UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 1995
Commission file number 1-6775
HOWARD B. WOLF, INC.
(Exact name of registrant as specified in its charter)
Texas 75-0847571
(State of incorporation) (IRS Employer Identification No.)
3809 Parry Avenue, Dallas, Texas 75226-1753
Address of principal executive offices) (Zip Code)
(214) 823-9941
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
YES X . NO .
Common stock, par value $.033-1/3 per share:
1,056,191 shares outstanding as of
January 12, 1996
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of
Operations and Retained Earnings for the
three month and six-month periods ended
November 30, 1995 and November 30, 1994 (Unaudited) 3
Consolidated Balance Sheets
November 30, 1995 (Unaudited) and May 31, 1995 4
Consolidated Statements of Cash Flows for the
six-month period ended November 30, 1995
and November 30, 1994 (Unaudited) 5
Notes to Consolidated financial Statements
(Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 & 8
PART II. OTHER INFORMATION
Item 9. Exhibits and Reports on Form 8-K 8
Part I. FINANCIAL INFORMATION
Item 1. Financial Statement
HOWARD B. WOLF, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
Three Months Ended
November 30
1995 1994
Net sales $3,876 $3,670
Cost and expenses:
Cost of sales 2,365 2,299
Selling, general and
administrative expenses 1,122 1,033
Provision for bad debt expense 23 23
3,510 3,355
366 315
Gain on sale of property, plant
and Equipment not used in operations 144 -
Other income 18 26
Interest Income 5 9
Interest Expense (16) (5)
Income before federal income tax 517 345
Provision for federal income tax (180) (122)
Net income 337 223
Retained earnings -
beginning of year 4,667 4,200
Cash dividends (85) (74)
Retained earnings - end of year 4,919 4,349
Average number of shares outstanding 1,056 1,056
Net income per share $0.32 $0.21
Cash dividends per share $0.08 $0.07
See notes to consolidated financial statements.
Six Months Ended
November 30, 1995
Net Sales $7,665 $7,263
Cost and expenses:
Cost of sales 4,903 4,663
Selling, general and
administrative expenses 2,026 1,947
Provision for bad debt expense 45 45
6,974 6,655
691 608
Gain on sale of Property, Plant
and equipment not used in operations 144 -
Other income 28 49
Interest income 7 18
Interest expense (28) (12)
Income before federal income tax 842 663
Provision for federal income tax 295 234
Net income 547 429
Retained earnings -
beginning of year 4,540 4,068
Cash dividends (168) (148)
Retained earnings - end of year 4,919 4,349
Average number of shares outstanding 1,056 1,056
Net income per share $0.52 $0.41
Cash dividends per share $0.16 $0.14
See notes to consolidated financial statements.
HOWARD B. WOLF, INC.
CONSOLIDATED BALANCE SHEET
November 30, May 31,
1995 1995
ASSETS
Current assets:
Cash and cash equivalents $1,465 $1,376
Accounts receivable (net) 1,836 1,984
Inventories 4,217 4,025
Prepaid expenses 137 107
Deferred federal income tax benefit 192 183
Total current assets 7,847 7,674
Property, plant and equipment 2,343 2,114
Less accumulated
depreciation and amortization (1,221) (1,155)
1,122 959
Property, plant and equipment
not used in operations
less accumulated depreciation 3 114
Other assets 49 49
Total Assets $9,020 $8,796
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,248 $1,278
Accrued compensation 90 156
Accrued taxes 93 56
Other accrued liabilities 203 364
Federal income tax payable 92 26
Total current liabilities 1,727 1,879
Deferred federal income tax 80 82
Shareholders' equity:
Common stock, par value $.33-1/3;
3,000,000 shares authorized,
1,081,191 shares issued 360 360
Additional paid-in capital 2,035 2,035
Retained earnings 4,919 4,540
Less common stock in treasury,
at cost, 25,000 shares (100) (100)
7,214 6,835
$9,020 $8,796
Note: The consolidated balance sheet at May 31, 1995 has been taken from the
audited financial statements.
See notes to consolidated financial statements.
HOWARD B. WOLF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
November 30,
1995 1994
Cash flows from operating activities:
Net income $ 548 $ 429
Adjustments to reconcile net income to net
cash (used in) provided by
operating activities --
Depreciation and amortization 71 65
Provision for losses on accounts receivable 45 45
Gain on sale of property, plant and equipment
not used in operations (144) -
Decrease in deferred federal income
tax credit (2) (1)
Net changes in assets and liabilities
(Increase) decrease in accounts receivable 103 (208)
Increase in inventories (192) (425)
Increase in prepaid expenses (30) (42)
Decrease in accounts payable
and accrued liabilities (218) (64)
Increase in deferred federal
income tax benefit (9) (52)
Increase in federal income tax payable 66 44
Net cash(used in) provided by
operating activities 238 (210)
Cash flow from investing activities:
Additions to property, plant and equipment (229) (116)
Sale of property, plant and equipment
not used in operations 250 -
Net cash provided by (used in) investing
activities 21 (116)
Cash flow from financing activities:
Cash dividends paid (169) 148
Net cash used in financing activities (169) 148
Net decrease in
cash and cash equivalents 90 (473)
Cash and cash equivalents
at beginning of period 1,376 1,790
Cash and cash equivalents
at end of period $1,465 $1,317
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The consolidated balance sheet as of November 30, 1995 the consolidated
statements of operations and the consolidated statements of cash flows for
the three-month and six-month periods ended November 30, 1995 and 1994 have
been prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position, results of operations and changes
in cash flows at November 30, 1995 and 1994 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's May 31, 1995 annual
report to shareholders. The results of operations for the six-month period
ended November 30, 1995 are not necessarily indicative of the operating
results for the full year ending May 31, 1996.
November 30, 1995 May 31, 1995
Cash and cash equivalents consist of:
Cash $ 242 $ 413
Money market funds 308 134
Matured funds at factor 916 829
$1,466 $1,376
Allowances for collection
losses and discounts are:
Collection losses $ 108 $ 88
Discounts 12 10
$ 120 $ 98
Inventories consist of:
Raw materials $1,422 $1,381
Work-in-process 1,105 985
Finished goods 1,690 1,659
$4,217 $4,025
Accumulated depreciation on
property, plant and equipment
not used in operations is: $ 134 $ 347
Provision for federal income
tax detail is:
Current tax expense $ 305 $ 480
Deferred tax benefit (11) (49)
$ 294 $ 431
Cash flow information:
Cash payments for interest $ 28 $ 32
Cash payments for
federal income taxes $ 340 $ 460
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Working capital at November 30, 1995 was $6,120,169, an increase of $325,202
from May 31, 1995. Cash and cash equivalents increased $89,869 during the
six-month period ended November 30, 1995. Cash was used to fund normal
working capital requirements, including acquisition of property, plant and
equipment additions, payment of dividends and payment of matured accounts
payable and accrued liabilities. Accounts receivable decreased $147,841
primarily due to the timing of shipments during the quarter. Inventories
increased $191,785 primarily to meet increased sales. Accounts payable and
accrued liabilities decreased $28,467 primarily due to payment of normal
maturities and accrued expenses during the six-month period.
The current ratio at November 30, 1995 is 4.5 to 1 (4 to 1 at May 31, 1995).
Total liabilities to assets equals twenty percent (twenty-two percent at May
31, 1995).
The Company factors its accounts receivable with a commercial factor on a
matured basis. (Funds are remitted by the factor upon maturity of the
invoices, plus a set number of collection days). The factor establishes a
credit line per customer on a non-recourse basis. Credit extended by the
company in excess of the credit line is factored on a recourse basis (946,000
at November 30, 1995-$614,000 at May 31, 1995).
Capital acquisition and improvement expenditures totaled $229,071 during the
six-month period ended November 30, 1995. It is estimated that approximately
$50,000 additional capital expenditures will be made over the next two
quarters, consisting primarily of equipment and improvements to existing
facilities. Funding will come from cash flows generated through operating
activities. No significant disposition of equipment occurred during the six-
month period ended November 30, 1995, and none is planned during the next
three-month period. In November 1995 a building, carried in the balance
sheet as property, plant and equipment not used in operations was sold for
$250,000 from which a gain of $95,154 after taxes was realized.
The Company does not offer a retirement plan nor offer post retirement or
employment benefits. Accordingly, there will be no impact on the Company due
to SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" and SFAS 112, "Employers' Accounting for Post Employment Benefits".
Based on current operations and internally generated cash flows, management
believes that adequate resources will be available to meet current and future
liquidity requirements.
RESULTS OF OPERATIONS
Net sales for the second quarter and six-month periods ended November 30,
1995 increased approximately five and six-tenths of one percent and five and
one-half of one percent, respectively, in each period compared to the 1994
second quarter and six-month periods. Net sales for the second quarter ended
November 30, 1995 increased approximately two and three-tenths of one percent
over the preceding first quarter. The increases resulted primarily from a
slightly stronger product demand and a broadened market base.
Cost of sales, as a percentage relationship to net sales for the second
quarter ended November 30, 1995, decreased approximately one and six-tenths
of one percent from the second quarter ended November 30, 1994 and
approximately six percent from the preceding first quarter ended August 31,
1995. For the six-month period ended November 30, 1995, the cost of sales
percentage relationship to net sales decreased approximately two-tenths of
one percent compared to the 1994 six-month period. The percentage decreases
resulted primarily from a change in product sales mix.
Selling, general and administrative expenses for the three-month and six-
month periods ended November 30, 1995, as a percentage relationship to net
sales, increased approximately eight-tenths of one percent and decreased
four-tenths of one percent, respectively, compared to the 1994 three-month
and six-month periods. Selling, general and administrative expenses, as a
percentage relationship to net sales, were approximately five percent higher
in the 1995 second quarter compared to the first quarter. The percentage
increases resulted primarily from higher selling and marketing expenses. The
provision for bad debt expense was $45,000, in the 1995 and 1994 six-month
periods.
Other income in the 1995 three-month and six-month periods decreased
approximately thirty percent and forty-three percent, respectively, in both
periods over the 1994 comparable periods. Other income increased
approximately forty-five percent in the 1995 second quarter compared to the
first quarter. The increase and decreases all resulted primarily from rental
income from property not used in operations.
Interest income in the three-month periods ended November 30, 1995 decreased
approximately forty-four percent and sixty-one percent, respectively,
compared to the same periods in 1994. Interest income increased
approximately one hundred twenty-two percent in the 1995 second quarter
compared to the first quarter. The changes are primarily due to changes in
average cash balances.
Interest expense for the three-month and six-month periods ended November 30,
1995 increased approximately one hundred ninety-six percent and one hundred
twenty-five percent, respectively, compared to the same periods in 1994. The
increases resulted primarily from higher factor interest costs on recourse
accounts receivable. Interest expense in the 1995 second quarter increased
approximately thirty-six percent from the first quarter. The increases
resulted primarily from higher factor interest costs on recourse accounts
receivable.
The federal income tax provision effective tax rate of 35 percent differs
from the statutory rate (34 percent) as a result of nondeductible life
insurance premiums, nondeductible portion of meals, accelerated depreciation,
capitalization of certain expenses in inventories and the difference between
the doubtful account reserve and write-off.
Part II. OTHER INFORMATION
Item 9. No reports on Form 8-K were filed during the three-month period
ended November 30, 1995.
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.
HOWARD B. WOLF, INC.
Eugene K. Friesen /s
Eugene K. Friesen
Senior Vice-President & Treasurer
Howard B. Wolf /s
Howard B. Wolf
Chairman
January 12, 1996