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 August 31, 1996
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 $.33-1/3 per share: 1,056,191 shares
outstanding as of October 15, 1996
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
and Retained Earnings
Three months ended August 31, 1996
and August 31, 1995 (Unaudited) 3
Consolidated Balance Sheets
August 31, 1996 (Unaudited) and May 31, 1996 4
Consolidated Statements of Cash Flows
Three months ended August 31, 1996
and August 31, 1995 (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 Statements
HOWARD B. WOLF, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
Three Months Ended
August 31,
1996 1995
Net Sales $3,630,878 $3,789,539
Costs and expenses:
Cost of sales 2,412,723 2,537,607
Selling, general and
administrative expenses 949,568 903,984
Provision for bad debt expense 22,500 22,500
3,384,791 3,464,091
246,087 325,448
Other income 14,419 9,832
Interest income 7,215 2,209
Interest expense (8,671) (11,907)
Income before federal income tax 259,050 325,582
Federal income tax provision (92,336) (114,395)
Net income 166,714 211,187
Retained earnings-
beginning of period 5,074,237 4,540,170
Cash dividends (84,495) (84,495)
Retained earnings-end of period $5,156,456 $4,666,862
Average number of
shares outstanding 1,056,191 1,056,191
Net income per share $.16 $.20
Dividends paid per share $.08 $.08
See notes to consolidated financial statements.
HOWARD B. WOLF, INC.
CONSOLIDATED BALANCE SHEETS
August 31, May 31,
1996 1996
ASSETS (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $1,062,118 $1,261,987
Accounts receivable (net) 2,188,784 1,976,798
Inventories 3,912,920 4,147,286
Prepaid expenses 124,921 160,367
Deferred federal income tax benefit 235,000 177,000
Total current assets 7,523,743 7,723,438
Property, plant and equipment 2,374,748 2,340,711
Less accumulated
depreciation and amortization (1,325,013) (1,286,013)
1,049,735 1,054,698
Property, plant and equipment
not used in operations, 5,810 5,810
Other assets 49,665 49,665
$8,628,953 $8,833,611
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
and accrued liabilities $1,011,933 $1,422,824
Federal income tax payable 89,076 (35,938)
Total current liabilities 1,101,009 1,386,886
Deferred federal income tax 77,000 78,000
Shareholders' equity:
Common stock, par value $.33-1/3;
3,000,000 shares authorized,
1,081,191 shares issued 360,400 360,400
Additional paid-in capital 2,034,088 2,034,088
Retained earnings 5,156,456 5,074,237
Less common stock in treasury,
at cost, 25,000 shares (100,000) (100,000)
7,450,944 7,368,725
$8,628,953 $8,833,611
See accompanying notes
HOWARD B. WOLF, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
August 31,
1996 1995
Cash flows from operating activities:
Net income $ 166,714 $ 211,187
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 39,000 38,279
Provision for losses on accounts receivable 22,500 22,500
Decrease in deferred federal income tax credit (1,000) (1,000)
Net changes in operating assets and liabilities-
Accounts receivable (234,486) 7,895
Inventories 234,366 25,860
Prepaid expenses 35,446 (23,635)
Accounts payable and accrued liabilities (410,891) (441,106)
Federal income tax benefit (58,000) 1,000
Federal income tax payable 125,014 (5,363)
Net cash used in operating activities (81,337) (164,383)
Cash flow from investing activities:
Additions to property, plant and equipment (34,037) (156,820)
Net cash used in investing activities (34,037) (156,820)
Cash flow from financing activities:
Cash dividends paid (84,495) (84,495)
Net cash used in financing activities (84,495) (84,495)
Net decrease in
cash and cash equivalents (199,869) (405,698)
Cash and cash equivalents
at beginning of period 1,261,987 1,375,569
Cash and cash equivalents
at end of period $1,062,118 $ 969,871
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The consolidated balance sheet as of August 31, 1996 the consolidated
statements of operations and the consolidated statements of cash flows
for the three-month periods ended August 31, 1996 and 1995 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 August 31, 1996 and 1995 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, 1996 annual report to shareholders. The results of operations for
the three-month period ended August 31, 1996 are not necessarily
indicative of the operating results for the full year ending May 31,
1997.
August 31, 1996 May 31,1996
Cash and cash equivalents consist of:
Cash $ 244,480 $ 138,018
Money market funds 142,963 516,165
Matured funds at factor 674,675 607,804
$1,062,118 $1,261,987
Allowances for collection
losses and discounts are:
Collection losses $ 77,410 $ 76,728
Discounts 13,623 8,758
$ 91,033 $ 85,486
Inventories consist of:
Raw materials $1,115,338 $1,195,129
Work-in-process 922,567 995,539
Finished goods 1,875,015 1,956,618
$3,912,920 $4,147,286
Accumulated depreciation on
property, plant and equipment
not used in operations is: $ 131,195 $ 131,195
Provision for federal income
tax detail is:
Current tax expense $ 151,336 $ 458,194
Deferred tax (benefit) expense (59,000) 2,000
$ 92,336 $ 460,194
Cash flow information:
Cash payments for interest $ 8,830 $ 48,108
Cash payments for
federal income taxes $ 26,322 $ 519,758
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Working capital at August 31, 1996 was $6,422,734, an increase of
$86,182 from May 31, 1996. Cash and cash equivalents decreased
approximately sixteen percent during the three-month period ended August
31, 1996. 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 increased approximately eleven percent
primarily due to the timing of shipments during the quarter. Inventories
decreased approximately six percent. Accounts payable and accrued
liabilities decreased approximately nine percent primarily due to
payment of normal maturities and accrued expenses during the three-month
period.
The current ratio at August 31, 1996 is 6.8 to 1 (5.5 to 1 at May 31,
1996). Total liabilities to assets equals fourteen percent (seventeen
percent at May 31, 1996).
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.
Capital acquisition and improvement expenditures totaled $34,037 during
the three-month period ended August 31, 1996. It is estimated that
approximately $65,000 additional capital expenditures will be made over
the next three 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 three-month period ended August 31, 1996.
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
August 31, 1996 first quarter net sales decreased approximately four
percent compared to the first quarter of the previous year. The
decrease resulted primarily from a slightly softer product demand and
product sales mix.
Cost of sales, as a percentage relationship to net sales, decreased
approximately four-tenths of one percentage point from the first quarter
last year. The percentage decrease resulted primarily from slightly
lower manufacturing costs partially offset by higher sales allowances.
Selling, general and administrative expenses increased approximately two
and one-half of one percentage point as a percentage relationship to net
sales compared to last year's first quarter. The percentage increase
resulted primarily from lower net sales and slightly higher
administrative costs. The provision for bad debt expense was $22,500,
the same as 1995.
Other income increased approximately forty-seven percent from the first
quarter last year, resulting primarily from rental from property not
used in operations.
Interest income increased approximately two hundred and twenty seven
percent compared to the first quarter of the previous year due primarily
to higher average cash balances.
Interest expense, compared to last year's first quarter, was
approximately twenty seven percent lower. The decrease resulted
primarily from lower factor interest charges on recourse accounts
receivable.
The federal income tax provision effective tax rate of 35.6 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
writeoff.
Part II OTHER INFORMATION
Item 9. No reports on Form 8-K were filed during the three-month period
ended August 31, 1996.
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 and Treasurer
(Chief Accounting Officer)
Howard B. Wolf /s
Howard B. Wolf
Chairman of the Board
October 15, 1996