TABLE  OFCONTENTS

**FORM 10-QUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.    20549**

 

| ý | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934** |
|--------|--------------------------------------------------------------------------------------------|

**For the quarterlyperiod ended March 29, 2003**

**OR**

|  ̈ | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934** |
|--------|---------------------------------------------------------------------------------------------|

**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   incorporation or organization)** | **(I.R.S. Employer Identification No.)** |
|                                                                      |                                          |
| 701 Griffith Road Charlotte, North Carolina                               | 28217                                    |
|                                                                           |                                          |
| **(Address of principal executive offices)**                              | **(Zip Code)**                           |

**(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 befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject tosuch filing requirements for the past 90 days.

** YES ****þ**                  **NO **** ̈**

Indicate the number of shares outstanding of each of the issuer's classes of common stockas of the latest practicable date.

| **Class of Common Stock** | **Outstanding atMay 6, 2003** |
|---------------------------|-------------------------------|
| Par value $.10 per share  | 3,255,428                     |

 

----

**AND SUBSIDIARIES**

**INDEX**

| PART I.  FINANCIAL INFORMATION:                                                                                                                                                        | **Page No.** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
|                                                                                                                                                                                        |         |
|       Item 1.  Financial Statements:                                                                                                                          |         |
|                                                                                                                                                                                        |         |
|            Condensed ConsolidatedBalance Sheets                                                                                 | 3-4          |
|                                                                                                                                                                                        |         |
|            Condensed ConsolidatedStatements of Operations                                                                       | 5            |
|                                                                                                                                                                                        |         |
|            Condensed ConsolidatedStatements of Cash Flows                                                                            | 6            |
|                                                                                                                                                                                        |         |
|            Condensed ConsolidatedStatements of Stockholders’ Equity                                                            | 7            |
|                                                                                                                                                                                        |         |
|            Notes to CondensedConsolidated Financial Statements                                                                       | 8-13         |
|                                                                                                                                                                                        |         |
|       Item 2.Management's Discussion and Analysis of FinancialCondition            and Results ofOperations | 14-23        |
|                                                                                                                                                                                        |         |
|       Item 3. Quantitative and Qualitative Disclosure about Market Risk                                                                                       | 23           |
|                                                                                                                                                                                        |         |
|       Item 4. Controls and Procedures                                                                                                                         | 23           |
|                                                                                                                                                                                        |         |
| PART II. OTHERINFORMATION                                                                                                                                                                   | 24           |
|                                                                                                                                                                                        |         |
|       Item 6. Exhibits and reports on Form 8-K                                                                                                                | 24           |

Page 2
**SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS**
   
March 29,
 
June 29,
  
2003
 
2002

 
(unaudited)
  **ASSETS**    
CURRENT:
    
   Cash and cash equivalents

$

- 

$

970,000    

   Accounts receivable, less allowances of      $902,000 and $819,000

12,415,000 
 
 10,144,000    

   Inventories
 
10,608,000 
 
13,542,000    

   Income tax refund
 
- 
 
523,000    

   Deferred tax asset, current
 
1,773,000 
 
1,773,000    

   Prepaid expenses and other current assets
 
750,000 
 
1,004,000    

         TOTAL CURRENT ASSETS
 
25,546,000 
 
27,956,000    
               
PROPERTY AND EQUIPMENT:
    
   Building and leasehold improvements
 
6,890,000 
 
6,887,000    

   Machinery and equipment
 
946,000 
 
939,000    

   Furniture, fixtures and transportation equipment
 
1,562,000 
 
1,575,000    

        Total
 
9,398,000 
 
9,401,000    

   Less accumulated depreciation and amortization
 
(3,552,000)
 
(3,089,000)   
     
         NET PROPERTY AND EQUIPMENT
 
5,846,000 
 
6,312,000    
     
DEFERRED TAX ASSET, LONG TERM
 
1,518,000 
 
1,561,000    

OTHER LONG-TERM ASSETS
 
1,072,000 
 
428,000    

GOODWILL, NET OF ACCUMULATED AMORTIZATION
 
3,790,000 
 
3,790,000    
      
$

37,772,000 

$

40,047,000    

See accompanying notes to condensed consolidated financialstatements.

Page 3
**SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS**
  
March 29,
 
June 29,
  
2003
 
2002
  
(unaudited)
  **LIABILITIES AND STOCKHOLDERS’ EQUITY**          
CURRENT LIABILITIES:
     
   Accounts payable

$

9,426,000 

$

9,994,000    

   Customers’ deposits
 
1,627,000 
 
1,779,000    

   Accrued expenses
 
562,000 
 
545,000    

   Current maturities of long-term debt
 
5,447,000 
 
6,565,000    

   Current maturity of obligation under capital lease
 
135,000 
 
121,000    
     
         TOTAL CURRENT LIABILITIES
 
17,197,000 
 
19,004,000    
    
 

Long-term debt
 
4,049,000 
 
4,544,000    

Obligation under capital lease
 
4,288,000 
 
4,380,000    

          TOTAL LIABILITIES
 
25,534,000
 
27,928,000    
          
STOCKHOLDERS’ EQUITY:
    
**  ** Common stock – par value $.10; authorized12,000,000      shares, issued 3,396,228, outstanding 3,255,428
 
340,000 
 
 340,000    

   Additional paid-in capital
 
13,047,000 
 
13,047,000    

   Accumulated other comprehensive loss
 
(137,000)
 
(169,000)   

   Accumulated deficit
 
(425,000)
 
(512,000)   

        Total
 
12,825,000 
 
12,706,000    

   Treasury stock, at cost, 140,800 shares
 
(587,000)
 
(587,000)   

         TOTAL STOCKHOLDERS’EQUITY
 
12,238,000 
 
12,119,000    
    
$

37,772,000 

$

40,047,000    

See accompanying notes to condensed consolidated financialstatements.

Page 4
**SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**
 
(Unaudited)

(Unaudited)
 
For the Three Months Ended

For the Nine Months Ended*   *
 
03-29-03   

03-30-02    

03-29-03     

03-30-02    
 
(13 Weeks)  

(13 Weeks)  

(39 Weeks)  

(39 Weeks)  
     
REVENUES

$

15,007,000

$

12,932,000 

$

47,984,000

$

40,216,000 
         
COST OF SALES
 
12,505,000
 
11,216,000 
 
40,216,000
 
34,916,000 
         
GROSS PROFIT
 
2,502,000
 
1,716,000 
 
7,768,000
 
5,300,000 
         
SELLING EXPENSES
 
880,000
 
1,392,000 
 
2,864,000
 
4,316,000 
          
GENERAL AND ADMINISTRATIVE      EXPENSES
 
1,138,000
 
1,627,000 
 
3,563,000
 
4,647,000 
         
LOSS ON GOODWILL IMPAIRMENT
 
-
 
1,000,000 
 
-
 
1,000,000 
         
OPERATING INCOME (LOSS)
 
484,000
 
(2,303,000)
 
1,341,000
 
(4,663,000)
         
     Net Interest Expense
 
400,000
 
399,000 
 
1,199,000
 
1,536,000 
         
INCOME (LOSS) BEFORE INCOME     TAX EXPENSE (BENEFIT)
 
84,000
 
(2,702,000)
 
142,000
 
(6,199,000)
         
INCOME TAX EXPENSE (BENEFIT)
 
33,000
 
(488,000)
 
55,000
 
(1,518,000)
         
NET INCOME (LOSS)

$

51,000

$

(2,214,000)

$

87,000

$ 

(4,681,000)
        
Basic loss per share
 
$ 0.02
 
(0.68)
 
$ 0.03
 
(1.44)

Diluted loss per share
 
0.02
 
(0.68)
 
0.03
 
(1.44)
        
Weighted average shares     Outstanding:
 
 
      
     Basic
 
3,255,428
 
3,255,428 
 
3,255,428
 
3,255,428 

     Diluted
 
3,255,428
 
3,255,428 
  
3,255,428
 
3,255,428 

 

See accompanying notes to condensed consolidated financialstatements.

Page 5
**  SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**
 
(Unaudited)
 
For the Nine Months Ended 
03-29-03

03-30-02
 
(39 Weeks)

 

(39 Weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
    
      Net income (loss)

 

$
87,000
 

$
(4,681,000)Adjustments to reconcile net income (loss) to cashprovided by       operating activities:    
          Depreciation
 
489,000 
 
646,000 

          Amortization
 
- 
 
184,000 

          Provision for inventoryobsolescence
 
- 
 
238,000 

          Provision for losses on accountsreceivable
 
83,000 
 
240,000 
          Deferred income taxes 
75,000 
 
(1,448,000)
          Loss on impairment of goodwill 
- 
 
1,000,000 

          Gain on disposal ofassets
 
(3,000)
 
(13,000)

          (Increase) decrease in:
                  Accounts receivable 
(2,354,000)
 
8,072,000 
              Inventories 
2,934,000 
 
1,838,000 

              Income TaxReceivable
 
523,000 
 
- 

              Prepaidexpenses and other current assets
 
254,000 
 
204,000 
              Other assets 
(644,000)
 
45,000 

          Increase (decrease) in:
    
              Accountspayable
 
(568,000)
 
(2,589,000)

             Trade notes payable
 
(1,248,000)
 
- 

              Accruedexpenses and customers’ deposits
 
(135,000)
 
(1,841,000)

          Net cash(used in) provided by operatingactivities
 
(507,000)
 
1,895,000 

CASH FLOWS FROM INVESTING ACTIVITIES:
    
      Capital expenditures
 
(63,000)
 
(13,000)

      Proceeds on sale of assets
 
43,000 
 
124,000 

          Net cash (used in) provided byinvesting activities
 
(20,000)
 
111,000 

CASH FLOWS FROM FINANCING ACTIVITIES:
    
      Net payments on line of credit agreement
 
(301,000)
 
(1,478,000)

      Principal payments on capital lease obligation
 
(78,000)
 
(405,000)

      Principal payments on long-term debt
 
(64,000)
 
- 
          Net cash (used in) financing activities 
(443,000)
 
(1,883,000)
     
NET (DECREASE) INCREASE IN CASH
 
(970,000)
 
123,000 
CASH AND CASH EQUIVALENTS at beginning of period 
970,000 
 
- 

CASH AND CASH EQUIVALENTS at end of period

 
$
- 
 

$

123,000      
Supplemental Disclosures:
    
      Cash paid (refunded) during period for:
    
          Interest

 

$
1,209,000 
 

$
1,543,000 
          Income taxes
 
(403,000)
 
65,000 

See accompanying notes to condensed consolidated financialstatements.

Page 6
**SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**
 
CommonShares

Common Stock

AdditionalPaid-In  Capital

RetainedEarnings(accumulated deficit)

AccumulatedOther ComprehensiveLoss

TreasuryStock

Comprehensive Loss

 

 
            
 

BALANCE, JUNE 30, 2001

3,396,228 

$

340,000 

$

13,047,000 

$

4,830,000 

$
(264,000)
$

(587,000)
  
Net loss

- 
 
- 
 
- 
 
(5,342,000)
 
- 
 
- 

$

(5,342,000)

Accumulated Comprehensive loss   – Interest rate swap, net of tax

 - 
 
- 
 
 - 
 
 - 
 
95,000 
 
 - 
 
 95,000

   Comprehensive Loss 

- 
 
- 
 
- 
 
- 
 
- 
 
- 

$

(5,247,000)

BALANCE, JUNE 29, 2002

3,396,228 
 
340,000 
 
13,047,000 
 
(512,000)
 
(169,000)
 
(587,000)
  
Net income.

          - 
 
- 
 
- 
 
87,000 
 
- 
 
- 

$

87,000 

Accumulated Comprehensive income   – Interest rate swap, net of tax

- 
 
 - 
 
 - 
 
 - 

 

 32,000 
 
 - 
 
32,000 

   Comprehensive income

- 
 
- 
 
- 
 
- 
 
- 
 
- 

$

119,000 

BALANCE, MARCH 29, 2003 (unaudited)

3,396,228 

$

340,000 

$

13,047,000 

$

(425,000)

 

$
(137,000)
$

(587,000)
  
See accompanying notes to condensed consolidated financialstatements.

Page 7
**SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS**

Note 1.        Interim FinancialStatements

Inthe opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary topresent 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 Condensed ConsolidatedFinancial Statements.

The accounting policies followed by the Registrant are set forth in the Registrant's Form10-K for the fiscal year ended June 29, 2002, which is incorporated by reference.

Note 2.        Deferred Revenue

The Company, insome instances with its laundry equipment and services business, is engaged ininstallation projects for customers on a contract basis.  Some contractscall for progress billings.  In such cases, the Company uses the percentageof completion method to recognize revenue whereby sales are recorded based uponthe ratio of costs incurred to total estimated costs at completion. Deferred revenue was $398,000 at March 29, 2003 and immaterial at June 29, 2002.

Note 3.       Inventories

Inventoriesconsisted of the following:
  
March 29,
 
June 29,
  
2003
 
2002
  
(unaudited)
  
Machines

$

5,894,000

$

8,705,000

Parts and supplies
 
4,714,000

 
4,837,000

         Total

$

10,608,000

$

13,542,000

Note 4.       Taxes on Income

Taxeson income are allocated to interim periods on the basis of an estimated annual effective tax rate.  Other comprehensive income(losses), if any, are net of an estimated deferred tax expense (benefit).  Deferred income taxes at March 29, 2003 and June29, 2002 consisted primarily of net operating loss carryforwards.   The income tax refund represents the anticipatedstate and federal tax refund for the prior fiscal year. 

Note 5.       Net Income (Loss) Per Share

Basic net income (loss) per share includes no dilution and is calculated by dividing netincome (loss) by the weighted average number of common shares outstanding for the period.  Diluted net loss per share reflectsthe potential dilution of securities that could share in the net income of the Company, which consists of stock options using thetreasury stock method.  In a period with a net loss, the weighted average shares outstanding will be the same for basic anddiluted net loss per share.

Page 8
Note 6.        Risk Management and Derivative FinancialInstruments

The Company had one interest rate swap derivative designated as a cash flow hedge at March29, 2003.  The change in the fair market value during the current year was a gain of $32,000 net ofincome tax expense, and wasrecognized in Other Comprehensive Income/Loss at March 29, 2003.  For interest rate swap agreements, increases or reductionsin interest expense are recognized in the periods in which they accrue.

Note 7.        Long-Term Debt

The Company has a revolving credit facility and a line of credit for issuance ofDocumentary Letters of Credit with SouthTrust Bank, N.A.  Effective March 31, 2003, the Company entered into a Sixth Amendmentand Forbearance Agreement relating to its credit facility with SouthTrust Bank, extending the maturity date until December 31,2003.  The credit facility, as amended, provides a revolving credit facility up to $10.0 million and an additional line ofcredit for issuance of documentary letters of credit up to $7.5 million.  The availability under the combined facility islimited to a borrowing base as defined by the bank.  The Company, as of March 29, 2003, had borrowings with SouthTrust Bank of$4.7 million under the revolving credit facility and had unused availability of $2.1 million.  Advances under the revolvingcredit facility and line of credit as amended are broken down into two components for the calculation of interest expense: theLondon Interbank Offered Rate (LIBOR) component that accrues interest at the LIBOR rate plus 11⁄2% to 21⁄2%, and a baserate component that accrues interest at prime plus 11⁄4%.  The rates are scaled based upon the Company’s fundeddebt as defined in the original Credit Facility Agreement.  Prior to the Second Amendment and pursuant to the terms of theFirst Amendment dated November 13, 2000, the LIBOR component accrued interest at the LIBOR rate plus 3%, and the base ratecomponent accrued interest at prime plus 11⁄4%.  The Company also has in effect an interest rate swap derivative thatfixes the interest rate for advances under the LIBOR component at 7.79% plus the applicable margin for borrowing levels of $5.0million, which expires on June 2, 2003.  Upon the expiration of the interest rate swap agreements, all borrowings under therevolving credit facility will accrue interest at prime plus 11⁄4% until June 30, 2003.  Effective July 1, 2003, interestfor all borrowings will accrue at prime plus 3.0%.  As of March 29, 2003, amounts outstanding of $3.0 million were advancedunder the LIBOR component at a rate of 1.30% plus 2.5%.  The facility is secured by substantiallyallthe assets of the Company.

Page 9
Other long-term obligations primarily include trade debt with payment dates beyond oneyear.  Effective February 2002, the Company restructured its payment terms with Lonati S.p.A., its largest supplier, oncurrent trade obligations amounting to $5.2 million, less $1.0 million owed to the Company.  The net balance of $4.2 millionis payable over a 24-month period commencing March 1, 2004.  The restructured terms also include an interest charge at 6% perannum, payable quarterly commencing September 2002.  The agreement also provides the Company through February 2006 withexclusive distribution rights for Lonati’s product line and the ability to purchase inventory in U.S. dollars.  At March29, 2003, the Company was in compliance with all of its covenants related to the Lonati agreement.

In fiscal 2002, the Company restructured a refundable customer deposit in the amount of$1.2 million included in trade notes payable below, to a two-year period, payable monthly commencing January 31, 2002.  Theamount of this obligation bears no interest.

Long-term debt consists of:
  
March 29,
  
June 29,
  
2003
  
2002
  
(unaudited)
   
Revolving Credit Facility 

$

4,699,000 
 
$

5,000,000 

Trade notes payable
 
4,797,000 
  
6,109,000 

Total.
 
9,496,000 
  
11,109,000 

Current maturities
 
(5,447,000)
  
(6,565,000)
 
$

4,049,000 
 
$

4,544,000 
 
Page 10
Note 8.         Segment Information

The Company operates primarily in two segments of business, textile equipment(“textile”) and laundry equipment and services (“laundry”).  Corporate operations include generalcorporate expenses, amortization of debt issuance costs, interest expense related to the Company’s credit facility andelimination of intersegment balances.  The table below summarizes financial data by segment. 

Segment Information

Nine Months

Total Textile

Total Laundry
  
 

Ended March

 

Segment

 

 Segment

 

 Corporate

 

Total 
          
Net Revenues

2003

$

28,690,000 

$

19,294,000 

$

- 

$

47,984,000 
 
2002
 
22,487,000 
 
17,729,000 
 
-  
 
40,216,000 
          
Earnings (Loss) before Interest       &Taxes

2003

$

1,385,000 

$

857,000 

$

(901,000)

$

1,341,000 
 
2002
 
  (3,175,000)
 
(543,000)
 
(945,000)
 
(4,663,000)
          
Capital Expenditures

2003

$ 

53,000 

$

10,000 

$

- 

$

63,000 
 
2002
 
11,000 
 
2,000 
 
- 
 
13,000 
          
Depreciation and Amortization 

2003

$ 

224,000 

$

24,000 

$

241,000 

$

489,000 
 
2002
 
582,000 
 
63,000 
 
185,000 
 
830,000 
          
Interest Expense

2003

$ 

682,000 

$

4,000 

$

513,000 

$

1,199,000 
 
2002
 
679,000    
 6,000 
 
851,000 
 
1,536,000 
          
 

Segment Information

Three Months

Total Textile

Total Laundry
  
 

Ended March

 

Segment

 

 Segment

 

 Corporate

 

Total 
          
Net Revenues.

2003

$

9,505,000  

$

5,502,000 

$

- 

$

15,007,000 
 
2002
 
5,743,000  
 
7,189,000 
 
- 
 
  12,932,000 
          
Earnings (Loss) before Interest       &Taxes

2003

$

481,000  

$

375,000 

$

(372,000)

$

484,000 
 
2002
 
(2,235,000) 
 
178,000 
 
(246,000)
 
(2,303,000)
          
Capital Expenditures

2003

$

35,000  

$

- 

$

- 

$

35,000 
 
2002
 
-  
 
- 
 
- 
 
- 
          
Depreciation and Amortization

2003

$

74,000  

$

8,000 

$

80,000 

$

162,000 
 
2002
 
194,000  
 
21,000 
 
61,000 
 
276,000 
          
Interest Expense .

2003

$

228,000  

$

1,000 

$

171,000 

$

400,000 
 
2002
 
46,000  
 
2,000 
 
351,000 
 
399,000 
          
Total Assets
         
      March 29, 2003 (unaudited) 

$

28,522,000 

$

9,250,000 

$

- 

$

37,772,000 

      June 29,2002 .

$

30,258,000 

$

9,789,000 

$

- 

$

40,047,000 
          
Goodwill
         
      March 29, 2003 (unaudited)..

$

622,000 

$

3,168,000 

$

- 

$

3,790,000 

      June 29,2002 

$

622,000 

$

3,168,000 

$

- 

$

3,790,000 

                      In 2002, the loss before interest andtaxes for the textile segment includes a loss on impairment of goodwill of $1,000,000.

Note 9.        Accounting for Stock-BasedCompensation

The Company adopted the disclosure only provisions of Statement of Financial Standards No.123, *Accounting for Stock-Based Compensation*.  In addition, the Company adopted the disclosure provisions of SFAS No.148, *Accounting for Stock-Based Compensation*, which amends the disclosure requirements of SFAS No. 123.  SFAS No. 148had no impact on net income (loss) or stockholders’ equity.  The Company uses the intrinsic value method of accountingfor the plan in accordance with Accounting Principle Board Opinion No. 25, and, therefore, recognizes no compensation expense forstock options.  No stock options were issued for the nine months ended  

Page 11
March 29, 2003. Pro forma net income and earnings per share, as if the fair value method in SFAS No. 123 had been used to account for stock-based compensation, and the assumptionsused for nine months ended March 29, 2003 and March 30, 2002 are as follows:
  
For the NineMonths ended
  
For the NineMonths ended
  
March 29,
  
March 30,
  
2003
  
2002

Income (Loss):
     As reported
$

87,000 
 
$

(4,681,000)
Compensation expense 
(16,000)
  
(60,000)
Pro forma
$

71,000 
 
$

(4,741,000)
      
Basic income (loss) earnings per share:
     As reported
$

0.03 
 
$

(1.44)
Compensation expense 
- 
  
(0.02)
Pro forma
$

0.03 
 
$

(1.46)
      Black-Scholes assumptions *     Fair market value of option granted 
$  0.63   
  
$  0.63   
Risk-free interest rate 
4.9%
  
4.9%
Dividend yield 
0%
  
0%
Stock volatility 
73.9%
  
73.9%
Expected option life 
10 years
  
10 years

**__________________*** weighted average

Note 10.      Commitments And Contingencies

The Company has outstanding commitments backed by letters or credit of approximately$5,954,000 and $5,012,000 at March 29, 2003 and June 29, 2002 respectively, relating to the purchase of machine inventory fordelivery to customers.

On June 29, 2000, Hazel Hernandez filed a lawsuit against the Company and Wink DavisEquipment Company, Inc. (a wholly owned subsidiary of Speizman Industries) in the U.S. District Court for the Northern District ofIllinois, Case No. 00-CV-5183 and is seeking damages of $2.7 million.  The plaintiff’s claims include allegations thatthe Company and Wink Davis Equipment Company, Inc. placed an unreasonably dangerous machine in the stream of commerce, werenegligent in the design, manufacture, sale, and distribution of the machine, and other grounds.  The court has dismissed theclaim against Speizman Industries.  On October 15, 2002, the U.S. District Court for the Northern Illinois District ofIllinois granted Wink Davis’ motion for dismissal and good faith regarding settlement.  Wink Davis assumed noresponsibility in the settlement agreement.

The Company filed a lawsuit with one of its customers for nonperformance associated withcertain sales contracts.  On July 31, 2001, the defendant filed a counterclaim alleging damages due to delay in delivery ofmachines and defects in operation in the amount of $6.8 million (Canadian) or approximately U.S. $4.3 million, plus interest andpenalties in an unspecified amount.  Based upon discussions with its legal counsel, the Company believes the counterclaim iswithout merit and intends to defend its position vigorously.

Page 12
In the normalcourse of business, the Company is named in various other lawsuits. The Companyvigorously defends such lawsuits, none of which are expected to have a materialimpact on operations, either individually or in the aggregate.

 

Page 13
**MANAGEMENT'SDISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

NOTE REGARDING PRIVATE SECURITIES LITIGATION REFORM ACT

This report contains forward-looking statements that have been made pursuant to theprovisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are based on currentexpectations, estimates, and projections about Speizman's industry, management beliefs, and certain assumptions made by Speizman'smanagement.  Words such as "anticipates," "expects," "intends," "plans," "believes,” "seeks," "estimates," variations ofsuch words, and similar expressions are intended to identify such forward-looking statements.  These statements are notguarantees 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 bylaw, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of newinformation, future events, or otherwise.  However, readers should carefully review the risk factors set forth in otherreports and documents that the Company files from time to time with the Securities and Exchange Commission.

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”) andlaundry equipment and services (“laundry segment”).  In the textile segment, the Company distributes sock-knittingmachines, other knitting equipment, automated boarding, finishing and packaging equipment used in the sock industry, and relatedparts.  In the laundry segment, the Company sells commercial and industrial laundry equipment, including the distribution ofmachines and parts as well as providing installation and after sales service.  The Company refers to its operations in thetextile segment as Speizman Industries, and the laundry segment as Wink Davis Equipment Co., Inc. (“WinkDavis”).

RESULTS OF OPERATIONS

Revenues increased to $15.0 million for the third quarter of fiscal 2003 from $12.9million for third quarter in fiscal 2002.  Revenues for the textile division increased to $9.5 million in the third quarter offiscal 2003 from $5.7 million for third quarter fiscal 2002.  The increase in revenue is due primarily to an 84.0% increase inthe sales of new machines in the third quarter of 2003 over the prior year’s third quarter and reflects an increase in demandfor the Company’s sock finishing equipment.  Revenues for the laundry division decreased to $5.5 million from $7.1million last year.  The decline in revenue reflects a 33.0% reduction in sales of new machines in the third quarter of 2003 ascompared to the prior year.  This decline is due to the continued sluggishness in the hospitality industry.

For the nine months ended March 28, 2003, total revenues increased 19.2% to $47.9 millionfrom $40.2 million in the prior year.  Revenues for the textile division increased to $28.7 million from $22.4 million in theprior year.  Laundry revenues increased 8.5% to $19.2 million from $17.7 million in the prior year.  The increase in bothdivisions reflects an increase in sales of new machinery.

Gross profit for the third quarter increased to $2.5 million from $1.7 million in thethird quarter of last year.  As a percentage of revenues, gross profit increased to 16.7% from 13.3% in the prior year. Third quarter gross margin increased in the textile division from 7.9% in 2002 to 15.1% in 2003.  The increase is dueprimarily to increased demand for the Company’s products in the third quarter of 2003 as compared to the prior year.  Inthe prior year, the Company offered significant discounts on certain products in order to stimulate sales.  The increase alsoreflects a 26.0% increase in the sales of parts and services, on which the Company typically earns a higher margin.  Thirdquarter gross margin for the laundry division increased to 19.5% from 17.5% for the same quarter of last year.  The increaseis due primarily to a change in product mix.  The Company sold fewer large projects in the third quarter of 2003 than in theprior year.  Due to the competitive nature of these large projects, the Company experiences lower margins on those sales thanon the sales of smaller white machines.

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Gross profit for the nine months ended March 29, 2003, increased to $7.7 million from $5.3million in 2002.  As a percentage of sales, gross profit increased to 16.1% from 13.2% last year.  The increase in grossprofit is attributable to the increase in sales volume noted above, the reduction of service related salaries included in cost ofsales for both divisions, and a 23.0% increase in sales of parts and services for both divisions, on which the Company typicallyearns a higher margin.

Selling expenses decreased to $880,000 in the third quarter of fiscal 2003 from $1.4million last year.  As a percentage of sales, selling expenses decreased to 5.9% from 10.8%.  The decrease is dueprimarily to a change in the Company’s sales compensation plans late in the second quarter of last year that reduced thefixed component of the salesmen’s compensation.

Selling expenses decreased to $2.9 million (5.9% of sales) in the nine months ended March29, 2003, as compared to $4.3 million (10.8% of sales) in the same period last year.  The decrease is primarily due to achange in the Company’s sales compensation plans that reduced the fixed component of the salesmen’ssalaries. 

General and administrative expenses decreased to $1.1 million (7.6% of sales) in the thirdquarter of fiscal 2003 from $1.6 million (12.6% of sales) in the third quarter of last year.  The reduction in general andadministrative expenses reflects management’s continued emphasis on controlling costs, primarily payroll relatedcosts.

For the nine months ended March 29, 2003, general and administrative expenses decreased23.3% to $3.6 million from $4.6 million in the same period last year.  The decrease primarily reflects a reduction in payrollrelated expenses.

Interest expense decreased to $1.2 million in the nine months ended March 29, 2003, from$1.5 million in the prior year. The decrease is due to reduced borrowing rates and a lower level of borrowing under theCompany’s revolving line of credit.

The provision for income tax in the current quarter was $33,000 or 39.0% of the currentpre-tax income.  This compared to a benefit of $488,000 for income tax for the same period last year or 18.0% of the pre-taxloss.  For the nine months period ended March 29, 2003 and 2002, the effective rates were 39.0% and 24.0%, respectively. The difference between the effective tax rates and the statutory tax rates are due to non-deductible expenses for tax purposes suchas meal and entertainment expenses.

Net income for the quarter ended March 29, 2003 was $51,000, or $0.02 per basic anddiluted share, compared to a net loss of $2.2 million or $0.68 per basic and diluted share for the quarter ended March 30,2002.

Net income for the nine months ended March 29, 2003, was $87,000 or $0.03 per basic anddiluted share, as compared to a net loss of $4.7 million, or $1.44 per basic and diluted share for the same period lastyear.

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LIQUIDITY AND CAPITAL RESOURCES

The Company has historically satisfied its cash requirements from operations, borrowingsunder credit facility arrangements, and by negotiating extended terms of trade debt.  The Company has a revolving creditfacility with SouthTrust Bank, N.A.  The agreement with SouthTrust as amended on March 31, 2003, expires on December 31, 2003and provides a revolving line of credit up to $10.0 million and an additional line of credit for issuance of Documentary Letters ofCredit up to $7.5 million.  The availability under the combined lines of credit is limited by the percentage of accountsreceivable and inventory advance rates determined from time to time by SouthTrust.  As of March 29, 2003, the Company’srevolving line of credit was $4.7 million and the usage for documentary letters of credit was $6.0 million.  The unused amountavailable to the Company as determined by the Bank was $2.1 million.  Amounts outstanding under the line of credit for directborrowings bear interest based upon two components:  London Interbank Offered Rate (LIBOR) plus the applicable margin (1.5% to2.5%) for a short term fixed period and prime plus the applicable margin (0% to 1.25%) for the non-fixed period.  The ratesvary based upon the Company’s funded debt as defined in the loan agreement.  Beginning on June 3, 2003, all borrowingsunder the line will accrue interest at prime plus 11⁄4% until June 30, 2003.  On July 1, 2003, the interest rate willincrease to prime plus 3% until the expiration of the agreement.  In connection with the SouthTrust facility, the Companygranted a security interest in all assets of the Company. 

Working capital at March 29, 2003 was $8.3 million, a decrease of $700,000 from $9.0 atJune 29, 2002.  The working capital ratio at March 29, 2003 was 1.49 compared with 1.47 at June 29, 2002.  Net cashused in operating activities was $507,000 for the nine months ended March 29, 2003 compared with $1,895,000 provided byoperating activities during the same period in 2002.  

The increase of $2.3 million in accounts receivable during the first nine months of fiscal2003 primarily resulted from greater than average shipment (and sales) of laundry equipment in March 2003. 

The reduction in inventory of $2.9 million was primarily due to sales of stock textileequipment.   Inventory reserves of $607,000 were released during the first nine months of fiscal 2003 for certain stockequipment that was liquidated at below cost in order to reduce inventory levels.

 The income tax refund decreased $523,000 due to receipt of cash associated with theFederal Income tax refund.

Prepaid expenses and other current assets decreased $254,000 during the first nine monthsof fiscal 2003.  The decrease is primarily due to the decrease in prepaid insurance as the Company continues to amortize itsannual insurance premiums. 

Other long-term assets increased $644,000 during the first nine months of fiscal2003.  The increase is due to the reclassification of accounts receivable to long-term for two customers in which payments arenot anticipated within one year due to restructuring of one receivable and litigation associated with the other.  Although theaccounts have been reclassified as a long-term asset, management believes they will be collected in full. 

Cash used in investing activities was $20,000 and resulted from capital expenditures of$63,000 offset by proceeds from sales of fixed assets of $43,000.

Net cash used in financing activities was $443,000 for the nine months ended March29, 2003 and consisted of $365,000 for principal payments of debt obligations and $78,000 for capital leaseobligations.

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The Company’s credit facility with SouthTrust matures December 31, 2003.  TheCompany currently does not have the financial resources to repay this debt when it becomes due and will therefore need to refinancethis debt prior to maturity.  There is no assurance that the Company will be able to refinance this debt with another lenderon a timely basis, on commercially reasonable terms, or at all.  Additionally, the textile industry has continued toexperience tightened lending practices from traditional financial institutions which may further hinder Speizman’s ability torefinance this debt, especially in light of Speizman’s recent financial losses.  If Speizman is unable to refinance thisdebt or obtain needed additional capital, it would be required to significantly reduce its operations, dispose of assets and/orsell additional securities on terms that could be dilutive to current stockholders.  However, there is no assurance thatadditional financing will be available when needed or desired on terms favorable to the Company or at all.

*Contractual Obligations and Commitments*

The following table presents our long-term contractual obligations:
 
Payments Due by Periods
 
        Total     

Less Than   One Year  

      1-3 Years   

     4-5 Years   

  After 5 Years

Long-term debt 

$
9,496,000
$
5,447,000
$
4,049,000
$  

-
$  
-
Capital lease obligations 

4,423,000

135,000

546,000

531,000

3,211,000

Irrevocable letters of credit 

5,954,000

5,954,000

-

-

-

Operating leases 

   
1,362,000
   
587,000
   
708,000 67,000
  
-
Total contractual cash obligations 

$
21,235,000
$
12,123,000
$
5,303,000
$  
598,000
$ 
3,211,000
Critical Accounting Policies

     The Company’s discussion and analysis of its financialcondition and results of operations are based upon our consolidated financial statements, which have been prepared in accordancewith accounting principles generally accepted in the United States. The preparation of these financial statements requiresmanagement to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, andrelated disclosure of contingent assets and liabilities. Management bases its estimates and judgments on historical experience andon various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results maydiffer from these estimates under different assumptions or conditions.  Management believes the following critical accountingpolicies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financialstatements.

*Revenue Recognition*

     The major portion of the Company’s revenues consists ofsales and commissions on sales of machinery and equipment. The revenue derived therefrom for the textile segment is recognized infull at the time of shipment, and for the laundry segment, at time of installation. In some instances the laundry equipment andservices business is engaged in installation projects for customers on a contract basis. 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 theratio of costs incurred to total estimated costs at completion. Shipping and handling charges to customers are included inrevenues. Costs associated with shipping are included in cost of sales.

*Impairment of Goodwill*

     In assessing the value of the Company’s goodwill,management must make assumptions regarding estimated future cash flows and other factors to determine the carrying amount of theassets.  If these estimates or their related assumptions change in the future, the Company may be required to recordimpairment charges for these assets.  Effective July 1, 2001, the Company adopted Statement of Financial Standards No. 142,*"Goodwill and Other Intangible Assets"* and is now required to analyze goodwill for impairment issues on an annualbasis.

 

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The Company performs its annual impairment test of goodwill on the last day of its fiscalyear and more often if circumstances surrounding its business dictate that it do so.  For purposes of determining the fairvalue of its goodwill, the Company computes the net present value of its future cash flows using the five-year average return oninvestment earned by comparable companies in its industry and compares that to the book value of the reporting segment.  

*Inventory and Bad Debt Reserves*

     In assessing the value of the Company’s accounts receivableand inventory, management must make assumptions regarding the collectibility of accounts receivable and the market value of theCompany’s inventory.  In the case of accounts receivable, the Company considers the current and future financialcondition of its customers and judgmentally determines the reserve required.  In the case of inventory, the Company considersrecent sales of similar products, trends in the industry and other factors when establishing an inventoryreserve.  

*Deferred Tax Assets*

     The Company has recorded a deferred tax benefit associated withits net operating losses and other timing differences associated with tax regulations and generally accepted accounting principles,because management believes these assets will be recoverable by offsetting future taxable income.  If the Company does notreturn to profitability, or if the loss carryforwards cannot be utilized within federal statutory deadlines (currently 20 years),the asset may be impaired.  During fiscal 2002, the Company reduced its deferred tax asset by $200,000 in light of theseuncertainties.

OUTLOOK 

Fiscal 2003 Equipment Bookings – The Company experienced a decline in equipmentbookings in the textile and laundry divisions during the first nine months of fiscal 2003.  Consistent with the cost savinginitiatives that began in fiscal year 2001, the Company continues to look for ways to control its expenses to help mitigate theadverse effects from the decline in bookings. 

Hosiery Equipment – Shipments of the new generation closed toe sock knitting machineproduced by Lonati, S.p.A. of Brescia, Italy, the world’s largest manufacturer of hosiery knitting machines, began inmid-March 2001.  The new generation closed toe machines have been commercially accepted and the Company anticipates they couldgradually replace most of the conventional athletic sock machines in the United States and Canada over the next four to sixyears.

Knitted Fabric Equipment – Although the Company experienced an increase in demand inthe first nine months of fiscal 2003, the overall market demand for seamless actionwear machines has decreased significantly sinceits peak two years ago.  However, it now appears that only the large, well-capitalized underwear and lingerie firms who havesignificant resources with brand names and direct relationships with major retail outlets will have the ability to purchasesignificant quantities of additional seamless garment machines.

Wink Davis – The Company, through Wink Davis, maintains a strong presence in theUnited States industrial laundry segment through its sale of new equipment, parts and services.  Due to the combination of theslowing economy and the effects of September 11, the demand for on premise laundry equipment within the hospitality industry hasdeclined significantly in the past 18 – 24 months.  Proposals for larger installation projects continue to remainactive; however, if successful, margins will continue to be slightly lower as a result of increased competition in a relativelytight market.

Other Areas of Development – The Company continually explores opportunities foradditional growth including new relationships with manufacturers that have competitive product offerings in its existing marketchannels.  The Company has begun several initiatives geared toward increasing parts sales and service revenues in both textileand laundry divisions.

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EMPLOYEES

As of March 29, 2003, the Company had 105 full-time domestic employees.  TheCompany’s employees are not represented by a labor union, and the Company has never suffered an interruption of business as aresult of a labor dispute.  The Company considers its relations with its employees to be good.

BACKLOG

As of May 3, 2003, the Company’s backlog of unfilled equipment orders wasapproximately $5.8 million.  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 backlogwithin 12 months; however, orders constituting the current backlog are subject to customer cancellation, changes in delivery andmachine performance.  As a result, the Company’s backlog may not necessarily be indicative of future revenue and willnot necessarily lead to revenues in any future period.  Any cancellation, delay or change in orders which constitute ourcurrent 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 forone week in July.  Consequently, no shipments or deliveries, as the case may be, of machines distributed by the Company thatare 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’soperations.

OTHER RISK FACTORS 

*Risks Related to Speizman’s Bank Debt*

As of May 7, 2003, Speizman had $4.1 million in borrowings under its line of creditfacility with SouthTrust Bank.  The scheduled maturity date for this facility is December 31, 2003.  The Companycurrently does not have the financial resources to repay this debt when it becomes due and will therefore need to refinance thisdebt prior to the maturity date.  There is no assurance that the Company will be able to refinance this debt with anotherlender on a timely basis, on commercially reasonable terms, or at all.  Additionally, the textile industry has continued toexperience tightened lending practices from traditional financial institutions which may further hinder Speizman’s ability torefinance this debt, especially in light of Speizman’s recent financial losses.  If Speizman is unable to refinance thisdebt or obtain needed additional capital, it would be required to significantly reduce its operations, dispose of assets and/orsell additional securities on terms that could be dilutive to current stockholders.

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*Risks Related to Lonati Agreement*

In May 2002, the Company and Lonati S.p.A. entered into an agreement, effective February2002, providing for the amendment of their agreement under which Speizman distributes Lonati sock-knitting machines in the UnitedStates and Canada, and Lonati’s forbearance and payment restructuring with respect to $4.2 million of trade debt owed bySpeizman to Lonati.  This amendment and forbearance agreement provides that the following events, among others, willconstitute an event of default under Speizman’s distribution agreement with Lonati, as amended:
- failure to pay any amounts owed Lonati when due, which failure continues for 10 daysafter written notice; 
- an event of default occurring under Speizman’s existing credit facility withSouthTrust; or 
- failure to pay other debts when due.

Upon the occurrence of an event of default, Lonati can terminate its distributionagreement with Speizman and can declare all amounts then due Lonati payable in full.

The Lonati and Santoni agreements allow Lonati to make sales directly to customers locatedin the Company’s distribution territories and pay the Company a commission as determined on a case by case basis.  Ifdirect sales to customers became material, it would have an adverse effect on the Company’s profits since the commissionsreceived by Speizman are typically less than the profits generated by equipment sales.

*Risks Related to Wink Davis Contracts*

The Company’s distributor agreements with Pellerin Milnor and Chicago Dryer arerenewed on an annual basis.  If the Company lost the distribution rights to either of these product lines, it would have amaterial adverse impact on the revenues of the Company.

*Speizman’s Ability to Return to Profitability*

Due principally to a decline in sales, the Company incurred a net loss of $5.3 million infiscal 2002.  In addition, Speizman incurred a net loss of $5.9 million in fiscal 2001 due principally to losses associatedwith foreign currency derivatives.  For the year ended June 29, 2002, the Company generated cash from operating activities of$7.0 million.  For the nine months ended March 29, 2003, the Company used cash from operating activities of$507,000.  Although the Company has returned to profitability for the nine months ended March 29, 2003, Speizman will need togenerate continued increases in its revenues, or reductions in overhead in order to continue generating additionalcash from operating activities.  

*Speizman’s Large Amount of Debt Could Negatively Impact its Business and itsStockholders*

Principally as a result of losses funded over the past two fiscal years, the Company isburdened with a large amount of debt.  Speizman’s large amount of debt could negatively impact its stockholders in manyways, including:
- reducing funds available to support its business operations and for other corporatepurposes because portions of cash flow from operations must be dedicated to the payment of its existing debt;
- impairing its ability to obtain additional financing for working capital, capitalexpenditures, 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 itsbusiness.

Page 20
*Relationship with Foreign Suppliers*

The majority of Speizman Industries’ suppliers for textile parts and textileequipment are based in foreign countries, primarily Italy.  There can be no assurance that Speizman will not encountersignificant difficulties in any attempt to enforce any provisions of the agreements with foreign manufacturers, or any agreementthat may arise in connection with the placement and confirmation of orders for the machines manufactured by foreign manufacturersor 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 fromthe sale of sock knitting and other machines manufactured by both Lonati S.p.A. and Santoni, S.p.A., Brescia, Italy, one ofLonati's subsidiaries, and the Company expects this dependence to continue. Sales of sock knitting and other machines manufacturedby Lonati and Santoni generated an aggregate of approximately 31.9% and 30.4% of the Company's net revenues in fiscal 2002 andfiscal 2001, respectively.  The Company amended its agreement with Lonati for the sale of its machines effective February 2002to be the exclusive agent through February 2006.  The Company has acted as the United States sales agent and distributor forcertain machines manufactured by Lonati continuously since 1982.  The cost to the Company of Lonati machines, as well as thedelivery schedule of these machines, are at the discretion of Lonati.  Management believes that the Company’srelationship 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 orwill continue on its present terms.  Any decision by Lonati to sell machines through another distributor or directly topurchasers 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 issueswith machine performance and delays from Lonati in shipments of closed toe knitting machines and Santoni undergarment knittingmachines.  The Company experienced material cancellations or postponements of orders due to these delays and performanceissues.  There can be no assurance that delayed deliveries in the future or issues with machine performance on newertechnology will not result in the loss or cancellation of significant orders.  The Company also cannot predict situations inItaly such as potential employee strikes or political developments which could further delay deliveries or have other adverseeffects 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 andspare parts for resale were denominated in Italian lira or Euro dollars.  For purchases of machines that were denominated inItalian lira or Euro dollars, Speizman generally purchased foreign currency hedging contracts to compensate for anticipated dollarfluctuations; however, during fiscal year 2001, the Company experienced adverse effects utilizing lira hedging contracts for ordersthat were postponed or delayed.  Prior to fiscal year 2001 and for approximately 30 years, the Company did not experience anyadverse effect from utilizing lira-hedging contracts.  During fiscal year 2001, and in light of newer technology that wasbeing delivered by Lonati represented by its newer version closed toe single cylinder sock knitting machine, and with previousexperiences of delays associated with the development of its previous generation closed toe machine, the Company arranged withLonati 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 in February 2006.  In the future, for purchases of machines that are supplied by othermanufacturers that are denominated in Euro dollars, Speizman Industries feels its current practices enable the Company to adjustsales prices, or to commit to Euro dollar hedging contracts that effectively compensate for anticipated dollarfluctuations.

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Additionally, international currency fluctuations that result in substantial price levelchanges could impede or promote import/export sales and substantially impact profits.  Speizman is not able to assess thequantitative effect of such international price level changes could have upon Speizman Industries’ operations.  Therecan be no assurance of fluctuations and foreign exchange rates will not have an adverse effect on Speizman Industries’ futureoperations.  All of Speizman Industries’ export sales originating from the United States are made in U.S.dollars.

*Industry Conditions*

The Company's business is subject to all the risks inherent in acting as a distributorincluding competition from other distributors and other manufacturers of both textile and laundry equipment, as well as thetermination of profitable distributor-manufacturer relationships.

The Company's laundry equipment segment is subject to the risks associated with newconstruction in the hospitality industry. Currently, there is a slowdown in construction of new hotels due to a general slowdown inthe U.S. economy and excess room availability.

The Textile Segment is subject to the risks associated with certain categories in thetextile 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 contributeto fluctuations in the demand for the Company's sock knitting and packaging equipment and knitted fabric equipment products. There has been a slowdown in underwear and actionwear garments that commenced during the second half of fiscal 2001; however, theCompany has experienced a modest upturn in demand for its circular knitting machines used in the production of seamlessundergarments, action wear, and swimsuits in recent months.

*Nasdaq Listing*

The Company’s Common stock has been listed on the Nasdaq SmallCap Market since March20, 2001 and was listed on the Nasdaq National Market System from October 1993 to March 19, 2001.  The Company’scontinued listing of its common stock on the Nasdaq SmallCap Market is subject to certain criteria which include a minimum bid of$1.00 as well as maintaining a minimum market value of public float of $1.0 million.  Since January 2002, the Company’sstock has been trading below $1.00.  On May 8, 2003, the closing per share bid price for the Company’s common stock was$0.30.  The Company has been notified by Nasdaq that its common stock will be delisted on May 12, 2003.  The Companyplans to appeal the delisting. 

On January 30, 2003, Nasdaq issued a press release proposing to extend the grace periodfor compliance with the minimum bid requirement from 180 days to 540 days.  Management believes that, if the proposal isadopted, its common stock would be included in the extended grace period.

On April 22, 2003, the Company was notified by Nasdaq that its common stock has notmaintained a minimum market value of publicly held shares (“MVPHS”) of $1,000,000.  If at anytime before July 21,2003, the MVPHS of the Company’s common stock is not $1,000,000 or more for at least 10 consecutive trading days, then theCompany’s common stock will be delisted.  The Company estimates that the closing per share bid price of its common stockmust be at least $0.42 in order to meet the minimum MVPHS.

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If the Company is delisted, its common stock might trade in the OTC – BulletinBoard, which is viewed by most investors as a less desirable marketplace.  In such event, the market price of the common stockmay 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKETRISK

The Company is exposed to market risks, which include changes in U.S. and internationalinterest rates as well as changes in foreign currency exchange rates as measured against the U.S. dollar and each other.  TheCompany 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.  Changesin 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 thosetransactions aimed at limiting in part the impact of currency fluctuations.  The Company has historically entered into forwardexchange contracts to protect against currency exchange risks associated with the Company’s anticipated and firm commitmentsof lira-denominated purchases for resale.

These hedging activities provide only limited protection against currency exchangerisks.  Factors that could impact the effectiveness of the Company’s programs include volatility of the currencymarkets, and availability of hedging instruments.  All currency contracts that are entered into by the Company are componentsof hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure, not forspeculation.  Although the Company maintains these programs to reduce the impact of changes in currency exchange rates, whenthe U.S. dollar sustains a strengthening position against the Euro in which the Company has anticipated purchase commitments, theCompany’s earnings could be adversely affected if future sale prices cannot be increased because of marketpressures.

ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to the filing of this report, under the supervision and with theparticipation of the Company’s management, including the Company’s chief executive and chief financial officers, anevaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) under theSecurities Exchange Act of 1934) was performed.  Based on this evaluation, such officers have concluded that theCompany’s disclosure controls and procedures were effective as of the date of that evaluation in alerting them in a timelymanner to material information relating to the Company required to be included in this report and the Company’s other reportsthat it files or submits under the Securities Exchange Act of 1934.  There were no significant changes in the Company’sinternal controls or in other factors that could significantly affect these controls subsequent to the date of theirevaluation.

Page 23
PART II.     OTHER INFORMATION

Item 6.  Exhibits and reports on Form 8-K
  
(a)

Exhibits:
       
10(a)

Sixth Amendment and Forbearance Agreement between SouthTrust Bank and Speizman Industries,Inc. effective March 31, 2003.
      
99.1

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
      
99.2

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
(b)

Reports on Form 8-K:
     
Current Report on Form 8-K: Press release announcing bank extension, dated April 2,2003.
     
Current Report on Form 8-K: Press release announcing third quarter 2003 financial results,dated May 12, 2003.
   
 

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**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
SPEIZMAN INDUSTRIES, INC.
 
            (Registrant)
  
Date:  May 13, 2003

/s/    *Robert S.Speizman*                                 
 
By:  Robert S. Speizman
 
Title:  President
    
Date:  May 13, 2003

/s/    *Paul R.M. Demmink                                *
 
By:  Paul R.M. Demmink
 
Title:  CFO/Secretary-Treasurer
 
 

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**CERTIFICATIONS**

               I, Robert S. Speizman, Chairman of the Board and President (Principal Executive Officer) of Speizman Industries, Inc., certifythat:

               1.  I have reviewed this quarterly report on Form 10-Q of Speizman Industries, Inc.

               2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

               3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,the periods presented in this quarterly report;

               4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)        Designed such disclosure controls andprocedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made knownto us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)        Evaluated the effectiveness of theregistrant’s disclosure control and procedures as of a date within 90 days prior to the filing date of this quarterly report(the “Evaluation Date”); and

c)        Presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the EvaluationDate;

               5.  The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant'sauditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)     All significant deficiencies in the design or operation ofinternal controls which could adversely affect the registrant’s ability to record, process, summarize and report financialdata and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)    Any fraud, whether or not material, that involves management or otheremployees who have a significant role in the registrant's internal controls; and

               6.  The registrant's other certifying officers and I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that could significantly affect internal controls subsequent to thedate of our most recent evaluation, including any corrective actions with regard to significant deficiencies and materialweaknesses.

Date:  May 13, 2003
  /s/*Robert S. Speizman                       *Robert S. Speizman        Chairman of the Board and President
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                I, Paul R.M. Demmink, Vice President-Finance, CFO, Secretary and Treasurer (Principal Financial Officer), of SpeizmanIndustries, Inc., certify that:

               1.  I have reviewed this quarterly report on Form 10-Q of Speizman Industries, Inc.

               2.  Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

               3.  Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,the periods presented in this quarterly report;

               4.  The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)        Designed such disclosure controls andprocedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made knownto us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)        Evaluated the effectiveness of theregistrant’s disclosure control and procedures as of a date within 90 days prior to the filing date of this quarterly report(the “Evaluation Date”); and

c)        Presented in this quarterly report ourconclusions  about the effectiveness of the disclosure controls and procedures based on our evaluation as of the EvaluationDate;

               5.  The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant'sauditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)     All significant deficiencies in the design or operation ofinternal controls which could adversely affect the registrant’s ability to record, process, summarize and report financialdata and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)    Any fraud, whether or not material, that involves management or otheremployees who have a significant role in the registrant's internal controls; and

               6.  The registrant's other certifying officers and I have indicated in this quarterly report whether or not there weresignificant changes in internal controls or in other factors that could significantly affect internal controls subsequent to thedate of our most recent evaluation, including any corrective actions with regard to significant deficiencies and materialweaknesses.

Date:  May 13, 2003
 */s/ Paul R.M. Demmink                                            *Paul R.M. Demmink        Vice President-Finance, CFO, Secretary and        Treasurer
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