-----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, PYWEBr58A7+zbCEcFaRlVkhyaXtpHvBpTuof1icayh0YJ9C7ZhgKhpb1n87swKfF TurMt+OnT18N9rce0UdyzQ== 0000922423-99-000874.txt : 19990714 0000922423-99-000874.hdr.sgml : 19990714 ACCESSION NUMBER: 0000922423-99-000874 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990529 FILED AS OF DATE: 19990713 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-Q SEC ACT: SEC FILE NUMBER: 001-05901 FILM NUMBER: 99663450 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-Q 1 FORM 10-Q QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 29, 1999 --------------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from___________ to ___________ Commission file number 1-5901 ------------------------------------------------ Fab Industries, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-2581181 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer) incorporation or organization) Identification No.) 200 Madison Avenue, New York N.Y. 10016 - -------------------------------------------------------------------------------- (Address of principal executive office) (Zip Code) (212) 592-2700 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year; if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No CLASS Shares Outstanding at July 12, 1999 - ------------------------------------ -------------------------------------- Common stock, $.20 par value 5,406,452 FAB INDUSTRIES INC. AND SUBSIDIARIES TABLE OF CONTENTS PART 1 - FINANCIAL INFORMATION PAGE Table of Contents 1 Consolidated Statements of Income 13 Weeks ended May 29, 1999 and May 30, 1998 2 Consolidated Statements of Income 26 Weeks ended May 29, 1999 and May 30, 1998 3 Consolidated Balance Sheets (Asset Section) May 29, 1999 and November 28, 1998 4 Consolidated Balance Sheets (Liabilities and Stockholders' Equity Section) May 29, 1999 and 5 November 28, 1998 Consolidated Statements of Stockholders' Equity 26 Weeks ended May 29, 1999 6 Consolidated Statements of Cash Flows 26 Weeks ended May 29, 1999 and May 30, 1998 7 Consolidated Statements of Comprehensive Income (Loss) 13 Weeks and 26 Weeks ended May 29, 1999 and May 30, 1998 8 Notes to Consolidated Financial Statements 9 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 13 Item 6. Exhibits and Reports on Form 8-K 14 Management's Discussion and Analysis of Financial Condition and Results of Operations 15 SIGNATURES 20 (1) FAB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE 13 WKS ENDED ---------------------------- May 29, 1999 May 30, 1998 (Unaudited) (Unaudited) ---------------------------- Net sales $ 37,467,000 $ 39,761,000 Cost of goods sold 31,801,000 33,403,000 ------------ ------------ Gross profit 5,666,000 6,358,000 Selling, general and administrative expenses 4,112,000 4,091,000 ------------ ------------ Operating income 1,554,000 2,267,000 ------------ ------------ Other income (expense): Interest and dividend income 686,000 890,000 Interest expense (17,000) (30,000) Net gain on investment securities 467,000 280,000 ------------ ------------ Total other income 1,136,000 1,140,000 ------------ ------------ Income before taxes 2,690,000 3,407,000 Taxes on income 708,000 1,073,000 ------------ ------------ Net Income $ 1,982,000 $ 2,334,000 ============ ============ Earnings per share (Note 5): Basic $0.37 $0.41 Diluted $0.37 $0.41 See notes to consolidated financial statements. (2) FAB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE 26 WKS ENDED ---------------------------- May 29, 1999 May 30, 1998 (Unaudited) (Unaudited) ---------------------------- Net sales $ 66,474,000 $ 74,012,000 Cost of goods sold 60,562,000 63,321,000 ------------ ------------ Gross profit 5,912,000 10,691,000 Selling, general and administrative expenses 7,987,000 7,400,000 ------------ ------------ Operating income (loss) (2,075,000) 3,291,000 ------------ ------------ Other income (expense): Interest and dividend income 1,523,000 2,014,000 Interest expense (30,000) (45,000) Net gain on investment securities 786,000 679,000 ------------ ------------ Total other income 2,279,000 2,648,000 ------------ ------------ Income before taxes 204,000 5,939,000 Taxes on Income 37,000 1,870,000 ------------ ------------ Net Income $ 167,000 $ 4,069,000 ============ ============ Earnings per share (Note 5): Basic $0.03 $0.72 Diluted $0.03 $0.71 See notes to consolidated financial statements. (3) FAB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS A S S E T S - - - - - - AS OF ------------------------------- May 29, 1999 November 28, 1998 ------------------------------- (Unaudited) Current Assets: Cash and cash equivalents (Note 2) $ 2,225,000 $ 6,078,000 Investment securities available-for-sale (Note 3) 48,384,000 48,233,000 Accounts receivable-net of allowance of $1,400,000 and $1,000,000 for doubtful accounts 28,610,000 27,979,000 Inventories (Note 4) 28,802,000 32,213,000 Other current assets 1,944,000 1,727,000 ------------ ------------ Total current assets 109,965,000 116,230,000 ------------ ------------ Property, plant and equipment - at cost 130,558,000 128,428,000 Less: Accumulated depreciation 91,632,000 88,407,000 ------------ ------------ 38,926,000 40,021,000 Other assets 4,181,000 4,152,000 ------------ ------------ $153,072,000 $160,403,000 ============ ============ See notes to consolidated financial statements. (4) FAB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS L I A B I L I T I E S and ------------------------------- S T O C K H O L D E R S' E Q U I T Y ------------------------------------------------ AS OF ------------------------------- May 29, 1999 November 28, 1998 ------------------------------- (Unaudited) Current liabilities: Accounts payable $ 7,653,000 $ 9,110,000 Corporate income and other taxes 408,000 768,000 Accrued payroll and related expenses 1,867,000 1,980,000 Dividends payable 946,000 977,000 Other current liabilities 398,000 495,000 Deferred income taxes 1,112,000 1,538,000 ------------ ------------ Total current liabilities 12,384,000 14,868,000 ------------ ------------ Obligations under capital leases - net of current maturities 447,000 486,000 Other noncurrent liabilities 3,082,000 2,817,000 Deferred income taxes 4,907,000 4,705,000 ------------ ------------ Total liabilities 20,820,000 22,876,000 ------------ ------------ Stockholders' equity 132,252,000 137,527,000 ------------ ------------ $153,072,000 $160,403,000 ============ ============ See notes to consolidated financial statements. (5) FAB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE 26 WEEKS ENDED MAY 29, 1999
Common Stock * ============ Additional Number of Paid-in Retained Total Shares Amount Capital Earnings - -------------------------------------------------------------------------------------------------------------------- Balance at November 28, 1998 $ 137,527,000 6,588,444 $ 1,318,000 $ 6,903,000 $ 164,714,000 Net income 167,000 167,000 Cash dividends (1,895,000) (1,895,000) Exercise of stock options 54,000 3,500 1,000 53,000 Purchase of treasury stock (3,292,000) Compensation under restricted stock plan 12,000 11,000 Change in net unrealized holding gain (loss) on investment securities available-for- sale, net of taxes (321,000) -------------------------------------------------------------------------------- Balance at May 29, 1999 $ 132,252,000 6,591,944 $ 1,319,000 $ 6,967,000 $ 162,986,000 (Unaudited) ============= ========= ============= ============= ============= Accumulated Other Unearned Treasury Stock Loan to Comprehensive Restricted ============== Employee Stock Income Stock Number of Ownership Plan (Loss) Compensation Shares Cost - -------------------------------------------------------------------------------------------------------------- Balance at November 28, 1998 ($ 6,327,000) $ 550,000 ($ 1,000) (1,005,081) ($ 29,630,000) Net income Cash dividends Exercise of stock options Purchase of treasury stock (178,493) (3,292,000) Compensation under restricted stock plan 1,000 Change in net unrealized holding gain (loss) on investment securities available-for- sale, net of taxes (321,000) -------------------------------------------------------------------------------- Balance at May 29, 1999 ($ 6,327,000) $ 229,000 $ 0 (1,183,574) ($ 32,922,000) (Unaudited) ============= ============= ============= ========== =============
* Common stock $0.20 par value - 15,000,000 shares authorized. Preferred stock $1.00 par value - 2,000,000 shares authorized, none issued. See notes to consolidated financial statements. (6) FAB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 26 WKS ENDED ---------------------------------- May 29, 1999 May 30, 1998 ---------------------------------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 167,000 $ 4,069,000 Adjustments to reconcile net income to net cash used in operating activities: Provision for doubtful accounts 400,000 200,000 Depreciation and amortization 3,225,000 2,550,000 Deferred income taxes (11,000) (81,000) Net gain on investment securities (786,000) (679,000) Compensation under restricted stock plan 12,000 24,000 Decrease (increase) in: Accounts receivable (1,031,000) (3,350,000) Inventories 3,411,000 (7,164,000) Other current assets (217,000) 167,000 Other assets (29,000) (372,000) (Decrease) increase in: Accounts payable (1,457,000) 2,554,000 Accruals and other liabilities (375,000) (2,209,000) ------------ ------------ Net cash (used in) provided by operating activities 3,309,000 (4,291,000) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (2,130,000) (11,997,000) Proceeds from sales of investment securities 1,195,000 18,892,000 Acquisition of investment securities (1,094,000) (949,000) ------------ ------------ Net cash provided by (used in) investing activities (2,029,000) 5,946,000 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (3,292,000) (2,817,000) Dividends (1,895,000) (1,978,000) Exercise of stock options 54,000 344,000 ------------ ------------ Net cash used in financing activities (5,133,000) (4,451,000) ------------ ------------ Decrease in cash and cash equivalents (3,853,000) (2,796,000) Cash and cash equivalents, beginning of period 6,078,000 4,574,000 ------------ ------------ Cash and cash equivalents, end of period $ 2,225,000 $ 1,778,000 ============ ============
See notes to consolidated financial statements. (7) FAB INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE 13 WEEKS ENDED May 29, 1999 May 30, 1998 ------------ ------------ (Unaudited) Unaudited) Net Income $ 1,982,000 $ 2,334,000 Unrealized holding loss on investment securities, available-for-sale, arising during the period net of taxes of $(139,000) and $(35,000) (209,000) (53,000) ------------ ------------ Comprehensive Income $1,773,000 $2,281,000 ========== ========== FOR THE 26 WEEKS ENDED May 29, 1999 May 30, 1998 ------------ ------------ (Unaudited) Unaudited) Net Income $ 167,000 $ 4,069,000 Unrealized holding loss on investment securities, available - for - sale, arising during the period net of taxes of $(214,000) and $(41,000) (321,000) (62,000) ------------ ------------ Comprehensive Income (Loss) ($ 154,000) $ 4,007,000 ============ ============ (8) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of presentation: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the 26 weeks ended May 29, 1999 are not necessarily indicative of the results that may be expected for the entire fiscal year ending November 27, 1999. The balance sheet at November 28, 1998 has been derived from the audited balance sheet at that date. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended November 28, 1998. 2. Cash and cash equivalents consist of the following (in thousands): May 29, 1999 November 28, 1998 ------------ ----------------- (Unaudited) Cash $1,194 $1,458 Tax-free short-term debt instruments 1,031 4,620 ------ ------ $2,225 $6,078 ====== ====== (9) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. Investment Securities: At May 29, 1999 and November 28, 1998, investment securities available-for-sale consist of the following (in thousands): Gross Gross Unrealized Unrealized Holding Holding Fair May 29, 1999 (Unaudited) Cost Gain Loss Value - ------------------------ ---- ---- ---- ----- Equities $ 9,458 $ 152 ($ 42) $ 9,568 U.S. Treasury obligations 10 10 Corporate bonds 3,553 47 (152) 3,448 Tax-exempt obligations 34,982 470 (94) 35,358 -------- -------- -------- -------- $ 48,003 $ 669 ($ 288) $ 48,384 ======== ======== ======== ======== Gross Gross Unrealized Unrealized Holding Holding Fair November 28, 1998 Cost Gain Loss Value - ----------------- ---- ---- ---- ----- Equities $ 9,885 $ 331 ($ 55) $ 10,161 U.S. Treasury obligations 14 14 Corporate bonds 4,698 139 (171) 4,666 Tax-exempt obligations 32,719 686 (13) 33,392 -------- -------- -------- -------- $ 47,316 $ 1,156 ($ 239) $ 48,233 ======== ======== ======== ======== (10) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. Inventories: The Company's inventories are valued at the lower of cost or market. Cost for a portion of the inventories is determined by the last-in, first-out (LIFO) method, with the remainder being determined by the first-in, first-out (FIFO) method. Because of changes in the global marketplace which resulted in unpredictability of future changes in yarn prices, the Company based its LIFO reserve at February 27, 1999 on actual rather than projected FIFO costs. This resulted in a reduction in the LIFO reserve of $1,095,000 in the first quarter of fiscal 1999. This reduction related principally to a decline in the average cost of yarn purchased during the first quarter. As of May 29, 1999, management believes that yarn prices have stabilized. Accordingly, the interim LIFO calculations as of the end of the second quarter are based on management's estimates of projected year-end inventory levels and costs. Such projections indicate that no further material changes are anticipated in the Company's LIFO reserves for the remainder of the fiscal year. May 29, 1999 November 28, 1998 ---------------- ---------------- (Unaudited) Raw materials $ 8,089,000 $ 9,090,000 Work in process 10,085,000 14,177,000 Finished goods 10,628,000 8,946,000 ----------- ----------- Total $28,802,000 $32,213,000 =========== =========== Approximate percentage of inventories valued under LIFO valuation 45% 50% ============ ============ Excess of FIFO valuation over LIFO valuation $ 3,500,000 $ 4,595,000 ============ ============ (11) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Earnings Per Share: Basic and diluted earnings per share for the 13 weeks ended May 29, 1999 and May 30, 1998 are calculated as follows:
Net Per-share Income Shares Amount ------ ------ ------ For the 13 weeks ended May 29, 1999 Basic earnings per share $1,982,000 5,413,898 $0.37 ===== Effect of assumed conversion of employee stock options -- 2,230 ---------- ---------- Diluted earnings per share $1,982,000 5,416,128 $0.37 ========== ========== ===== For the 13 weeks ended May 30, 1998 Basic earnings per share $2,334,000 5,655,979 $0.41 ===== Effect of assumed conversion of employee stock options -- 50,514 ---------- --------- Diluted earnings per share $2,334,000 5,706,493 $0.41 ========== ========== ===== Basic and diluted earnings per share for the 26 weeks ended May 29, 1999 and May 30, 1998 are calculated as follows: Net Per-share Income Shares Amount ------ ------ ------ For the 26 weeks ended May 29, 1999 Basic earnings per share $ 167,000 5,424,462 $0.03 ===== Effect of assumed conversion of employee stock options -- 9,261 ---------- --------- Diluted earnings per share $ 167,000 5,433,723 $0.03 ========== ========== ===== For the 26 weeks ended May 30, 1998 Basic earnings per share $4,069,000 5,669,851 $0.72 ===== Effect of assumed conversion of employee stock options -- 50,254 ---------- --------- Diluted earning per share $4,069,000 5,720,105 $0.71 ========== ========== =====
(12) PART II. OTHER INFORMATION --------------------------------------------- Item 4. Submission of Matters to a Vote of Security Holders - ----------------------------------------------------------------------- The Company held its Annual Meeting of Stockholders on May 6, 1999. The matter submitted to a vote of the Company's stockholders was the election of three directors to Class II of the Company's Board of Directors. The Company's stockholders elected Messrs. Lawrence H. Bober, Martin B. Bernstein and Frank S. Greenberg to Class II of the Company's Board of Directors, to hold office until the 2002 Annual Meeting of Stockholders and until their respective successors are duly elected and qualified. The results of the voting were as follows: Lawrence H. Bober ----------------- Voted for 5,125,749 Authority withheld 57,239 Abstained 0 Broker non-votes 0 Martin B. Bernstein ------------------- Voted for 5,126,347 Authority withheld 56,641 Abstained 0 Broker non-votes 0 Frank S. Greenberg ------------------ Voted for 5,126,347 Authority withheld 56,641 Abstained 0 Broker non-votes 0 (13) PART II. OTHER INFORMATION --------------------------------------------- Item 6. Exhibits and Reports on Form 8-K - -------------------------------------------------- a) Exhibits: No exhibits are filed herewith except for Exhibit 27 which is filed with EDGAR filing only. b) Reports on Form 8-K: The Registrant did not file any Current Reports on Form 8-K during the quarter ending May 29, 1999. (14) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- Results of Operations Second Quarter and Six Months Fiscal 1999 Compared to Fiscal 1998 - ----------------------------------- Net sales for the second quarter of fiscal 1999 were $37,467,000 as compared to $39,761,000 in the similar 1998 period, a decrease of 5.8%. For the six months ended May 29, 1999, net sales were $66,474,000, a decline of $7,538,000, or 10.2%, from 1998. Business conditions within the textile industry remained erratic, and the Company continued to experience competitive market conditions, both domestic and foreign. U.S. firms are forced to compete against a flood of cheap imports and falling demand for U.S. goods overseas. These conditions have to date continued into the third quarter. Gross margins for the second quarter 1999 as a percentage of sales declined from 16.0% to 15.1%. Lower sales volume reduced operating schedules at manufacturing plants. Margins were aided by improved product mix, and cost control programs. In the 1998 quarter, a reduction in LIFO reserves arising from lower average FIFO cost levels benefited margins in the amount of $600,000. In the current quarter, no adjustments to LIFO inventory reserves were required. For the six months ended May 29, 1999, gross profit margins were 8.9% compared to 14.4% in 1998. The comparative effect of changes in LIFO inventory reserves benefited margins in the amount of $495,000. (15) Selling, general and administrative expenses in the current quarter remained relatively constant, despite the lower sales volume. As a percentage of sales, such costs increased from 10.3% to 11.0% Because of lower sales volume. For the six months ended May 29, 1999, selling general and administrative expenses increased by $587,000, and as a percentage of sales from 10.0% From 12.0%. An increase in selling expenses is attributable primarily to the acquisitions of Lida Stretch Fabrics and SMS Textiles acquired in the latter part of second quarter 1998) and was partially offset by lower incentive-based compensation and effects of the company's expense containment program. Interest and dividend income for the current quarter decreased by $204,000 as a result of lower average available balances. The effective income tax rate for the current quarter was 26.3% as against 31.5% in the comparative 1998 period. The decline was primarily attributable to the fact that tax exempt interest represents a higher percentage of pre-tax income than in the comparative 1998 period. As a result of these factors, quarterly net income decreased to $1,982,000, from $2,334,000. As a percentage of sales, quarterly net income decreased to 5.3% compared to 5.9% in last year's second quarter. For the current quarter, basic and diluted earnings per share were $0.37 compared to $0.41 last year. For the six months, basic and diluted earnings per share were $0.03 compared to $0.72 basic and $0.71 diluted earnings per share last year. (16) Liquidity and Capital Resources - ------------------------------- Operating activities for the six-month period provided cash of $3,309,000,as compared to cash used of $4,291,000 in the comparable 1998 period. Of this increase, $10,575,000 relates to comparative changes in inventories and $2,319,000 in accounts receivable, which was offset by a $3,902,000 reduction in net income and $2,177,000 related to changes in accounts payable, accruals and other liabilities. Capital expenditures for the six months were $2,130,000 against $11,997,000 in the comparable 1998 period. In 1998 these capital expenditures included assets acquired from SMS Textiles Mills, Inc. and Lida Stretch Fabrics, Inc., manufacturers of wide elastic fabrics and circular knit stretch fabrics, respectively. During the first six months of fiscal 1999, the Company repurchased 178,493 shares of its common stock at a cost of $3,292,000 (an average price of $18.44). 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. The Company declared a quarterly dividend of $0.175 per share, payable July 23, 1999, to stockholders of record as of June 1, 1999. Stockholders' equity was $132,252,000 ($24.45 per share) at May 29, 1999, as compared to $137,527,000 ($24.63 per share) at the previous fiscal year-end November 27, 1998, and $137,472,000 ($24.49 per share) at the end of the comparative 1998 second quarter. 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, and pay dividends. (17) Compliance With Year 2000 The Company has devoted significant resources and has taken steps in an attempt to make the transition to the year 2000 successful and without incident. Management has initiated a Company wide program to prepare the Company's computer systems, hardware, devices and other equipment for year 2000 compliance. An inventory of hardware and software is being completed, including the Company's centralized information system department, distributed technologies, and process control and non-technical components such as checks and forms. A primary plan for remediation of the Company's legacy systems is in place, and system and program changes are being implemented and tested as they become ready. The Company has established a corporate task force to monitor the progress toward the resolution of identified year 2000 issues. All known computer systems corrections are expected to be completed by July 30, 1999. The Company expects to incur internal staff costs as well as other expenses necessary to prepare its systems for the year 2000, including costs for outside consultants. The Company expects to resolve year 2000 compliance issues primarily through normal upgrades of its software or, when necessary, through replacement of existing software with year 2000 compliant applications. As of June 1, 1999, the Company has incurred approximately $102,000 of external costs to address the Company's year 2000 issues. The total cost of this effort is still being evaluated, but is not expected to be material to the Company's results of operations or financial condition. However, there can be no assurance that such corrections can be completed on schedule or within estimated costs or can successfully address the year 2000 compliance issues. The Company has provided information regarding the status of its year 2000 compliance to customers who requested. The Company is in the process of asking its major customers and suppliers to certify that they are year 2000 compliant or, if they are not yet so compliant, to provide the Company with a description of their plans to become so. If the Company's present efforts to address the year 2000 compliance issues are not successful, or if customers, suppliers and other third parties with which the Company conducts business do not successfully address such issues, the Company's business, results of operations and financial condition could be materially and adversely affected. (18) FORWARD LOOKING INFORMATION Certain statements in this report are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All forward looking statements involve risks and uncertainties. In particular, any statement contained herein, in press releases, written statements or other documents filed with the Securities and Exchange Commission, or in the Company's communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, regarding the consummation and benefits of future acquisitions, as well as expectations with respect to future sales, operating efficiencies and product expansion, are subject to known and unknown risks, uncertainties and contingencies, many of which are beyond the control of the Company, which may cause actual results, performance or achievements to differ materially from anticipated results, performances or achievements. Factors that might affect such forward looking statements include, among other things, overall economic and business conditions; the demand for the Company's goods and services; competitive factors in the industries in which the Company competes; changes in government regulation; changes in tax requirements (including tax rate changes, new tax laws and revised tax law interpretations); interest rate fluctuations and other capital market conditions, including foreign currency rate fluctuations: economic and political conditions in international markets, including governmental changes and restrictions on the ability to transfer capital across borders; the ability to achieve anticipated synergies and other cost savings in connection with acquisitions; the timing, impact and other uncertainties of future acquisitions; and the Company's ability and its customers' and suppliers' ability to replace, modify or upgrade computer programs in order to adequately address Year 2000 issue. (19) SIGNATURES - -------------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: July 12, 1999 FAB INDUSTRIES, INC. By: /s/ David A. Miller ---------------------- David A. Miller Vice President-Finance, Treasurer And Chief Financial Officer (Principal Financial and Accounting Officer) (20) EX-27 2 ART. 5 FDS FOR 2ND QUARTER 99 10-Q
5 1000 6-MOS NOV-27-1999 MAY-29-1999 2,225 48,384 30,010 1,400 28,802 109,965 130,558 91,632 153,072 12,384 447 1,319 0 0 130,933 153,072 66,474 66,474 60,562 60,562 7,987 400 30 204 37 167 0 0 0 167 .03 .03
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