-----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, GXt8xBSylIYfFHzvlciKAyGprjM74T4XJCdNO59DCSiNZ5wCuN5e6IOfHN7DEXga mqwXwLvMy4pVVy8s3hPY3w== 0000912057-96-030295.txt : 19961231 0000912057-96-030295.hdr.sgml : 19961231 ACCESSION NUMBER: 0000912057-96-030295 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961227 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GARAN INC CENTRAL INDEX KEY: 0000039917 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 135665557 STATE OF INCORPORATION: VA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04506 FILM NUMBER: 96686823 BUSINESS ADDRESS: STREET 1: 350 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10118 BUSINESS PHONE: 2125632000 MAIL ADDRESS: STREET 1: 350 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10118 10-K 1 FORM 10-K 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 For the fiscal year ended September 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File No. 1-4506 GARAN, INCORPORATED (Exact name of registrant as specified in its charter) VIRGINIA 13-5665557 (State of incorporation) (I.R.S. Employer Identification No.) 350 Fifth Avenue, New York, New York 10118 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 212-563-2000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange TITLE OF EACH CLASS ON WHICH REGISTERED - ------------------- ----------------------- Common Stock, no par value American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: Common Stock Purchase Rights (Title of class) 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 ___ 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 statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant on December 2, 1996, was approximately $75,300,000. At December 2, 1996, 5,069,892 shares of the registrant's Common Stock, no par value, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE The registrant incorporates by reference in Part III of this Report specified portions of its definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with its 1997 Annual Meeting of Shareholders ("1997 Proxy Statement"). 2 PART I Item 1. Business. (a) General development of business. (a)(1) The registrant was incorporated on December 4, 1957. During the fiscal year ended September 30, 1996, there were no material changes or developments in the business done by the registrant or its subsidiaries or in the manner in which it conducted its business during the prior five fiscal years. (a)(2) Not applicable. (b) Financial information about industry segments. The registrant produces only apparel and, accordingly, information relative to industry segments is not applicable. (c) Narrative description of business. (c)(i) The registrant is engaged in the design, manufacture, and sale of apparel for men, women, and children including boys, girls, toddlers, and infants. The percentage of registrant's net sales in each of the foregoing categories in the last three fiscal years is as follows: 3 Percentage of Net Sales (years ended September 30) 1996 1995 1994 ---- ---- ---- Men's apparel 8% 10% 13% Women's apparel 18 18 17 Children's apparel 74 72 70 The registrant produces apparel primarily sold to regional mass merchandisers, major national chain stores, department stores, and specialty stores. Sales are made primarily by the registrant's salaried sales staff. (c)(ii) Not applicable. (c)(iii) Raw materials essential to the registrant are readily available from various alternate sources of supply. (c)(iv) The registrant distributes: children's apparel under various of its own trademarks including, principally, GARAN, GARANIMALS, and ROB ROY, men's apparel under various of its own trademarks including, principally, GARAN, and women's apparel under various of its own trademarks including, principally, GARAN. Sales of branded apparel under the registrant's own trademarks accounted for approximately 4%, 6%, and 9% of the registrant's net sales in fiscal 1996, 1995, and 1994, respectively. 4 Since 1975, registrant has been a non-exclusive licensee of professional sports leagues and teams for T-shirts, knit shirts, sweatshirts, and sweaters for boys and men, and since 1990, registrant has been a non-exclusive licensee of various colleges and universities for sweatshirts and knit shirts for boys and men. Sales of such apparel by registrant accounted for approximately 9%, 12%, and 19% of the registrant's net sales in fiscal 1996, 1995, and 1994, respectively. Since 1986, the registrant has been the exclusive licensee of the trademark BOBBIE BROOKS for girls' and women's apparel, and sales of apparel by registrant bearing the BOBBIE BROOKS trademark accounted for approximately 8%, 7%, and 3% of the registrant's net sales in fiscal 1996, 1995, and 1994, respectively. (The registrant also sublicenses the BOBBIE BROOKS trademark to non-affiliates.) Since fiscal 1991, registrant has been a non-exclusive licensee of Disney Enterprises, Inc. for various trademarks and for characters, scenes, and logos from various animated television series and motion pictures for children's apparel, and sales of apparel bearing such trademarks accounted for approximately 9%, 8%, and 11% of registrant's net sales for fiscal 1996, 1995, and 1994, respectively. In 1995, the registrant became the exclusive licensee of the trademark EVERLAST for men's, boys', and girls' activewear. Sales of apparel bearing the EVERLAST trademark commenced in fiscal 1996 and accounted for approximately .3% of registrant's net sales for that fiscal year. Total sales of apparel bearing licensed trademarks and logos, some of which apparel also bears the registrant's trademarks LONG GONE, TEAM RATED, GLORY DAYS, and G.T.S., accounted for approximately 28%, 5 27%, and 35% of the registrant's net sales in fiscal 1996, 1995, and 1994, respectively. The terms of the foregoing license agreements range from 1 to 3 years, royalty rates range from 2% to 14% of net sales, each license agreement has a minimum royalty commitment, and certain license agreements impose an advertising commitment. Shortfalls between earned royalties and minimum royalties have not been material. Except for certain license agreements with Disney Enterprises, Inc. for characters, scenes, and logos relating to motion pictures no longer in general release, the registrant, to the extent it desires to do so, will seek to renew each license agreement when it expires upon substantially the same terms. (c)(v) The registrant operates primarily on the basis of two seasons - Spring/Summer and Fall/Holiday. Shipments for the Spring/Summer season are generally made from December through July and for the Fall/Holiday season from June through December. Registrant has been able to keep production levels relatively constant throughout the year. However, because of long production runs and short shipping periods, the registrant's inventory levels fluctuate during the year. (c)(vi) Not applicable. (c)(vii) Wal-Mart Stores, Inc. accounted for 66%, 63%, and 62% of the registrant's net sales during fiscal 1996, 1995, and 1994, respectively. During the same periods, J.C. Penney Company, Inc. accounted for 15%, 20%, and 18% of the registrant's net sales. The registrant has had a business 6 relationship with Wal-Mart Stores, Inc. for more than the past 19 years and with J.C. Penney Company, Inc. for more than the past 30 years. However, neither of these relationships involve long-term contractual commitments, and, accordingly, there can be no assurance as to the level of future business with either of these customers. The balance of the registrant's sales are made to approximately 3,800 accounts, none of which is responsible for more than 10% of the registrant's net sales. (c)(viii) The registrant has been consistently able to secure substantial orders from its customers to insure that production levels are kept relatively constant throughout the year. As of December 2, 1996, firm backlog orders amounted to $31,600,000, and firm backlog orders as of December 1, 1995, amounted to $37,000,000. Registrant expects that all of its backlog orders at December 2, 1996, will be filled during the 1997 fiscal year. Registrant's firm backlog orders at any given time represent orders taken throughout the year and vary throughout the year. The registrant believes that year to year variations are immaterial to an understanding of its business. (c)(ix) Not applicable. (c)(x) The men's, women's, and children's apparel business in the United States is highly competitive primarily in price, style, and delivery and consists of many domestic and foreign manufacturers, importers, and distributors. The registrant does not compete solely on a price basis with low cost foreign sources; the registrant competes by relying on style, 7 programs, and delivery as well as price. No single enterprise sells more than a small portion of the total apparel sold in the United States, and there are no reliable figures available from which the registrant's relative position in the United States apparel industry can be determined or from which the effect of foreign competition can be assessed. (c)(xi) No material expenditures are made by the registrant for research activities relating to the development of new services or products or the improvement of existing services or products. (c)(xii) The registrant's compliance with Federal, state, and local environmental laws and regulations had no material effect upon its capital expenditures, earnings, or competitive position during the fiscal year ended September 30, 1996. The registrant does not anticipate any material capital expenditures for environmental control in either its present or succeeding fiscal years. (c)(xiii) The registrant employed approximately 2,500 persons at September 30, 1996. (d) Financial information about foreign and domestic operations and export sales. The registrant has operated a manufacturing facility in Costa Rica since 1984, and in fiscal 1995, began operating manufacturing facilities in El Salvador, but it was not 8 otherwise engaged in business within any foreign country during the fiscal year ended September 30, 1996. During fiscal 1996, 1995, and 1994, export sales by registrant amounted to less than 1% of total sales and are not considered to be significant to an understanding of registrant's business. Item 2. Properties. Expiration Location Use Sq. Ft. Estate Date - -------- --- ------- ------ ---------- Adamsville, Tennessee Manufacturing 100,000 Fee Manufacturing 60,080 Lease 1999(1) Carthage, Mississippi Manufacturing 105,300 Lease (1)(2) Church Point, Louisiana Manufacturing 73,000 Lease 1999(1) Clinton, Kentucky Manufacturing 52,000 Fee Corinth, Mississippi Manufacturing 76,000 Fee Eupora, Mississippi Manufacturing 96,742 Lease (1)(3) Haleyville, Alabama Manufacturing 10,000 Fee Jemison, Alabama Manufacturing 20,800 Lease 2001(1) Kaplan, Louisiana Manufacturing 87,900 Lease (1)(4) 43,900 Fee (4) Lambert, Mississippi Manufacturing 100,300 Fee (5) Marksville, Louisiana Manufacturing 75,000 Lease 1999(1) 9 Expiration Location Use Sq. Ft. Estate Date - -------- --- ------- ------ ---------- New York, New York Showroom and Office 38,500 Lease 2011 Ozark, Arkansas Manufacturing 75,000 Lease 1997(1) Philadelphia, Mississippi Manufacturing 107,920 Lease (1)(6) Rainsville, Alabama Manufacturing 53,000 Fee San Jose, Costa Rica Manufacturing 33,258 Fee San Salvador, El Salvador Manufacturing 22,350 Lease 1999(7) San Salvador, El Salvador Manufacturing 41,047 Lease 2000 San Salvador, El Salvador Manufacturing 24,200 Lease 2001 Starkville, Mississippi Manufacturing and Office 90,000 Lease 1998(1) (1) The registrant or a wholly-owned subsidiary of the registrant has the option to purchase the facilities and/or to renew each of the current leases for terms which vary between 2 and 68 years. (2) One continuous building consisting of a 63,000 square foot section leased to 1999, a 22,500 square foot section leased to 2002, and a 19,800 square foot section leased to 2004. 10 (3) One continuous building consisting of a 15,000 square foot section leased to 1999, a 21,000 square foot section leased to 1997, a 41,000 square foot section leased to 1997, and a 19,742 square foot section leased to 2004. (4) One continuous building consisting of a 72,000 square foot section leased to 1999 and a 15,900 square foot section leased to 2005, which was expanded by a 43,000 square foot section owned by a wholly-owned subsidiary of the registrant and financed with the proceeds of Industrial Revenue Bonds issued in September, 1990. The entire building is located on land owned by a wholly-owned subsidiary of the registrant. (5) The registrant determined that it no longer required the manufacturing capacity of its plant in Lambert, Mississippi, and that facility was closed in 1995. The carrying value of the Lambert facility has been written down to its net realizable value. (6) One continuous building consisting of a 78,000 square foot section leased to 2000 and a 29,920 square foot section leased to 2004. (7) The registrant determined to transfer the operations of its first San Salvador, El Salvador, facility to a new facility, and the first facility was closed in 1996. The carrying value of that facility has been written down to its net realizable value. 11 The registrant believes that its facilities are suitable and adequate for its foreseeable needs, and except as otherwise noted, each was fully utilized during fiscal 1996. Item 3. Legal Proceedings. None. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. 12 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. (a), (b), and (c) Market information, Holders, and Dividends. The registrant's common stock is listed and traded on the American Stock Exchange under the symbol GAN. The high and low sales prices during each quarterly period for fiscal years 1996 and 1995 are set forth in the table below: Sales Price of Common Stock ------------------------------------------ 1996 1995 Quarters High Low High Low - -------- ---- --- ---- --- First . . . . . . . . . . . . $19 3/8 $16 3/8 $18 1/4 $15 1/2 Second . . . . . . . . . . . 17 15 1/8 18 14 7/8 Third . . . . . . . . . . . . 17 1/2 16 3/8 18 1/4 15 5/8 Fourth . . . . . . . . . . . . 18 16 3/8 17 3/4 15 7/8 Dividends paid during the last two fiscal years were as follows: Dividends Paid per Share Quarters 1996 1995 - -------- ---- ---- First -Regular . . . . . . . $ .20 $ .20 -Special . . . . . . . .20 .20 Second -Regular . . . . . . . .20 .20 Third -Regular . . . . . . . .20 .20 Fourth -Regular . . . . . . . .20 .20 ----- ----- Total . . . . . . . . . $1.00 $1.00 ----- ----- ----- ----- As at December 2, 1996, there were 483 shareholders of record including Cede & Company in its capacity as nominee for the Depository Trust Company. 13 Item 6. Selected Financial Data Five-Year Review - ------------------------------------------------------------------------ - ------------------------------------------------------------------------
1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------ Net Sales $146,491,000 $141,330,000 $173,002,000 $189,581,000 $170,377,000 Cost of Sales 114,744,000 111,454,000 131,687,000 134,212,000 122,716,000 - ------------------------------------------------------------------------------------------------------------------------ Gross Margin on Sales 31,747,000 29,876,000 41,315,000 55,369,000 47,661,000 Selling and Administrative Expenses 22,652,000 23,270,000 27,320,000 29,319,000 25,093,000 Interest on Capitalized Leases 123,000 141,000 153,000 202,000 250,000 Interest Income (2,426,000) (2,534,000) (1,491,000) (1,592,000) (2,007,000) - ------------------------------------------------------------------------------------------------------------------------ Earnings before Provision for Income Taxes 11,398,000 8,999,000 15,333,000 27,440,000 24,325,000 Provision for Income Taxes 4,502,000 3,510,000 5,980,000 10,591,000 9,001,000 - ------------------------------------------------------------------------------------------------------------------------ Net Earnings $6,896,000 $5,489,000 $9,353,000 $16,849,000 $15,324,000 - ------------------------------------------------------------------------------------------------------------------------ Earnings Per Share $1.36 $1.08 $1.84 $3.32 $3.03 Average Shares Outstanding 5,070,000 5,070,000 5,070,000 5,068,000 5,058,000 Dividends Paid Per Share $1.00 $1.00 $1.80 $1.80 $1.175 - ------------------------------------------------------------------------------------------------------------------------ Current Assets $87,365,000 $88,685,000 $98,896,000 $101,847,000 $94,082,000 Current Liabilities 17,626,000 20,237,000 18,519,000 21,181,000 20,902,000 - ------------------------------------------------------------------------------------------------------------------------ Working Capital 75,767,000 68,448,000 80,377,000 80,666,000 73,180,000 Working Capital Ratio 5.30 4.38 5.34 4.81 4.50 - ------------------------------------------------------------------------------------------------------------------------ Total Assets $119,547,000 $120,431,000 $118,525,000 $121,791,000 $112,863,000 - ------------------------------------------------------------------------------------------------------------------------ Long-term Obligations $2,937,000 $3,061,000 $3,620,000 $4,176,000 $4,625,000 - ------------------------------------------------------------------------------------------------------------------------ Shareholders' Equity $96,141,000 $94,315,000 $93,896,000 $93,669,000 $85,795,000 Common Stock Issued and Outstanding 5,069,892 5,069,892 5,069,892 5,069,892 5,052,132 - ------------------------------------------------------------------------------------------------------------------------
NOTE: All share and per share data give effect to the two-for-one stock split on December 7, 1992. 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Net Sales Net sales in fiscal 1996 were $146,491,000, an increase of $5,161,000 over fiscal 1995 net sales of $141,330,000. The increase in fiscal 1996 was primarily a result of an increase in total units shipped. Net sales in fiscal 1995 were $141,330,000, a decrease of $31,672,000 from fiscal 1994 net sales of $173,002,000. The sales decreases occurred primarily in the Sports Licensing divisions due to ongoing competitive conditions in the marketplace, in the Disney division as a result of not participating in a film property in 1995, and in the Women's Sweater division, which ceased operations early in fiscal 1995. Gross Margin Gross margin in fiscal 1996 was $31,747,000, or 22% of net sales, as compared to $29,876,000, or 21% of net sales, in fiscal 1995. The increase in gross margin was the result of improved absorption of manufacturing expenses as a result of the volume increase. Gross margin for fiscal 1995 was $29,876,000, or 21% of net sales, as compared to $41,315,000, or 24% of net sales, in fiscal 1994. The decline in gross margin from year to year primarily resulted from (a) reduced volume in the Sports Licensing divisions, which historically maintain higher gross margins than the other divisions (the gross margin for the Sports Licensing divisions is higher than for other divisions, but net sales of these divisions are subject to a royalty expense which is included in selling and administrative expenses), which affected product mix, and (b) from customer orders taken at lower margins to maintain market share. Selling and Administrative Expenses; Interest Income Selling and administrative expenses in fiscal 1996 were $22,652,000, or 15% of net sales, as compared to $23,270,000, or 16% of net sales, in fiscal 1995. The decrease, both in absolute dollars and as a percentage of net sales, was the result of reduced general overhead expenses offset by increased advertising in the Everlast division. Selling and administrative expenses in fiscal 1995 were $23,270,000, or 16% of net sales, as compared to $27,320,000, or 16% of net sales, in fiscal 1994. The decrease in dollar amount resulted primarily from reduced royalty and commission expenses associated with the reduced sales volume in the Sports Licensing divisions. 15 Management's Discussion and Analysis of Financial Condition and Results of Operations (Con't) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Interest income of $2,426,000 in fiscal 1996 decreased slightly from $2,534,000 in fiscal 1995 due to a decline in interest rates on investments. Interest income in fiscal 1995 was $2,534,000, an increase from $1,491,000 in the previous year. The increase from 1994 to 1995 was the result of more favorable rates of return throughout the year and higher levels of investments. Liquidity and Capital Resources The Company's financial position remained strong throughout fiscal 1996. At September 30, 1996 working capital was $75,767,000, an increase of $7,319,000 from September 30, 1995 working capital of $68,448,000. As is noted in footnote 1, the Company adopted Statement of Financial Accounting Standards No. 115 (SFAS 115), which requires that investments held to maturity be classified based upon contractual maturities. As such, at September 30, 1996, $6,028,000 of investments were reclassified as short-term. The Company's primary source of cash during the three years ended September 30, 1996 has been its operating activities. In 1996, 1995, and 1994, operating activities provided $20,453,000, $6,727,000, and $17,113,000, respectively. The primary uses of cash during the three year period ended September 30, 1996, have been payment of dividends, additions to property, plant, and equipment, and repayment of capitalized lease obligations. In fiscal 1996 the Company continued its year end special dividend payment which it initiated in fiscal 1988. At September 30, 1996, shareholders' equity was $96,141,000 or $18.96 per share, up from $94,315,000, or $18.60 per share, at September 30, 1995. At September 30, 1994 shareholders' equity was $93,896,000, or $18.52 per share. Management believes that the Company has sufficient working capital to finance its operations and projected growth. There were no short-term borrowings outstanding during fiscal years 1996, 1995 and 1994, and management does not anticipate the need for any such borrowings. If necessary, the Company has the ability to obtain funds from a number of sources to meet its seasonal and long-term requirements. 16 Item 8. Financial Statements and Supplementary Data. Consolidated Balance Sheets - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
Assets September 30, 1996 September 30, 1995 - ------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents $ 20,587,000 $ 8,649,000 U.S. Government securities--short-term 12,568,000 20,424,000 Accounts receivable, less estimated uncollectibles: 1996 and 1995, $514,000 26,041,000 25,746,000 Inventories 28,639,000 29,454,000 Other current assets 5,558,000 4,412,000 - ------------------------------------------------------------------------------------------- Total Current Assets 93,393,000 88,685,000 - ------------------------------------------------------------------------------------------- U.S. Government Securities--long-term 7,003,000 12,015,000 Property, Plant and Equipment, net 14,915,000 15,069,000 Other Assets 4,236,000 4,662,000 - ------------------------------------------------------------------------------------------- Total $119,547,000 $120,431,000 - ------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity - ------------------------------------------------------------------------------------------- Current Liabilities: Accounts payable $ 4,609,000 $ 6,851,000 Accrued liabilities 11,321,000 11,005,000 Income taxes payable 1,572,000 2,227,000 Current portion of capitalized lease obligations 124,000 154,000 - ------------------------------------------------------------------------------------------- Total Current Liabilities 17,626,000 20,237,000 - ------------------------------------------------------------------------------------------- Capitalized Lease Obligations, net of current portion 2,937,000 3,061,000 - ------------------------------------------------------------------------------------------- Deferred Income Taxes 2,843,000 2,818,000 - ------------------------------------------------------------------------------------------- Shareholders' Equity: Preferred stock ($10 par value), 500,000 shares authorized; none issued Common stock (no par value), 15,000,000 shares authorized; shares issued: 5,069,892 at 1996 and 1995 2,535,000 2,535,000 Additional paid-in capital 5,821,000 5,821,000 Retained earnings 87,785,000 85,959,000 - ------------------------------------------------------------------------------------------- Total Shareholders' Equity 96,141,000 94,315,000 - ------------------------------------------------------------------------------------------- Total $119,547,000 $120,431,000 - -------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 17 Consolidated Statements of Earnings - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Years Ended September 30, ---------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------------------------------- Net Sales $146,491,000 $141,330,000 $173,002,000 Cost of sales 114,744,000 111,454,000 131,687,000 - -------------------------------------------------------------------------------------------- Gross margin on sales 31,747,000 29,876,000 41,315,000 Selling and administrative expenses 22,652,000 23,270,000 27,320,000 Interest on capitalized leases 123,000 141,000 153,000 Interest income (2,426,000) (2,534,000) (1,491,000) - -------------------------------------------------------------------------------------------- Earnings before provision for income taxes 11,398,000 8,999,000 15,333,000 Provision for income taxes 4,502,000 3,510,000 5,980,000 - -------------------------------------------------------------------------------------------- Net Earnings $ 6,896,000 $ 5,489,000 $ 9,353,000 - -------------------------------------------------------------------------------------------- Earnings per share $ 1.36 $ 1.08 $ 1.84 Average shares outstanding 5,070,000 5,070,000 5,070,000 - --------------------------------------------------------------------------------------------
Consolidated Statements of Shareholders' Equity - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Additional Common Paid-in Retained Years Ended 1994, 1995 and 1996 Stock Capital Earnings Total - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ Balance at September 30, 1993 $2,535,000 $5,821,000 $85,313,000 $93,669,000 - ------------------------------------------------------------------------------------------ Net earnings 9,353,000 9,353,000 Dividends paid--$1.80 per share (9,126,000) (9,126,000) - ------------------------------------------------------------------------------------------ Balance at September 30, 1994 $2,535,000 $5,821,000 $85,540,000 $93,896,000 - ------------------------------------------------------------------------------------------ Net earnings 5,489,000 5,489,000 Dividends paid--$1.00 per share (5,070,000) (5,070,000) - ------------------------------------------------------------------------------------------ Balance at September 30, 1995 $2,535,000 $5,821,000 $85,959,000 $94,315,000 - ------------------------------------------------------------------------------------------ Net earnings 6,896,000 6,896,000 Dividends paid--$1.00 per share (5,070,000) (5,070,000) - ------------------------------------------------------------------------------------------ Balance at September 30, 1996 $2,535,000 $5,821,000 $87,785,000 $96,141,000 - ------------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 18 Consolidated Statements of Cash Flows - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Years Ended September 30, -------------------------------------- 1996 1995 1994 - --------------------------------------------------------------------------------------- Cash Flows From Operating Activities: Net earnings $ 6,896,000 $ 5,489,000 $ 9,353,000 Adjustments to reconcile net earnings to net cash flows from operating activities: Depreciation and amortization 3,426,000 3,591,000 3,647,000 Provision for losses on accounts receivable 43,000 112,000 170,000 Deferred income taxes 25,000 (537,000) 480,000 Changes in assets and liabilities: U.S. Government Securities--short-term 12,887,000 (14,880,000) Accounts receivable (338,000) 13,849,000 1,443,000 Inventories 815,000 (1,573,000) 5,992,000 Other current assets (1,146,000) (514,000) 208,000 Accounts payable (2,242,000) 305,000 (71,000) Accrued liabilities 316,000 (4,000) (1,113,000) Income taxes payable (655,000) 1,466,000 (1,710,000) Other assets 426,000 (577,000) (1,286,000) - --------------------------------------------------------------------------------------- Net Cash Flows From Operating Activities 20,453,000 6,727,000 17,113,000 - --------------------------------------------------------------------------------------- Cash Flows From Investing Activities: Sale of U.S. Government Securities--long-term 997,000 3,000,000 25,924,000 Purchase of U.S. Government Securities--long-term (1,016,000) (27,149,000) Additions to property, plant and equipment (3,557,000) (3,284,000) (2,535,000) Proceeds from sales of property, plant and equipment 285,000 168,000 489,000 - --------------------------------------------------------------------------------------- Net Cash Flows From Investing Activities (3,291,000) (116,000) (3,271,000) - --------------------------------------------------------------------------------------- Cash Flows From Financing Activities: Payment of dividends (5,070,000) (5,070,000) (9,126,000) Repayment of capitalized lease obligations (154,000) (556,000) (854,000) - --------------------------------------------------------------------------------------- Net Cash Flows From Financing Activities (5,224,000) (5,626,000) (9,980,000) - --------------------------------------------------------------------------------------- Increase in Cash 11,938,000 985,000 3,862,000 - --------------------------------------------------------------------------------------- Cash and Cash Equivalents At Beginning of Year 8,649,000 7,664,000 3,802,000 - --------------------------------------------------------------------------------------- Cash and Cash Equivalents At End of Year $ 20,587,000 $ 8,649,000 $ 7,664,000 - --------------------------------------------------------------------------------------- Supplemental Disclosures Cash Paid During The Year For: Interest $ 123,000 $ 141,000 $ 153,000 Income taxes 5,120,000 2,167,000 7,211,000 - ---------------------------------------------------------------------------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 19 Notes to Consolidated Financial Statements - ----------------------------------------------------------- - ----------------------------------------------------------- Note 1--Summary of Significant Accounting Policies a.PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been eliminated in consolidation. b.USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. c.REVENUE RECOGNITION Sales are recognized upon shipment of merchandise. The Company does not provide for allowances or return of goods except for cause. When an allowance or return occurs, it is accounted for as a reduction of sales. Sales allowances are not significant to the operations of the Company. d.INVENTORIES Inventories are stated at the lower of cost (principally standard cost which approximates actual cost on a first-in, first-out basis) or market. e.PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost. Depreciation and amortization for financial accounting purposes are provided by using the straight line method over the estimated useful lives of the assets. Leases of manufacturing facilities which are in substance financing arrangements have been capitalized, with the corresponding liability included in capitalized lease obligations. f.INCOME TAXES Deferred income taxes are provided to reflect the tax effect of timing differences in reporting income and deductions for tax and financial statement purposes under SFAS 109 which provides for accounting for deferred income taxes using the liability method. g.EARNINGS PER SHARE Earnings per share are calculated on the basis of the weighted average number of common shares outstanding during the year. h.CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. i.INVESTMENTS Financial instruments, which potentially subject the Company to concentration of risk, consist of cash and investments. The Company places its investments in US Treasury obligations which limits the amount of credit exposure. Effective December 31, 1994, the Company adopted Statement of Financial Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115), under which the Company's investments are designated as trading or held-to-maturity. Trading securities are reported at fair value, with changes in fair value included in earnings. When the Company has the intent and ability to hold the securities to maturity they are classified as held-to-maturity securities and reported at amortized cost. In accordance with SFAS 115, prior years' financial statements have not been restated to reflect the change in accounting method. There was no cumulative effect as a result of adopting SFAS 115 and the impact on net earnings for the year ended September 30, 1995 was not material. 20 - ----------------------------------------------------------- - ----------------------------------------------------------- Note 2--Investments Investments in the trading category amounted to $6,540,000 at September 30, 1996 and consisted of U.S. Treasury Bills maturing from November 1996 through December 1996. Gross unrealized holding gains at September 30, 1996 were approximately $43,000. Investments in the held-to-maturity category amounted to $13,031,000 at September 30, 1996 and consisted of U.S. Treasury Notes with contractual maturities as follows: 1997 (included in U.S. Government securities -- short-term)............................................ $ 6,028,000 1998..................................................... 6,051,000 1999..................................................... 952,000 ------------ $ 13,031,000 ------------ ------------
The estimated fair value of investments approximates the amortized cost, and, therefore, there are no unrealized gains or losses as at September 30, 1996. Note 3--Inventories INVENTORIES CONSIST OF THE FOLLOWING:
1996 1995 ----------- ----------- Raw materials......................................... $ 3,115,000 $ 5,135,000 Work in process....................................... 6,837,000 9,374,000 Finished goods........................................ 18,687,000 14,945,000 ----------- ----------- $28,639,000 $29,454,000 ----------- ----------- ----------- -----------
Note 4--Property, Plant and Equipment PROPERTY, PLANT AND EQUIPMENT CONSIST OF THE FOLLOWING:
1996 1995 ----------- ----------- Capitalized leased manufacturing plants............... $11,545,000 $12,626,000 Machinery and equipment............................... 16,075,000 14,711,000 Leasehold improvements................................ 3,753,000 3,689,000 Transportation equipment.............................. 1,882,000 1,788,000 ----------- ----------- 33,255,000 32,814,000 Less accumulated depreciation and amortization........ 18,340,000 17,745,000 ----------- ----------- $14,915,000 $15,069,000 ----------- ----------- ----------- -----------
The net book value of the capitalized leased manufacturing plants was $4,025,000 at September 30, 1996 and $4,716,000 at September 30, 1995. Note 5--Capitalized Leases Substantially all of the Company's leases of manufacturing facilities have been capitalized. Future minimum lease payments of principal and interest under leases capitalized at September 30, 1996 are as follows: 1997...................................................... $ 227,000 1998...................................................... 226,000 1999...................................................... 262,000 2000...................................................... 165,000 2001...................................................... 367,000 Later years............................................... 2,731,000 ------------ 3,978,000 Less interest--4.0% to 8.0%............................... (917,000) ------------ Total minimum lease payments.............................. 3,061,000 Less amounts due within one year.......................... (124,000) ------------ $ 2,937,000 ------------ ------------
21 - ----------------------------------------------------------- - ----------------------------------------------------------- Note 6--Income Taxes The difference between the total statutory Federal income tax and the actual income tax expense is accounted for as follows:
1996 1995 1994 ------------------------- ------------------------- ------------------------- Percent of Percent of Percent of Pre-Tax Pre-Tax Pre-Tax Amount Earnings Amount Earnings Amount Earnings ------------------------- ------------------------- ------------------------- Federal statutory tax expense................ $3,989,000 35.0% $3,150,000 35.0% $5,367,000 35.0% State and local income tax expense, net of Federal income tax benefit................... 513,000 4.5 360,000 4.0 613,000 4.0 ---------- --- ---------- --- ---------- --- Income tax expense........................... $4,502,000 39.5% $3,510,000 39.0% $5,980,000 39.0% ---------- --- ---------- --- ---------- --- ---------- --- ---------- --- ---------- ---
Income tax expense consists of the following components:
1996 1995 1994 ---------- ---------- ---------- Current....................................... $4,477,000 $4,047,000 $5,500,000 Deferred...................................... 25,000 (537,000) 480,000 ---------- ---------- ---------- $4,502,000 $3,510,000 $5,980,000 ---------- ---------- ---------- ---------- ---------- ----------
Deferred income taxes are provided to reflect the tax effect of timing differences in reporting income and deductions for tax and financial statement purposes, principally depreciation, pension, employee benefits, deferred compensation and inventory. Included in Other Current Assets at September 30, 1996 and 1995 is $1,504,000 and $1,478,000, respectively, of current deferred income tax debits, and included in Income Taxes Payable at September 30, 1996 and 1995 is $506,000 and $863,000, respectively, of current deferred income tax credits. Note 7--Commitments The Company is obligated under certain long-term leases which do not meet the criteria for capitalization. The annual minimum rental commitments (excluding escalation) of these leases are: 1997....................................................... $1,225,000 1998....................................................... 1,225,000 1999....................................................... 1,225,000 2000....................................................... 1,153,000 2001....................................................... 1,153,000 2002-2005.................................................. 3,392,000
Total rental expense charged to operations in 1996, 1995 and 1994 amounted to $1,501,000, $2,474,000, and $2,421,000, respectively. The Company is obligated under various licensing agreements for annual minimum royalty expense commitments, amounting to approximately $1,800,000, $1,400,000 and $200,000 for 1997, 1998 and 1999, respectively. Total royalty expense charged to operations in 1996, 1995 and 1994 amounted to $3,433,000, $3,336,000, and $5,309,000, respectively. Note 8--Stock Option Plan In 1989, the Company adopted a plan for granting stock options to employees to purchase common stock at a price equal to its fair market value at the respective date of grant. Options expire five years after the respective date of grant. For the years ended September 30, 1994, 1995 and 1996, there were 200,000 options available for grant, and there were no unexercised options for these respective periods. 22 - ----------------------------------------------------------- - ----------------------------------------------------------- Note 9--Pension and Retirement Plans The Company contributes to defined benefit pension plans which cover all eligible employees. Pension costs are generally funded currently. Pension expense amounted to $606,385 in 1996, $391,055 in 1995 and $549,587 in 1994. Net pension costs under FASB No. 87 included the following components:
1996 1995 1994 ------------ ------------ ------------ Service cost-benefits earned during the period.................................. $ 626,204 $ 562,230 $ 620,643 Interest cost on projected benefit obligation.............................. 1,072,436 980,101 1,056,531 Actual return on plan assets loss (gain).................................. (1,711,145) (1,797,953) 253,612 Net amortization and deferral............ 398,651 640,469 (1,381,199) ------------ ------------ ------------ Net periodic pension cost before settlement.............................. 386,146 384,847 549,587 Settlement gain.......................... 220,239 6,208 ------------ ------------ ------------ Net periodic pension cost after settlement.............................. $ 606,385 $ 391,055 $ 549,587 ------------ ------------ ------------ ------------ ------------ ------------
The following table sets forth the funded status for the Company's defined benefit pension plans:
1996 1995 ------------ ------------ Actuarial present value of benefit obligation Vested benefit obligation........................... $(11,947,688) $(11,651,126) Nonvested benefit obligation........................ (431,473) (465,500) ------------ ------------ Accumulated benefit obligation...................... (12,379,161) (12,116,626) Excess of projected benefit obligation over accumulated benefit obligation..................... (1,276,116) (1,409,543) ------------ ------------ Projected benefit obligation........................ (13,655,277) (13,526,169) Actual plan assets at fair value.................... 17,131,256 15,774,026 ------------ ------------ Projected benefit obligation less than plan assets............................................. 3,475,979 2,247,857 Unrecognized net (gain)............................. (793,060) (105,711) Unrecognized prior service cost..................... 455,558 535,719 Unrecognized net transition obligation at September 30,................................................ 629,800 655,568 ------------ ------------ Prepaid pension cost at September 30,............... $ 3,768,277 $ 3,333,433 ------------ ------------ ------------ ------------
The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation for the Company's plans was 8.0% in 1996, 7.0% in 1995 and 7.5% in 1994. The expected long-term rate of return on assets used for the Company's plans was 9.5% in 1996 and 7.5% in 1995 and 9.5% in 1994. The Board of Directors adopted on April 1, 1989 a Supplemental Executive Retirement Plan for certain executive employees to restore pension benefits which have been reduced by legislative action. The Company purchases annuity contracts to fund its obligation for the four participants (three officers-directors and one employee-director of the Company) under such plan and reimburses the participants for the current tax recognition resulting from such purchases. The respective costs are being amortized over the remaining estimated employment lives of the participants. The 1996, 1995 and 1994 expense for such plan was $705,000, $705,000 and $736,000, respectively. The Board of Directors adopted on January 1, 1995, a Supplemental Benefit Restoration Plan for certain employees not covered by the Supplemental Executive Retirement Plan to restore certain pension benefits which have been reduced by legislative action. The Company is currently funding its obligations to the five participants, and the 1996 and 1995 expense for such plan was $68,000 and $75,000, respectively. Note 10--Major Customers The Company operates within one industry segment - the manufacture of apparel. The Company performs ongoing credit evaluations of its customers and generally does not require collateral or 23 - ----------------------------------------------------------- - ----------------------------------------------------------- other security to support customer receivables. Sales to one national retail chain accounted for approximately 66% of the Company's net sales in 1996, 63% in 1995 and 62% in 1994. Another national retail chain accounted for approximately 15%, 20% and 18% of the Company's net sales in 1996, 1995 and 1994, respectively. No other customer accounted for more than 10% of the Company's net sales in each of the three years ended 1996. The Company routinely assesses the financial strength of its customers and, as a consequence, management believes that its trade receivable credit risk exposure is limited. Historically, the Company has not experienced significant losses related to receivables. Note 11--Shareholders' Equity Pursuant to the Company's Rights Plan, each shareholder holds one right for each share of common stock, and in the event any person acquires 20% of the Company's common stock, each right will give the holder the option to purchase one share of the Company's common stock for $90, subject to adjustment. The rights expire May 16, 2003, and may be redeemed by the Company for $.01 per right. As of September 30, 1995, 5,069,892 shares of the Company's common stock were reserved for issuance under the Company's Rights Plan. Note 12--Employment Agreements The Company maintains employment agreements with four directors, three of whom are also officers of the Company. The employment agreements contain change in control provisions that would entitle each of the four directors to receive up to 2.99 times his five year average annual salary plus continuation of certain benefits if there is a change in control in the Company (as defined) and a termination of his employment. The maximum contingent liability under these agreements in such event is approximately $6,500,000. The employment agreements also provide for severance benefits, disability and death benefits and, as to one officer-director, consulting services under certain circumstances. Note 13--Quarterly Financial Data (Unaudited) Financial data for the interim periods of 1996 and 1995 were as follows:
Fiscal Year 1996 Net Gross Net Earnings Quarters Sales Margins Earnings Per Share - ---------------------------------------------- --------- ----------- ----------- ----------- (In thousands, except per share amounts) First......................................... $ 33,024 $ 6,474 $ 1,341 $ .26 Second........................................ 26,882 5,975 1,002 .20 Third......................................... 37,218 9,133 2,067 .41 Fourth........................................ 49,367 10,165 2,486 .49 --------- ----------- ----------- ----------- Total...................................... $ 146,491 $ 31,747 $ 6,896 $ 1.36 --------- ----------- ----------- ----------- --------- ----------- ----------- ----------- Fiscal Year 1995 Quarters - ---------------------------------------------- First......................................... $ 38,668 $ 7,404 $ 1,122 $ .22 Second........................................ 28,380 6,588 1,052 .21 Third......................................... 33,040 7,092 1,404 .28 Fourth........................................ 41,242 8,792 1,911 .37 --------- ----------- ----------- ----------- Total...................................... $ 141,330 $ 29,876 $ 5,489 $ 1.08 --------- ----------- ----------- ----------- --------- ----------- ----------- -----------
24 Independent Auditors' Report - ----------------------------------------------------------- - ----------------------------------------------------------- Board of Directors and Shareholders Garan, Incorporated We have audited the accompanying consolidated balance sheets of Garan, Incorporated and its subsidiaries as at September 30, 1996 and 1995 and the related consolidated statements of earnings, shareholders' equity and cash flows for each of the three fiscal years in the period ended September 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned financial statements present fairly, in all material respects, the consolidated financial position of Garan, Incorporated and its subsidiaries as at September 30, 1996 and 1995, and the results of consolidated operations, changes in shareholders' equity and cash flows for each of the three fiscal years in the period ended September 30, 1996 in conformity with generally accepted accounting principles. Robbins, Greene, Horowitz, Lester & Co., LLP New York, New York November 15, 1996 25 PART III Item 10. Directors and Executive Officers of the Registrant. The information required to be set forth in this Item will be contained in registrant's 1997 Proxy Statement under the caption "Election of Directors" and is incorporated by reference into this Report. Item 11. Executive Compensation. The information required to be set forth in this Item will be contained in registrant's 1997 Proxy Statement under the caption "Executive Compensation" and is incorporated by reference into this Report. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information required to be set forth in this Item will be contained in registrant's 1997 Proxy Statement under the caption "Election of Directors; Security Ownership of Certain Beneficial Owners and Management" and is incorporated by reference into this Report. Item 13. Certain Relationships and Related Transactions. The information required to be set forth in this Item will be contained in registrant's 1997 Proxy Statement under the caption "Transactions with Management" and is incorporated by reference into this Report. 26 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) Index to Consolidated Financial Statements and Consolidated Financial Statement Schedules. Page ---- (1) Consolidated Financial Statements. Included in Part II, Item 8 of this Report: Consolidated Balance Sheets as at 17 September 30, 1996, and September 30, 1995. Consolidated Statements of Earnings - 18 years ended September 30, 1996, September 30, 1995, and September 30, 1994. Consolidated Statements of Shareholders' 18 Equity - years ended September 30, 1996, September 30, 1995, and September 30, 1994. Consolidated Statements of Cash Flows - 19 years ended September 30, 1996, September 30, 1995, and September 30, 1994. Notes to Consolidated Financial Statements 20-24 for the years ended September 30, 1996, September 30, 1995, and September 30, 1994. 27 Page ---- Independent Auditors' Report dated 25 November 15, 1996. (2) Consolidated Financial Statement Schedules. Independent Auditors' Report on Schedules dated November 15, 1996, and Consent of Independent Certified Public Accountants dated December 23, 1996. F-1 Supplemental Notes to Consolidated Finan- cial Statements for the years ended September 30, 1996, September 30, 1995, and September 30, 1994. F-2 Schedules other than those listed above are omitted for the reason that they are not required, are not applicable, or the required information is shown in the Consolidated Financial Statements or Notes thereto. Individual financial statements of the registrant and its subsidiaries are omitted because all subsidi- aries included in the Consolidated Financial Statements are 100% owned. (b) No reports on Form 8-K have been filed by the registrant during the last quarter of the period covered by this Report. 28 Page ---- (c) Exhibits filed as part of this Report. (3) Articles of Incorporation and by-laws. (i) Restated Articles of Incorporation was reported and filed as an exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1988, and is in-corporated by reference into this report. (ii) Articles of Amendment of the Restated Articles of Incorporation was reported and filed as an exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1988, and is incorporated by reference into this report. (iii) Articles of Amendment of the Restated Articles of Incorporation dated November 9, 1992, was reported and filed as an Exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1992, and is incorporated by reference into this report. (iv) By-laws, as amended through April 21, 1993, were reported and filed as an Exhibit in the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, and are incorporated by reference into this report. (4) Instruments defining the rights of security holders, including indentures. Amended and Restated Rights Agreement dated as of April 21, 1993, between the registrant and Chemical Bank was reported and filed as an exhibit in the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, and is incorporated by reference into this report. 29 Page ---- (10) Material Contracts. (i) Employment Agreement as amended and restated on December 4, 1992,between the registrant and Rodney Faver, was reported and filed as an Exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1992, and is incorporated by reference into this report. (ii) Amendment to Employment Agreement dated November 15, 1995, between the registrant and Rodney Faver was reported and filed as an Exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1995, and is incorporated by reference into this report. (iii) Employment Agreement as amended and restated on December 4, 1992, between the registrant and Jerald Kamiel, was reported and filed as an Exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1992, and is incorporated by reference into this report. (iv) Employment and Consulting Agreement as amended and restated on December 4, 1992, between the registrant and Seymour Lichtenstein, was reported and filed as an Exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1992 and is incorporated by reference into this report. (v) Employment Agreement as amended and restated on December 4, 1992, between the registrant and William J. Wilson, was reported and filed as an Exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1992, and is incorporated by reference into this report. (vi) Supplemental Executive Retirement Plan, effective April 1, 1989, was reported and filed as an exhibit in the 30 registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1989, and is incorporated by reference into this report. (vii) Form of Indemnity Agreement dated August 9, 1993, between the registrant and each of its directors was reported and filed as an exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1993, and is incorporated by reference into this report. (viii) Indemnity Agreement dated August 9, 1993, between the registrant and Alexander J. Sistarenik was reported and filed as an exhibit in the registrant's Annual Report on Form 10-K for the fiscal year ended September 30, 1993, and is incorporated by reference into this report. (21) Schedule of Subsidiaries of registrant. 33 (27) Financial Data Schedule. 34 (d) The Consolidated Financial Statement Schedules Specified in Item 14(a)(2) are annexed. 31 INDEPENDENT AUDITORS' REPORT ON SCHEDULES Board of Directors and Shareholders Garan, Incorporated In connection with our audit of the Consolidated Financial Statements of Garan, Incorporated for the year ended September 30, 1996, incorporated into this Annual Report on Form 10-K in Part II, Item 8, we also have audited the supporting Consolidated Financial Statement Schedules listed in Item 14(a)(2) of this Report. In our opinion, those Consolidated Financial Statement Schedules present fairly, when read in conjunction with the related Consolidated Financial Statements, the financial data required to be set forth therein. ROBBINS, GREENE, HOROWITZ, LESTER & CO., LLP November 15, 1996 New York, New York CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS As independent certified public accountants, we hereby consent to the incorporation of our report dated November 15, 1996 included in, or incorporated by reference in, Registration Statement Nos. 2-72544 and 33-29054 on Form S-8 and the related Prospectuses. ROBBINS, GREENE, HOROWITZ, LESTER & CO., LLP December 23, 1996 New York, New York F-1 GARAN, INCORPORATED AND SUBSIDIARIES SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 15 - INTEREST INCOME Interest income is comprised of the following components: 1996 1995 1994 ---- ---- ---- Investments $1,999,000 $2,155,000 $1,066,000 Other 427,000 379,000 425,000 --------- --------- --------- $2,426,000 $2,534,000 $1,491,000 --------- --------- --------- --------- --------- --------- Note 16 - ACCRUED LIABILITIES Accrued liabilities as at September 30, 1996 and September 30, 1995 consist of the following: 1996 1995 ---- ---- Payroll $ 3,236,000 $ 2,663,000 Payroll Taxes 132,000 67,000 Accrued Expenses 7,953,000 8,275,000 ---------- ---------- $11,321,000 $11,005,000 ---------- ---------- ---------- ---------- F-2 SIGNATURES Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GARAN, INCORPORATED December 23, 1996 By: /s/ William J. Wilson ---------------------------------------- William J. Wilson, Vice President Finance and Administration Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. December 23, 1996 /s/Seymour Lichtenstein ---------------------------------------- Seymour Lichtenstein Principal Executive Officer, Director December 23, 1996 /s/William J. Wilson ---------------------------------------- William J. Wilson Principal Financial Officer, Director December 23, 1996 /s/Alexander J. Sistarenik ---------------------------------------- Alexander J. Sistarenik, Principal Accounting Officer December 23, 1996 /s/Rodney Faver ---------------------------------------- Rodney Faver, Director December 23, 1996 /s/Jerald Kamiel ---------------------------------------- Jerald Kamiel, Director December 23, 1996 /s/Marvin S. Robinson ---------------------------------------- Marvin S. Robinson, Director 32 EX-21 2 SUBSIDIARIES OF REGISTRANT EXHIBIT 21 SUBSIDIARIES OF REGISTRANT Name of Corporation State of Incorporation ------------------- ---------------------- Garan Central America Corp. Virginia Garan Export Corp. New York Garan Manufacturing Corp. Virginia Garan Services Corp. Delaware Garan de El Salvador, S.A. de C.V. El Salvador EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF EARNINGS AND BALANCE SHEETS OF GARAN, INCORPORATED ANNEXED HERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCAIL STATMENTS. 12-MOS SEP-30-1996 OCT-1-1995 SEP-30-1996 20,587,000 12,568,000 26,555,000 514,000 28,639,000 93,393,000 33,255,000 18,340,000 119,547,000 17,626,000 2,937,000 0 0 2,535,000 93,606,000 119,547,000 146,491,000 146,491,000 114,744,000 114,744,000 0 0 123,000 11,398,000 4,502,000 0 0 0 0 6,896,000 1.36 0
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