant and Landlord each represent and warrant to each other that neither consulted nor negotiated with any broker or finder with regard to the rental of the demised premises from Landlord other than George Comfort & Sons, Inc., and Jeffrey Management Corp. Each party agrees to indemnify and hold Landlord harmless from any claims, damages, costs and expenses (including attorneys' fees and disbursements) suffered or incurred by Landlord by reason of any breach of the foregoing representation. Landlord agrees to pay George Comfort & Sons, Inc., and Jeffrey Management Corp., any commissions which become due related to the extension of the term of the Lease in accordance with separate agreement to be entered into by George Comfort & Sons, Inc., and Jeffrey Management Corp. with Landlord. 7. Except as herein modified, all other terms, covenants and conditions of the Lease are and shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. 200 MADISON ASSOCIATES, L.P., LANDLORD By: LOEB PARTNERS REALTY AND DEVELOPMENT CORP., General Partner By: /s/ ---------------------- Title: V.P. FAB INDUSTRIES, INC., - TENANT By: /s/ Samson Bitensky --------------------- Chairman - 7 - EX-23 3 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCTS EXHIBIT 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Fab Industries, Inc. New York, New York We hereby consent to the incorporation by reference in the Prospectus constituting a part of the Registration Statement on Form S-8 filed June 28, 1993, the Registration Statement on Form S-3 filed January 31, 1992 and the Registration Statement on Form S-8 filed June 9, 1989 of our report dated February 9, 1997 relating to the consolidated financial statements and schedule of Fab Industries, Inc. and subsidiaries appearing in the Company's Annual Report on Form 10-K for the year ended November 30, 1996. We also consent to the reference to us under the caption "experts" in the Prospectus forming a part of such Registration Statements. /s/ BDO Seidman, LLP ---------------------- BDO SEIDMAN, LLP New York, New York February 27, 1997 EX-27 4 FINANCIAL DATA SCHEDULE
5 1000 YEAR NOV-30-1996 DEC-3-1995 NOV-30-1996 7,518 60,880 29,397 600 28,947 128,086 108,324 78,121 160,980 19,446 620 0 0 1,313 132,575 160,980 156,136 156,136 133,466 133,466 14,150 400 124 12,596 3,800 8,796 0 0 0 8,796 1.52 1.52
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