10-Q 1 d10q.txt SPEIZMAN INDUSTRIES, INC. FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------------------------------------------------------- [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 29, 2001 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 No. 0-8544 SPEIZMAN INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Delaware 56-0901212 -------------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 701 Griffith Road 28217 -------------------------------------- ------------------------ Charlotte, North Carolina (Zip Code) -------------------------------------- (Address of principal executive offices) (704) 559-5777 ---------------- (Registrant's telephone number, including area code) Not Applicable ---------------- (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, 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 latest practicable date. Outstanding at Class of Common Stock February 8, 2002 ------------------------ ---------------- Par value $.10 per share 3,255,428 Page 1 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES INDEX
PART I. FINANCIAL INFORMATION: Page No. -------- Item 1. Financial Statements: Condensed Consolidated Balance Sheets..................................... 3-4 Condensed Consolidated Statements of Operations........................... 5 Condensed Consolidated Statements of Cash Flows........................... 6 Condensed Consolidated Statements of Stockholders' Equity................. 7 Notes to Condensed Consolidated Financial Statements...................... 8-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................. 12-21 PART II. OTHER INFORMATION: Item 6. Exhibits and reports on Form 8-K..................................... 22
Page 2 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- December 29, June 30, 2001 2001 ------------ ------------ (unaudited) ASSETS ------ CURRENT: Accounts receivable, less allowances of $717,987 and $747,092 $ 15,053,757 $ 19,440,188 Inventories 16,177,042 16,721,714 Prepaid expenses and other current assets 3,460,971 3,142,445 ------------ ------------ TOTAL CURRENT ASSETS 34,691,770 39,304,347 ------------ ------------ PROPERTY AND EQUIPMENT: Building and leasehold improvements 7,336,153 7,336,153 Machinery and equipment 1,079,571 1,083,517 Furniture, fixtures and transportation equipment 1,632,547 1,657,855 ------------ ------------ Total 10,048,271 10,077,525 Less accumulated depreciation and amortization (3,260,708) (2,865,649) ------------ ------------ NET PROPERTY AND EQUIPMENT 6,787,563 7,211,876 ------------ ------------ DEFERRED TAX ASSET, LONG TERM 4,264,751 3,297,707 OTHER LONG-TERM ASSETS 239,077 268,750 GOODWILL, NET OF ACCUMULATED AMORTIZATION 4,790,407 4,790,407 ------------ ------------ $ 50,773,568 $ 54,873,087 ============ ============ See accompanying notes to condensed consolidated financial statements. Page 3 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONDENSED CONSOLIDATED BALANCE SHEETS -------------------------------------
December 29, June 30, 2001 2001 ------------ ------------ (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Bank overdraft $ 186,967 $ 1,438,466 Accounts payable 12,699,717 14,005,690 Customers' deposits 4,903,312 4,183,369 Accrued expenses 896,842 1,475,347 Current maturities of long-term debt 12,731,873 901,216 ------------ ------------ TOTAL CURRENT LIABILITIES 31,418,711 22,004,088 Long-term debt -- 10,978,000 Obligation under capital lease 4,442,615 4,524,682 ------------ ------------ TOTAL LIABILITIES 35,861,326 37,506,770 ------------ ------------ STOCKHOLDERS' EQUITY: Common stock - par value $.10; authorized 20,000,000 shares, issued 3,396,228, outstanding 3,255,428 339,623 339,623 Additional paid-in capital 13,047,150 13,047,150 Accumulated other comprehensive loss (250,153) (263,585) Retained earnings 2,362,445 4,829,952 ------------ ------------ Total 15,499,065 17,953,140 Treasury stock, at cost, 140,800 shares (586,823) (586,823) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 14,912,242 17,366,317 ------------ ------------ $ 50,773,568 $ 54,873,087 ============ ============
See accompanying notes to condensed consolidated financial statements. Page 4 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -----------------------------------------------
(Unaudited) (Unaudited) For the Three Months Ended For the Six Months Ended -------------------------- ------------------------ 12-29-01 12-30-00 12-29-01 12-30-00 (13 Weeks) (13 Weeks) (26 Weeks) (26 Weeks) ---------- ---------- ---------- ---------- REVENUES $ 15,107,150 $ 17,810,685 $ 27,284,257 $ 38,706,566 COST OF SALES 13,012,763 15,405,592 23,700,254 34,753,721 ------------ ------------ ------------ ------------ GROSS PROFIT 2,094,387 2,405,093 3,584,003 3,952,845 SELLING EXPENSES 1,412,563 1,812,153 2,924,433 3,823,220 GENERAL AND ADMINISTRATIVE EXPENSES 1,419,909 2,109,290 3,019,274 3,990,183 ------------ ------------ ------------ ------------ OPERATING LOSS (738,085) (1,516,350) (2,359,704) (3,860,558) Net Interest Expense 582,151 646,720 1,137,803 1,158,124 Loss on settlement of uncommitted foreign currency derivative contracts - 3,925,947 - 3,925,947 ------------ ------------ ------------ ------------ LOSS BEFORE BENEFIT FOR INCOME TAX (1,320,236) (6,089,017) (3,497,507) (8,944,629) BENEFIT FOR INCOME TAX (280,000) (2,338,146) (1,030,000) (3,410,100) ------------ ------------ ------------ ------------ NET LOSS $ (1,040,236) $ (3,750,871) $ (2,467,507) $ (5,534,529) ============ ============ ============ ============ Basic loss per share $ (0.32) $ (1.15) $ (0.76) $ ( 1.70) Diluted loss per share (0.32) (1.15) (0.76) (1.70) Weighted average shares Outstanding: Basic 3,255,428 3,252,428 3,255,428 3,252,428 Diluted 3,255,428 3,252,428 3,255,428 3,252,428
See accompanying notes to condensed consolidated financial statements. Page 5 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -----------------------------------------------
(Unaudited) ------------------------------ For the Six Months Ended ------------------------------ 12-29-01 12-30-00 (26 Weeks) (26 Weeks) -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,467,507) $ (5,534,529) Adjustments to reconcile net loss to cash used in operating activities: Depreciation 430,783 461,666 Amortization 122,832 260,698 Provision for inventory obsolescence 238,000 568,311 Provision for losses on accounts receivable 60,000 362,907 Gain (Loss) on disposal of assets (4,679) 7,282 Decrease (Increase) in: Accounts receivable 4,326,431 12,260,758 Inventories 306,672 (4,854,173) Prepaid expenses and other current assets (441,358) 1,859,258 Other assets 29,673 146,863 Deferred tax asset, long term (1,030,000) (2,781,401) (Decrease) Increase in: Accounts payable and accrued liability on foreign currency derivatives and bank overdraft (2,557,472) (7,540,388) Accrued expenses, deferred revenue and customers' deposits 217,826 3,960,396 ------------ ------------ Net cash used in operating activities (768,799) (822,352) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (12,643) (250,250) Proceeds on sale of assets 10,852 68,773 ------------ ------------ Net cash used in investing activities (1,791) (181,477) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings on line of credit agreement 1,152,503 735,000 Principal payments on long-term debt (381,913) (374,363) ------------ ------------ Net cash provided by financing activities 770,590 360,637 ------------ ------------ NET DECREASE IN CASH - (643,192) CASH AND CASH EQUIVALENTS at beginning of period - 713,754 ------------ ------------ CASH AND CASH EQUIVALENTS at end of period $ - $ 70,562 ============ ============ Supplemental Disclosures: Cash paid during period for: Interest $ 1,143,516 $ 1,078,018 Income taxes $ 64,670 $ 40,200
See accompanying notes to condensed consolidated financial statements. Page 6 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ---------------------------------------------------------
Accumulated Additional Other Common Common Paid-In Retained Comprehensive Treasury Comprehensive Shares Stock Capital Earnings Loss Stock Loss --------- ---------- ----------- ------------ ------------- ----------- ------------- BALANCE, JULY 1, 2000 3,393,228 $ 339,323 $13,045,200 $10,692,607 $ - $ (586,823) Net loss............................. - - - (5,862,655) - - $(5,862,655) Accumulated Comprehensive loss - Interest rate swap, net of tax.. - - - - (263,585) - (263,585) ----------- Comprehensive Loss................ - - - - - - $(6,126,240 =========== Exercise of stock options............ 3,000 300 1,950 - - - --------- ---------- ----------- ----------- ----------- ----------- BALANCE, JUNE 30, 2001 3,396,228 339,623 13,047,150 4,829,952 (263,585) (586,823) Net loss............................. - - - (2,467,507) - - $(2,467,507) Accumulated Comprehensive Income - Interest rate of tax... - - - - 13,432 - 13,432 ----------- Comprehensive Loss................ - - - - - - $(2,480,939) --------- ---------- ----------- ----------- ----------- ----------- =========== BALANCE, DECEMBER 29, 2001 (unaudited) 3,396,228 $ 339,623 $13,047,150 $ 2,362,445 $ (250,153) $ (586,823) ========= ========== =========== =========== =========== ===========
See accompanying summary of accounting policies and notes to condensed consolidated financial statements. Page 7 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- Note 1. Interim Financial Statements In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present the Registrant's financial position, the results of operations and changes in cash flow for the periods indicated. Any interim adjustments are of a normal recurring nature unless otherwise indicated in the Notes to the Financial Statements. The accounting policies followed by the Registrant are set forth in the Registrant's Form 10-K for the fiscal year ended June 30, 2001, which is incorporated by reference. Note 2. Deferred Revenue The Company, in some instances with its laundry equipment and services business, is engaged in installation projects for customers on a contract basis. Generally, retainage on such contracts is withheld and recorded as deferred revenue until the project is complete. In addition, some contracts call for progress billings. In such cases, the Company uses the percentage of completion method to recognize revenue whereby sales are recorded based upon the ratio of costs incurred to total estimated costs at completion. Deferred revenue was immaterial at December 29, 2001 and June 30, 2001. Note 3. Inventories Inventories consisted of the following: December 29, June 30, 2001 2001 ------------ ------------ (unaudited) Machines $10,714,158 $10,910,198 Parts and supplies 5,462,884 5,811,516 ------------ ------------ Total $16,177,042 $16,721,714 ============ ============ Note 4. Taxes on Income Taxes on income are allocated to interim periods on the basis of an estimated annual effective tax rate. Other comprehensive losses, if any, are net of an estimated deferred tax benefit. Deferred income taxes consist primarily of net operating loss carryforwards. For the period ending December 2002, management determined it was prudent to establish a valuation allowance of $220,000 against its gross deferred tax assets of $5.9 million based upon general economic conditions remaining soft and, more specifically, the conditions in the textile industry deteriorating further in the current year than originally anticipated. Management believes that it is more likely than not that a sufficient level of taxable income will be generated in years subsequent to fiscal 2002 and prior to the expiration of the Company's NOLs relating to its deferred tax asset to realize the net deferred amount of $5.9 million at December 29, 2001. Page 8 Note 5. Net Income (Loss) Per Share Basic net income per share includes no dilution and is calculated by dividing net income by the weighted average number of common shares outstanding for the period. Diluted net loss per share reflects the potential dilution of securities that could share in the net income of the Company which consists of stock options using the treasury stock method. In a period with a net loss, the weighted average shares outstanding will be the same for basic and diluted net loss per share. Note 6. Intangibles In June 2001, the Financial Accounting Standards Board finalized Statement of Financial Accounting Standards (SFAS) Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interest methods of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify, if applicable, the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company has elected early adoption of SFAS 142 for the fiscal year beginning July 1, 2001. The Company, based upon its transitional testing, concluded there was no impairment relating to the net book value of its goodwill. Additionally, pursuant to SFAS 142, no amortization expense relating to the Company's goodwill was recognized for the six months ended December 29, 2001. For the six months ended December 29, 2000, amortization of goodwill was $220,000. Note 7. Risk Management and Derivative Financial Instruments Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133), as amended by SFAS No. 137 and SFAS No. 138, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS 133, as amended, requires the Company to recognize all derivative instruments on the balance sheet at fair value. If the derivative is a hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income (equity) until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is recognized in earnings. Page 9 The Company has historically entered into forward exchange contracts to reduce the foreign currency exchange risks associated with its committed and anticipated lira and Euro denominated purchases, and not for speculation. As of December 29, 2001, the Company had no foreign exchange contracts. The Company had two interest rate swap derivatives designated as cash flow hedges at December 29, 2001. The change in the fair market value during the current year was a gain of $13,432 net of tax expense, and was recognized in Other Comprehensive Loss (equity) at December 29, 2001. For interest rate swap agreements, increases or reductions in interest expense are recognized in the periods in which they accrue. Note 8. Line of Credit The Company has a revolving credit facility and a line of credit for issuance of Documentary Letters of Credit with SouthTrust Bank, N.A. Effective July 1, 2001 the Company entered into a Second Amendment and Forbearance Agreement ("Second Amendment") relating to its original Credit Facility Agreement with SouthTrust. The amendment modified the original agreement which provided a $17.5 million credit facility and a $15.0 million line for documentary letters of credit. The Second Amendment supercedes all terms of the First Amendment dated November 13, 2000. The Amended Agreement dated July 1, 2001 provides a revolving credit facility up to $15.0 million and an additional line of credit for issuance of Documentary Letters of Credit up to $9.0 million. The availability under the combined facility is limited to a borrowing base as defined in the Second Amendment and the original Credit Facility Agreement. The Second Amendment also changes the maturity date on the credit facility to July 31, 2002 from May 31, 2003 per the original Credit Facility Agreement. Advances under the revolving credit facility and line of credit are broken down into two components for the calculation of interest expense: the London Interbank Offered Rate (LIBOR) component that accrues interest at the LIBOR rate plus 1 1/2% to 2 1/2%, and a base rate component that accrues interest at prime plus 1%. The rates are scaled based upon the Company's funded debt as defined in the original Credit Facility Agreement. Prior to the Second Amendment and pursuant to the terms of the First Amendment dated November 13, 2000, the LIBOR component accrued interest at the LIBOR rate plus 3%, and the base rate component accrued interest at prime plus 1 1/4 %. The Company also has in effect interest rate swap derivatives that fix the interest rate for advances under the LIBOR component at 7.77% and 7.79% plus the applicable margin for borrowing levels of $3.0 million and $5.0 million, respectively, which expire on June 2, 2002 and June 2, 2003, respectively. As of December 29, 2001, amounts outstanding of $10.5 million were advanced under the LIBOR component at a rate of 3.46% plus 3%, and $1,630,503 were advanced under the base rate component at the prime rate of 4.75% plus 1 1/4%. The facility is secured by all the assets of the Company. The Credit Facility as amended by the Second Agreement contains specific covenants that require, among other things, the Company to maintain a specified level of earnings, tangible net worth, and debt to equity ratios for each quarter in fiscal year 2002. The Company was in violation with the covenants pertaining to specified level of earnings for the first and second quarters and the tangible net worth requirement as of September 29, 2001 and December 29, 2001, pursuant to the terms of the Second Amendment. The Company received waivers from SouthTrust Bank in connection with the Company's non-compliance on those covenants for periods ended September 29, 2001 and December 29, 2001. Page 10 Note 9. Segment Information The Company operates primarily in two segments of business, textile equipment ("textile") and laundry equipment and services ("laundry"). Prior to the acquisition of Wink Davis on August 1, 1997, the Company operated only in the textile segment. Corporate operations include general corporate expenses, amortization of debt issuance costs, interest expense related to the Company's credit facility and elimination of intersegment balances. The table below summarizes financial data by segment.
Six Months Total Textile Total Laundry Segment Information: Ended Dec. Segment Segment Corporate Total -------------- -------------- ---------------- -------------- ------------ Net Revenues .......................... 2001 $ 16,743,977 $ 10,540,280 $ - $ 27,284,257 2000 23,044,788 15,661,778 - 38,706,566 (Loss) Earnings before Interest & Taxes ...................... 2001 (939,360) (720,418) (699,926) (2,359,704) 2000 *(7,337,805) 163,183 (571,883) (7,786,505) Capital Expenditures .................. 2001 11,243 1,400 - 12,643 2000 239,287 10,963 - 250,250 Depreciation and Amortization ......... 2001 388,627 42,156 122,832 553,615 2000 489,495 192,171 40,698 722,364 Interest Expense ...................... 2001 633,110 4,019 500,674 1,137,803 2000 646,911 5,287 505,926 1,158,124 Three Months Total Textile Total Laundry Segment Information: Ended Dec. Segment Segment Corporate Total -------------- -------------- ---------------- -------------- ------------ Net Revenues .......................... 2001 $ 9,887,300 $ 5,229,850 $ - $ 15,107,150 2000 9,508,158 8,302,527 - 17,810,685 (Loss) Earnings before Interest & Taxes ...................... 2001 (258,052) (141,474) (311,559) (738,085) 2000 *(5,383,246) 247,082 (306,133) (5,442,297) Capital Expenditures .................. 2001 3,974 - - 3,974 2000 208,964 2,963 - 211,927 Depreciation and Amortization ......... 2001 193,578 21,078 61,416 276,072 2000 241,124 95,529 20,349 357,002 Interest Expense ...................... 2001 368,999 2,809 210,343 582,151 2000 414,543 4,532 277,645 646,720 Total Assets: December 29, 2001 (unaudited) ..................... 38,308,322 15,441,553 (2,976,307) 50,773,568 June 30, 2001 ..................................... 43,338,426 14,570,252 (3,035,591) 54,873,087
* Amount includes one-time loss on settlement of uncommitted foreign currency derivatives of $3,925,947 recognized during the quarter and six months ended December 2000. Page 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL ------- Speizman Industries, Inc. is a major distributor of specialized industrial machinery, parts and equipment. The Company operates primarily in two segments, textile equipment ("textile segment") and laundry equipment and services ("laundry segment"). In the textile segment, the Company distributes sock-knitting machines, other knitting equipment, automated boarding, finishing and packaging equipment used in the sock industry, and related parts. In the laundry segment, the Company sells commercial and industrial laundry equipment, including the distribution of machines and parts as well as providing installation and after sales service. RESULTS OF OPERATIONS --------------------- Total revenues decreased 15% to $15.1 million for the second quarter ended December 29, 2001, compared to $17.8 million for the same period last year. Revenues for the textile segment for the second quarter ended December 2001 increased 4% to $9.9 million, compared to $9.5 million for the same period last year. The increase in the textile segment was offset by a decrease in the Company's laundry equipment and services segment of 38% to $5.2 million, compared to $8.3 million in the same period of the prior fiscal year. For the six months ended December 2001, total revenues decreased 45% to $27.3 million, compared with $38.7 million for the same period in the prior year. For the six months ended December 2001, the Company's revenues for its textile and laundry segment decreased 28% to $16.7 million, and 34% to $10.5 million, respectively, compared to the same period in the prior year. The decrease in sales for both segments is primarily from reduced market demand due to the slowness in the textile and hospitality industries, as well as the continued downturn in the U.S. economy. Gross profit for the second quarter ended December 29, 2001 was $2.1 million, a reduction of approximately $300,000 from the gross profit in the second quarter ended December 30, 2000 of $2.4 million. Consolidated gross profit as a percentage of revenues increased slightly to 13.9% in the second quarter of fiscal 2002. This compared to a gross profit percentage of 13.5% for the same period in the prior fiscal period. Gross profit for the textile segment improved $500,000 primarily from higher gross margins on product in the current period compared to the prior year's second quarter. The increase in the gross margins on products in the current period was approximately $1.0 million and was significantly influenced from higher cost of sales in the prior year resulting from losses in connection with the utilization of foreign currency contracts in that period. The improvement in the textile segment's product margins were offset by lower commission revenue in the current period of $500,000 when compared to the prior year's second quarter. The improvement in the textile segment's gross profit was offset by a reduction in the laundry segment's gross profit of $800,000, of which $650,000 was due to reduced equipment sales, with the balance due to less contribution generated from services. Gross profit for the six months ended December 2001 was $3.6 million, a $400,000 reduction in the amount reported in the prior year's six-month period. Gross profit, as a percentage of revenues, improved to 13.1% for the current six-month period, compared to 10.2% reported for the prior six-month period. The decrease in gross profit dollars was attributable primarily from reduced volume in both segments resulting in a reduction in gross margin contribution of $1.7 million, a reduction in textile sales commission revenue of $500,000, reduced contribution in laundry services of $200,000, offset by lower cost of sales in the current period of $2.3 million relating to the textile group. The lower costs of sales in the current year of $2.3 Page 12 million as compared to the prior year's six-month period resulted from the utilization of foreign currency contract during fiscal 2000 that were devalued because they were originally designated for purchase orders that were subsequently cancelled or delayed. Selling expenses for the second quarter ended December 2001 improved to $1.4 million from $1.8 million in the prior fiscal period. As a percentage of revenues, selling expenses improved slightly to 9.3% in the current fiscal period from 10.2% for the prior year's second quarter. The improvement in the selling expenses was a result of both reduction in variable expenses such as commissions, as well as a reduction of fixed costs including salaries, sales personnel, and travel related expenses. Selling expenses year to date have decreased $900,000 compared with the same period last year. The decrease was primarily due to lower variable expenses such as commissions, travel, and exhibitions. As a percentage of revenue, selling expenses were 10.8% compared to 9.9% for the same period last year. The increase as a percentage of sales is due to selling costs, such as salaried personnel in the textile segment, being primarily fixed in nature, coupled with a decrease in textile sales compared with the same period last year. General and administrative expenses reduced to $1.4 million in the second quarter, compared with $2.1 million for the same period last year. General and administrative expenses year-to-date have decreased $1.0 million compared with the same period last year. The decrease in the current second fiscal quarter and year-to-date when compared to the same periods in the last fiscal year was primarily the result of lower overhead costs, including personnel, amortization, and bad debts. Net amortization expenses were lower primarily due to the Company ceasing to amortize goodwill in accordance with recent accounting pronouncements, offset by an increase in the amortization of debt issuance cost associated with the Company's bank facility that matures on July 31, 2002. Net interest expense for the current year's second quarter decreased $65,000 compared to the same period last year. The decrease was attributable to lower average borrowings on the Company's line of credit facility for the current year period as compared to the same period in the prior year. Benefit for income tax in the current quarter and six-month period is $280,000 and $1,250,000, respectively. The provision for the quarter ended December 29, 2001 includes a valuation reserve of $220,000 provided on the Company's gross deferred tax asset of $5.9 million as of December 2001. The Company deemed it prudent to record a deferred tax valuation allowance as of December 2001 in light of general economic conditions remaining soft, and more specifically, the textile industry deteriorating further than initially anticipated in the current fiscal year. Net loss for the second quarter was $1.0 million or $0.32 per share both basic and diluted. This compared with a loss for the same period last year of $3.8 million or $1.15, basic and diluted. Net loss for the six months ended December 2001 was $2.5 million or $0.76 per share, basic and diluted, and compared to a loss in the prior six-month period of $5.5 million or $1.70 per share, basic and diluted. The loss in the prior year's second quarter and six months year-to-date period included a one-time loss on settlement of uncommitted foreign currency derivative contracts of $3.9 million before tax benefit. Page 13 LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company has a revolving credit facility with SouthTrust Bank, N.A. The agreement with SouthTrust as recently amended, expires on July 31, 2002 and provides a line of credit up to $15.0 million and an additional line of credit for issuance of Documentary Letters of Credit up to $9.0 million. The availability under the combined lines of credit is limited by the percentage of eligible accounts receivable and inventory determined from time to time by SouthTrust. The Company has previously announced that it expected a decline in equipment bookings and sales through at least June 2002 and that it intended to further reduce its expenses in an effort to mitigate the adverse effects from the expected decline in equipment bookings and sales. Subsequent to this announcement, general economic conditions have remained soft and the textile and hospitality industry conditions have further deteriorated resulting in even lower than expected sales, primarily due to reduced volume. This greater than anticipated decline in sales has also reduced the Company's borrowing base with respect to its line of credit facility. The Company expects this trend to continue at least in the short term further adversely affecting the Company's liquidity. As of February 4, 2002, the Company had borrowings of $11.4 million and had an unused availability of $600,000 under its credit facility based upon its borrowing base at that time. Lower than expected sales also adversely impacted the operations of the Company and its ability to comply with certain financial covenants in its credit facility. The Company was not in compliance with certain financial covenants in its credit facility for the second quarter ended December 2001. The Company received a waiver relating to the covenants that were in default for the second fiscal quarter ended December 2001 and is currently in active discussions for the purpose of modifying its covenants for the balance of its loan term which currently matures on July 31, 2002. In addition to modifying its existing financial covenants, the Company expects the bank to require monthly compliance with certain financial covenants and to increase its borrowing base under the credit facility which the Company expects will result in additional cash availability for the Company under the facility of approximately $400,000. However, the Company can not make any assurances about the ultimate outcome of these discussions. Amounts outstanding under the line of credit for direct borrowings bear interest based upon two components: London Interbank Offered Rate (LIBOR) rate plus 1.5% to 2.5% for a short term fixed period and prime plus 0% to 1% for the non-fixed period. The rates vary based upon the Company's funded debt as defined in the loan agreement. The Company has two interest rate swaps that fix the LIBOR interest rate (exclusive of margin of 250 basis points) at 7.77% and 7.79% for borrowings of $3.0 million and $5.0 million, respectively, which expire on June 2, 2002 and June 3, 2003, respectively. Working capital at December 29, 2001 was $3.3 million as compared to $17.3 million at June 30, 2001. The working capital ratio was 1.10 at December 29, 2001 and 1.79 at June 30, 2001. The decrease in working capital was primarily due to the classification of the Company's debt with SouthTrust Bank of $12,130,000 as current since the debt facility matures on July 31, 2002. Excluding the classification of the SouthTrust debt as current, the Company's working capital ratio would improve to 1.80. Net cash used in operating activities for the six months ended December 29, 2001 was $769,000. Net cash used in operating activities was primarily due to a net loss of $2.5 million, a reduction in accounts payable and overdraft of $2.5 million, a non-cash tax benefit of $1,030,000, and an increase in prepaid expenses of $441,000, partially offset by a reduction in accounts receivable of $4.3 million, a reduction in inventories of $306,000, an increase in customers deposits and accrued expenses of $217,000, and non-cash expenses of $850,000. Page 14 Accounts receivable and accounts payable including bank overdraft decreased at December 29, 2001 compared to June 30, 2001 primarily from reduced billing and purchasing activity, respectively, resulting from reduced demand for equipment in the marketplace. The increase in prepaid expenses and other current assets was due primarily to a deposit on equipment purchase orders related to a new installation project in the laundry segment. The increase in net deferred taxes of $1,030,000 represented a non-cash benefit recognized during the six months ended December 2001 of $1,250,000, net of a valuation allowance of $220,000. The Company believes the net deferred tax benefit will be recoverable through its normal course of business in the future. Net cash used in investing activities was approximately $2,000 for the six months ended December 2001. Net cash provided by financing activities was $770,000 for the six months ended December 2001, which included borrowings of $1.2 million from the Company's bank credit facility, offset by principal payments on long-term debt of $382,000. The Company has satisfied its cash requirements in the past principally from cash generated from operations and borrowings under its line of credit facility with commercial banks. The continued decline in the Company's business has resulted in limited liquidity due to decreased cash generated from operations and decreased availability under its current line of credit facility as a result of a decline in its accounts receivable borrowing base. The Company's ability to continue to fund its cash requirements, including its net losses, from these sources of liquidity for the remainder of fiscal 2002 is dependent upon its ability to generate adequate cash from operations as well as maintaining a sufficient borrowing base for borrowed funds under its line of credit facility. Factors such as reduced sales volume, reduced gross margin contribution due to decreased volume or pricing, the timeliness of collections on current accounts receivable, and the ability to maintain existing and/or extended payment terms with certain suppliers will impact the Company's ability to generate cash from operations. An adverse effect of any one of these factors could further restrict the Company's liquidity. As of February 4, 2002, $600,000 was available and unused under the Company's line of credit facility. In the event there is a decrease in the Company's eligible accounts receivable, which will occur in the event the equipment bookings continue to decline, or if collections on current accounts receivable are delayed, availability under this facility will decrease. The Company's line of credit facility is scheduled to mature on July 31, 2002. The Company does not have the financial resources to repay this debt and will therefore need to refinance this debt prior to the maturity date. There is no assurance that the Company will be able to refinance this obligation with its existing or another lender on a timely basis, on commercially reasonable terms, or at all. Additionally, the textile industry has continued to experience tightened lending practices from traditional financial institutions which may further hinder the Company's ability to refinance this debt, especially in light of the Company's recent financial losses. The Company may need to raise additional funds to become current with its vendors and other obligations, and to fund losses until it returns to cash flow positive. If equipment bookings and sales continue to decline resulting in decreased cash generated from operations, the Company may need capital during fiscal 2002 in addition to that available under its line of credit facility. The Company is actively considering other financing options in the event additional financial resources are needed, including the raising of additional funds through debt or equity financing or the disposition of assets. There is no assurance that such funding will be available on commercially reasonable terms or at all. In the event the Company is unable to obtain additional needed capital, the Company would be required to significantly reduce its operations, dispose of assets and/or sell additional securities on terms that could be dilutive to current stockholders. Page 15 OUTLOOK ------- Fiscal 2002 Equipment Bookings - The Company over the past six months experienced a decline in its equipment bookings. The Company expects this trend to continue during the next six months in fiscal year 2002 based upon current market conditions and the Company's existing backlog. In furtherance with the Company's cost saving initiatives that began in fiscal year 2001, the Company expects to continue to reduce its expenses to help mitigate the adverse effects from the decline in equipment bookings. Hosiery Equipment - Shipments of the new generation closed toe sock knitting machine produced by Lonati, S.p.A. of Brescia, Italy, the world's largest manufacturer of hosiery knitting machines, began in mid-March 2001. The new generation closed toe machines have been commercially accepted and the Company anticipates they could gradually replace most of the conventional athletic sock machines in the United States and Canada over the next four years. Knitted Fabric Equipment - The market demand for seamless actionwear machines decreased significantly since its peak two years ago. The Company does not feel that this is the end of the demand for seamless type garments. However, it now appears that only the large, well-capitalized underwear and lingerie firms who have significant resources with brand names and direct relationships with major retail outlets will have the ability to purchase significant quantities of additional seamless garment machines. Wink Davis - The Company, through Wink Davis, maintains a strong presence in the United States industrial laundry segment through its sale of new equipment, parts and services. Over the past six months, the demand for on premise laundry equipment has declined significantly. The Company does not feel this is the end of demand and expects this market segment to improve somewhat in the second half of the fiscal year 2002. Proposals for larger installation projects continue to remain active; however, if successful, margins will be slightly lower due to lower selling prices as a result of increased competition in a relatively tight market. Settlement of Litigation - During October 2001, the Company settled for $35,000 a lawsuit filed by Bluegrass Hosiery, Inc., in which Bluegrass alleged that the Company breached its contract relating to machines sold to Bluegrass. Other Areas of Development - The Company continually explores opportunities for additional growth including new relationships with manufacturers that have competitive product offerings in its existing market channels. EMPLOYEES --------- As of December 29, 2001, the Company had 136 full-time domestic employees. The Company's employees are not represented by a labor union, and the Company has never suffered an interruption of business as a result of a labor dispute. The Company considers its relations with its employees to be good. BACKLOG ------- As of February 8, 2002, the Company's backlog of unfilled equipment orders was approximately $13.7 million, which includes an order for $3.7 million that is contingent upon the customer obtaining financing to satisfy payment. The period of time required to fill orders varies depending on the model ordered, manufacturers' production capabilities, and availability of overseas shippers. The Company typically fills its backlog within 12 months; however, orders constituting the current backlog are subject to customer cancellation, changes in delivery and machine performance. As a result, the Company's backlog may not necessarily be Page 16 indicative of future revenue and will not necessarily lead to revenues in any future period. Any cancellation, delay or change in orders which constitute our current or future backlog may result in lower than expected revenues. SEASONALITY AND OTHER FACTORS ----------------------------- There are certain seasonal factors that may affect the Company's business. Traditionally, manufacturing businesses in Italy close for the month of August, and the Company's hosiery customers close for one week in July. Consequently, no shipments or deliveries, as the case may be, of machines distributed by the Company that are manufactured in Italy are made during these periods which fall in the Company's first quarter. In addition, manufacturing businesses in Italy generally close for two weeks in December, during the Company's second quarter. Fluctuations of customer orders or other factors may result in quarterly variations in net revenues from year to year. EFFECTS OF INFLATION AND CHANGING PRICES ---------------------------------------- Management believes that inflation has not had a material effect on the Company's operations. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK --------------------------------------------------------- The Company is exposed to market risks, which include changes in U.S. and international interest rates as well as changes in foreign currency exchange rates as measured against the U.S. dollar and each other. The Company attempts to reduce these risks by utilizing financial instruments, pursuant to Company policies. The value of the U.S. dollar affects the Company's financial results. Changes in exchange rates may positively or negatively affect the Company's revenues (as expressed in U.S. dollars), cost of sales, gross margins, operating expenses, and retained earnings. Where the Company deems it prudent, it engages in hedging those transactions aimed at limiting in part the impact of currency fluctuations. The Company has historically entered into forward exchange contracts to protect against currency exchange risks associated with the Company's anticipated and firm commitments of lira-denominated purchases for resale. These hedging activities provide only limited protection against currency exchange risks. Factors that could impact the effectiveness of the Company's programs include volatility of the currency markets, and availability of hedging instruments. All currency contracts that are entered into by the Company are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure, not for speculation. Although the Company maintains these programs to reduce the impact of changes in currency exchange rates, when the U.S. dollar sustains a strengthening position against the lira in which the Company has anticipated purchase commitments, the Company's earnings could be adversely affected if future sale prices cannot be increased because of market pressures. The Company had no foreign exchange contracts outstanding as of December 29, 2001. The Company is also subject to interest rate exposure on $12.1 million of debt outstanding at December 29, 2001 that was priced at interest rates that float with the market. The Company has interest rate swaps to hedge adverse interest rate changes on a portion of this debt; specifically for borrowing levels of $3.0 million and $5.0 million, interest is fixed at 7.77% and 7.79%, respectively, exclusive of a margin for the bank at 250 basis points. These swaps expire on June 2, 2002 and June 2, 2003, respectively. A one hundred basis point change in interest rates on the average variable portion on the Company's borrowings for the six months ended December 2001 would have impacted net interest expense by $19,000. Reference is made to Note 8 for additional information. Page 17 NOTE REGARDING PRIVATE SECURITIES LITIGATION REFORM ACT ------------------------------------------------------- This report contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates, and projections about Speizman's industry, management beliefs, and certain assumptions made by Speizman's management. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include those set forth herein under the caption "Other Risk Factors." Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth in other reports and documents that the Company files from time to time with the Securities and Exchange Commission. OTHER RISK FACTORS ------------------ Risks Related to Speizman's Bank Debt As of February 4, 2002, Speizman had $11.4 million in borrowings under its line of credit facility with a commercial bank. The scheduled maturity date for this facility is July 31, 2002. The Company currently does not have the financial resources to repay this debt when it becomes due and will therefore need to refinance this debt prior to the maturity date. There is no assurance that the Company will be able to refinance this debt with its existing or another lender on a timely basis, on commercially reasonable terms, or at all. Additionally, the textile industry has continued to experience tightened lending practices from traditional financial institutions which may further hinder Speizman's ability to refinance this debt, especially in light of Speizman's recent financial losses. Speizman was in default under the financial covenants in its line of credit facility for each of the first and second quarters of fiscal 2002. Speizman has received waivers with respect to these defaults that occurred at each respective quarter end. Speizman is currently engaged in negotiations with its lender to modify the financial covenants in its line of credit facility, measure compliance with these covenants on a monthly basis, and increase the borrowing base. Speizman does not believe that it can comply with the financial covenants in its facility for the third and fourth quarter of fiscal 2002 without modification. If Speizman defaults under its line of credit facility, the lender could accelerate the payment of amounts outstanding. If this were to happen, Speizman, if unable to refinance, would be unable to repay the loan. The occurrence of an event of default under Speizman's line of credit facility entitles the lender to exercise certain rights, including the right to declare all amounts outstanding immediately due and payable, and to exercise certain remedial action. If Speizman is Unable to Obtain Additional Needed Capital, Its Business Will be Harmed Speizman intends to use its available cash and existing financing arrangements to fund its losses, working capital requirements and minimal capital expenditures. Speizman may need to raise additional funds to become current with its vendors and other obligations, and to fund losses until it returns to cash flow positive. If equipment bookings and sales continue to decline resulting in decreased cash generated from operations, Speizman may need capital during fiscal 2002 in addition to that available under its line of credit facility. There can be no assurance that additional needed financing will be available on terms acceptable to Speizman, or at all. If additional needed funds are not available, Speizman's business could Page 18 be detrimentally impacted. If Speizman is unable to obtain needed additional capital, it would be required to significantly reduce its operations, dispose of assets and/or sell additional securities on terms that could be dilutive to current stockholders. Speizman's Ability to Return to Profitability Speizman incurred a net loss of $1.4 million in the first quarter of fiscal 2002, and $1.0 million in the second quarter of fiscal 2002. In addition, Speizman incurred net losses of $5.9 million in fiscal 2001 principally as a result of losses associated with foreign currency derivatives. For the six months ended December 29, 2001, Speizman's use of cash in operating activities was $770,000. Although Speizman intends to further reduce its expenses, the Company will need to generate increases in its revenues to return to profitability. The Company expects its losses to continue at least through fiscal 2002 based upon its current outlook. Speizman's Large Amount of Debt Could Negatively Impact its Business and its Stockholders Principally as a result of losses funded over the past six months ended December 2001 and fiscal year 2001, the Company is burdened with a large amount of debt. Speizman's large amount of debt could negatively impact its stockholders in many ways, including: . reducing funds available to support its business operations and for other corporate purposes because portions of cash flow from operations must be dedicated to the payment of on its existing debt; . impairing its ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate purposes; . increasing vulnerability to increases in interest rates; . hindering its ability to adjust rapidly to changing market conditions; and . making it more vulnerable to a further downturn in general economic conditions or in its business. Relationship with Foreign Suppliers The majority of Speizman Industries' suppliers for parts and equipment are based in foreign countries primarily concentrated in Italy. There can be no assurance that Speizman will not encounter significant difficulties in any attempt to enforce any provisions of the agreements with foreign manufacturers, or any agreement that may arise in connection with the placement and confirmation of orders for the machines manufactured by foreign manufacturers or obtain an adequate remedy for a breach of any such provision, due principally that they are foreign companies. Dependence on Lonati The Company's operations are substantially dependent on the net revenues generated from the sale of sock knitting and other machines manufactured by both Lonati and Santoni, S.r.l., Brescia, Italy, one of Lonati's subsidiaries, and the Company expects this dependence to continue. Sales of sock knitting and other machines manufactured by Lonati and Santoni generated an aggregate of approximately 30.4% and 53.5% of the Company's net revenues in fiscal 2001 and fiscal 2000, respectively. The Company amended its Page 19 agreement with Lonati for the sale of its machines in March 2001 to be the exclusive agent through December 31, 2003. The Company and Lonati entered into their present agreements for the sale of Lonati machines in Canada in January 1992 and for Mexico in 1997, which are renewable annually. The Company has acted as the United States sales agent and distributor for certain machines manufactured by Lonati continuously since 1982. The cost to the Company of Lonati machines, as well as the delivery schedule of these machines, are at the discretion of Lonati. Management believes that the Company's relationship with Lonati will continue to be strong as long as the Company generates substantial sales of Lonati machines; however, there can be no assurance that the Company will be able to do so or that the Company's relationship with Lonati will continue or will continue on its present terms. Any decision by Lonati to sell machines through another distributor or directly to purchasers would have a material adverse effect on the Company. Machine Performance and Delayed Deliveries During fiscal 2000 and the early part of fiscal year 2001, the Company experienced issues with machine performance and delays from Lonati in shipments of closed toe knitting machines and Santoni undergarment knitting machines. The Company experienced material cancellations or postponements of orders due to these delays and performance issues. There can be no assurance that delayed deliveries in the future or issues with machine performance on newer technology will not result in the loss or cancellation of significant orders. The Company also cannot predict situations in Italy such as potential employee strikes or political developments which could further delay deliveries or have other adverse effects on the business of Lonati and the other Italian manufacturers represented by the Company. Foreign Currency Risk Historically, Speizman Industries' purchases of foreign manufactured machinery and spare parts for resale are denominated in Italian lira. For purchases of machines that were denominated in Italian lira or Euro dollars, Speizman generally purchased lira hedging contracts to compensate for anticipated dollar fluctuations; however, during fiscal year 2001, the Company experienced adverse effects utilizing lira hedging contracts for orders that were postponed or delayed. Prior to fiscal year 2001 and for approximately 30 years, the Company did not experience any adverse effect from utilizing lira-hedging contracts. During fiscal year 2001, and in light of newer technology that was being delivered by Lonati represented by its newer version closed toe single cylinder sock knitting machine, and with previous experiences of delays associated with the development of its previous generation closed toe machine, the Company arranged with Lonati and its affiliates to purchase its products for resale in U.S. dollars. Speizman's arrangement to buy in U.S. dollars with Lonati contractually ends on April 30, 2002. The Company had no foreign exchange contracts outstanding as of December 29, 2001. In the future, for purchases of machines that are supplied by other manufacturers that are denominated in Italian lira or Euro dollars, Speizman Industries feels its current practices enable the Company to adjust sales prices, or to commit to lira hedging contracts that effectively compensate for anticipated dollar fluctuations. Additionally, international currency fluctuations that result in substantial price level changes could impede or promote import/export sales and substantially impact profits. Speizman is not able to assess the quantitative effect of such international price level changes could have upon Speizman Industries' operations. There can be no assurance of fluctuations and foreign exchange rates will not have an adverse effect on Speizman Industries' future operations. All of Speizman Industries' export sales originating from the United States are made in U.S. dollars. Page 20 Industry Conditions The Company's business is subject to all the risks inherent in acting as a distributor including competition from other distributors and other manufacturers of both textile and laundry equipment, as well as the termination of profitable distributor-manufacturer relationships. The Company's laundry equipment segment is subject to the risks associated with new construction in the hospitality industry. Currently, there is a slowdown in construction of new hotels due to excess room availability as a whole. This as well as a general slowdown in the U.S. economy recently reduced demand for new equipment product offered by the Company. The textile segment is subject to the risks associated with certain categories in the textile industry, specifically, for socks, underwear, and actionwear garments. The textile industry risks relating to socks, underwear, and actionwear garments include the impact of style and consumer preference changes. These factors may contribute to fluctuations in the demand for the Company's sock knitting and packaging equipment and knitted fabric equipment products. There is a slowdown in underwear and actionwear garments that commenced during the second half of the last fiscal year. Currently, there also appears to be a downturn in the sock industry. Nasdaq Listing The Company's common stock has been listed on the Nasdaq SmallCap Market since March 20, 2001 and was listed on the Nasdaq National Market System from October 1993 to March 19, 2001. The Company's continual listing of its common stock on the Nasdaq SmallCap Market is subject to certain criteria which includes a minimum bid of $1.00. The Company's stock has been trading below $1.00 for the past 24 trading days as of February 6, 2002. The Company's failure to maintain a minimum bid price of $1.00 for 30 consecutive trading days will cause the Company to be out of compliance with the Nasdaq SmallCap minimum bid requirement. Upon official notification by Nasdaq regarding the non-compliance with the minimum bid requirement, the Company will have 90 calendar days to regain compliance for the minimum bid requirement, which involves maintaining a closing bid price of at least $1.00 for a minimum period of 10 consecutive trading days. The Company may also request an appeal with Nasdaq if it fails to regain compliance within the 90-day period. However, no assurance can be made about the outcome of such appeal. If the Company loses its Nasdaq SmallCap Market status, its common stock might trade in the OTC - Bulletin Board, which is viewed by most investors as a less desirable marketplace. In such event, the market price of the common stock may be adversely impacted and a stockholder may find it difficult to dispose, or obtain accurate quotations as to the market value, of the Company's common stock. Page 21 PART II. OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K (a) Exhibits: 10(a). Certificate of Amendment of Certificate of Incorporation of Speizman Industries, Inc. dated January 7, 2002. (b) Reports on Form 8-K: None. Page 22 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. SPEIZMAN INDUSTRIES, INC. (Registrant) Date: February 12, 2002 /s/ Robert S. Speizman ------------------------------ Robert S. Speizman President Date: February 12, 2002 /s/ John C. Angelella ------------------------------ John C. Angelella CFO/Secretary-Treasurer Page 23