-----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, IlLdSRD4QVbu2hRah6U6tPrGw7Ybr8Xz9pyS2WXRCdO4rt7mKWRc/ijohxEif6XF 1yD4qofgyVR4Dn4oWV65zA== 0000950168-96-001918.txt : 19961023 0000950168-96-001918.hdr.sgml : 19961022 ACCESSION NUMBER: 0000950168-96-001918 CONFORMED SUBMISSION TYPE: ARS PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19961021 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPEIZMAN INDUSTRIES INC CENTRAL INDEX KEY: 0000092827 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-INDUSTRIAL MACHINERY & EQUIPMENT [5084] IRS NUMBER: 560901212 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: ARS SEC ACT: 1934 Act SEC FILE NUMBER: 000-08544 FILM NUMBER: 96645823 BUSINESS ADDRESS: STREET 1: P O BOX 31215 CITY: CHARLOTTE STATE: NC ZIP: 28231 BUSINESS PHONE: 7043723751 MAIL ADDRESS: STREET 1: P O BOX 31215 CITY: CHARLOTTE STATE: NC ZIP: 28231 ARS 1 SPEIZMAN INDUSTRIES ANNUAL REPORT (Speizman logo) SPEIZMAN INDUSTRIES, INC. 1996 ANNUAL REPORT Dear Stockholders: Fiscal 1996 was the first year in the last ten that your Company lost money. We had net revenues of $46.3 million, a decline of 24.9% from last year. Those revenues generated an operating loss of $240,000 or 7(cents) per share. We also discontinued an operation for a loss of $333,000 or 10(cents) per share. The combined loss was $573,000 or 17(cents) per share. However, the fourth quarter of Fiscal 1996 shows a sales increase over the prior year's fourth quarter of 7.6% with after-tax profits of $422,000 or 13(cents) per share, a 64% improvement over the fourth quarter of last year. During the first three quarters of our fiscal year, demand for the products produced by all of the equipment in the various fields in which we operate was weak. This resulted in soft equipment sales. During our fourth quarter, demand for our sock machines increased dramatically. This increase in demand, particularly for our Lonati machines which produce sport athletic socks, and other peripheral equipment which we sell to the sock industry, were the major reasons for our rebound. During Fiscal 1996, we determined that our CopyGuard Division was no longer viable and we discontinued it. This resulted in a one-time loss of $333,000 or 10(cents) per share. We continue to aggressively manage and monitor the results of all of the Divisions of your Company. We make every effort to enhance their sales and profitability. However, when management feels that a Division is no longer viable, we will not hesitate to terminate its operations. Your Company will remain as a distributor/service company within the capital equipment business. We will continue to evaluate and expand wherever possible our current Divisions while searching for additional products to distribute. Although we are not now in negotiations for acquiring a company, we certainly would consider an acquisition if we felt that the company meshed with our overall needs and strategy. Our goal is to increase the value of the shares of Speizman Industries' stock in a prudent yet aggressive manner. We also want to keep your Company financially strong with as little debt as possible. We are a distributor. Our objective is to be the dominant supplier in every industry in which we operate. We want to achieve this dominance by giving our customers the lowest possible prices with the best technical service and after-sales follow-up on the equipment they purchase from us. We want to help our customers by developing and strengthening their business and making sure that the products we sell them are delivered to them at the lowest possible price. We want all of our employees to feel each lost sale is a personal loss, not just a business loss. We want to make sure that each of our customers realize that we are totally committed to strengthening their businesses so that Speizman can continue to be their partner as they continue to grow and succeed in their business efforts. Fiscal 1996 has ended in a very positive manner. We hope that we will be able to continue this growth, both in sales and in profits, through Fiscal 1997. Very truly yours, SPEIZMAN INDUSTRIES, INC. /s/ Robert S. Speizman Robert S. Speizman President SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL DATA
FISCAL YEAR ENDED JUNE 29, JULY 1, JULY 2, JULY 3, JUNE 27, 1996 1995 1994 1993 1992 (IN THOUSANDS, EXCEPT NET INCOME PER SHARE DATA) STATEMENT OF INCOME DATA: Net revenues $46,280 $61,597 $69,526 $39,552 $26,564 Cost of sales 40,547 53,986 60,004 32,635 22,997 Gross profit 5,733 7,611 9,522 6,917 3,567 Selling, general and administrative expenses 6,045 5,478 4,350 3,651 2,546 Operating income (loss) (312) 2,133 5,172 3,266 1,021 Interest (income) expense, net (43) (15) 6 186 196 Income (loss) before taxes on income (269) 2,148 5,166 3,080 825 Taxes (benefit) on income (1) (29) 854 1,869 661 82 Income (loss) from continuing operations (240) 1,294 3,297 2,419 743 (Loss) from discontinued operation (333) -- -- -- -- Net income (loss) (573) 1,294 3,297 2,419 743 Preferred stock dividends -- -- 41 -- -- Net income (loss) applicable to common stock $ (573) $ 1,294 $ 3,256 $ 2,419 $ 743 PER SHARE DATA: Income (loss) from continuing operations $ (.07) $ .40 $ 1.12 $ 1.03 $ .32 Loss from discontinued operation $ (.10) -- -- -- -- Net income (loss) $ (.17) $ .40 $ 1.12 $ 1.03 $ .32 Weighted average number of shares 3,284 3,271 2,905 2,360 2,297 BALANCE SHEET DATA: Working capital $16,313 $17,613 $16,579 $ 4,553 $ 2,792 Total assets 36,149 35,704 30,160 18,145 13,519 Short-term debt -- -- -- 175 401 Long-term debt, including current maturity 148 147 293 1,060 1,374 Stockholders' equity 18,203 18,782 17,483 5,137 2,714
(1) Reflects the utilization of prior net operating losses to completely offset federal income taxes in 1992 and to partially offset federal income taxes in 1993. 1 BUSINESS OVERVIEW GENERAL Speizman Industries, Inc. (the "Company") is the leading distributor of new sock knitting machines in the United States. It distributes technologically advanced sock knitting machines manufactured by Lonati, S.p.A., Brescia, Italy ("Lonati"), which the Company believes is the world's largest manufacturer of hosiery knitting equipment. It also distributes Lonati sock and sheer hosiery knitting machines in Canada. In addition, through sales arrangements with other European textile machinery manufacturers, the Company distributes other sock knitting machines, knitting machines for underwear, sweaters, collars and trim, and other knitted fabrics and other equipment related to the manufacture of socks, sheer hosiery and other textile products, principally in the United States and Canada. The Company also sells dyeing and finishing equipment for the textile industry. The Company sells textile machine parts and used textile equipment in the United States and in a number of foreign countries. ALL REFERENCES HEREIN ARE TO THE COMPANY'S 52-OR-53 WEEK FISCAL YEAR ENDING ON THE SATURDAY CLOSEST TO JUNE 30. FISCAL 1996, 1995, 1994, AND 1992, EACH CONTAINED 52 WEEKS AND ENDED ON JUNE 29, 1996, JULY, 1, 1995, JULY 2, 1994 AND JUNE 27, 1992. FISCAL 1993 CONTAINED 53 WEEKS AND ENDED ON JULY 3, 1993. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM THE "COMPANY" AS USED HEREIN INCLUDES SPEIZMAN INDUSTRIES, INC. AND ITS SUBSIDIARIES. The Lonati single cylinder machines distributed by the Company are for the knitting of athletic socks. The Lonati double cylinder machines are for the knitting of dress and casual socks. The Lonati machines are electronic, high- speed, and have computerized controls. Lonati single cylinder machines are capable of knitting pouch heel and toe, reciprocated heel and toe and tube socks. These and other features allow the rapid change of sock design, style and size, result in increased production volume and efficiency and simplify the servicing of the machines. The Company distributes these sock knitting machines as well as Lonati sheer hosiery knitting machines in Canada. In addition, the Company distributes the knitting machines, described below, manufactured by Santoni, S.r.l. Brescia, Italy ("Santoni"), one of Lonati's subsidiaries, in the United States and Canada. Sales by the Company in the United States and Canada of machines manufactured by Lonati, S.p.A., generated the following percentages of the Company's net revenues: 46.2% in 1996, 44.4% in 1995 and 65.6% in 1994. In addition, sales of Santoni machines in the United States and Canada generated 4.8%, 9.3% and 4.4% of the Company's net revenues in fiscal 1996, 1995 and 1994, respectively. In addition to the Lonati machines, the Company distributes new knitting and other machines and equipment under written agreements and other arrangements with the manufacturers. The following table sets forth certain information concerning certain of these additional distribution arrangements:
MANUFACTURER MACHINE TERRITORY Santoni, S.r.l., Circular knitting machines for United States and Canada Brescia, Italy underwear, men's socks and women's sheer hosiery and surgical support hose Conti Complett, S.p.A., Sock toe closing machines and sock United States and Canada Milan, Italy turning devices Sperotto Rimar, S.p.A., Fabric processing and finishing United States Malo, Italy machines Corino Macchine, S.r.l., Fabric handling equipment United States and Canada Alba, Italy Fimatex, Turning devices for sock machines United States Scandicci, Italy Orizio Paolo, S.p.A., Fabric knitting machines United States Brescia, Italy Tonello, S.r.l., Garment wet processing equipment United States, Canada and Mexico Sarcedo, Italy
2
MANUFACTURER MACHINE TERRITORY Solis, S.r.l., Flat parts for knitting machines United States Florence, Italy Mec-Mor, S.p.A., Circular knitting machines for United States and Canada Varese, Italy sweaters Zamark, S.p.A.. Flat knitting machines for collars United States, Canada, the United Somma Lombardo, Italy and trim and sweaters Kingdom and Ireland Jumberca, S.A., Sweater knitting machines United States, Canada, the United Badalona, Spain Kingdom and Ireland
Sales of machines manufactured by Zamark (an affiliate of Lonati) generated 1.0%, 1.0% and 1.1% of the Company's net revenues in fiscal 1996, 1995 and 1994, respectively. In August 1996, this distribution agreement was canceled effective December 31, 1996. Sales of machines manufactured by Jumberca generated 2.9%, 9.8% and 9.8% of the Company's net revenues in fiscal 1996, 1995 and 1994, respectively. In August 1995, this distribution agreement was canceled effective December 31, 1995. The Company sells used machinery and parts to the textile industry. The Company carries significant amounts of machinery and parts inventories to meet customers' requirements and to assure itself of an adequate supply of used machinery. The Company acts as a liquidator of textile mills and as a broker in the purchase and sale of such mills. MARKETING AND SALES The Company markets and sells knitting machines and related equipment primarily by maintaining frequent contacts with customers and understanding of its customers' individual business needs. Salespersons will set up competitive trials in a customer's plant and allow the customer to use the Company's machine in its own work environment alongside competing machines for two weeks to three months. The Company also offers customers the opportunity to send their employees to the Company for training courses on the operation and service of the machines and, depending on the number of machines purchased and the number of employees to train, may offer such training courses at the customer's facility. In addition, the Company exhibits its equipment at trade shows and uses its private showroom to demonstrate new machines. These marketing strategies are complemented by the Company's commitment to service and continuing education. The Company also produces, at its own expense, training videos for its major lines of equipment. At August 20, 1996, the Company employed approximately 18 salespersons and 28 technical representatives. In addition to its sales staff, the Company uses over 40 commission sales agents in a number of foreign countries in connection with its sales of used machines. 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company's revenues are generated primarily from its distribution of textile equipment, principally knitting machines and dyeing and finishing equipment, to manufacturers of textile products and, to a lesser extent, from the sale of parts used in such equipment and the sale of used textile equipment. RESULTS OF OPERATIONS YEAR ENDED JUNE 29, 1996 COMPARED TO YEAR ENDED JULY 1, 1995 NET REVENUES. Net revenues in fiscal 1996 were $46.3 million as compared to $61.6 million in fiscal 1995, a decrease of $15.3 million, or 24.9%. This decrease reflects a $11.3 million decline in sales of hosiery equipment, a $7.3 million decline in sales of sweater manufacturing and related equipment, a $0.5 million decline in parts and other sales activities partially offset by a $3.8 million increase in sales of knitted fabric machines. The Company's backlog of unfilled orders for new and used machines at June 29, 1996, was $19.3 million as compared to $4.1 million at July 1, 1995. The improved level of backlog in 1996 results from substantially increased demand for sock knitting machines. COST OF SALES. In fiscal 1996, cost of sales was $40.5 million as compared to $54.0 million in fiscal 1995, a decrease of $13.5 million, or 24.9%, matching the relative decline in revenues. Cost of sales as a percent of revenues was 87.6% in fiscal 1996, unchanged from fiscal 1995. SELLING EXPENSES. Selling expenses increased to $4.2 million in fiscal 1996 from $3.6 million in fiscal 1995, an increase of 16.3%. Major elements in the increase were salespersons' salaries and commissions, warehouse and office space costs, travel, insurance, telecommunications, and insurance, partially offset by a decrease in letter of credit expenses. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses totaled $1,878,000, down by $17,000 from $1,895,000 in fiscal 1995. This small decrease resulted from declines in salaries and bonuses and bad debt provisions, partially offset by increases in professional fees and in life insurance expenses. INTEREST EXPENSE. Interest expense is expressed net of interest income. In fiscal 1996, interest income exceeded interest expense by $43,000. Net interest income was $15,000 in fiscal 1995. TAXES (BENEFIT) ON INCOME (LOSS) FROM CONTINUING OPERATIONS. The provision for income taxes in fiscal 1996 is a tax benefit of $29,000 on the $269,000 loss from continuing operations, or 10.8% of the loss. In the prior year, the tax provision was 39.8% of income before taxes. The current year effective rate reflects the combined effects of non-deductible entertainment and life insurance expenses and U.S. profits taxed at higher rates as compared to U.K. losses taxed at lower rates. NET INCOME (LOSS) FROM CONTINUING OPERATIONS. Net loss from continuing operations was $240,000 in fiscal 1996. This compares to net income of $1,294,000 in fiscal 1995. LOSS FROM DISCONTINUED OPERATION. During the third quarter of fiscal 1996, management decided to discontinue the operations of the Company's CopyGuard Division which was in the development stage. CopyGuard was developing a computer-generated matrix to invisibly mark garments to prevent counterfeiting. However, its continuing cash funding requirements were diverting funds from the Company's core business while prospects of bringing the system to market, successfully, were diminishing. Although the system developed by CopyGuard functioned successfully from a technical point of view, the system had not proven to be commercially feasible for the prospective users. Consequently, in the third fiscal quarter of fiscal 1996, management elected to cease all CopyGuard operations, write off all assets of the CopyGuard Division and provide for any remaining expenses. The loss on CopyGuard operations was $55,000, after tax benefits. The loss on disposal of CopyGuard, after tax benefits, was $278,000. The combined loss on the discontinued operation was $333,000 or approximately $0.10 per share of outstanding common stock. 4 NET INCOME (LOSS). Net income applicable to common stock declined from $1.3 million in fiscal 1995 to a loss of $0.6 million. The 1996 loss is composed of $240,000 in losses from continuing operations and $333,000 in losses from discontinued operations. Net loss per share in fiscal 1996 was $0.17, composed of $0.07 from continuing operations and $0.10 from discontinued operations. These compare to $0.40 per share net income in fiscal 1995. YEAR ENDED JULY 1, 1995 COMPARED TO YEAR ENDED JULY 2, 1994 NET REVENUES. Net Revenues in fiscal 1995 were $61.6 million as compared to $69.5 million in fiscal 1994, a decrease of $7.9 million, or 11.4%. This decrease reflects a $14.3 million decline in sales of hosiery equipment, partially offset by increases of $3.4 million in the sales of sweater machines and related equipment, $1.8 million in the sales of dyeing and finishing equipment, and $1.2 million in the sales of spare parts. The Company's backlog of unfilled orders for new and used machines at July 1, 1995, was $4.1 million as compared to $15.1 million at July 2, 1994. The decline in backlog is attributed to weakened demand for sock and sweater machines. COST OF SALES. In fiscal 1995, cost of sales was $54.0 million as compared to $60.0 million for fiscal 1994, a decrease of $6.0 million, or 10.0%. Cost of sales as a percent of net revenues increased to 87.6% in fiscal 1995 as compared to 86.3% in fiscal 1994. Approximately 85% of this increase is attributable to increased field service expenses associated with new machines. The remainder is related to leveling of demand. SELLING EXPENSES. Selling expenses increased to $3.6 million in fiscal 1995 from $2.4 million in fiscal 1994, an increase of 48.8%. This increase resulted from the start-up of the U.K. knitting machine division, as well as increased selling activities, overall. Major components of the increase were salespersons' salaries and commissions, advertising and exhibitions, travel, warehouse and office space cost, letter of credit expense and insurance expense. GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses, at $1,895,000 in fiscal 1995, were down slightly from $1,942,000 in fiscal 1994. The decrease reflects declines in salaries and bonuses, partially offset by increases in payroll and other taxes and in provisions for losses on accounts receivable. As a percent of net revenues, general and administrative expenses were 3.1% in 1995 as compared to 2.8% in fiscal 1994, reflecting the 11.4% decrease in net revenues between the two fiscal years. INTEREST EXPENSE. Interest expense is expressed net of interest income. In fiscal 1995, interest income exceeded interest expense by $15,000. Net interest expense was $6,000 in fiscal 1994. TAXES ON INCOME. The provision for taxes on income in fiscal 1995 was 39.8% of income before taxes. The provision for taxes on income in fiscal 1994 was 36.2%. NET INCOME. Net income applicable to common stock decreased to $1.3 million in fiscal 1995 from $3.3 million in fiscal 1994. Net income per share decreased to $0.40 as compared to $1.12 per share in fiscal 1994 on a 12.6% increase in the equivalent number of common shares outstanding. JUMBERCA AGREEMENT Prior to its amendment in March 1995, the Jumberca Agreement contained certain minimum purchase requirements for the Jumberca sweater and fabric knitting machines. The Company did not meet the minimum purchase requirements under the Jumberca Agreement with regard to either type of machine in fiscal 1995 due principally to weakened demand for such machines. Due, in part to the weakened demand, at the Company's request, in March 1995, the parties amended the Jumberca Agreement to eliminate the minimum purchase requirements thereunder and to allow for the termination of the agreement prior to its original termination date in January 1997. In accordance with the terms of the Jumberca Agreements, as amended in March 1995, the Company terminated the agreement with regard to the Jumberca fabric knitting machines in August 1995 and with regard to the Jumberca sweater knitting machines in December 1995. Although the weakened demand for the machines and the termination of the Jumberca Agreement had an adverse effect on net revenues in fiscal 1996, it did not have a significant effect on net income for the year. LIQUIDITY AND CAPITAL RESOURCES The Company's operations require a substantial line of letters of credit to cover its customers' orders. The Company's credit facility provides for an overall facility of $18.0 million for letters of credit, including up to $2.0 5 million in revolving funds. This facility expires October 31, 1996. Management believes that this facility will be extended for several additional years and will be revised appropriately to meet current financial requirements. Working capital at June 29, 1996 was $16.3 million as compared to $17.6 million at July 1, 1995, a decline of $1.3 million. Operating activities in fiscal 1996 provided $6.4 million in funds. In fiscal 1995, such activities required $2.4 million. This improvement in cash flow from operations resulted essentially from substantial decreases in accounts receivable and inventories and an increase in accrued expenses and customers' deposits. In the current fiscal year, investing activities used $812,000 as compared to usage of $461,000 in the prior year. As a result, cash and cash equivalents increased by $5.5 million to total $8.0 million at June 29, 1996 as compared to $2.4 million at July 1, 1995. 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 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. A substantial portion of the Company's machine and spare part purchases are denominated and payable in Italian lira. Currency fluctuations of the lira could result in substantial price level changes and therefore impede or promote import/export sales and substantially impact profits. However, to reduce exposure to adverse foreign currency fluctuations during the period from customer orders to payment for goods sold, the Company enters into forward exchange contracts. The Company is not able to assess the quantitative effect that such currency fluctuations could have upon the Company's operations. There can be no assurance that fluctuations in foreign currency exchange rates will not have a significant adverse effect on future operations. 6 MARKET AND DIVIDEND INFORMATION The Company's Common Stock has been included for quotation on the NASDAQ National Market System under the NASDAQ symbol "SPZN" since October 1993. The following table sets forth, for the periods indicated, the high and low sale prices as reported by the NASDAQ National Market System.
HIGH LOW FISCAL 1995 First Quarter (ended October 1, 1994) $8.75 $6.00 Second Quarter (ended December 31, 1994) 6.50 3.22 Third Quarter (ended April 1, 1995) 5.38 3.38 Fourth Quarter (ended July 1, 1995) 6.75 4.25 FISCAL 1996 First Quarter (ended September 30, 1995) 5.12 3.50 Second Quarter (ended December 30, 1995) 3.88 2.62 Third Quarter (ended March 30, 1996) 4.50 2.50 Fourth Quarter (ended June 29, 1996) 5.62 3.50
As of June 29, 1996, there were approximately 419 stockholders of record of the Common Stock. The Company has never declared or paid any dividends on its Common Stock. On November 29, 1993, the Company purchased all of the 8,147 outstanding shares of its 5% noncumulative nonvoting preferred stock, par value $100 per share (the "5% Preferred Stock"), for $100.00 per share. Under the terms of the 5% Preferred Stock, the Company was obligated to pay a cash dividend of $5.00 per share in connection with this purchase. Consequently, on November 29, 1993, a dividend of $40,735 was paid to the former holders of the 5% Preferred Stock. Future cash dividends, if any, will be at the discretion of the Company's Board of Directors and will depend upon, among other things, future earnings, operations, capital requirements, surplus, restrictive covenants in agreements to which the Company may be subject, general business conditions and such other factors as the Board of Directors may deem relevant. The Company's present credit facility contains certain financial and other covenants that could limit the Company's ability to pay cash dividends on its capital stock. 7 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders Speizman Industries, Inc. We have audited the accompanying consolidated balance sheets of Speizman Industries, Inc. and subsidiaries as of June 29, 1996 and July 1, 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended June 29, 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 audits 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Speizman Industries, Inc. and subsidiaries at June 29, 1996 and July 1, 1995, and the results of their operations and their cash flows for each of the three years in the period ended June 29, 1996, in conformity with generally accepted accounting principles. /s/ BDO Seidman, LLP BDO SEIDMAN, LLP Charlotte, North Carolina September 10, 1996 8 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 29, JULY 1, JULY 2, 1996 1995 1994 NET REVENUES (Note 1) $46,279,969 $61,596,833 $69,525,581 COSTS AND EXPENSES: Cost of sales 40,546,962 53,986,242 60,003,901 Selling expenses 4,167,490 3,582,719 2,407,086 General and administrative expenses 1,878,193 1,894,915 1,942,375 Total costs and expenses 46,592,645 59,463,876 64,353,362 (312,676) 2,132,957 5,172,219 INTEREST (INCOME) EXPENSE, net of interest income of $126,522, $101,562 and $128,675 (43,400) (14,858) 6,393 Income (loss) from continuing operations before taxes (269,276) 2,147,815 5,165,826 TAXES (BENEFIT) ON INCOME from continuing operations (Note 5) (29,000) 854,000 1,869,000 INCOME (LOSS) from continuing operations (240,276) 1,293,815 3,296,826 DISCONTINUED OPERATION (Note 13): Loss from operations of CopyGuard, net of $33,000 tax (55,115) -- -- Loss from disposal of CopyGuard, net of $166,000 tax (277,675) -- -- LOSS from discontinued operations (332,790) -- -- NET INCOME (LOSS) (573,066) 1,293,815 3,296,826 Preferred stock dividends -- -- 40,735 NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ (573,066) $ 1,293,815 $ 3,256,091 PER SHARE DATA: Income (loss) from continuing operations $ (.07) $ 0.40 $ 1.12 Loss from discontinued operation $ (.10) -- -- NET INCOME (LOSS) $ (.17) $ 0.40 $ 1.12 Weighted average number of common and equivalent shares 3,283,828 3,271,464 2,904,525
See accompanying summary of accounting policies and notes to consolidated financial statements. 9 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JUNE 29, JULY 1, 1996 1995 ASSETS CURRENT: Cash and cash equivalents $ 7,981,723 $ 2,436,859 Accounts receivable (Notes 2 and 6) 12,160,449 16,078,683 Inventories (Notes 3 and 6) 11,639,552 13,428,014 Prepaid expenses and other current assets 2,340,111 2,458,355 TOTAL CURRENT ASSETS 34,121,835 34,401,911 PROPERTY AND EQUIPMENT: (Notes 4 and 7) Leasehold improvements 550,684 543,874 Machinery and equipment 1,208,508 876,565 Furniture, fixtures, and transportation equipment 1,218,570 834,187 2,977,762 2,254,626 Less accumulated depreciation and amortization (1,525,058) (1,440,688) NET PROPERTY AND EQUIPMENT 1,452,704 813,938 OTHER 574,685 488,609 $36,149,224 $35,704,458 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT: Accounts payable $14,864,567 $15,056,927 Customers' deposits 2,723,466 884,881 Accrued expenses 209,881 833,886 Current maturities of long-term debt (Note 7) 11,051 13,190 TOTAL CURRENT LIABILITIES 17,808,965 16,788,884 LONG-TERM DEBT (Note 7) 137,334 133,629 TOTAL LIABILITIES 17,946,299 16,922,513 COMMITMENTS (Notes 4, 9, 11, 12 and 14) STOCKHOLDERS' EQUITY (Notes 8, 9 and 10): Common Stock -- par value $.10; authorized 6,000,000 shares; issued 3,236,199 shares 323,620 323,620 Additional paid-in capital 12,459,965 12,459,965 Retained earnings 5,524,360 6,097,426 Foreign currency translation adjustment (5,223) 731 Total 18,302,722 18,881,742 Treasury stock, at cost, 27,600 common shares (99,797) (99,797) TOTAL STOCKHOLDERS' EQUITY 18,202,925 18,781,945 $36,149,224 $35,704,458
See accompanying summary of accounting policies and notes to consolidated financial statements. 10 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOREIGN ADDITIONAL CURENCY PREFERRED COMMON COMMON PAID-IN RETAINED TRANSLATION TREASURY STOCKHOLDERS' STOCK SHARES STOCK CAPITAL EARNINGS ADJUSTMENT STOCK EQUITY BALANCE, JULY 3, 1993 $894,152 1,998,841 $199,884 $ 2,595,488 $1,547,520 $ -- $(99,797) $ 5,137,247 Net income before preferred stock dividend -- -- -- -- 3,296,826 -- -- 3,296,826 Preferred stock dividend -- -- -- -- (40,735) -- -- (40,735) Redemption of preferred stock (894,152) -- -- -- -- -- -- (894,152) Conversion of preferred stock to common stock -- 240,770 24,077 55,376 -- -- -- 79,453 Net proceeds of common stock offering -- 864,609 86,461 9,163,885 -- -- -- 9,250,346 Exercise of stock options -- 130,729 13,073 174,841 -- -- -- 187,914 Tax effect of exercise of stock options -- -- -- 466,000 -- -- -- 466,000 BALANCE, JULY 2, 1994 -- 3,234,949 323,495 12,455,590 4,803,611 -- (99,797) 17,482,899 Net income -- -- -- -- 1,293,815 -- -- 1,293,815 Exercise of stock options -- 1,250 125 4,375 -- -- -- 4,500 Foreign currency translation adjustment -- -- -- -- -- 731 -- 731 BALANCE, JULY 1, 1995 -- 3,236,199 323,620 12,459,965 6,097,426 731 (99,797) 18,781,945 Net loss -- -- -- -- (573,066) -- -- (573,066) Foreign currency translation adjustment -- -- -- -- -- (5,954) -- (5,954) BALANCE, JUNE 29, 1996 $ -- 3,236,199 $323,620 $12,459,965 $5,524,360 $(5,223) $(99,797) $18,202,925
See accompanying summary of accounting policies and notes to consolidated financial statements. 11 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED JUNE 29, JULY 1, JULY 2, 1996 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (573,066) $ 1,293,815 $ 3,296,826 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 173,336 166,965 193,133 Provision for losses on accounts receivable 113,500 171,477 17,850 Provision for inventory obsolescence 139,436 200,000 200,000 Provision for deferred income taxes (58,000) (75,000) 109,000 Provision for deferred compensation 6,782 (6) 28,788 Foreign currency translation adjustment (5,954) 731 -- (Increase) decrease in: Accounts receivable 3,804,734 (1,079,970) (4,322,948) Inventories 1,649,026 (6,331,178) (2,741,376) Prepaid expenses 159,244 (1,176,461) (554,615) Other assets (69,076) 43,662 (168,226) Increase (decrease) in: Accounts payable (192,360) 5,015,062 2,237,330 Accrued expenses and customers' deposits 1,214,580 (623,547) (1,159,937) Net cash provided by (used in) operating activities 6,362,182 (2,394,450) (2,864,175) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures -- other equipment (511,039) (520,274) (102,723) Capital expenditures -- equipment leased to customers (648,620) -- -- Proceeds from property and equipment disposals 347,557 59,377 3,501 Net cash used in investing activities (812,102) (460,897) (99,222) CASH FLOWS FROM FINANCING ACTIVITIES: Net payments on notes payable -- -- (174,785) Principal payments on long-term debt (5,216) (145,958) (734,800) Net proceeds of common stock offering -- -- 9,250,346 Dividends on preferred stock -- -- (40,735) Redemption of preferred stock -- -- (814,699) Issuance of common stock upon exercise of stock options -- 4,500 187,914 Net cash provided by (used in) financing activities (5,216) (141,458) 7,673,241 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,544,864 (2,996,805) 4,709,844 CASH AND CASH EQUIVALENTS, at beginning of year 2,436,859 5,433,664 723,820 CASH AND CASH EQUIVALENTS, at end of year $7,981,723 $ 2,436,859 $ 5,433,664
See accompanying summary of accounting policies and notes to consolidated financial statements. 12 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES SUMMARY OF ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements of Speizman Industries, Inc. (the "Company") include all of its subsidiaries, all of which are majority owned. All material intercompany transactions (domestic and foreign) have been eliminated. The financial statements of the Company's United Kingdom subsidiary are translated from pounds sterling to U.S. dollars in accordance with generally accepted accounting principles. REVENUE RECOGNITION The major portion of the Company's revenues consists of sales and commissions on sales of machinery and equipment. The profit derived therefrom is recognized in full at the time of shipment, except that commissions receivable over more than one year are recognized at their discounted present value. Total sales commissions included in net revenues approximated $56,000, $286,000 and $142,000 for the years ended June 29, 1996, July 1, 1995 and July 2, 1994, respectively. CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. The carrying amount of cash and cash equivalents approximates fair value because of the short term maturity of these instruments. INVENTORIES Inventories are carried at the lower of cost or market. Cost is computed, in the case of machines, on an identified cost basis and, in the case of other inventories, on an average cost basis. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the assets by the straight-line method for financial reporting purposes and by accelerated methods for income tax purposes. FOREIGN EXCHANGE CONTRACTS The Company enters into foreign currency contracts to reduce the foreign currency exchange risks. Foreign currency hedging contracts obligate the Company to buy a specified amount of a foreign currency at a fixed price in specific future periods. Realized and unrealized gains and losses are recognized in net income in the period of the underlying transaction. As of June 29, 1996, the Company had contracts maturing through June 1997 to purchase approximately 17.7 billion Lira for approximately $11.5 million which approximates the spot rate on that date. TAXES ON INCOME For fiscal years ended 1996, 1995 and 1994, the Company adopted the FAS Statement No. 109, "Accounting for Income Taxes", which changes the liability approach to calculating deferred income taxes set forth in Statement No. 96. The impact of adopting the rules on the Company's financial statements was not material. INCOME PER SHARE Income per share is computed on the weighted average number of common and equivalent shares outstanding during the period. Common equivalent shares include those common shares which would be issued upon the full conversion of the outstanding convertible preferred stock and those common shares issuable upon the exercise of the stock options, when dilutive, net of shares assumed to have been repurchased with the proceeds. 13 FISCAL YEAR The Company maintains its accounting records on a 52-53 week fiscal year. The fiscal year ends on the Saturday closest to June 30. Years ending June 29, 1996, July 1, 1995 and July 2, 1994 included 52 weeks. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NEW ACCOUNTING PRONOUNCEMENTS Statements of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," issued by the Financial Accounting Standards Board (FASB), encourages the accounting for stock-based employee compensation programs to be reported within the financial statements on a fair value based method; however, it allows an entity to continue to measure compensation cost under Accounting Principles Board Opinion ("APB") No. 25. If the Company elects to retain the accounting under APB No. 25, then the standard requires pro forma disclosure of the effect on net income and earnings per share as if the fair value based method had been adopted. This pronouncement is effective for fiscal years beginning after December 15, 1995. Implementation of this pronouncement should have no material effect on the Company's financial statements. 14 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- BUSINESS AND CREDIT RISK CONCENTRATION The Company is engaged in the distribution of machinery for the textile industry. With operations in the United States, Canada and the United Kingdom, the Company primarily sells to customers located within the United States. Export sales from the United States were approximately $7,196,000, $8,547,000 and $5,439,000 during fiscal 1996, 1995 and 1994, respectively. There were no export sales by the Canadian operations. Sales of the Company's United Kingdom subsidiary amounted to approximately $2,286,000 in 1996, essentially all of which were to customers in the United Kingdom. Financial instruments which potentially subject the Company to credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments with high credit quality financial institutions and, by policy, limits the amount of credit exposure to any one financial institution. The Company reviews a customer's credit history before extending credit. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific customers, historical trends and other information. To reduce credit risk the Company generally requires a down payment on large equipment orders. A substantial amount of the Company's revenues are generated from the sale of sock knitting and other machines manufactured by Lonati, S.p.A. and one of its wholly owned subsidiaries (Santoni). Sales by the Company in the United States and Canada of machines manufactured by Lonati, S.p.A., generated the following percentages of the Company's net revenues: 46.2% in 1996, 44.4% in 1995 and 65.6% in 1994. In addition, sales of Santoni machines in the United States and Canada generated 4.8%, 9.3% and 4.4% of the Company's net revenues in fiscal 1996, 1995 and 1994, respectively. In 1996, approximately 9% and 6% of revenues consisted of sales to the Company's two largest customers. In 1995, approximately 7% and 5% of revenues consisted of sales to the Company's two largest customers. In 1994, approximately 14% and 13% of revenues consisted of sales to the Company's two largest customers. Generally, the customers contributing the most to the Company's net revenues vary from year to year. NOTE 2 -- ACCOUNTS RECEIVABLE Accounts receivable are summarized as follows:
JUNE 29, JULY 1, 1996 1995 Trade receivables $12,420,405 $16,285,841 Less allowance for doubtful accounts (259,956) (207,158) Net accounts receivable $12,160,449 $16,078,683
NOTE 3 -- INVENTORIES Inventories are summarized as follows:
JUNE 29, JULY 1, 1996 1995 Machines New $ 1,645,825 $ 4,786,811 Used 6,565,417 5,319,489 Parts and supplies 3,428,310 3,321,714 Total $11,639,552 $13,428,014
15 NOTE 4 -- LEASES The Company conducts its operations from leased facilities which include both offices and warehouses. Its primary operating facility is leased from a partnership in which Mr. Robert S. Speizman, the Company's president, has a 50% interest. The lease extends through March 1998. Lease payments to the partnership approximated $323,000, $204,000 and $168,000 in fiscal years 1996, 1995 and 1994, respectively. The Company leases furniture and fixtures under noncancelable capital lease agreements which expire at various dates through 1998. Capitalized leases included in property and equipment are summarized as follows:
JUNE 29, JULY 1, 1996 1995 Furniture, fixtures and transportation equipment $ 105,264 $ 145,006 Less accumulated amortization (89,037) (100,440) Net leased property $ 16,227 $ 44,566
As of June 29, 1996, future net minimum lease payments under capital leases and future minimum rental payments required under operating leases that have initial or remaining noncancelable terms in excess of one year are as follows:
CAPITAL OPERATING LEASES LEASES 1997 $12,006 $499,894 1998 2,181 127,964 1999 -- 63,158 2000 -- 17,139 2001 -- 4,936 Beyond -- 14,809 Total minimum lease payments $14,187 $727,900 Less amount representing interest (1,366) Present value of net minimum lease payments $12,821
Total rent expense for operating leases approximated $791,400, $515,800 and $311,600 for fiscal years 1996, 1995 and 1994, respectively. 16 NOTE 5 -- TAXES ON INCOME Provisions for federal and state income taxes applicable to continuing operations are made up of the following components:
1996 1995 1994 Current: Federal $114,000 $673,000 $1,556,000 Foreign (85,000) 74,000 -- State -- 182,000 204,000 29,000 929,000 1,760,000 Deferred: Federal (58,000) (54,000) 71,000 State -- (21,000) 38,000 (58,000) (75,000) 109,000 Total taxes (benefit) on income $(29,000) $854,000 $1,869,000
Deferred tax benefits and liabilities are provided for the temporary differences between the book and tax bases of assets and liabilities. Deferred tax assets (liabilities) are reflected in the consolidated balance sheets as follows:
JUNE 29, JULY 1, 1996 1995 Net current assets $436,000 $395,000 Net noncurrent liabilities (22,000) (39,000) $414,000 $356,000
Principal items making up the deferred income tax (assets) liabilities are as follows:
YEAR ENDED JUNE 29, JULY 1, 1996 1995 Inventory valuation reserves $(191,000) $(225,000) Depreciation 78,000 98,000 Deferred charges (69,000) (54,000) Capitalized leases (4,000) (5,000) Inventory capitalization (130,000) (91,000) Accounts receivable reserves (97,000) (78,000) Other (1,000) (1,000) Net deferred tax asset $(414,000) $(356,000)
17 The Company's effective income tax rates were different than the U.S. Federal statutory tax rate for the following reasons:
1996 1995 1994 U.S. Federal statutory tax rate 34.0% 34.0% 34.0% State income taxes, net of Federal income tax benefit -- 3.5 3.7 Non-deductible expenses (15.8) 1.7 0.7 Foreign tax rates (14.5) 1.2 -- Net tax effect of prior year adjustments 7.4 -- -- Other (0.3 ) (0.6) (2.2) Effective tax rate 10.8% 39.8% 36.2%
NOTE 6 -- LINE OF CREDIT The Company has a credit facility with NationsBank, expiring October 31, 1996. This facility provides $18.0 million including up to a maximum of $2.0 million for direct borrowings, with the balance available for the issuance of documentary letters of credit. Amounts outstanding under the line of credit bear interest at the greater of prime plus 1% or the Federal Funds Effective Rate plus 1.5% for base rate loans and the 30, 60 or 90 day LIBOR rate plus 2.0% for LIBOR loans. In connection with this line of credit, the Company granted a security interest in accounts receivable and inventory, as defined in the loan agreement. (See Note 14) This credit facility contains certain covenants that require, among other things, the Company to maintain levels of current assets to current liabilities, total liabilities to net worth, working capital, tangible net worth of $13,841,000, restrictions on dividends and certain fixed charge coverage. As of June 29, 1996, the Company was in compliance with such covenants. NOTE 7 -- LONG-TERM DEBT Long-term debt consists of:
JUNE 29, 1996 JULY 1, 1995 TOTAL CURRENT TOTAL CURRENT Capital lease obligations (Note 4) $ 12,821 $11,051 $ 16,037 $13,190 Other 135,564 -- 130,782 -- Total 148,385 $11,051 146,819 $13,190 Current maturities (11,051) (13,190) $137,334 $133,629
Annual maturities of long-term debt are 1997, $11,051; 1998, $1,770; 1999, $0; 2000, $0; 2001, $0; thereafter, $135,564. 18 NOTE 8 -- STOCK OPTIONS The Company has reserved 125,000, 250,000 and 145,000 shares of Common Stock under three employee stock plans, adopted in 1981, 1991 and 1995, respectively. As of June 29, 1996, options to purchase 11,522 shares under the 1981 Plan, 192,070 shares under the 1991 Plan, and 130,500 shares under the 1995 Plan were outstanding. Each option granted under the Plans becomes exercisable in cumulative increments of 20%, 50%, 80% and 100% on the first, second, third and fourth anniversaries of the date of grant, respectively, and subject to certain exceptions with regard to termination of employment and the percentage of outstanding shares of Common Stock owned, must be exercised within ten (10) years from the date of the grant. The option price under the 1981 and 1991 Plans, subject to certain exceptions, may not be less than 100% of the fair market value per share of Common Stock on the date of the grant of the option or 110% of such value for persons who control 10% or more of the voting power of the Company's stock on the date of the grant. The option price under the 1995 Plan is not limited and may be less than 100% of the fair market value on the date of the grant. A summary of employee stock option transactions and other information for 1996, 1995 and 1994 follows:
YEAR ENDED JUNE 29, JULY 1, JULY 2, 1996 1995 1994 Shares under option, beginning of year 150,429 124,957 255,686 Options granted 183,663 29,722 -- Options exercised -- (1,250) (130,729) Options expired -- (3,000) -- Shares under option, end of year 334,092 150,429 124,957 Options exercisable 117,086 78,521 16,464 Prices of options exercised -- $.75 to $ .75 to $ 1.875 $3.1625 Prices of options outstanding, end of year $.75 to $.75 to $ .75 to $ 5.50 $ 5.50 $ 5.50
The Company has reserved 15,000 shares of Common Stock under a non-employee directors stock option plan adopted in 1995. Each option granted under the Plan becomes exercisable in cumulative increments of 50% and 100% on the first and second anniversaries of the date of the grant, respectively, and subject to certain exceptions must be exercised within ten (10) years from the date of the grant. The option price equals the fair market value per share of Common Stock on the date of the grant. Options to purchase 3,000 shares were granted and outstanding at the end of the year at a price of $2.875. NOTE 9 -- STOCK REDEMPTION AGREEMENTS The Company has an agreement with its principal stockholder whereby, upon his death, the Company is obligated to redeem a portion of the stock in the Company held by the estate. The redemption price for common stock is to be the fair market value of common stock, less 5%, plus any accrued dividends. In no case will the Company pay out more than the amount of life insurance proceeds received by the Company as a result of the death of the stockholder. At June 29, 1996, there were 584,932 common shares covered by the above agreement. The face value of life insurance carried by the Company under this agreement amounts to $1,150,000. NOTE 10 -- PREFERRED STOCK During the fiscal year ended July 2, 1994, all of the Company's 5% Non-Voting Preferred Stock was redeemed and all of the Company's 5% Non-Voting Senior Convertible Preferred was converted into common stock. 19 NOTE 11 -- DEFERRED COMPENSATION PLANS The Company has deferred compensation agreements with two employees providing for payments amounting to $2,056,680 upon retirement and from $1,546,740 to $2,181,600 upon death prior to retirement. One agreement, as modified, has been in effect since 1972 and the second agreement was effective October 1989. Both agreements provide for monthly payments on retirement or death benefits over fifteen year periods. Both agreements are funded under trust agreements whereby the Company pays to the trust amounts necessary to pay premiums on life insurance policies carried to meet the obligations under the deferred compensation agreements. Charges to operations applicable to those agreements were approximately $53,885, $43,885 and $72,673 for the fiscal years 1996, 1995 and 1994, respectively. NOTE 12 -- EMPLOYEES' RETIREMENT PLAN The Company adopted a 401(k) retirement plan, effective October 1, 1989, for all qualified employees of the Company to participate in the plan. Employees may contribute a percentage of their pretax eligible compensation to the plan, and the Company matches 25% of each employee's contribution up to 4% of pretax eligible compensation. The Company's matching contributions totaled approximately $21,000, $17,000 and $13,000 in fiscal years 1996, 1995 and 1994, respectively. NOTE 13 -- DISCONTINUED OPERATION During fiscal 1996, management decided to discontinue the operations of the Company's CopyGuard Division, which was in the development stage. CopyGuard was developing a computer-generated matrix to invisibly mark garments to prevent counterfeiting. However, its continuing cash funding requirements were diverting funds from the Company's core business while prospects of bringing the system to market, successfully, were diminishing. Although the system developed by CopyGuard functioned successfully from a technical point of view, the system had not proven to be commercially feasible for the prospective users. Consequently, in the third fiscal quarter of fiscal 1996, management elected to cease all CopyGuard operations, write off all assets of the CopyGuard Division and provide for any remaining expenses. The loss on disposal of CopyGuard was $333,000, after income tax benefits, or approximately $0.10 per share of outstanding common stock. Costs incurred during fiscal year ended 1995 related to software development and were deferred. NOTE 14 -- COMMITMENTS AND CONTINGENCIES The Company had outstanding commitments backed by letters of credit of approximately $13,244,000 and $8,916,000 at June 29, 1996 and July 1, 1995, respectively, relating to the purchase of machine inventory for delivery to customers. The Company has not obtained product liability insurance to date due to the prohibitive cost of such insurance. The nature and extent of distributor liability for product defects is uncertain. The Company has not engaged in manufacturing activities since 1990, and management presently believes that there is no material risk of loss to the Company from product liability claims against the Company as a distributor. NOTE 15 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
YEAR ENDED JUNE 29, JULY 1, JULY 2, 1996 1995 1994 Cash paid during year for: Interest $ 81,578 $ 86,704 $ 135,068 Income taxes 120,086 524,464 2,079,097
20 CORPORATE INFORMATION OFFICERS Robert S. Speizman CHAIRMAN OF THE BOARD AND PRESIDENT Josef Sklut VICE PRESIDENT-FINANCE, TREASURER AND SECRETARY TRANSFER AGENT AND REGISTRAR First-Citizens Bank & Trust Co. Corporate Trust Dept. P.O. Box 29522 Raleigh, N.C. 27626 DIRECTORS Robert S. Speizman CHAIRMAN OF THE BOARD AND PRESIDENT Steven P. Berkowitz CHAIRMAN OF THE BOARD OF MARWEN FOUNDATION William Gorelick PRIVATE INVESTOR Scott C. Lea CHAIRMAN OF THE BOARD, LANCE, INC. Josef Sklut VICE PRESIDENT-FINANCE, TREASURER AND SECRETARY LOCATIONS Speizman Industries, Inc. Executive Offices: 508 W. Fifth Street Charlotte, N.C. 28202 Speizman Industries, Inc. 59 Tec Street Hicksville, N.Y. 11801 Speizman Canada, Inc. 5205 boul. Metropolitain est, Suite 3 Montreal, Quebec H1R 1Z7 Canada Speizman Industries (Europe) Limited Unit 3F, 77 Waterside Road, Hamilton Industrial Park, Leicester LE5 1TL, England LISTING Speizman Industries, Inc. Common Stock is listed on the NASDAQ National Market System under the symbol "SPZN." GENERAL COUNSEL Odom & Groves, P.C. Charlotte, N.C. INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS BDO Seidman, LLP Charlotte, N.C. FORM 10-K Copies of the Company's Annual Report on Form 10-K for the year ended June 29, 1996, may be obtained without charge by writing: Mr. Josef Sklut Speizman Industries, Inc. P.O. Box 31215 Charlotte, N.C. 28231 (Speizman logo) SPEIZMAN INDUSTRIES, INC. -----END PRIVACY-ENHANCED MESSAGE-----