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 quarterly period endedDecember 28, 2002**

**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 atFebruary 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                                                                         | 8-11         |
|                                                                                                                                                                                          |              |
|       Item 2.  Management's Discussion and Analysis of FinancialCondition            and Results ofOperations | 12-20        |
|                                                                                                                                                                                          |              |
|       Item 3. Quantitative and Qualitative Disclosure about Market Risk                                                                                         | 20           |
|                                                                                                                                                                                          |              |
|       Item 4. Controls and Procedures                                                                                                                           | 21           |
|                                                                                                                                                                                          |              |
| PART II.  OTHERINFORMATION                                                                                                                                                                    | 22           |
|                                                                                                                                                                                          |              |
|       Item 6. Exhibits  and reports on Form 8-K                                                                                                                 | 22           |

Page2          

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**Part I.    FINANCIAL INFORMATION**

**Item 1.    Financial Statements**

**SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED  BALANCE SHEETS**

|                                                                                                     |         | December 28,2002                         |   | June 29,2002                       |
|----------------------------------------------------------------------------------------------------------|--------------|------------------------------------------|--------|------------------------------------|
|                                                                                                     |         |                                          |   |                                    |
|                                                                                                     |         | (unaudited)                              |   |                               |
| **ASSETS**                                                                                               |         |                                     |   |                               |
| CURRENT:                                                                                                 |         |                                          |   |                               |
|    Cash and cash equivalents                                                                   | $            | 501,000              | $      | 970,000        |
|    Accounts receivable, less allowances of      $904,000 and $819,000 |              | 13,892,000           |   | 10,144,000     |
|    Inventories                                                                                 |         | 10,305,000           |   | 13,542,000     |
|    Income tax refund                                                                           |         | 56,000               |   | 523,000        |
|    Deferred tax asset, current                                                                 |         | 1,773,000            |   | 1,773,000      |
|    Prepaid expenses and other current assets                                                   |         | 1,197,000            |   | 1,004,000      |
|                                                                                                     |         |                                          |   |                                    |
|          TOTAL CURRENT ASSETS                                    |         | 27,724,000           |   | 27,956,000     |
|                                                                                                     |         |                                          |   |                                    |
|                                                                                                     |         |                                     |   |                               |
|                                                                                                     |         |                                     |   |                               |
|                                                                                                     |         |                                     |   |                               |
| PROPERTY AND EQUIPMENT:                                                                                  |         |                                     |   |                               |
|    Building and leasehold improvements                                                         |         | 6,890,000            |   | 6,887,000      |
|    Machinery and equipment                                                                     |         | 942,000              |   | 939,000        |
|    Furniture, fixtures and transportation equipment                                            |         | 1,563,000            |   | 1,575,000      |
|                                                                                                     |         |                                          |   |                                    |
|         Total                                                         |         | 9,395,000            |   | 9,401,000      |
|    Less accumulated depreciation and amortization                                              |         | (3,394,000)               |   | (3,089,000)         |
|                                                                                                     |         |                                          |   |                                    |
|                                                                                                     |         |                                          |   |                               |
|          NET PROPERTY AND EQUIPMENT                              |         | 6,001,000            |   | 6,312,000      |
|                                                                                                     |         |                                          |   |                                    |
|                                                                                                     |         |                                     |   |                               |
| DEFERRED TAX ASSET, LONG TERM                                                                            |         | 1,518,000            |   | 1,561,000      |
| OTHER LONG-TERM ASSETS                                                                                   |         | 875,000              |   | 428,000        |
| GOODWILL, NET OF ACCUMULATED AMORTIZATION                                                                |         | 3,790,000            |   | 3,790,000      |
|                                                                                                     |         |                                          |   |                                    |
|                                                                                                     |         |                                          |   |                               |
|                                                                                                     | $            | 39,908,000      | $      | 40,047,000     |
|                                                                                           |    |                                          |   |                                    |

See accompanying notes to condensed consolidated financialstatements.

Page 3          

----

**SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS**

|                                                                                                                                               |   | December 28,2002                   |        | June 29,2002                       |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|------------------------------------|
|                                                                                                                                               |   |                                    |   |                                    |
|                                                                                                                                               |   | (unaudited)                        |        |                               |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                     |   |                               |        |                               |
|                                                                                                                                               |   |                               |        |                               |
| CURRENT LIABILITIES:                                                                                                                               |   |                               |        |                               |
|    Accounts payable                                                                                                                      | $      | 9,633,000      | $      | 9,994,000      |
|    Customers’ deposits                                                                                                             |   | 1,452,000      |        | 1,779,000      |
|    Accrued expenses                                                                                                                      |   | 1,087,000      |        | 545,000        |
|    Current maturities of long-term debt                                                                                                  |   | 6,830,000      |        | 6,565,000      |
|    Current maturity of obligation under capital lease                                                                                    |   | 130,000        |        | 121,000        |
|                                                                                                                                               |   |                                    |   |                                    |
|                                                                                                                                               |   |                               |   |                               |
|          TOTAL CURRENT LIABILITIES                                                                         |   | 19,132,000     |   | 19,004,000     |
|                                                                                                                                               |   |                               |   |                               |
| Long-term debt                                                                                                                                     |   | 4,277,000      |   | 4,544,000      |
| Obligation under capital lease                                                                                                                     |   | 4,312,000      |   | 4,380,000      |
|                                                                                                                                               |   |                                    |   |                                    |
|           TOTAL LIABILITIES                                                                                |   | 27,721,000     |   | 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                                                                                                                   |   | (476,000)           |   | (512,000)           |
|                                                                                                                                               |   |                                    |   |                                    |
|         Total                                                                                                   |   | 12,774,000          |   | 12,706,000     |
|    Treasury stock, at cost, 140,800 shares                                                                                               |   | (587,000)           |   | (587,000)           |
|                                                                                                                                               |   |                                    |   |                                    |
|          TOTAL STOCKHOLDERS’EQUITY                                                                   |   | 12,187,000     |   | 12,119,000     |
|                                                                                                                                               |   |                                    |   |                                    |
|                                                                                                                                               |   |                               |   |                               |
|                                                                                                                                               | $      | 39,908,000     | $      | 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 Six Months Ended |
|          | 12-28-02                   | 12-29-01                 | 12-28-02 | 12-29-01 |
|          | (13 Weeks)                 | (13 Weeks)               | (26 Weeks) | (26 Weeks) |
|          |                       |                     |   |   |
| REVENUES      | $                          |  16,149,000         | $ | 15,107,000   | $ | 32,977,000 | $ | 27,284,000   |
|          |                  |                     |   |   |   |   |   |   |
| COST OF SALES |                       |  13,493,000         |   | 13,013,000   |   |   
23,700,000  
           
GROSS PROFIT
 
2,656,000
 
2,094,000  
 
5,266,000
 
3,584,000  
         
SELLING EXPENSES
 
974,000

1,412,000  

1,984,000

2,924,000  
         
GENERAL AND ADMINISTRATIVE      EXPENSES
 
1,051,000
 
 1,420,000  
 
2,425,000
 
 3,019,000  
          
OPERATING INCOME (LOSS)
 
631,000
 
(738,000) 
 
857,000
 
(2,359,000) 
         
     Net Interest Expense
 
399,000
 
582,000  
 
799,000
 
1,138,000  
          
INCOME (LOSS) BEFORE BENEFIT     FOR INCOME TAX
 
232,000
 
(1,320,000) 
 
58,000
 
 (3,497,000) 
       
INCOME TAX EXPENSE (BENEFIT)
 
69,000
 
(280,000) 
 
22,000
 
(1,030,000) 
        
NET INCOME (LOSS)

$

163,000

$

(1,040,000) 

$

36,000

$

(2,467,000) 
        
Basic loss per share
 
$  0.05

$  (0.32) 

$  0.01

$  (0.76) 

Diluted loss per share
 
0.05

(0.32) 

0.01

(0.76) 
         
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 Six Months Ended
 
12-28-02

12-29-01
 
(26Weeks)

 (26Weeks) 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
    
      Net income (loss)

$

36,000    

$

(2,467,000)

Adjustments to reconcile net loss to cash used in      operating activities:
    
          Depreciation
 
326,000    
 
431,000 

          Amortization
 
-    
 
123,000 

          Provision for inventoryobsolescence
 
-    
 
238,000 

          Provision for losses on accountsreceivable
 
85,000    
 
60,000 
          Deferred income taxes 
22,000    
 
(1,030,000)

         (Gain) Loss on disposal ofassets
 
-     
 
(5,000)

          Decrease (increase) in:
    
              Accountsreceivable
 
(3,833,000)   
 
4,326,000 

             Inventories
 
3,237,000    
 
306,000 

              Income TaxReceivable
 
467,000    
 
(66,000)

              Prepaidexpenses and other current assets
 
(193,000)   
 
(375,000)

              Otherassets
 
(447,000)   
 
30,000 

          (Decrease) increase in:
    
              Accountspayable
 
(361,000)   
 
(2,558,000)

              Accruedexpenses and customers’ deposits
 
268,000    
 
218,000 
 
          Net cash used in operatingactivities
 
(393,000)   
 
(769,000)
 
CASH FLOWS FROM INVESTING ACTIVITIES:
    
      Capital expenditures
 
(28,000)   
 
(13,000)

      Proceeds on sale of assets
 
13,000    
 
11,000 
 
          Net cash used in investingactivities
 
(15,000)   
 
(2,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
    
      Net borrowings on line of credit agreement
 
1,057,000    
 
1,153,000 

      Principal payments on capital lease obligation
 
(59,000)   
 
(30,000)

      Principal payments on long-term debt
 
(1,212,000)   
 
(352,000)

      Proceeds from notes payable
 
153,000    
 
- 
 
          Netcash provided by (used in) financingactivities
 
(61,000)   
 
771,000 
      
NET INCREASE (DECREASE) IN CASH
 
(469,000)   
 
- 

CASH AND CASH EQUIVALENTS at beginning of period
 
970,000    
 
- 
 
CASH AND CASH EQUIVALENTS at end of period

$

501,000    

$

- 
      
Supplemental Disclosures:
    
      Cash paid(refunded) during period for:
    
          Interest

$

874,000    

$

1,144,000 

          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**
 
**Common Shares**

**Common Stock**

**Additional Paid-In Capital**

  

**Retained Earnings (accumulated deficit)**

 

**Accumulated Other Comprehensive Loss**

**Treasury Stock**

**Comprehensive Loss**
                 
BALANCE, JULY 2, 2000

3,393,228

$

339,000

$

13,045,000

$

10,693,000 

$

-  

$

(587,000)

$
 
Net loss

-

-

-

(5,863,000)
 
-  

- 

(5,863,000)

Accumulated Comprehensive     loss - Interest rate swap, net       of tax

 -

 -

 -

 - 
 
 (264,000) 

 - 

 (264,000)
             
    Comprehensive Loss 

-

-

-

- 
 
-  

- 

$

(6,127,000)
            
Exercise of stock options

3,000

1,000

2,000

- 
 
-  

- 
      
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     Income - 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

-
 
-
 
-
 
36,000 
 
-  
 
- 
 
36,000 

Accumulated Comprehensive     loss - Interest rate swap, net       of tax

 -
 
 -

 -

 - 
 
32,000 

 - 

32,000
              
    Comprehensive Income 

-
 
-
 
-
 
- 
 
-  
 
- 

$

68,000
       
BALANCE, DECEMBER 28, 2002

 3,396,228

$

340,000

 $

13,047,000

 $

(476,000) 

 $

(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 FinancialStatements.

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

TheCompany, in some instances with its laundry equipment and services business, is engaged in installation projects for customers on acontract basis.  Some contracts call for progress billings.  In such cases, the Company uses the percentage of completionmethod to recognize revenue whereby sales are recorded based upon the ratio of costs incurred to total estimated costs atcompletion.  Deferred revenue was $559,000 at December 28, 2002 and immaterial at June 29, 2002.

Note 3.         Inventories

              Inventories consisted of the following:
 
December 28,

June 29,
 
2002

2002
   
(unaudited)
 
Machines

$

5,697,000

$

8,705,000

Parts and supplies
 
4,608,000
 
4,837,000
  
        Total

$

10,305,000

$

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 December 28, 2002 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 loss per share includes no dilution and is calculated by dividing net loss bythe weighted average number of common shares outstanding for the period.  Diluted net loss per share reflects the potentialdilution of securities that could share in the net income of the Company, which consists of stock options using the treasury stockmethod.  In a period with a net loss, the weighted average shares outstanding will be the same for basic and diluted net lossper share.

Page 8         
   
Note 6.       Risk Management and Derivative FinancialInstruments

Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instrumentsand Hedging Activities (SFAS 133), as amended by SFAS No. 137 and SFAS No. 138, establishes accounting and reporting standards forderivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. SFAS 133, as amended, requires the Company to recognize all derivative instruments on the balance sheet at fair value.  If thederivative is a hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets,liabilities, or firm commitments through earnings or recognized in other comprehensive income (equity) until the hedged item isrecognized in earnings.  The ineffective portion of a derivative’s change in fair value is recognized inearnings.

The Company has historically entered into forward exchange contracts to reduce the foreigncurrency exchange risks associated with its committed and anticipated Euro denominated purchases, and not for speculation.  Asof December 28, 2002, the Company had no foreign exchange contracts outstanding.

The Company had one interest rate swap derivative designated as a cash flow hedge atDecember 28, 2002.  The change in the fair market value during the current year was a gain of $32,000 net of tax expense, andwas recognized in Other Comprehensive Income/Loss at December 28, 2002.  For interest rate swap agreements, increases orreductions in 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 December 31,2002, the Company entered into a Fifth Amendment and Forbearance Agreement relating to its credit facility with SouthTrust Bank,extending the maturity date until March 31, 2003.  The credit facility, as amended, provides a revolving credit facility up to$13.0 million and an additional line of credit for issuance of documentary letters of credit up to $6.0 million. Theavailability under the combined facility is limited to a borrowing base as defined by thebank.  The Company, as of January 24, 2003, had borrowings with SouthTrust Bank of $6.0 million under the revolving credit facility and had unused availability of$1.3 million.  The Fifth Amendment requires monthly compliance on certain EBITDA targets through March 2003. 

Advances under the revolving credit facility and line of credit as amended are broken downinto two components for the calculation of interest expense: the London Interbank Offered Rate (LIBOR) component that accruesinterest at the LIBOR rate plus 11⁄2% to 21⁄2%, and a base rate component that accrues interest at prime plus11⁄4%.  The rates are scaled based upon the Company’s funded debt as defined in the original Credit FacilityAgreement.   Prior to the Second Amendment and pursuant to the terms of the First Amendment dated November 13, 2000, the LIBORcomponent accrued interest at the LIBOR rate plus 3%, and the base rate component accrued interest at prime plus 11⁄4%. The Company also has in effect an interest rate swap derivative that fixes the interest rate for advances under the LIBOR componentat 7.79% plus the applicable margin for borrowing levels of $5.0 million, which expires on June 2, 2003.  As of December 28,2002, amounts outstanding of $6.0 million were advanced under the LIBOR component at a rate of 1.84% plus 2.5%.  The facilityis secured by all the assets of the Company.

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

Page 9          
   
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 in U.S. dollars.  At December 28,2002, 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:
 
December 28, 2002

June 29, 2002
  
Total

Total
 
Revolving Credit Facility 

$

6,057,000 

$

5,000,000 

Trade notes payable
 
  5,050,000 
 
  6,109,000 
   
Total
 
11,107,000 
 
11,109,000 

Current maturities
 
  (6,830,000)
 
  (6,565,000)
    
$

  4,277,000 

$

  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 general corporate expenses,amortization of debt issuance costs, interest expense related to the Company’s credit facility and elimination ofintersegment balances.  The table below summarizes financial data by segment. 

Segment Information

Six Months

Total Textile

Total Laundry
  **Ended December**** Segment ****Segment****Corporate ** Total 
Net Sales

2002

$

19,185,000 
 
13,792,000 
 
- 

$

 32,977,000 
 
2001

$

 16,744,000 
 
10,540,000 
 
- 

$

27,284,000 
          
Earnings (Loss) before Interest       & Taxes 

 2002

$

   901,000 
 
485,000 
 
(529,000)

$

857,000 
 
2001

$

   (939,000)
 
(720,000)
 
(700,000)

$

(2,359,000)
          
Capital Expenditures

2002

$

18,000 
 
10,000 
 
- 

$

28,000 
 
2001

$

11,000 
 
2,000 
 
- 

$

13,000 
          
Depreciation and Amortization 

2002

$

149,000 
 
16,000 
 
161,000 

$

326,000 
 
2001

$

389,000 
 
42,000 
 
123,000 

$

554,000 
  
        
Interest Expense 

2002

$

455,000 
 
2,000 
 
342,000 

$

799,000 
 
2001

$

633,000 
 
4,000 
 
501,000 

$

1,138,000 

 

Segment Information

Three Months

Total Textile

Total Laundry
  **Ended December**** Segment ****Segment****Corporate ** Total 
Net Sales

2002

$

10,698,000 
 
5,451,000 
 
- 

$

 16,149,000 
 
2001

$

 9,877,000 
 
5,230,000 
 
- 

$

15,107,000 
          
Earnings (Loss) before Interest       &Taxes 

 2002

$

   664,000 
 
233,000 
 
(266,000)

$

631,000 
 
2001

$

   (285,000)
 
(141,000)
 
(312,000)

$

(738,000)
          
Capital Expenditures

2002

$

12,000 
 
10,000 
 
- 

$

22,000 
 
2001

$

4,000 
 
- 
 
- 

$

4,000 
          
Depreciation and Amortization 

2002

$

74,000 
 
8,000 
 
80,000 

$

162,000 
 
2001

$

194,000 
 
21,000 
 
61,000 

$

276,000 
  
        
Interest Expense 

2002

$

284,000 
 
1,000 
 
114,000 

$

399,000 
 
2001

$

368,000 
 
3,000 
 
211,000 

$

582,000 
          
Total Assets
         
      December28, 2002 (unaudited) 

$

30,672,000 

$

10,698,000 

$

(1,462,000)

$

 39,908,000 

      June 29, 2002 

$

30,258,000 

$

9,789,000 

$

- 

$

40,047,000 

 

Page 11          
   
**MANAGEMENT'S DISCUSSION 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 $16.1 million for the second quarter of fiscal 2003 from $15.1million for second quarter in fiscal 2002.  Revenues for the textile division increased to $10.7 million in the second quarterof fiscal 2003 from $9.9 million for second quarter fiscal 2002.  Revenues for the laundry division increased to $5.4 millionfrom $5.2 million last year.

For the six months ended December 28, 2002, total revenues increased 20.9% to $33.0million from $27.3 million in the prior year.  Revenues for the textile division increased to $19.2 million from $16.8 millionin the prior year.  Laundry revenues increased 31.5% to $13.8 million from $10.5 million in the prior year.  The increasein both divisions reflects an increase in sales of new machinery.

Gross profit for the second quarter increased 28.6% to $2.7 million from $2.1 million inthe second quarter of last year.  As a percentage of revenues, gross profit increased to 16.5% from 13.9% in the prioryear.  Second quarter gross margin increased slightly in the textile division from 15.6% in 2002 to 15.7% in 2003. Reductions in customer service costs of $87,000 included in cost of sales and improvements in new equipment margins were offset bylower margins on inventory that the Company is liquidating to reduce inventory levels.  Second quarter gross margin for thelaundry division increased to 17.9% from 10.7% for the same quarter of last year.  The improvement in the laundry division wasdue primarily to higher equipment margins of 18.7% from 12.1% last year, higher service revenue of $194,000 and lower customer

Page 12          
   
service costs of $107,000 compared with the prior year.  Laundry product margins were lower last year because the product mixincluded large installation projects which typically have lower profit margins. 

Gross profit for the six months ended December 28, 2002, increased to $5.3 million from$3.6 million in 2001.  As a percentage of sales, gross profit increased to 16.0% from 13.2% last year.  The increase ingross profit is attributable to the increase in sales volume noted above and to the reduction of service related salaries includedin cost of sales for both divisions totaling $512,000.

Selling expenses decreased to $1.0 million in the second quarter of fiscal 2003 from $1.4million last year.  As a percentage of sales, selling expenses decreased to 6.0% from 9.4%.  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 $2.0 million (6.1% of sales) in the six months endedDecember 28, 2002, as compared to $2.9 million (10.8% of sales) in the same period last year.  The decrease is primarily dueto a change in the Company’s sales compensation plans that reduced the fixed component of the salesmen’ssalaries.  As a percentage of revenues, the increase also reflects the increased revenues noted above.

General and administrative expenses decreased to $1.1 million (6.5% of sales) in thesecond quarter of fiscal 2003 from $1.4 million (9.4% of sales) in the second quarter of last year.  The reduction in generaland administrative expenses reflects management’s continued emphasis on controlling costs, primarily payroll relatedcosts.

For the six months ended December 28, 2002, general and administrative expenses decreased20.0% to $2.4 million from $3.0 million in the same period last year.  The decrease primarily reflects a reduction in payrollrelated expenses as the Company continues to right size its operations.

The reduction in interest expense in the second quarter of 2003 reflects the reduction inborrowings under the Company’s revolving line of credit and reduced interest rates.

Interest expense decreased to $799,000 in the six months ended December 28, 2002, from$1.1 million in the prior year.  The decrease is due to a $159,000 reduction in interest on the Company’s capital leaseobligations as a result of an amendment to the lease in January 2002.  The remainder is due to reduced borrowing rates and alower level of borrowing under the Company’s revolving line of credit.

The provision for income tax in the current quarter was $69,000 or 30.0% of the currentpre-tax income.  This compared to a benefit of $280,000 for income tax for the same period last year or 22.0% of the pre-taxloss.  For the six months period ended December 2002 and 2001, the effective rates were 38.0% and 29.5%, 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 December 28, 2002 was $163,000, or $0.05 per basic anddiluted share, compared to a net loss of $1.0 million or $0.32 per basic and diluted share for the quarter ended December 29,2001.

Net income for the six months ended December 28, 2002, was $36,000 or $0.01 per basic anddilutive share, as compared to a net loss of $2.5 million, or $0.76 per basic and dilutive share for the same period lastyear.

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 credit

Page 13          
   
facility with SouthTrust Bank, N.A.  The agreement with SouthTrust as amended on December 31, 2002, expires on March 31, 2003and provides a revolving line of credit up to $13.0 million and an additional line of credit for issuance of Documentary Letters ofCredit up to $6.0 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 January 24, 2003, theCompany’s revolving line of credit was $6.0 million and the usage for documentary letters of credit was $6.0 million. The unused amount available to the Company as determined by the Bank was $1.2 million.  Amounts outstanding under the line ofcredit for direct borrowings bear interest based upon two components:  London Interbank Offered Rate (LIBOR) plus theapplicable margin (1.5% to 2.5%) for a short term fixed period and prime plus the applicable margin (0% to 1.25%) for the non-fixedperiod.  The rates vary based upon the Company’s funded debt as defined in the loan agreement.    Inconnection with the SouthTrust facility, the Company granted a security interest in all assets of the Company. 

Working capital at December 28, 2002 was $8.6 million, a decrease of $400,000 from $9.0 atJune 29, 2002.  The working capital ratio at December 28, 2002 was 1.45 compared with 1.47 at June 29, 2002.  Net cashused by operating activities was $393,000 for the six months ended December 28,2002 compared with $769,000 used by operatingactivities during the same period in 2001.  

The increase of $3.8 million in accounts receivable during the first half of fiscal 2003primarily resulted from greater than average shipment (and sales) of textile equipment in December,including a largeorder. 

The reduction in inventory of $3.2 million was primarily due to sales of stock textileequipment.   Inventory reserves of $524,000 were released during the first six months of fiscal 2003 for certain stockequipment that was liquidated at below cost in order to reduce inventory levels.

 The income tax refund decreased $467,000 due to receipt of cash associated with theFederal Income tax refund.

Prepaid expenses and other current assets increased $193,000 during the first half offiscal 2003.  The increase is primarily due to the payment of property and liability insurance premiums that are recorded as aprepaid asset and ratably reduced over the year. 

Other long-term assets increased $447,000 during the first half of fiscal 2003.  Theincrease is due to the reclassification of accounts receivable to long term for two customers in which payments are not anticipatedwithin one year due to restructuring of one receivable and litigation associated with the other.

Deferred revenue increased $545,000 during the first half of fiscal 2003.  Theincrease is associated with a large sales commission from a vendor on equipment that is being recognized as the equipment ships andfor a large laundry installation project in process.

 Cash used in investing activities was $15,000 and resulted from capital expenditures of$28,000 offset by proceeds from sales of fixed assets of $13,000.

Net cash used in financing activities was $61,000 for the six months ended December28,2002.  Principal payments of trade debt obligations were $1,314,000 offset by borrowings from banks of$1,253,000.

The Company’s credit facility with SouthTrust matures March 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

Page 14          
   
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.

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.

*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.

*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 division during the first six months of fiscal 2003.  Consistent with the cost saving initiatives thatbegan in fiscal year 2001, the Company continues to look for ways to reduce its expenses to help mitigate the adverse effects fromthe decline in textile equipment bookings. 

Page 15          
   
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 half of fiscal 2003, the overall market demand for seamless actionwear machines has decreased significantly since itspeak two years ago.  The Company does not feel that this is the end of the demand for seamless type garments.  However,it now appears that only the large, well-capitalized underwear and lingerie firms who have significant resources with brand namesand direct relationships with major retail outlets will have the ability to purchase significant quantities of additional seamlessgarment 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 has declined significantly in the past12 – 15 months.  Proposals for larger installation projects continue to remain active; however, if successful, marginswill continue to be slightly lower as a result of increased competition in a relatively tight 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.

EMPLOYEES

As of December 28, 2002, the Company had 115 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 January 31, 2003, the Company’s backlog of unfilled equipment orders wasapproximately $10.3 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.

Page 16          
   
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 January 24, 2003, Speizman had $6.0 million in borrowings under its line of creditfacility with Southtrust Bank.  The scheduled maturity date for this facility is March 31, 2003.  The Company currentlydoes not have the financial resources to repay this debt when it becomes due and will therefore need to refinance this debt priorto the maturity date.  There is no assurance that the Company will be able to refinance this debt with another lender on atimely basis, on commercially reasonable terms, or at all.  Additionally, the textile industry has continued to experiencetightened lending practices from traditional financial institutions which may further hinder Speizman’s ability to refinancethis debt, especially in light of Speizman’s recent financial losses.  If Speizman is unable to refinance this debt orobtain needed additional capital, it would be required to significantly reduce its operations, dispose of assets and/or selladditional securities on terms that could be dilutive to current stockholders.

*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 refinance its existing credit facility at maturity for a new term extendingbeyond July 31, 2003.

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.

Page 17          
   
*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 six months ended December 28, 2002, the Company used cash from operating activities of $393,000. Although the Company has returned to profitability for the six months ended December 28, 2002, Speizman will need to generatecontinued increases in its revenues, or reductions in overhead in order to generate cash from operatingactivities.  

*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. 

*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

Page 18          
   
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.

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.

Page 19          
   
*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 February 10, 2003, the closing per share bid price for the Company’s commonstock was $0.44.  The Company has been notified by Nasdaq that unless its common stock maintains a closing bid price of atleast $1.00 for a minimum period of 10 consecutive trading days by February 10, 2003, the Company’s common stock will bedelisted.  On January 30, 2003, Nasdaq issued a press release proposing to extend the grace period for compliance with theminimum bid requirement from 180 days to 540 days.  Management believes that, if the proposal is adopted, its common stockwould be included in the extended grace period.

On January 24, 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 April 24,2003, 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.

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.

 

Page 20          
   
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.

The Company is also subject to interest rate exposure on $6.1 million of debt outstandingat December 28,  2002 that was priced at interest rates that float with the market.  The Company has an interest rateswap to hedge adverse interest rate changes on a portion of this debt; specifically for borrowing levels of $5.0 million, interestis fixed at 7.79%, exclusive of a margin for the bank at 250 basis points.  The swap expires June 2, 2003. 

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.

 

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PART II.    OTHER INFORMATION

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

Exhibits:
     
10(a)

Fifth Amendment and Forebearance Agreement between SouthTrust Bank and SpeizmanIndustries, Inc. effective December 31, 2002.
      
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:
      
None.

Page 22          
   
 

**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:  February 11, 2003

/s/    *Robert S.Speizman*                              
 
By:  Robert S. Speizman
 
Title:  President
    
Date:  February 11, 2003

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

 

Page 23          
   
**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:  February 11, 2003

 
 
/s/*Robert S. Speizman                                                             *Robert S. SpeizmanChairman 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:  February 11, 2003

 

*  /s/ Paul R.M. Demmink                                                  *Paul R.M. DemminkVice President-Finance, CFO, Secretary andTreasurer

 
 
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