-----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, P1m9NTh/wf6QN/CBhJv61HaMjG9GPv0tIz5p9XwuPtrB5zNC6/DVCWE5W+Miinmh 2NrgN736ai+eI3Cj3uH1qA== 0001033525-02-000013.txt : 20020515 0001033525-02-000013.hdr.sgml : 20020515 20020515140621 ACCESSION NUMBER: 0001033525-02-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04506 FILM NUMBER: 02650672 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-Q 1 gar10q_051502.txt FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2002 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 2002 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, NY 10118 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (212) 563-2000 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 than 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Class Outstanding March 31, 2002 Common Stock (no par value) 4,509,587 shares GARAN, INCORPORATED AND SUBSIDIARIES FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Page # Item 1. Consolidated Statements of Earnings Three Months Ended March 31, 2002 and 2001 3 Consolidated Statements of Earnings Six Months Ended March 31, 2002 and 2001 4 Consolidated Balance Sheets March 31, 2002 and September 30, 2001 5 Consolidated Statements of Cash Flows Six Months Ended March 31, 2002 and 2001 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Qualitative and Quantitative Disclosure About Market Risk 10 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 PART I. - FINANCIAL INFORMATION Item 1. GARAN, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) THREE MONTHS ENDED 3/31/02 3/31/01 ----------- ----------- Net sales $54,071,000 $56,685,000 Cost of sales 36,240,000 40,305,000 ----------- ----------- Gross margin on sales 17,831,000 16,380,000 Selling and administrative expenses 7,312,000 7,515,000 Interest on capitalized leases 7,000 21,000 Interest income (217,000) (542,000) ----------- ----------- Earnings before provision for income taxes 10,729,000 9,386,000 Provision for income taxes 4,345,000 3,848,000 ----------- ----------- Net earnings $ 6,384,000 $ 5,538,000 =========== =========== Earnings per share data (see Note 2): Earnings per share - Basic $ 1.42 $ 1.09 - Diluted $ 1.41 $ 1.08 Average common shares outstanding - Basic 4,494,000 5,083,000 - Diluted 4,531,000 5,105,000 Dividends paid per share $ 0.25 $ 0.25
GARAN, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
SIX MONTHS ENDED 3/31/02 3/31/01 ----------- ----------- Net sales $109,737,000 $111,738,000 Cost of sales 76,590,000 81,769,000 ----------- ----------- Gross margin on sales 33,147,000 29,969,000 Selling and administrative expenses 14,881,000 14,780,000 Interest on capitalized leases 20,000 50,000 Interest income (569,000) (1,158,000) ----------- ----------- Earnings before provision for income taxes 18,815,000 16,297,000 Provision for income taxes 7,661,000 6,682,000 ----------- ----------- Net earnings $11,154,000 $ 9,615,000 =========== =========== Earnings per share data (see Note 2): Earnings per share - Basic $ 2.48 $ 1.89 - Diluted $ 2.46 $ 1.88 Average common shares outstanding- Basic 4,494,000 5,083,000 - Diluted 4,531,000 5,105,000 Dividends paid per share $ 1.40 $ 1.30
GARAN, INCORPORATED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS 03/31/02 9/30/01 ------------- ------------ (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents $ 33,421,000 $ 33,881,000 U.S. Government securities - short-term 25,859,000 0 Accounts receivable, less allowance for uncollectibles of $1,843,000 at 3/31/02 and $493,000 at 9/30/01 30,130,000 59,301,000 Inventories 39,393,000 41,596,000 Other current assets 8,007,000 7,092,000 ----------- ----------- Total current assets 136,810,000 141,870,000 U.S. Government securities - long-term 3,500,000 3,500,000 Property, plant and equipment, less accumulated depreciation and amortization 15,572,000 16,109,000 Other assets 6,395,000 6,554,000 ------------ ------------ TOTAL ASSETS $ 162,277,000 $ 168,033,000 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 7,604,000 $ 11,609,000 Accrued liabilities 20,484,000 20,573,000 Federal and state income taxes payable 3,340,000 9,945,000 Current portion of capitalized leases 200,000 220,000 ------------ ------------ Total current liabilities 31,628,000 42,347,000 ------------ ------------ Capitalized lease obligations, net of current portion 1,710,000 1,710,000 ------------ ------------ Deferred income taxes 1,212,000 1,412,000 ------------ ------------ Shareholders' Equity: Preferred stock ($10 par value) 500,000 shares authorized; none issued Common stock (no par value) 15,000,000 shares authorized; issued 4,509,587 at 3/31/02 and 4,491,387 at 9/30/01 2,255,000 2,246,000 Additional paid-in-capital 6,117,000 5,817,000 Retained earnings 119,355,000 114,501,000 ------------ ------------ Total shareholders' equity 127,727,000 122,564,000 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 162,277,000 $ 168,033,000 ============= =============
GARAN, INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED 3/31/02 3/31/01 ------------- ------------ Cash Flows from Operating Activities: Net earnings $ 11,154,000 $ 9,615,000 Adjustments to reconcile to net cash provided by operating activities: Deferred compensation 426,000 Depreciation and amortization 2,572,000 3,662,000 Deferred income taxes (200,000) 255,000 Provision for bad debts 1,350,000 Changes in assets and liabilities: U.S. Government securities - Short-term (25,859,000) (1,884,000) Accounts receivable 27,821,000 17,028,000 Inventories 2,203,000 (10,507,000) Other current assets (915,000) (241,000) Accounts payable (4,005,000) 703,000 Accrued liabilities (89,000) (2,309,000) Income taxes payable (6,605,000) 11,000 Other assets 159,000 976,000 Net Cash Provided by Operating ------------ ------------ Activities 7,586,000 17,735,000 ------------ ------------ Cash Flows from Investing Activities: Purchase of U.S. Government securities - long-term (2,026,000) Additions to property, plant and equipment (2,035,000) (2,388,000) ------------ ------------ Net Cash Used for Investing Activities (2,035,000) (4,414,000) ------------ ------------ Cash Flows From Financing Activities: Payment of dividends (6,300,000) (6,606,000) Repayment of capitalized lease obligations (20,000) (20,000) Proceeds from exercised stock options 309,000 179,000 ------------ ------------ Net Cash Used for Financing Activities (6,011,000) (6,447,000) ------------ ------------ Net (decrease) increase in Cash and Cash Equivalents (460,000) 6,874,000 Cash and Cash Equivalents at Beginning of Period 33,881,000 14,580,000 ------------ ------------ Cash and Cash Equivalents at End of Period $ 33,421,000 $ 21,454,000 ============ ============ Supplemental Cash Flow Disclosures Cash Paid During the Period for: Interest $ 20,000 $ 50,000 Income taxes 14,034,000 6,251,000 ============ ============
GARAN, INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 (UNAUDITED) 1. In the opinion of management, all adjustments necessary for a fair statement of the results of operations have been reflected. 2. Basic and diluted earnings per share for the six months ended March 31, 2002 and 2001, are calculated on the basis of the weighted average number of common shares outstanding during such six month periods in accordance with the provisions of Statement of Financial Accounting Standards No. 128 as follows: Six Months Ended Six Months Ended March 31, 2002 March 31,2001 ------------------------------ ------------------------------- Income Shares Per Share Income Shares Per Share Basic EPS $11,154,000 4,494,000 $ 2.48 $9,615,000 5,083,000 $1.89 ========= ========= Effect of dilutive options 37,000 22,000 --------------------- ---------------------- $11,154,000 4,531,000 $ 2.46 $9,615,000 5,105,000 $1.88 ============================== =============================== Basic and diluted earnings per share for the three months ended March 31, 2002 and 2001, are based on earnings per share for the corresponding six month period less earnings per share for the three months ended December 31, 2001, and December 31, 2000, respectively. 3. Inventories consist of the following: 03/31/02 09/30/01 ----------- ----------- (UNAUDITED) Raw Materials $ 6,607,000 $ 6,627,000 Work in Process 5,398,000 6,070,000 Finished Goods 27,388,000 28,899,000 ----------- ----------- $39,393,000 $41,596,000 =========== ===========
ITEM 2. GARAN, INCORPORATED AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Some of the information presented in this Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," and similar expressions are intended to identify forward-looking statements. The Company's actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors including, but not limited to, uncertainties regarding continued market acceptance of the Company's products, competition, the Company's relationship with its principal customer, the consistent availability of raw materials, and risks associated with the Company's Central American operations. These as well as other factors which could affect the Company's business are discussed under the caption "Risk Factors" and elsewhere in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2001. The forward-looking statements in this report are made as of the date of this report, and the Company assumes no obligation to update such forward-looking statements or to update the reasons why actual results could differ materially from those anticipated in such forward-looking statements. Results of Operations -- Three and Six-Month Periods Ended March 31, 2002, and March 31, 2001: Net Sales Net sales for the three months ended March 31, 2002, were $54,071,000 compared to $56,685,000 for the three months ended March 31, 2001. Net sales for the six months ended March 31, 2002, were $109,737,000 compared to $111,738,000 for the six months ended March 31, 2001. The decrease in sales in both the three and six month periods was the result of lower average selling prices offset in part by increased units shipped. The lower selling prices were due to a combination of market pressure, product mix, and markdowns of inventory being liquidated in connection with the closing of the Company's licensing division. Net earnings for the three months ended March 31, 2002, were $6,384,000, or $1.42 per share, compared to $5,538,000, or $1.09 per share, for the three months ended March 31, 2001. Net earnings for the six months ended March 31, 2002, were $11,154,000, or $2.48 per share, compared to $9,615,000, or $1.89 per share, for the six months ended March 31, 2001. The increase in net earnings per share for the three months ended March 31, 2002, was primarily due to cost reductions described below under the caption "-Gross Margin." In addition, the increases in net earnings per share for the three and six months ended March 31, 2002, as compared to the prior fiscal year periods are partially due to the Company's repurchase of 596,250 of its shares in June, 2001. Earnings per share for the same period for fiscal 2001 were based on the shares outstanding at that time. Gross Margin Gross margin for the three months ended March 31, 2002, was $17,831,000, or 33.0% of net sales, compared to $16,380,000, or 28.9% of net sales, for the three months ended March 31, 2001. Gross margin for the six months ended March 31, 2002, was $33,147,000, or 30.2% of net sales, compared to $29,969,000, or 26.8% of net sales, for the six months ended March 31, 2001. The gross margin increase in both periods was due to several factors including (a) lower costs of production as a result of shifting more production offshore, (b) lower costs associated with improved manufacturing efficiencies, (c) lower costs obtained by better sourcing of raw materials used in production, and (d) duty savings as a result of lower effective duty rates on a portion of the Company's Caribbean Basin production. The Company is a beneficiary of the Trade and Development Act of 2000 pursuant to which a portion of its garments produced in the Caribbean Basin are imported free of duty subject to annual quotas. Selling and Administrative Expenses; Interest Income Selling and administrative expenses for the three months ended March 31, 2002, were $7,312,000, or 13.5% of net sales, as compared to $7,515,000, or 13.3% of net sales, for the three months ended March 31, 2001. Selling and administrative expenses for the six months ended March 31, 2002, were $14,881,000, or 13.6% of net sales, as compared to $14,780,000, or 13.2% of net sales, for the six months ended March 31, 2001. The decrease in absolute dollars in selling and administrative expenses for the three months ended March 31, 2002, was due primarily to decreased royalty expenses as a result of the closing of the Company's licensing division, partially offset by increases in premiums on insurance policies renewed after September 11, 2001. The increase in selling and administrative expenses for the six months ended March 31, 2002, was due primarily to a significant increase in premiums on insurance policies renewed after September 11, 2001, partially offset by decreases in both royalties and advertising expenses. Selling and administrative expenses include shipping and handling costs of $1,181,000 and $1,164,000, or approximately 2% and 2% of net sales, for the three months ended March 31, 2002 and 2001, respectively, and $2,451,000 and $2,238,000, or 2% and 2% of net sales, for the six months ended March 31, 2002 and 2001, respectively. Interest income for the three months ended March 31, 2002, decreased to $217,000 from $542,000 for the three months ended March 31, 2001. Interest income for the six months ended March 31, 2002, was $569,000 as compared to $1,158,000 for the six months ended March 31, 2001. Interest income decreased for both periods despite an increase in the level of investments, due to declines in interest rates. Financial Position, Capital Resources, and Liquidity - March 31, 2002, and March 31, 2001: At March 31, 2002, working capital was $105,182,000, an increase of $5,659,000 from working capital at September 30, 2001, of $99,523,000. The increase was due to net income in the period partially offset by the net decreases in both accounts payable and income taxes payable. Accounts payable decreased primarily as a result of the Company using more letters of credit and payments on sight for offshore raw materials, as opposed to usual payment terms. Income taxes payable decreased from $9,945,000 at September 30, 2001, to $3,340,000 at March 31, 2002, as a result of the Company not being required to make its' final tax payment for the 2001 fiscal year until October 2001. Shareholders' equity at March 31, 2002, was $127,727,000 or $28.32 book value per share as compared to $122,564,000, or $27.29 book value per share at September 30, 2001. Accounts receivable were $30,130,000 at March 31, 2002, a decrease of $29,171,000 over the balance at September 30, 2001. Because the Company's business is seasonal, it believes that it is more meaningful to compare the receivable balance at March 31, 2002, to the balance of $36,704,000 at March 31, 2001, rather than the September 30, 2001, fiscal year-end balance. The decrease at March 31, 2002, from March 31, 2001, was primarily due to decreased net sales and a $1,350,000 increase in the allowance for uncollectible accounts, representing approximately 50% of the amount due from Kmart Corp. as of the date of its bankruptcy filing. The Company's accounts receivable balance due from Wal-Mart Stores, Inc. was $26,160,000 and $31,277,000, or approximately 87% and 85% of total accounts receivable, at March 31, 2002 and 2001, respectively. The Company's accounts receivable balance at September 30, 2001, due from Wal-Mart Stores, Inc. was $54,920,000, or approximately 93% of total accounts receivable. Wal-Mart Stores, Inc. is a public company which is subject to the periodic reporting requirements of the U.S. Securities and Exchange Commission. Inventory decreased to $39,393,000 at March 31, 2002, from $41,596,000 at September 30, 2001. Because the Company's business is seasonal, the Company believes that it is more meaningful to compare inventory at March 31, 2002, to the balance at March 31, 2001, rather than the September 30, 2001, fiscal year-end balance. The decrease in inventory from $58,264,000 at March 31, 2001, to $39,393,000 at March 31, 2002, was due to several factors including (a) the March 31, 2001, inventory included accelerated production for the 2001 fall season which did not occur in 2002, (b) a lower amount of dozens in inventory at March 31, 2002, due to the closing of the licensing division, and (c) lower inventory valuation resulting from lower cost of the major components such as raw materials, labor, and overhead. Item 3. Qualitative and Quantitative Disclosure About Market Risk The Company does not believe it is exposed to market risks with respect to any of its investments; the Company does not utilize market rate sensitive instruments for trading or other purposes. The Company's investments consist primarily of U.S. Government securities with maturities of two years or less. PART II. - OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders. At the 2002 Annual Meeting of the shareholders of the Company held on March 1, 2002, Richard A. Lichtenstein, Seymour Lichtenstein, and Marvin S. Robinson were reelected as directors of the Company, and the selection of Citrin Cooperman & Company, LLP as the Company's independent certified public accountants for the fiscal year ending September 30, 2002, was ratified. The names of the Company's other directors who continued in office after the 2002 Annual Meeting are: Stephen J. Donohue, Rodney Faver, Jerald Kamiel, Frank Martucci, Perry Mullen, and William J. Wilson. The tabulation of the votes was as follows: Votes For Votes Withheld ------------- -------------- Richard A. Lichtenstein 3,643,686 34,694 Seymour Lichtenstein 3,643,686 34,694 Marvin S. Robinson 3,643,686 34,694 Votes For Votes Against Abstain ------------- -------------- ----------- Ratification of Accountants 3,667,268 10,040 1,072 ITEM 6. Exhibits and Reports on Form 8-K. a. Exhibits None. b. Reports on Form 8-K No reports have been filed on Form 8-K during the quarter ended March 31, 2002. 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. GARAN, INCORPORATED BY:/s/Seymour Lichtenstein ----------------------- Seymour Lichtenstein Principal Executive Officer BY:/s/William J. Wilson -------------------- William J. Wilson Principal Financial Officer DATE: May 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----