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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended December 28, 1996
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OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No fee required]
For the transition period from to
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Commission file number 333-4723
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Clark-Schwebel Holdings, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3883016
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2200 South Murray Avenue, Anderson, SC 29622
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(Address of Principal Executive Offices) (Zip Code)
(864) 224-3506
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ ].
No voting stock is held by any non-affiliates of the registrant as of December
28, 1996.
As of December 28, 1996, there were 9,000 shares outstanding of common stock of
Clark-Schwebel Holdings, Inc.
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CLARK-SCHWEBEL HOLDINGS, INC.
FORM 10-K ANNUAL REPORT FOR
FISCAL YEAR ENDED DECEMBER 28, 1996
TABLE OF CONTENTS
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PAGE NO.
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PART I
ITEM 1. Business 4
ITEM 2. Properties 11
ITEM 3. Legal Proceedings 11
ITEM 4. Submission of Matters to a Vote of Security Holders 11
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters 12
ITEM 6. Selected Financial Data 13
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 16
ITEM 8. Financial Statements and Supplementary Data 22
Independent Auditors' Report 23
Consolidated Balance Sheets as of
December 30, 1995 and December 28, 1996. 25
Consolidated Statements of Income for the
years ended December 28, 1996, December 30, 1995
and December 31, 1994. 26
Consolidated Statements of Cash Flows for the years
ended December 28, 1996, December 30, 1995
and December 31, 1994. 27
Notes to Consolidated Financial Statements. 28
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 40
PART III
ITEM 10. Directors and Executive Officers of the Registrant 41
</TABLE>
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<TABLE>
<S> <C> <C>
ITEM 11. Executive Compensation 43
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 45
ITEM 13. Certain Relationships and Related Transactions 47
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 49
SIGNATURES 52
EXHIBIT INDEX 55
</TABLE>
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PART I
ITEM 1. BUSINESS
General
Except where the context indicates otherwise, the term "the Company"
refers to the registrant, Clark-Schwebel Holdings, Inc., and its wholly owned
subsidiary, Clark-Schwebel, Inc.
The Company believes it has been a leading manufacturer and marketer of
industrial fabrics, including electronics fiber glass fabric, composite
materials fiber glass fabric and high performance fabrics since the founding of
the business in 1960. The Company believes it is the largest producer of fiber
glass fabrics for use in the growing electronics industry, with an estimated 50%
market share in the United States. Fiber glass fabrics are a critical component
used in the production of printed circuit boards, which are integral to
virtually all advanced electronic products, including computers,
telecommunications equipment, advanced cable television equipment, network
servers, televisions, automotive equipment and home appliances. The Company's
fiber glass fabrics are also used in composite materials to strengthen, insulate
and enhance the dimensional stability of hundreds of products in a variety of
markets, such as aerospace, coating and laminating, marine and tooling, building
insulation and sports equipment. The Company is also a leading manufacturer of
high performance fabrics composed of Kevlar(R), Spectra(R) and quartz fibers.
High performance fabrics composed of Kevlar(R), the most widely used aramid
fiber, are used primarily in ballistic protection products, such as vests and
helmets worn by state, local and private police forces and the military, and in
composite materials for aerospace applications.
The Acquisition
Clark-Schwebel Holdings, Inc., its wholly owned subsidiary, Clark-S
Acquisition Corporation ("Clark-S Acquisition"), and Clark-S Acquisition's
wholly owned subsidiary, CS Finance Corporation of Delaware, were all
incorporated in Delaware by Vestar Equity Partners, L.P. ("Vestar") in 1996 to
effect the acquisition (the "Acquisition") of Fort Mill A Inc. ("Fort Mill") and
Clark-Schwebel, Inc., Fort Mill's wholly owned subsidiary. Pursuant to an
Agreement and Plan of Merger, dated February 24, 1996, as amended (the "Merger
Agreement"), among Vestar/CS Holding Company, L.L.C. ("Vestar/CS Holding"),
Clark-S Acquisition, Springs Industries, Inc. ("Springs Industries") and Fort
Mill, Clark-S Acquisition purchased all of the issued and outstanding capital
stock of Fort Mill from Springs Industries. Concurrently with the consummation
of the Acquisition, Clark-S Acquisition merged into Fort Mill, with Fort Mill as
the surviving corporation, and CS Finance Corporation of Delaware merged into
Clark-Schwebel, Inc. with Clark-Schwebel, Inc. as the surviving corporation. On
the day following the Closing, Fort Mill merged (the "Merger") into
Clark-Schwebel, Inc., and immediately following such merger, Clark-Schwebel
Holdings, Inc.'s primary asset is the capital stock of Clark-Schwebel, Inc.
Clark-Schwebel, Inc. had been incorporated as a Delaware corporation in 1994.
The consideration for the Acquisition was $192.9 million in cash. In
order to finance the Acquisition, including the payment of related fees and
expenses: (i) Vestar/CS Holding and certain key members of management and their
lineal descendants (the "Management Investors") made an equity contribution of
$45.0 million in exchange for all of the capital stock of Clark-Schwebel
Holdings, Inc.; (ii) Clark-S Acquisition consummated an offering of $110.0
million in Senior Notes (the "Senior Notes"); and (iii) Clark-S Acquisition
entered into a Credit Agreement (the "Credit Agreement") providing for
borrowings of up to $70.0 million (of which approximately $50.0 million was
drawn at Closing). Clark-Schwebel Holdings, Inc. guaranteed the indebtedness
under the Senior Notes and the Credit Agreement. As a result of these
transactions, the obligations of Clark-S Acquisition with respect to the Senior
Notes and the Credit Agreement were assumed by the Company. On August 5, 1996,
the Company consummated the exchange of $110 million principal amount of Senior
Notes registered under the Securities Act of 1933, as amended, for the $110
million principal amount of Senior Notes issued in connection with the
Acquisition.
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Electronics Fiber Glass Fabric
The Company believes it is a leading producer of electronics fiber glass
fabric in the United States. The Company sells fiber glass fabric to
manufacturers of high pressure laminates ("HPL") who, in turn, convert fiber
glass fabric into rigid and thin core laminates that are sold to manufacturers
of single-sided, double-sided and multilayered printed circuit boards. Printed
circuit boards require a highly engineered substrate material on which to mount
and interconnect semiconductor chips, passive electronic devices and other
electronic components. Due to its low cost, high strength, dimensional
stability, temperature resistance and electrical insulating properties, fiber
glass fabric has proven to be the most effective substrate material used in the
manufacture of printed circuit boards. In addition, the Company believes that
currently there is no cost-effective substitute material which can satisfy the
stringent quality and performance specifications required of fiber glass fabric
for HPLs in printed circuit boards. Electronics fiber glass fabric represented
57.6%, 58.9% and 62.9% of the Company's net sales in 1994, 1995 and 1996,
respectively.
The Company continues to capitalize on the growth in demand for printed
circuit boards resulting from (i) the development of increasingly complex
electronics products, including personal computers, cellular phones, pagers and
portable computing devices, and (ii) the increasing electronic content of
products in which such use has been historically absent or limited, such as
automobiles, home appliances and medical equipment.
Composite Materials Fiber Glass Fabric
Fiber glass fabrics are also used in composite materials for the
aerospace, coating and laminating, marine and tooling, building insulation and
sports equipment markets. Composite materials fiber glass fabric is used in
various applications which require combinations of fiber glass' inherent
properties, including light weight, strength, temperature and flame resistance,
moisture and chemical resistance, and durability. The Company's customers
produce composite materials by impregnating fiber glass fabric with
thermosetting epoxy and phenolic resin systems. Applications of composite
material fiber glass fabric include aircraft components, such as interior
paneling systems and passenger overhead storage compartments. Fiber glass
fabrics are also used in a wide range of other industrial applications, such as
Teflon(R) coated conveyor belts, window shades, movie screens, electrical
insulation products, marine construction materials, automotive tooling and
roofing materials. Composite materials fiber glass fabric represented 23.9%,
18.5% and 21.3% of the Company's net sales in 1994, 1995 and 1996, respectively.
The Company's fiber glass fabrics can be found on major airframe programs
at The Boeing Company, McDonnell Douglas Corporation and Airbus Industries. The
Company expects increases in commercial aircraft build rates over the next
several years. The growing global economy and governmental regulations forcing
the removal of older, louder, less fuel efficient aircraft are expected to drive
demand for new aircraft.
High Performance Fabrics
The Company believes it is a leading producer of high performance fabrics
used primarily to make ballistic protection products, such as vests and helmets
worn by state, local and private police forces and the military and to reinforce
composite materials for aircraft applications. The Company's high performance
fabrics possess physical properties such as durability, low weight and high
tensile strength. The Company's line of high performance products are
manufactured by arranging and finishing aramid and other materials, such as
Kevlar(R), Spectra(R) and quartz. Wide ranges of fiber types and construction
patterns provide broad design potential, allowing the Company to manufacture
high performance fabrics to meet stringent customer standards. For instance, the
Company manufactures Kevlar(R) fabric, the most widely used aramid fabric,
according to ballistic design parameters determined by performance criteria of
the end product. The Company sells ballistic protection fabrics designed to
capture high mass, relatively low velocity bullets as well as ballistic
protection fabrics designed to capture low mass, high velocity fragments. High
performance fabrics represented 18.5%, 22.6% and 15.8% of the Company's net
sales in 1994, 1995, and 1996, respectively.
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Business Strategy
The Company's business strategy is to increase sales and profitability by
capitalizing on its leading position in the fiber glass fabrics industry and the
expected increased demand for printed circuit boards. The Company believes that
its long-standing customer and supplier relationships, manufacturing and
technical expertise, and commitment to providing consistent, high quality
products will enable the Company to maintain its leading position in the
industry.
The Electronics Fiber Glass Fabric Industry
Fiber glass fabric suppliers to the electronics industry, such as the
Company, convert fiber glass yarn into a variety of fabrics which are then sold
to HPL manufacturers. HPL manufacturers, in turn, convert fiber glass fabric
into rigid, layered laminates that are sold to printed circuit board
manufacturers. There are many intermediate steps between the manufacture of
unstuffed printed circuit boards (i.e. without semiconductors) and final
electronics products. The following chart illustrates the role of electronics
fiber glass fabric suppliers in the large and growing electronics industry.
United States Electronics Market Supply Chain
1996 Sales
Electronics $354.1 Billion
Printed Circuit Boards $7.1 Billion
High Pressure Laminates $1.1 Billion
Fiber Glass Fabrics $280 Million
Fiber Glass Yarn $135 Million
Sources: PCI Report (December 1996) Henderson Electronic Market Forecast
(December 1996) and Company estimates.
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Increasing Demand for Electronic Products. Fiber glass fabrics are a
critical component in the production of printed circuit boards, which are used
in virtually all electronics products. Demand for electronics products has
experienced substantial growth in recent years and is expected to continue to
grow due to expanded applications for computer systems, technological
advancements and new product introductions. This growth is primarily
attributable to the development of more complex and sophisticated electronic
products, including cellular phones, pagers, personal computers and portable
computing devices, as well as the increasing electronic content of products in
which such use has been historically absent or limited, such as automobiles,
home appliances and medical equipment.
The following table illustrates the historical growth of the major
end-user markets for electronics fiber glass fabric.
United States Electronic Equipment Production
(Dollars in Billions)
<TABLE>
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Historical
CAGR
1992 1993 1994 1995 1996 1992 -1996
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Computer office equipment .. $ 82.7 $ 91.5 $106.8 $125.7 $143.1 14.7%
Industrial/Instrumentation . 57.6 61.5 67.1 77.5 84.9 10.2
Communications ............. 36.7 40.2 47.9 53.6 59.8 13.0
Military ................... 52.2 49.0 45.5 44.5 43.7 (4.3)
Automotive/Consumer ........ 16.9 18.2 20.9 21.6 22.6 7.5
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Total .................... $246.1 $260.5 $288.2 $322.9 $354.1 9.5%
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</TABLE>
Source: PCI Quarterly Forecast (4th Quarter 1995) and Henderson Electronic
Market Forecast (December 1996)
High Performance Standards. As the proliferation of advanced electronics
products continues, electronics producers require printed circuit boards and
fiber glass materials which: (i) operate at higher speeds and frequencies; (ii)
have higher temperature tolerances; and (iii) have reliable, predictable
performance characteristics. Printed circuit boards that perform at faster
speeds with limited power usage must employ printed circuit materials with
improved electrical conductivity properties and insulating characteristics. The
ability of printed circuit boards to perform in high temperature environments is
directly correlated to the electronic materials used to construct the board.
Printed circuit board components must have consistently manufactured dimensional
characteristics and purity to extremely high tolerance levels in order for
printed circuit board manufacturers to achieve acceptable production yields.
Faster Production Cycles Require Closer Collaboration with Customers.
Competitive pressures have led electronic equipment manufacturers to introduce
new products and increase production volume to satisfy growing commercial
demand. These trends have increased the level of collaboration among system
providers, fabricators and printed circuit materials suppliers. Manufacturers of
electronics component materials, such as the Company, must maintain strong
customer and supplier relationships and provide greater technical support to
high pressure laminators on a timely basis.
Product Characteristics
The versatility of fiber glass fabric makes it a unique industrial
material. The Company's fiber glass fabrics offer an excellent combination of
properties from high strength to fire resistance. Wide ranges of yarn sizes and
weave patterns provide broad design potential, enabling the Company to work with
its customers to choose the best combination of material performance, economics
and product flexibility. Fiber glass fabrics have the properties shown below:
- Dimensional Stability. Fiber glass is a dimensionally stable
engineering material. Fiber glass does not stretch or shrink after
exposure to extremely high or low temperatures.
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- Moisture Resistance. Fiber glass does not absorb moisture and does
not change physically or chemically when exposed to water.
- High Strength. The high strength-to-weight ratio of fiber glass
makes it a superior material in applications where high strength
and minimum weight are required. When manufactured into a fiber
glass fabric, this strength can be unidirectional or
bi-directional, allowing flexibility in design and cost.
- Temperature Resistance. Fiber glass is an inorganic material and
does not burn or support combustion.
- Chemical Resistance. Most chemicals have little or no effect on
fiber glass. Fiber glass fabric does not mildew, rot or
deteriorate.
- Electrical Properties. Fiber glass fabric is an excellent material
for electrical insulation. The combination of properties such as
low moisture absorption, high strength, heat resistance and low
dielectric constant makes fiber glass fabric suitable as a
reinforcement for printed circuit boards and insulating varnishes.
- Thermal Conductivity. High thermal conductivity properties enable
fiber glass fabric to rapidly dissipate heat.
Product Applications
The Company manufactures approximately 600 products which are used in a
broad range of technical, highly engineered product applications as shown below:
<TABLE>
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Percentage
of 1996 Product
Product Market Net Sales Application
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Electronics Fiber High pressure 62.9% Personal and mainframe computers,
Glass Fabric laminates printers, cellular telephones, automotive
manufactured for electronics, advanced cable television
printed circuit equipment, personal communication
boards devices, network servers
Composite Materials Aerospace, 21.3% Commercial aircraft components, water
Fiber Glass Fabric Coating/ skis, electrical cable insulation, movie
Laminating, screens, window shades, pollution
Filtration, Marine, control, reinforced roofing products.
Tooling, Building
High Performance Aerospace, 15.8% Bullet-resistant vests and helmets,
Fabrics Ballistics aircraft interior/exterior components
(Kevlar(R), Spectra (R),
quartz)
</TABLE>
Research And Development
The Company has a modern, well-equipped research and development
laboratory located at its headquarters in Anderson, South Carolina. The
laboratory is equipped to (i) test the physical properties of yarns, fabrics,
and high pressure laminates and the chemical analysis of finishes, sizings and
resins and (ii) produce laminate samples similar to those made by its customers.
The Company's product development and technical staff works with the
in-house technical staffs of its customers in the early stages of product
development to produce and manufacture products with certain qualities and
performance specifications to meet specific customer needs. The Company believes
that its emphasis on product development and technology exchanges with its
German and Japanese joint ventures has enhanced its technical knowledge and
ability to serve its customers.
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Customers
The Company's customer list includes many leading companies in their
respective industry segments. In 1996, the Company sold its products to nearly
500 customers, with the ten largest accounting for approximately 70% of net
sales. Sales to two of the Company's customers, Allied-Signal Laminate Systems
and Park Electrochemical, each accounted for more than 10% of the Company's 1996
net sales. Sales to the two customers represented as a percentage of net sales
40.2% in 1994, 42.3% in 1995, and 43.3% in 1996, respectively. The Company's top
ten customers have been customers for over five years.
As customers seek to establish closer relationships with suppliers, the
Company expects the concentration of its customer base to increase. The Company
believes that each of its four largest electronics customers purchased over 50%
of its fiber glass fabrics supplies from the Company in 1996. If, for any
reason, any of its key customers were to purchase significantly less of the
Company's products in the future, such decreased level of purchases could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company markets its products primarily through a direct sales force
and distributes its products primarily through the use of common carriers. The
Company generally manufactures products according to customer forecasts and
regular communications with its customers.
Raw Materials
The principal materials used in the manufacture of the Company's products
are fiber glass, Kevlar(R) and Spectra(R) yarns, PVA sizing and silane binding
agents and coating materials. Over the past 35 years, the company has developed
close beneficial relationships with the two companies that produce virtually all
the fiber glass yarn manufactured in North America, PPG Industries, Inc. and
Owens-Corning Fiberglas Corporation. The Company currently purchases
substantially all of its fiber glass yarn from these two suppliers. Based on its
long-standing relationships with its fiber glass yarn suppliers and the volume
of its purchases, the Company believes it receives favorable terms on its
purchases of fiber glass yarn. DuPont, the sole manufacturer of Kevlar(R), has
provided its Kevlar(R) yarn to the Company for more than 20 years. The Company
currently purchases substantially all of its aramid yarn from this one supplier.
There are a limited number of manufacturers of fiber glass yarn and aramid yarn.
Any disruption in the ability or willingness of the Company's suppliers to
deliver fiber glass or aramid yarn to the Company, or any adverse changes to the
terms governing its yarn purchases, could have a material adverse effect on the
Company's business, financial condition, and results of operations.
Through mid-1996, fiber glass yarn was in short supply on a global basis,
and the price of fiber glass yarn increased in 1996 at a higher than historical
rate. During the latter half of 1996, fiber glass yarn supply became sufficient
to meet the Company's requirements and supply should be sufficient for the
forseeable future. The Company generally has been able to pass through its raw
material price increases to customers.
Competition
The Company believes it is the market share leader in its targeted fiber
glass fabrics markets in the United States, where it competes primarily on the
basis of long-term relationships with customers and suppliers, quality,
technical support, price and reliability. The Company's major competitor in the
fiber glass fabrics market is BGF Industries. Other fiber glass fabrics
manufacturers are smaller and generally compete in niche markets. The Company's
major competitor in the high performance fabrics market is Hexcel Corporation.
Joint Ventures
The Company has three joint ventures: Clark-Schwebel Tech-Fab Company
("CS Tech-Fab") in the United States, CS-Interglas AG ("CS-Interglas") in Europe
and Asahi-Schwebel Co., Ltd. ("Asahi-Schwebel") in Asia.
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CS-Interglas. Through a DM20 million convertible subordinated note and a
25% common stock ownership position, the Company effectively has a 42% fully
diluted equity interest in CS-Interglas, a publicly held German company.
CS-Interglas is the successor corporation to a 1993 combination of the Company's
European operations with Interglas. Today, CS-Interglas is Europe's leading
manufacturer of fiber glass fabrics with plants in England, Belgium, France and
Germany. In 1996, CS-Interglas had net sales of approximately $168.7 million.
Asahi-Schwebel. The Company owns a 39% interest in Asahi-Schwebel, a
manufacturer of fiber glass fabrics for the electronics industry headquartered
in Japan. Asahi-Schwebel has plant facilities in Japan and a majority interest
in a fiber glass fabric manufacturing and finishing plant in Taiwan. In 1996,
Asahi-Schwebel had net sales of $135.8 million.
CS Tech-Fab. CS Tech-Fab is 50% owned by each of the Company and Les Fils
d'Auguste Chomarat, a French Company. CS Tech-Fab manufactures nonwoven fiber
glass materials for roofing and cement construction applications and for high
performance sails. In 1996, CS Tech-Fab had net sales of approximately $13.4
million.
The Company's joint venture interests are not subject to the covenants of
the Indenture governing the Senior Notes or the Credit Agreement.
Employees
As of February 1, 1997, the Company had 1,385 full time employees, all of
whom were located in the United States. Of these employees, 1,294 were engaged
in manufacturing and manufacturing related services, and 91 were engaged in
sales, marketing and administrative functions. The Company's employees are not
represented by labor unions. The Company considers its relationship with its
employees to be satisfactory.
Environmental Matters
The Company's facilities are subject to a broad range of federal, state
and local environmental laws and requirements, including those governing
discharges to the air and water, the handling and disposal of solid and
hazardous substances and wastes and the remediation of contamination associated
with releases of hazardous substances at Company facilities and offsite disposal
locations. Liability with respect to hazardous substance releases arises
principally under the federal Comprehensive Environmental Response, Compensation
and Liability Act and similar state laws, which impose strict, retroactive,
joint and several liability upon statutorily defined classes of "potentially
responsible parties." The Company's foreign joint venture operations are subject
to varying degrees of environmental regulation in the jurisdictions in which
those facilities are located.
Based upon an environmental review conducted by outside consultants in
connection with the Acquisition, the Company believes that it is currently in
substantial compliance with all material environmental requirements, and will
not require material capital expenditures to maintain compliance with such
requirements in the foreseeable future. Nevertheless, as is the case with
manufacturing operations in general, if a release of hazardous substances occurs
on or from the Company's properties or any offsite disposal locations, or if
contamination from prior activities is discovered at such properties or
locations, the Company may be held liable and may be required to pay the cost of
remedying the condition and/or satisfying third party damage claims. The Company
has from time to time been the subject of administrative proceedings, litigation
or investigations relating to environmental matters. Management does not believe
that the Company is currently subject to any environmental proceedings,
litigation or investigations which will have a material adverse effect on the
Company.
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Patents And Trademarks
The Company has several United States patents, patent applications and
trademarks. While the Company considers its patents to be valuable assets, the
Company does not believe that its competitive position is dependent on patent
protection or that its operations are dependent on any individual patent or
group of related patents. However, in some instances, patents and patent
protection may serve as a barrier to entry in certain product lines. The
Company's policy is to obtain patents on its new products and enforce its patent
rights.
ITEM 2. PROPERTIES
The Company's executive offices are located in Anderson, South Carolina.
The Company leases warehouses in Santa Fe Springs, California and Anderson,
South Carolina and owns a warehouse that is part of its Statesville facility.
The Company owns and operates four principal manufacturing facilities located in
the southeastern United States.
<TABLE>
<CAPTION>
Facility size
Location (Square Feet) Principal Products Manufactured
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<S> <C> <C>
Statesville, North Carolina 553,000 Electronics Fiber Glass Fabric
Washington, Georgia 160,000 Electronics Fiber Glass Fabric
Cleveland, Georgia 93,000 Electronics Fiber Glass Fabric
Anderson, South Carolina 432,000 Composite Materials Fiber Glass
Fabric, High Performance Fabrics
</TABLE>
In 1994, 1995 and 1996 the Company spent an aggregate of approximately
$23.6 million on facilities maintenance, capacity expansion, modernization, and
upgrades of equipment. Management believes that substantially all of its
property and equipment is in good condition and that, with current capacity
substantially full, it has sufficient capacity to meet its current manufacturing
needs. Through capacity expansion and productivity improvements, management
believes that the Company will meet its projected manufacturing needs. The
Company's existing manufacturing facilities have approximately 1.2 million
square feet of floor space and are highly automated in their manufacturing
processes and equipment. The manufacturing processes and standards comply with
applicable environmental and worker safety laws and regulations. Three of the
Company's four manufacturing facilities produce a family of closely related
products. Management believes that this focused approach to manufacturing allows
these facilities to shorten manufacturing time, optimize product flow, and avoid
long and costly equipment retooling and employee training time, all of which
lead to overall reduced costs.
Substantially all of the Company's assets are subject to liens in favor
of the Credit Agreement lenders.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
arising in the ordinary course of business. None of the legal matters in which
the Company is currently involved, either individually or in the aggregate, is
expected to have a material adverse effect on the Company's business or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the common stock of the
Clark-Schwebel Holdings, Inc. There are approximately 20 holders of the
Company's common stock.
The information in the first paragraph under the subheading "Liquidity
and Capital Resources" in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations", is incorporated herein by
reference. All sales by the Registrant of its equity securities in 1996 were in
a non-public offering pursuant to Section 4(2) of the Securities Act of 1933,
as amended, to members of the Company's management, related individuals and an
affiliate of a merchant banking firm.
The 12.5% participating preferred stock (the "Holdings Preferred Stock")
of Clark-Schwebel Holdings, Inc. ("Holdings") is convertible, in whole or in
part, at the option of the holder thereof into the common stock of Holdings
(the "Holdings Common Stock") concurrent with or after the occurrence of an
initial public offering of the Holdings Common Stock. The price per share at
which each share of Holdings Participating Preferred Stock is subject to
conversion is (i) the price per share of Holdings Common Stock received by
Holdings (net of underwriting discounts and commissions) in an initial public
offering, if conversion occurs concurrent with an initial public offering, and
(ii) the fair market value of a share of Holdings Common Stock, if conversion
occurs after an initial public offering. The Company may at any time and from
time to time redeem all or any portion of Holdings Participating Preferred
Stock. Upon redemption or a conversion event, a holder of Holdings
Participating Preferred Stock is entitled to receive for each share of such
Holdings Participating Preferred Stock one share of Holdings Common Stock plus
the per share Liquidation Value of the Holdings Preferred Stock and accrued and
unpaid dividends.
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ITEM 6. SELECTED FINANCIAL DATA
Set forth below are selected historical and other financial data of Fort
Mill, the predecessor company, for the fiscal years ended 1992 through 1995.
Fort Mill had no other operations other than Clark-Schwebel, Inc. and its sole
asset was all of the capital stock of Clark-Schwebel, Inc. The selected
historical financial data were derived from the historical balance sheets for
1994 and 1995 and the historical income statements for 1993, 1994 and 1995 which
were audited by Deloitte & Touche LLP. The selected historical consolidated
balance sheet data for 1992 and 1993 and the income statement data for 1992 were
derived from unaudited historical financial statements of Fort Mill. The 1996
selected historical and other financial data represents the results of
operations of Fort Mill, the predecessor company, through April 17, 1996, and
Clark-Schwebel Holdings, Inc., the successor company, for the period of April
18, 1996 through December 28, 1996. Clark-Schwebel Holdings, Inc.'s sole asset
is all of the common stock of Clark-Schwebel, Inc., its operating company. The
1996 selected historical financial data were derived from 1996 consolidated
financial statements which were audited by Arthur Andersen, LLP. The information
contained in this table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and accompanying notes thereto included elsewhere in
this Form 10-K.
<TABLE>
<CAPTION>
(Dollars in Millions)
Fiscal Year
------------------------------------------------------------------------
1992(2) 1993 1994 1995 1996 1996 Combined
------- ---- ---- ---- ---- ---- --------
(3.5 (8.5 1996
months) months) ----
(12
(Predecessor) (Successor) months)
<S> <C> <C> <C> <C> <C> <C> <C>
Net .......................... $158.8 $163.7 $189.4 $231.3 $68.9 $152.0 $220.9
Cost of sales ................ 138.9 139.2 160.7 192.0 55.0 118.6 173.6
------ ------ ------ ------ ----- ------ ------
Gross profit ................. 19.9 24.5 28.7 39.3 13.9 33.4 47.3
Selling, general and
administrative expenses .... 16.3 15.5 14.4 17.8 4.8 10.4 15.2
Idle equipment write-off(1) .. -- -- 1.8 -- -- -- --
------ ------ ------ ------ ----- ------ ------
Operating income ............. 3.6 9.0 12.5 21.6 9.1 23.0 32.1
Interest expense ............. 0.5 0.4 0.4 0.4 0.1 10.1 10.2
Other, net ................... 0.1 -- -- -- -- 0.1 0.1
------ ------ ------ ------ ----- ------ ------
Income before income taxes ... 3.2 8.6 12.0 21.2 9.0 13.0 22.0
Provision for income taxes ... 1.6 3.6 4.9 8.4 3.6 5.5 9.1
Income (loss) from equity
investees, net(2) .......... (5.4) (3.4) 1.2 2.6 1.2 2.6 3.8
------ ------ ------ ------ ----- ------ ------
Income (loss) from continuing
operations ................. (3.8) 1.6 8.3 15.3 6.6 10.1 16.7
Discontinued operations(3) ... (0.2) 0.7 3.0 0.1 -- -- --
------ ------ ------ ------ ----- ------ ------
Net income (loss) ............ (4.0) 2.3 11.3 15.4 6.6 10.1 16.7
Accrued dividends on
preferred stock ............ -- -- -- -- -- 3.1 3.1
------ ------ ------ ------ ----- ------ ------
Net income (loss) applicable
to common shares ........... $ (4.0) $ 2.3 $ 11.3 $ 15.4 $ 6.6 $ 7.0 $ 13.6
====== ====== ====== ====== ===== ====== ======
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------------------------------------------------------
1992(2) 1993 1994 1995 1996 1996 Combined
------- ---- ---- ---- ---- ---- --------
(3.5 (8.5 1996
months) months) ----
(12
(Predecessor) (Successor) months)
<S> <C> <C> <C> <C> <C> <C> <C>
Other Data:
EBITDA(4) ......................... $13.0 $19.0 $ 22.5 $32.7 $12.7 $ 29.6 $ 42.3
EBITDA, as adjusted(4) ............ 13.0 19.0 24.3 34.1 12.7 29.6 42.3
Depreciation and amortization ..... 9.4 10.0 10.0 11.1 3.5 7.3 10.8
Capital expenditures .............. 4.3 8.8 11.5 8.4 1.6 2.0 3.6
Gross profit as a percentage
of net sales .................... 12.5% 15.0% 15.1% 17.0% 20.2% 22.0% 21.4%
EBITDA as a percentage of
net sales ....................... 8.2% 11.6% 11.9% 14.1% 18.4% 19.5% 19.1%
EBITDA, as adjusted as a
percentage of net sales ......... 8.2% 11.6% 12.8% 14.7% 18.4% 19.5% 19.1%
Ratio of earnings to fixed
charges(5) ...................... 4.3x 15.0x 23.2x 45.7x 47.5x 2.0x 2.5x
Net cash provided by (used in)(6):
Operating activities ............ $(1.4) $ 7.3 $ 16.2 $18.0 $ 8.0 $ 41.1 $ 49.1
Investing activities ............ (4.3) (8.7) 7.6 (8.4) (1.6) (194.9) (196.5)
Financing activities ............ 5.7 (8.7) (23.8) (9.1) (6.5) 157.4 150.9
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year
-------------------------------------------------------
1992(2) 1993 1994 1995 1996
------- ---- ---- ---- ----
(Predecessor) (Successor)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (at end of period):
Working capital ....................... $ 37.9 $ 38.1 $ 41.2 $ 46.3 $ 25.2
Total assets .......................... 184.8 186.2 179.6 188.7 240.7
Total long-term debt (including current
portion) ............................ 5.9 5.9 6.1 6.0 123.5
Total stockholders' equity ............ 148.7 47.6 137.5 144.0 49.8
</TABLE>
- ------------
(1) During 1994, the Company recorded a $1.8 million charge against operating
income related to the write-off of certain idle manufacturing equipment.
(2) In 1992, the Company's European operations were conducted through two
wholly owned subsidiaries (the "European Subsidiaries"). On March 25,
1993, the Company contributed its two European Subsidiaries and $8.8
million in cash to CS-Interglas AG, in consideration for a DM20 million
convertible subordinated note and a minority equity interest in
CS-Interglas AG. At the end of 1996, the DM20.0 million convertible note
had a carrying value of $13.0 million. The value assigned to the
Company's minority interest at the time of the Acquisition was $14.1
million. Beginning in 1993, the Company accounted for this investment
using the equity method of accounting. In order to show comparable
financial data, the results of the European Subsidiaries for 1992 have
been restated in the "Selected Historical Financial Data" chart using the
equity method of accounting. The financial results of the Company on a
consolidated basis for 1992 are reflected below (in millions).
14
<PAGE> 15
<TABLE>
<CAPTION>
Fiscal Year
1992
----
<S> <C>
Income Statement Data:
Net sales ................................................ $200.5
Operating loss ............................................ (4.3)
Net loss ................................................. (4.0)
======
</TABLE>
(3) In 1994, the Company sold substantially all of the assets of a subsidiary
engaged in a separate line of business. In January 1996, the Company sold
its equity investment in a company engaged in a separate line of
business. For further discussion, see Note 13 to the Audited Financial
Statements.
(4) EBITDA is defined herein as operating income plus depreciation and
amortization. EBITDA, as adjusted, is defined herein as operating income
plus depreciation, amortization, the non-recurring asset write-off ($1.8
million in 1994) and the provision for a customer bad debt ($1.4 million
in 1995) related to a receivable retained by Springs Industries. EBITDA
and EBITDA, as adjusted, do not include any income (loss) from equity
investees, net. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA is not a defined term
under generally accepted accounting principles ("GAAP") and should not be
construed as an alternative to operating income, net income or cash flows
from operating activities as determined by GAAP and should not be
construed as an indication of the Company's operating performance or as a
measure of liquidity. EBITDA and EBITDA, as adjusted, do not represent
available or discretionary funds of the Company.
(5) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income before taxes, earnings (loss) from a 50% owned
equity investment, distributed income from the less than 50% owned equity
investments and fixed charges. Fixed charges include interest expense,
including the interest portion of lease expense, and amortization of bond
issue costs.
(6) This cash flow information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
15
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with "Selected
Financial Data" and the Financial Statements and the notes thereto included
elsewhere in this Form 10-K. The accompanying analysis compares the results of
operations of Clark-Schwebel Holdings, Inc., the successor company, on a
consolidated basis, for the year ended December 28, 1996 to the results of
operations of Fort Mill A Inc., the predecessor company, for the year ended
December 30, 1995, and the results of operations of the predecessor company for
the 1995 fiscal year to those for the 1994 fiscal year. The results of
operations for the year ended December 28, 1996 represent the combined results
of the predecessor company, for the period of December 31, 1995 through April
17, 1996, and the successor company for the period of April 18, 1996 through
December 28, 1996, in order to establish comparative periods. No pro forma
adjustments were made to the financial statements for purposes of this analysis
due to the insignificance of the adjustments on operating income. Interest
expense for the periods is not comparable and the impact of interest expense on
the successor company is discussed below.
General
The Company believes it is the largest United States manufacturer of
fiber glass fabrics for use in the electronics industry and a leading
manufacturer of fiber glass fabrics and high performance fabrics for a wide
variety of industrial applications. Fiber glass fabric is a critical component
of printed circuit boards which are used in virtually all electronic products,
including computers, telecommunications equipment, advanced cable television
equipment, network servers, televisions, automotive equipment and home
appliances. Fiber glass fabrics are also used to reinforce plastic composite
materials for aircraft and aerospace applications and for marine and tooling
markets. Other applications of fiber glass fabrics include reinforcing
electrical tape and providing high temperature dust filtration for the carbon
black, steel and power industries. The Company's high performance fabrics are
used primarily for civilian and military ballistics protection in
bullet-resistant vests and helmets, and by the aerospace industry in the
manufacture of composite material aircraft parts.
Sales of the Company's fiber glass fabrics are principally driven by the
electronics industry which has experienced growth due to: (i) expanded
applications for computer systems; (ii) technological advancements; and (iii)
new product introductions. The Company believes that there is no cost-effective
substitute for fiber glass fabric that can satisfy the stringent quality and
performance criteria demanded of printed circuit boards. The Company's high
performance sales to the military end-use market are generally dependent upon
government expenditures and may fluctuate from year to year; however, sales to
the civilian ballistics protection market have historically been stable.
The Company's financial results have historically been affected by
general economic conditions and by conditions affecting the electronics industry
in particular. During the third quarter of 1996, the Company experienced
softening demand for electronics fiber glass fabric. The downturn in demand was
temporary in nature and resulted from an inventory correction experienced
throughout the electronics supply chain. Demand for electronics fiber glass
fabric returned to pre-correction levels during the fourth quarter. Furthermore,
in 1996 there was a significant reduction in the number of contract quotes
requested by the government for military ballistic fabrics, which led to a
decline in high performance sales in 1996.
Fiber glass yarn is the principal raw material used in the production of
fiber glass fabric. There are two major suppliers of fiber glass yarn in the
United States, and substitutes are not readily available. The Company purchases
most of its aramid yarn from one supplier. Beginning in the fourth quarter of
1994, shortages of fiber glass yarn occurred, and, in the first quarter of 1995,
suppliers of fiber glass yarn reduced shipments, limiting supply to the Company
and other purchasers of fiber glass yarn. However, since mid-1996, fiber glass
yarn supply has been sufficient to meet demand because of capacity increases by
the Company's suppliers coupled with the softness in electronics fiber glass
fabric requirements due to the above mentioned inventory correction. Yarn prices
increased in 1996 at a higher than historical rate due in part to the yarn
shortage. The Company generally has been able to pass through such price
increases to its customers.
16
<PAGE> 17
Results Of Operations
1996 Compared To 1995
<TABLE>
<CAPTION>
Twelve month Period from
period from December 31, Period from Combined twelve
January 1 - 1995 - April 18 - month period
December 30, April 17, December 28, from December 31,
1995 1996 1996 1995 - December
(Predecessor Basis) (Predecessor Basis) (Successor Basis) 28, 1996
------------------- -------------------- ----------------- --------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net sales .................................. $ 231,306 $ 68,911 $ 152,003 $ 220,914
Cost of goods sold ......................... 191,978 54,958 118,605 173,563
--------- -------- --------- ---------
Gross profit ............................... 39,328 13,953 33,398 47,351
Selling, general and administrative expenses 17,750 4,812 10,418 15,230
--------- -------- --------- ---------
Operating income ........................... 21,578 9,141 22,980 32,121
Interest expense ........................... (401) (148) (10,061) (10,209)
Other income (expense), net ................ 12 (5) 50 45
Provision for income tax ................... (8,444) (3,595) (5,460) (9,055)
Income from equity investees, net .......... 2,553 1,174 2,633 3,807
--------- -------- --------- ---------
Income from continuing operations .......... $ 15,298 $ 6,567 $ 10,142 $ 16,709
========= ======== ========= =========
PERCENTAGE OF NET SALES
Net sales .................................. 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold ......................... 83.0 79.7 78.0 78.6
--------- -------- --------- ---------
Gross profit ............................... 17.0 20.3 22.0 21.4
Selling, general and administrative expenses 7.7 7.0 6.9 6.9
--------- -------- --------- ---------
Operating income ........................... 9.3 13.3 15.1 14.5
Interest expense ........................... (0.2) (0.2) (6.6) (4.6)
Other income (expense), net ................ -- -- -- --
Provision for income tax ................... (3.6) (5.2) (3.6) (4.1)
Income (loss) from equity investees, net ... 1.1 1.7 1.7 1.7
--------- -------- --------- ---------
Income from continuing operations .......... 6.6% 9.6% 6.7% 7.5%
========= ======== ========= =========
</TABLE>
Net Sales. Net sales for 1996 decreased by $10.4 million, or 4.5%, to
$220.9 million from $231.3 million in 1995. Despite reduced demand for
electronics fiber glass fabric in the third quarter due to an inventory
correction in the supply chain, sales of electronics fiber glass in 1996
increased modestly by 2.0% in 1996 over 1995. Composite material fiber glass
sales increased 10.2% in the same period. Higher sales to the aerospace and
coating & laminating markets accounted for this increase. While overall fiber
glass sales were up $7.1 million, or 3.9%, the increase was more than offset by
a $17.5 million, or 33.4%, decline in high performance fabric sales. After a
strong first quarter in high performance fabric sales, there was a significant
reduction in the number of contract quotes requested by the government for
military ballistic fabrics. Management's decision to exit the automotive airbag
fabric business also contributed to the decline in high performance sales.
Gross Profit. Gross profit for 1996 increased $8.0 million or 20.4% to
$47.4 million from $39.3 million in 1995. Gross profit as a percentage of sales
improved to 21.4% in 1996 from 17.0% in 1995. The significant improvement in
both gross profit dollars and gross profit percentage resulted from several
factors including a shift in sales mix weighted more towards fiberglass fabrics
which generate higher margins than high performance fabric, improved operating
efficiencies which allow management the flexibility to run extended workweeks at
electronic fiber glass plants and to adjust running schedules to customer demand
when necessary, and improved pricing.
SG&A. SG&A for 1996 decreased by $2.5 million, or 14.2%, to $15.2
million. As a percentage of net sales, SG&A decreased to 6.9% in 1996 from 7.7%
in 1995. This decrease resulted from lower bad debt expense and lower stand
alone expenses in 1996 compared to parent company allocations in 1995, offset
somewhat by higher goodwill amortization and the payout to certain executives of
compensation under Springs Industries' executive compensation plans which vested
and were paid on the Closing of the Acquisition.
Operating Income. Operating income increased by 48.8% in 1996 to $32.1
million from $21.6 million in 1995. As a percentage of sales, operating income
increased to 14.5% in 1996 from 9.5% in 1995 due to all the factors mentioned
above.
17
<PAGE> 18
Interest Expense. Interest expense is not comparable to prior periods as
a result of the financing related to the Acquisition. Interest expense for the
successor company was $10.2 million, for the period of April 18,1996 to December
28,1996.
Income From Equity Investees, Net. Income from equity investees, net,
improved by $1.3 million to $3.8 million in 1996. This improvement resulted from
higher net income reported by Asahi-Schwebel. Asahi-Schwebel's results were
favorably impacted primarily by the strength of sales in Japan, driven by
improved pricing and a stronger dollar, and, to a lesser degree, by the
inclusion of the financial results of its newly acquired 51% owned subsidiary,
Asahi-Schwebel (Taiwan) Co., Ltd. The results of operations of Taiwan were
included with the results of Asahi-Schwebel effective with the acquisition on
April 1, 1996. CS-Interglas results were flat when compared to last year. Demand
for electronic fiber glass fabric in the last quarter of 1996 moderated somewhat
in Europe from earlier demand levels. CS-Tech Fab results in 1996 were slightly
lower than those experienced in 1995.
Income From Continuing Operations. The significant improvements in
operating results and income from equity investees were more than enough to
offset the increase in interest expense, as income from continuing operations
for 1996 was 9.2% higher than in 1995.
1995 Compared To 1994
Net Sales. Net sales for 1995 increased $41.9 million, or 22.1%, to
$231.3 million from $189.4 million in 1994. This increase was substantially
driven by volume increases in the electronics fiber glass and high performance
fabrics categories. Net sales of electronics fiber glass fabric grew in 1995 by
25.0%, with volume increases accounting for the majority of this increase. Net
sales of composite materials fiber glass fabric in 1995 decreased 5.8% due
primarily to lower volume in the markets for coated and laminated fabrics. Net
sales of high performance fabrics grew by $17.3 million, or 49.4%, to $52.3
million in 1995. Military contract related volume increases accounted for $14.1
million of this increase. In late 1995, the Company elected to discontinue sales
of high performance fabrics to the automotive industry for use in airbags due to
the existence of several well-established competitors and significant price
competition in the market. Airbag sales were $4.7 million, or 2.0%, of the
Company's net sales, in 1995 compared to $2.4 million in 1994. The Company
exited this business in the first half of 1996.
Gross Profit. Gross profit for 1995 increased to $39.3 million, or by
37.2%, from $28.7 million in 1994. The increase in gross profit resulted
primarily from increased volume in electronics fiber glass and high performance
fabrics. Gross profit as a percentage of net sales improved to 17.0% in 1995
from 15.1% in 1994 due primarily to improved capacity utilization resulting from
the volume increases and management's initiatives to improve productivity at its
manufacturing facilities.
SG&A. SG&A for 1995 increased by $3.4 million to $17.8 million from $14.4
million in 1994. Increased bad debt expense, higher intercompany charges
allocated by the Company's parent, Springs Industries, and increased
distribution costs related to higher volume accounted for $1.6 million, $0.6
million and $0.4 million, respectively, of the increase. Approximately $1.4
million of the increase in bad debt expense related to the potential
uncollectibility of an outstanding receivable from a high performance fabric
customer servicing the military end-use market. The outstanding accounts
receivable balance and corresponding reserve was transferred to Springs
Industries prior to the Closing of the Acquisition. As a percentage of net
sales, SG&A increased to 7.7% in 1995 from 7.6% in 1994.
Operating Income. Operating income for 1995 increased $9.1 million to
$21.6 million from $12.5 million in 1994. As a percentage of net sales,
operating income for 1995 increased to 9.3% from 6.6% in 1994. During 1994, the
Company took a $1.8 million charge against operating earnings related to the
write-off of certain idle manufacturing equipment. Operating income for 1994
excluding the write-off of certain idle equipment was $14.3 million or 7.6% of
net sales.
18
<PAGE> 19
Income From Equity Investees, Net. Income from equity investees, net,
increased $1.4 million in 1995 from $1.2 million in 1994. This improvement
resulted primarily from higher net income reported by Asahi-Schwebel and
CS-Interglas due to increased world wide demand for fiber glass fabric. Similar
to the U.S. market, this increase was driven primarily by the strong demand for
electronics. CS Tech-Fab reported a slight increase in net income.
Income From Continuing Operations. The significant improvements in
operating results and income from equity investees were more than enough to
offset the increase in SG&A expenses, as income from continuing operations for
1995 was 83.9% higher than in 1994.
Liquidity And Capital Resources
On April 17, 1996, the Company was purchased from Springs Industries for
approximately $192.9 million, funded by a combination of equity and debt. Equity
of $45.0 million was provided by Vestar/CS Holding and the Management Investors
in exchange for all of the capital stock of Holdings. Vestar/CS Holding
contributed $43.2 million in exchange for $35.0 million liquidation value of the
12.5% participating preferred stock of Holdings ("Holdings Preferred Stock") and
$8.2 million of the common stock of Holdings ("Holdings Common Stock"). The
Management Investors invested $1.8 million in Holdings Common Stock.
Approximately $0.8 million of the contribution from the Management Investors was
financed by loans from the Company. The funded debt used to finance the
Acquisition consisted of $110.0 million of Senior Notes, $15.0 million of loans
under a Term Loan under the Credit Agreement, and $35.0 million of loans under a
Revolving Credit Facility under the Credit Agreement. The required amortization
payments under the Term Loan are $0.4 million in 1997, $2.0 million in 1998,
$2.5 million in 1999, $3.0 million in 2000, $3.5 million in 2001 and $2.0
million in 2002. Futhermore, pursuant to the Credit Agreement, prepayments may
be required under the Term Loan depending on the Company's leverage ratio and
cash flow. The Company may prepay the Term Loan at any time without penalty. The
Revolving Credit Facility matures in April 2002. Substantially all of the assets
of Clark-Schwebel, Inc., the operating company, are subject to liens in favor of
the Credit Agreement lenders. Other than upon a change of control or as a result
of certain asset sales, the Company will not be required to make any principal
payments in respect of the Senior Notes until maturity in April 2006. The
Company is required to make semi-annual interest payments on April 15 and
October 15 with respect to the Senior Notes.
Cash provided by operations for the period from April 18, 1996 to
December 28, 1996 was $41.1 million, and for the period from December 31, 1995
to April 17, 1996 was $8.0 million compared with $18.0 million provided by
operations in fiscal 1995. Strong profitability coupled with the Company's
efforts to reduce its investment in working capital led to the significant
improvement in cash generated from operations for 1996. The Company invested
$2.0 million in capital expenditures for the period from April 18, 1996 to
December 28, 1996, and an additional $1.6 million for the period from December
31, 1995 to April 17, 1996, which was moderate compared to previous periods. The
moderate level of capital spending was primarily the result of fewer planned
major projects for fiscal 1996. The Company typically makes capital expenditures
to enhance capacity and improve manufacturing facilities and processing
equipment. The Company anticipates that capital spending in 1997 will increase
to approximately $9.5 million. Strong cash flow from operations and moderate
capital spending allowed the Company to reduce total long-term debt by $36.6
million since April 18, 1996. Debt of $35.0 million which was borrowed under the
Credit Agreement's Revolving Credit Facility at Closing was repaid during the
period, while the amount outstanding under the Credit Agreement's Term Loan was
reduced by $1.6 million. As of December 28, 1996, the Company had $55.0 million
of undrawn availability under the Revolving Credit Facility. The Company ended
the year with debt, net of cash, of $119.4 million, consisting of $110.0 million
in Senior Notes, $13.4 million under the Term Loan, and $4.0 million in cash and
cash equivalents.
To meet its liquidity needs, the Company has relied and expects to
continue to rely on internally generated funds and, to the extent necessary, on
undrawn commitments available under the Revolving Credit Facility. The Company's
ability to borrow in excess of the commitments set forth in the Credit Agreement
is limited by the terms of the Credit Agreement and the Senior Notes' Indenture.
Additionally, such terms place restrictions on the Company with respect to
liens, investments, dividends, debt repayments, capital expenditures,
transactions with affiliates, and mergers. All assets of Clark-Schwebel, Inc.
represent restricted net assets with the exception of the foreign equity
investments and distributions received from the foreign equity investments.
Except in limited circumstances, Clark-Schwebel, Inc. is prohibited from
transferring restricted net assets to Clark-Schwebel
19
<PAGE> 20
Holdings, Inc. in the form of cash dividends, loans, or advances without the
consent of a third party lender. The amount of unrestricted net assets at
December 28, 1996 is $61,221, which represents the book value of the foreign
equity investments ($59,906) and distributions received in the form of cash from
the foreign equity investments ($1,315). The Company believes that cash
generated from operations and borrowing resources will be sufficient to fund the
Company's cash needs for the foreseeable future.
Joint Ventures
The Company accounts for its three joint venture interests using the
equity method of accounting. Accordingly, the Company's operating income
excludes net income (loss) from such interests. Historically, each of the three
joint venture interests has been wholly self-supporting and received no
distributions from the Company. See "Business--Joint Ventures."
Accounting Standards
A summary of the Company's significant accounting policies is included in
Note 3 to the footnotes of the Audited Financial Statements for the fiscal year
ended December 28, 1996, enclosed in this Form 10-K.
Certain Relevant Factors
Under the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, forward looking statements, such as earnings projections,
are protected from liability as long as they are accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from projected results. The Company wishes to
caution readers that the following important factors, among others, in some
cases have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual results to differ materially from
those expressed in any forward-looking statements made by, or on behalf of, the
Company whether contained herein, in other documents subsequently filed by the
Company with the SEC, or in oral statements:
- - A moderating growth rate or reduction in sales of electronics products,
which incorporate a significant percentage of the Company's products,
could materially affect operating results. The electronics industry is
cyclical and has experienced recurring downturns. A future downturn could
reduce demand for, and prices of, materials used in electronics products,
including those manufactured by the Company.
- - Rapid technology changes in the electronics industry have placed
increasingly rigorous demands on weight, thickness, and consistency of
fiber glass products produced by the Company. Technological change in the
printed circuit board industry is rapid and continuous and will continue
to require increased technological and manufacturing capability and
expertise. Advances in semi-conductor technology could further reduce the
surface area of printed circuit boards and possibly demand for the
Company's products. Operating results could be materially affected by the
Company's ability to maintain its technological position.
- - The Company could face increased competition if cost-effective
alternatives to fiber glass fabrics were developed for the electronics
industry. Currently, only lower-end electronics, which use a paper based
laminate system for printed circuit boards, and very high-end
electronics, which use a variety of very expensive materials for printed
circuit boards, use non-fiber glass fabrics. However, the development and
introduction of cost-competitive alternatives could have a material
adverse impact on the Company's business, financial condition, and
results of operations.
- - Virtually all fiber glass yarn manufactured in North America is produced
by two suppliers, and substitutes are not readily available. The Company
purchases substantially all of its fiber glass yarn from these two
suppliers. The Company purchases most of its aramid yarn from one
supplier. Any disruption in the ability or willingness of the Company's
suppliers to deliver fiber glass or aramid yarns to the Company could
have a material adverse effect on the Company's business, financial
condition, and results of operations. During 1995 and through
20
<PAGE> 21
mid-1996, the Company experienced a fiber glass yarn shortage which
limited the Company's ability to expand production of fiber glass
fabrics. Additionally, due in part to the fiber glass yarn shortage, the
price of fiber glass yarn increased over the prior year at a higher than
historical rate. While the Company generally has been able to pass
through increases in the cost of fiber glass yarn, the inability of the
Company to do so in the future could have a material adverse effect on
the Company's business, financial condition, and results of operations.
- - The Company's customer base is concentrated. In 1996, sales to two of the
Company's customers each accounted for more than 10% of the Company's net
sales, and sales to the Company's top ten customers accounted for
approximately 70% of net sales. As customers seek to establish closer
relationships with their suppliers, the Company expects its customer base
to continue to become more concentrated. If, for any reason, any of its
key customers were to purchase significantly less of the Company's
products in the future, such decreased level of purchases could have a
material adverse effect on the Company's business, financial condition,
and results of operations.
- - The Company could face an increasingly competitive market place in
electronics fiber glass fabric resulting from expected capacity growth in
glass yarn and woven fiber glass both domestically and world wide.
- - The Company relies on constant communication with its customers to
anticipate the future volume of purchase orders. A variety of conditions,
both specific to the individual customer and generally affecting the
customer's industry, can cause a customer to reduce or delay orders
previously anticipated by the Company.
- - The Company's facilities are subject to a broad range of federal, state,
local, and foreign environmental laws and requirements, including those
governing discharges to the air and water, the handling and disposal of
solid and hazardous substances and wastes and the remediation of
contamination associated with releases of hazardous substances at Company
facilities and offsite disposal locations. The Company has made, and will
continue to make, expenditures to comply with such laws and requirements.
The Company believes, based on information currently available to
management, that it will not require material capital expenditures to
maintain compliance with environmental requirements during this or the
following fiscal year or the foreseeable future. However, future events,
such as changes in existing laws and regulations or the discovery of
contamination at sites owned or operated by the Company, or to which
Company waste has been transported, may give rise to additional
compliance or remediation costs which could have a material adverse
effect on the Company's financial condition or results of operations.
- - The Company's success is dependent upon certain key management personnel.
There is competition for qualified employees among companies in the
electronic materials industry, and the loss of certain of the Company's
employees or an inability to continue to attract and motivate highly
skilled employees could have a material adverse effect on the Company's
business, financial condition, and results of operations.
- - The Company's international joint ventures are subject to risks,
including exchange rates, unexpected changes in regulatory requirements,
tariffs, international trade restrictions or prohibitions, political and
economic instability, and changes in taxation. Equity income from the
international joint ventures may be materially affected by currency
exchange rate fluctuations.
Inflation
The Company generally attempts to pass cost increases to its customers.
Costs are affected by, among other things, inflation, and the effects of
inflation may be experienced by the Company in future periods. The Company
believes, however, that inflationary effects have not been material to the
Company during the past three years.
21
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(See Pages 23-39 - This page is intentionally left blank)
22
<PAGE> 23
Report of Independent Public Accountants
To the Board of Directors of
Clark-Schwebel Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Clark-Schwebel
Holdings, Inc. (a Delaware corporation) and subsidiaries as of December 28,
1996, and the related consolidated statements of income and cash flows for each
of the two periods in the year ending December 28, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Clark-Schwebel Holdings, Inc.
and subsidiaries as of December 28, 1996, and the results of their operations
and their cash flows for each of the two periods in the year ended December 28,
1996, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index are the
responsibility of the Company's management and are presented for the purposes of
complying with the Securities and Exchange Commission's rules and are not a
required part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Columbia, South Carolina,
February 14, 1997.
23
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Fort Mill A Inc. (the
"Predecessor") (a wholly owned subsidiary of Springs Industries, Inc.) as of
December 30, 1995, and the related statements of income and cash flows for the
two fiscal years in the period ended December 30, 1995. Our audits also included
the financial statement schedule listed in the Index at Item 14. These financial
statements and financial statement schedule are the responsibility of the
Predecessor's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Fort Mill A Inc. as of December 30, 1995,
and the results of its operations and its cash flows for each of the two fiscal
years in the period ended December 30, 1995 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 9, 1996
(February 24, 1996 as to Note 2)
24
<PAGE> 25
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1995 and DECEMBER 28, 1996
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
(Predecessor (Successor
Basis) Basis)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................................... $ 584 $ 4,064
Accounts receivable, net ............................................ 33,298 25,794
Inventories, net ................................................... 28,791 33,625
Other ............................................................... 2,069 592
--------- ---------
Total current assets ........................................... 64,742 64,075
--------- ---------
PROPERTY, PLANT AND EQUIPMENT ................................................. 96,791 67,936
Accumulated depreciation ................................................. (43,777) (5,841)
--------- ---------
Property, plant and equipment, net .................................. 53,014 62,095
--------- ---------
EQUITY INVESTMENTS ............................................................ 62,904 63,426
NET ASSETS OF DISCONTINUED OPERATIONS ......................................... 2,600 0
GOODWILL ...................................................................... 5,096 44,333
OTHER ASSETS .................................................................. 373 6,808
--------- ---------
TOTAL ASSETS .................................................................. $ 188,729 $ 240,737
========= =========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable .................................................... $ 9,032 $ 21,448
Accrued liabilities ................................................. 7,328 15,330
Deferred tax liabilities -- current ................................. 2,024 2,056
Current maturities of long-term debt ................................ 79 51
--------- ---------
Total current liabilities ...................................... 18,463 38,885
LONG-TERM DEBT ................................................................ 5,907 123,440
DEFERRED TAX LIABILITIES ...................................................... 14,826 21,458
LONG-TERM BENEFIT PLANS, DEFERRED COMPENSATION AND OTHER ...................... 5,570 7,121
COMMITMENTS AND CONTINGENCIES .................................................
--------- ---------
TOTAL LIABILITIES ............................................................. 44,766 190,904
--------- ---------
EQUITY:
Preferred stock (par value per share - $.01) - 12.5% participating,
10,000 shares authorized, 0 and 1,000 shares issued and
outstanding, respectively ............................................ 0 35,000
Common stock (par value per share - $.01) - 100,000 shares authorized,
9,000 shares issued and outstanding, less management loans of $822 ... 0 9,178
Common stock (par value per share - $1.00) - 1,000 shares authorized,
100 shares issued and outstanding .................................... 1 0
Retained earnings ....................................................... 0 7,005
Investment by Springs ................................................... 134,357 0
Cumulative translation adjustment ....................................... 9,605 (1,350)
--------- ---------
Total equity ....................................................... 143,963 49,833
--------- ---------
TOTAL LIABILITIES AND EQUITY .................................................. $ 188,729 $ 240,737
========= =========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 26
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
1995 - April 18 -
April 17, December 28,
1994 1995 1996 1996
---- ---- ---- ----
(Predecessor Basis) (Successor Basis)
<S> <C> <C> <C> <C>
Net sales ....................................... $ 189,419 $ 231,306 $ 68,911 $ 152,003
Cost of goods sold .............................. 160,747 191,978 54,958 118,605
--------- --------- -------- ---------
Gross profit .................................... 28,672 39,328 13,953 33,398
Selling, general and adminstrative
expenses ...................................... 14,370 17,750 4,812 10,418
Idle equipment write-off ........................ 1,836 0 0 0
--------- --------- -------- ---------
Operating income .......................... 12,466 21,578 9,141 22,980
Other income (expense):
Interest expense .......................... (401) (401) (148) (10,061)
Other, net ................................ (28) 12 (5) 50
--------- --------- -------- ---------
Income before income taxes ...................... 12,037 21,189 8,988 12,969
Provision for income tax ........................ (4,896) (8,444) (3,595) (5,460)
Income from equity investees, net ............... 1,176 2,553 1,174 2,633
--------- --------- -------- ---------
Income from continuing operations ............... 8,317 15,298 6,567 10,142
Discontinued operations:
Income from discontinued operations, net .. 426 111 0 0
Gain on sale of discontinued operation, net 2,573 0 0 0
--------- --------- -------- ---------
Net income ...................................... $ 11,316 $ 15,409 $ 6,567 10,142
========= ========= ========
Accrued dividends on preferred stock ............ (3,137)
---------
Net income applicable to common shares $ 7,005
=========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE> 27
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
1995 - April 18 -
April 17, December 28,
1994 1995 1996 1996
---- ---- ---- ----
(Predecessor Basis) (Successor
Basis)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income ........................................................... $ 11,316 $ 15,409 $ 6,567 $ 10,142
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .................................. 10,028 11,128 3,526 7,284
Idle equipment write-off ....................................... 1,836 0 0 0
Deferred tax provision ......................................... 577 176 1,404 (1,128)
Income from equity investments, net .......................... (1,176) (2,553) (1,174) (2,633)
Income from discontinued operations, net ..................... (426) (111) 0 0
Gain on sale of discontinued operation, net .................... (2,573) 0 0 0
Changes in assets and liabilities, net of the effects of the
purchase of the company:
Accounts receivable ....................................... (831) (8,244 1,832 3,811
Inventories ............................................... (1,825) (2,931) (2,833) 3,323
Prepaid expenses and other ................................ (2,055) 1,465 (187) 1,399
Accounts payable .......................................... 833 3,181 (697) 14,011
Accrued liabilities ....................................... 261 367 (289) 5,076
Other .......................................................... 200 124 (131) (151)
-------- -------- ------- ---------
Net cash provided by operating activities ............ 16,165 18,011 7,968 41,134
-------- -------- ------- ---------
INVESTING ACTIVITIES:
Purchases of equipment ............................................... (11,543) (8,429) (1,603) (2,035)
Proceeds from sale of discontinued operation ......................... 19,130 0 0 0
Proceeds from sale of assets ......................................... 18 42 0 0
Payment for purchase of company ...................................... 0 0 0 (192,895)
-------- -------- ------- ---------
Net cash provided by (used in) investing activities 7,605 (8,387) (1,603) (194,930)
-------- -------- ------- ---------
FINANCING ACTIVITIES:
Investment by Springs ................................................ (23,774) (8,982) (10,955) 0
Transfer of assets retained by Springs ............................... 0 0 4,461 0
Proceeds from issuance of stock ...................................... 0 0 0 45,000
Payment of acquisition fees, net ..................................... 0 0 0 (10,128)
Loans to management investors ........................................ 0 0 0 (822)
Proceeds from long-term borrowings ................................... 0 0 0 160,000
Principal payments under long-term debt and capital lease obligations (43) (87) (29) (36,616)
-------- -------- ------- ---------
Net cash provided by (used in) financing activities .. (23,817) (9,069) (6,523) 157,434
-------- -------- ------- ---------
NET CHANGE IN CASH ........................................................ (47) 555 (158) 3,638
CASH, BEGINNING OF PERIOD/YEAR ........................................... 76 29 584 426
-------- -------- ------- ---------
CASH, END OF PERIOD/YEAR .................................................. $ 29 $ 584 $ 426 $ 4,064
======== ======== ======= =========
CASH PAID FOR INTEREST .................................................... $ 401 $ 401 $ 120 $ 7,081
======== ======== ======= =========
CASH PAID FOR TAXES ....................................................... $ 0 $ 0 $ 0 $ 7,546
======== ======== ======= =========
</TABLE>
Noncash Transaction: The Company accrued dividends on preferred stock of $3,137
for the period of April 18 - December 28, 1996.
See notes to consolidated financial statements.
27
<PAGE> 28
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS in THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the assets,
liabilities and results of operations as of December 28, 1996 and for the period
from April 18, 1996 to December 28, 1996 of Clark-Schwebel Holdings, Inc., the
successor company ("Company"), following the change in ownership (see Note 2).
The Company's primary assets is the capital stock of Clark-Schwebel, Inc., its
operating company. The statements also include the assets, liabilities, and
results of operations as of and for the period ended December 30, 1995 and
December 31, 1994, and for the period from December 31, 1995 to April 17, 1996
of Fort Mill A Inc., the predecessor company ("Predecessor Company"), prior to
the change in ownership. The statements of the Predecessor Company include
certain liabilities and expenses that historically were accounted for only at
the Springs Industries, Inc. ("Springs") - parent company level. The
financial statements of the Predecessor Company and Successor Company are not
comparable in certain respects due to differences between the costs bases of
certain assets and liabilities and the impact of interest expense on the
Successor Company (see Note 2).
Summarized Financial Information---The following table provides summarized
financial information for Clark-Schwebel, Inc., the operating company, on a
stand alone basis. Clark-Schwebel, Inc. is a wholly owned subsidiary of
Clark-Schwebel Holdings, Inc. and its separate financial statements are not
included or filed separately because management has determined that they would
not be material to investors since they are not significantly different from
the financial statements of Clark-Schwebel Holdings, Inc. The balance sheet
information is as of December 28, 1996 and the income statement information is
for the period of April 18, 1996 through December 28, 1996.
<TABLE>
<CAPTION>
1996
----
(Successor)
<S> <C>
Current assets ................................................... $ 64,038
Noncurrent assets ................................................ 176,662
--------
Total assets ..................................................... $240,700
========
Current liabilities .............................................. $ 38,881
Noncurrent liabilities ........................................... 152,019
Equity ........................................................... 49,800
--------
Total liabilities and equity ..................................... $240,700
========
Net sales ........................................................ $152,003
Gross profit ..................................................... 33,398
Income from continuing operations ................................ 10,135
Net income ....................................................... 6,998
========
</TABLE>
All assets of Clark-Schwebel, Inc. represent restricted net assets with
the exception of the foreign equity investments and distributions received from
the foreign equity investments. Except in limited circumstances, Clark-Schwebel,
Inc. is prohibited from transferring restricted net assets to Clark-Schwebel
Holdings, Inc. in the form of cash dividends, loans, or advances without the
consent of a third party lender. The amount of unrestricted net assets at
December 28, 1996 is $61,221, which represents the book value of the foreign
equity investments ($59,906) and distributions received in the form of cash from
the foreign equity investments ($1,315).
Operations--The Company consists primarily of the operations, assets,
and liabilities of manufacturing facilities located in Anderson, SC,
Statesville, NC, Cleveland, GA, and Washington, GA, which produce woven fiber
glass and aramid fabrics. The Company's products are used in electronic circuit
boards, coated and laminated composites, aircraft construction and protective
apparel such as anti-ballistic vests and helmets.
28
<PAGE> 29
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
2. PURCHASE TRANSACTION
On February 24, 1996, the Company, Springs and affiliates of Vestar
Equity Partners, L.P. (Vestar), entered into an Agreement and Plan of Merger
(Agreement) whereby affiliates of Vestar would acquire the Company. Pursuant to
the Agreement, on April 17, 1996 (Closing Date), Vestar/CS Holding Company, LLC
(Vestar/CS) purchased all of the issued and outstanding capital stock of Fort
Mill A Inc. from Springs for approximately $192,895. The sources of cash for
this purchase included $110,000 of senior notes, an equity contribution of
$45,000 and bank debt. On the day following the Closing Date, Vestar/CS had an
82% common equity interest and management investors had an 18% common equity
interest in the Company.
Under the Agreement, Springs agreed to (i) assume responsibility for
repayment of the Industrial Revenue Bonds payable in 2010 and related accrued
interest (see Note 4), (ii) pay $959 in certain accrued employee benefits, (iii)
provide indemnification for certain environmental, tax and other matters
(including the environmental matter described in Note 14 for which $175 was
accrued at December 30, 1995), (iv) retain the accounts receivable from one
customer (which totaled $2,782 as of December 30, 1995) and related $1,400
reserve described in Note 3, and (v) retain the $99 accrued obligation related
to the Company's Long-Term Disability Plan. At the Closing Date, all payable and
receivable accounts between the Company and Springs were canceled.
The acquisition was accounted for as a purchase business combination. The
adjustment to net assets represents the step-up to fair value of the net assets
acquired as follows:
<TABLE>
<S> <C>
Purchase price ............................................................... $ 192,895
Nonfinancing portion of fees and expenses .................................... 2,780
---------
Total purchase price ......................................................... 195,675
Less fair value of net assets acquired ....................................... (150,547)
---------
Excess of purchase price over fair value of net assets acquired .............. $ 45,128
=========
</TABLE>
The fair values of Clark-Schwebel, Inc.'s assets and liabilities at the
date of acquisition are presented below:
<TABLE>
<S> <C>
Current assets .............................................................. $ 68,410
Property, plant and equipment ................................................ 66,391
Equity investments ........................................................... 62,314
Current liabilities .......................................................... (20,282)
Other liabilities ............................................................ (26,286)
---------
Net assets acquired .......................................................... $ 150,547
=========
</TABLE>
Following the acquisition, the purchase cost (including the fees and
expenses related thereto) was allocated to the tangible and intangible assets
and liabilities of the Company based upon their respective fair values. This
resulted in a step-up in the basis of inventory of $5,274 and property, plant
and equipment of $15,000. The excess of the purchase price over the fair value
of net assets acquired of $45,128 was recorded as goodwill, and is being
amortized on a straight-line basis over a period of 40 years.
Additional agreements include Transition Agreements for specified periods
in which Springs would be compensated for certain services provided to the
Company, and a Management Agreement that specifies services to be provided to
the Company by Vestar.
In accordance with agreements related to the change of ownership
transaction, certain assets totaling $4,461 were transferred to Springs in the
first quarter of 1996. This balance has been separately disclosed on the face of
the accompanying 1996 statements of cash flows.
29
<PAGE> 30
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of the significant accounting policies used in the
preparation of the financial statements of the Company.
Basis of Consolidation - The consolidated financial statements include
the accounts of the Company and its operating company and wholly-owned
subsidiary, Clark-Schwebel, Inc. All material intercompany amounts and
transactions have been eliminated.
Fiscal Year - The Company's operations are based on a fifty-two or
fifty-three week fiscal year ending on the Saturday closest to December 31. The
fiscal years ended December 31, 1994, December 30, 1995 and December 28, 1996
are referred to herein as 1994, 1995 and 1996, respectively. The 1994, 1995 and
1996 fiscal years each consisted of 52 weeks. Due to the purchase transaction on
April 17, 1996, the 52 week fiscal year in 1996 is comprised of the operations
of the Predecessor Company and the Successor Company.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. These estimates include the allowance for doubtful
accounts receivable and the liabilities for certain long-term benefit plans.
Actual results could differ from such estimates.
Revenue Recognition - Revenue from product sales is recognized at the
time ownership of the goods transfers to the customer and the earnings process
is complete. This generally occurs when the goods are shipped.
Cash and Cash Equivalents - Cash and cash equivalents include cash on
hand and in the bank as well as short term investments held for the purpose of
general liquidity. Such investments normally mature within three months from the
date of acquisition.
Accounts Receivable - The Company establishes an allowance for doubtful
accounts based upon factors including the credit risk of specific customers,
historical trends and other information. The Company performs ongoing credit
evaluations of its customers' financial condition and generally requires no
collateral. The reserve for doubtful accounts was $2,133 at December 30, 1995
and $853 at December 28, 1996. The reserve at December 30, 1995 included $1,400
applicable to $2,782 of accounts receivable from one customer. The provision for
uncollectible amounts was $240, $1,842, ($84), and $160 for fiscal 1994, 1995,
1996 (Predecessor) and 1996 (Successor), respectively. Net write-offs were $29,
$349, ($6), and ($38), respectively, for the same periods.
Inventories - Inventories are valued at the lower of cost or market. Cost
is determined using the last-in, first-out (LIFO) method for substantially all
inventories.
Property, Plant, and Equipment - Property, plant, and equipment is
recorded at cost and depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets. Estimated useful lives are as
follows:
Land improvements .................................... 10 to 20 years
Buildings and improvements ............................ 20 to 40 years
Machinery and equipment ............................... 3 to 11 years
Equity Investments - The company owns equity interests in CS-Interglas AG
(headquartered in Germany), Asahi-Schwebel Co., Ltd. (headquartered in Japan)
and Clark Schwebel Tech-Fab Company (located in Anderson, SC), which are
accounted for using the equity method of accounting.
30
<PAGE> 31
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
Foreign Currency - The foreign equity investments are translated at
year-end exchange rates. Equity income and losses are translated at the average
rate during the year. Cumulative translation adjustments are reflected as a
separate component of stockholders' equity.
Postretirement Benefits - Postretirement benefits are accounted for
pursuant to Statement of Financial Accounting Standards ("SFAS") No. 106,
Employers Accounting for Postretirement Benefits Other Than Pensions. SFAS No.
106 requires that the projected future cost of providing postretirement
benefits, such as health care and life insurance, be recognized as an expense as
employees render service rather than when claims are incurred.
Income Taxes - Income taxes are accounted for pursuant to SFAS 109,
Accounting for Income Taxes. Under SFAS No. 109, deferred income tax assets and
liabilities represent the future income tax effect of temporary differences
between the book and tax bases of assets and liabilities assuming they will be
realized and settled at the amounts reported in the financial statements. The
provision for income taxes included in the accompanying financial statements is
computed in a manner consistent with SFAS No. 109.
Certain Compensation Plans - Certain key employees of the Company were
granted stock options and certain types of deferred compensation related to
Springs common stock under Springs' executive plans. Compensation expense
allocated from Springs for these grants for 1994, 1995, 1996 (Predecessor) and
1996 (Successor) was approximately $125, $145, $418 and $0, respectively.
4. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 30, December 28,
1995 1996
---- ----
<S> <C> <C>
Senior Notes, payable in 2006, interest at 10.5% ............... $ 0 $ 110,000
Term Loan payable in quarterly installments of $440 beginning
December 31, 1997, $500 beginning March 31, 1998, $750
beginning September 30, 1999, and $1,000 beginning
September 30, 2001 through maturity in 2002, interest
at variable rates ......................................... 0 13,440
Revolving Credit Agreement, due 2002, interest at variable rates 0 0
Capitalized lease obligation payable in equal monthly
installments of $7, through August 1997 ................... 136 51
Industrial Revenue Bonds, payable in 2010, interest at 6.85%
(See Note 2) .............................................. 5,850 0
------- ---------
Total .......................................................... 5,986 123,491
Less current maturities ........................................ (79) (51)
------- ---------
Long-term debt ................................................. $ 5,907 $ 123,440
======= =========
</TABLE>
The senior notes accrue interest at a fixed rate of 10.5% per annum, with
interest payable semiannually in arrears on April 15 and October 15. The senior
notes are not redeemable at the option of the Company prior to April 15, 2001.
The debt under the credit facility bears interest which varies with LIBOR plus a
margin which fluctuates based on the Company's leverage ratio. On December 28,
1996 the interest rate was 6.9375% per annum. Interest is typically payable
monthly. The Company pays a quarterly commitment fee equal to 0.375% on the
unused portion of the revolving credit facility which was $55,000 at December
28, 1996. Management estimates the fair value of the Senior Notes is $115,500 at
December 28, 1996, based on the estimated market trading price for the Senior
Notes as of December 28,
31
<PAGE> 32
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
LONG-TERM DEBT - (Continued)
1996. The senior notes and the debt under the credit facility represent
liabilities of Clark-Schwebel, Inc., the operating company, and are guaranteed
by Clark-Schwebel Holdings, Inc.
The revolving credit facility and the senior notes' indenture contain
certain restrictive covenants which provide limitations on Clark-Schwebel, Inc.,
the operating company, with respect to restricted payments, indebtedness, liens,
investments, dividends, distributions, transactions with affiliates, debt
repayments, capital expenditures, mergers, and consolidations. The bank facility
and senior note covenants also require maintenance of certain financial ratios.
At December 28, 1996, the Company was in compliance with such covenants.
Substantially all of the assets of Clark-Schwebel, Inc., the operating
company, are subject to liens in favor of the revolving credit facility lenders.
The aggregate five-year maturities of long-term debt subsequent to
December 28, 1996 follow: 1997 - $491; 1998 - $2,000; 1999 - $2,500; 2000 -
$3,000; 2001 - $3,500.
5. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
December 30, December 28,
1995 1996
---- ----
<S> <C> <C>
Finished goods ............................................... $ 10,145 $ 10,256
Raw material and supplies .................................... 9,868 9,254
In process ................................................... 12,828 15,215
-------- --------
Total at standard cost (which approximates average cost) ..... 32,841 34,725
Less LIFO reserve ............................................ (4,050) (1,100)
-------- --------
Inventories, net ............................................. $ 28,791 $ 33,625
======== ========
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Land .................................................... $ 1,306 $ 1,875
Buildings and improvements .............................. 22,479 19,381
Machinery and equipment ................................. 69,438 43,113
Construction in progress ................................ 3,568 3,567
-------- --------
Total ................................................... 96,791 67,936
Less accumulated depreciation ........................... (43,777) (5,841)
-------- --------
Property, plant and equipment, net ...................... $ 53,014 $ 62,095
======== ========
</TABLE>
32
<PAGE> 33
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
7. OTHER CURRENT LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Accrued retirement and incentive $2,361 $ 3,841
Employee benefit accruals ...... 1,868 3,017
Accrued payroll ................ 1,050 2,759
Accrued interest ............... 4 2,477
Other accrued liabilities ...... 1,044 2,235
Unearned revenue ............... 1,001 1,001
------ -------
Total accrued liabilities ...... $7,328 $15,330
====== =======
</TABLE>
8. INVESTMENT BY SPRINGS
The changes in Investment by Springs for the fiscal years ended December
31, 1994 and December 30, 1995 were as follows:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C>
Beginning of year ........................................... $ 143,044 $ 127,930
Net income .................................................. 11,316 15,409
Intercompany charge for current income tax provision ........ 6,905 9,919
Intercompany charge for certain administrative services ..... 2,452 3,041
Net cash paid to Springs, other intercompany charges and cash
paid by Springs on behalf of the Company .................. (35,787) (21,942)
--------- ---------
End of year ................................................. $ 127,930 $ 134,357
========= =========
Weighted average of Investment by Springs ................... $ 135,487 $ 131,144
========= =========
</TABLE>
The Investment by Springs account was eliminated at April 17, 1996 as
part of the accounting for the purchase transaction (see Note 1).
9. STOCKHOLDERS' EQUITY
Changes in stockholders' equity on a successor basis for the period of
April 18, 1996 through December 28, 1996 consisted of the following (in
thousands, except share amounts):
<TABLE>
<CAPTION>
Preferred Stock Common Stock Cumulative
--------------- ------------ Retained Translation
Shares Amount Shares Amount Earnings Adjustment
------ ------ ------ ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Preferred stock issued on April 17, 1996 1,000 $35,000
Common stock issued on April 17,1996 ... 9,000 $10,000
Management loans (see Note 16) ......... (822)
Net income ............................. $10,142
Accrued preferred stock dividend ....... (3,137)
Cumulative translation adjustment ...... ($1,350)
----- ------- ----- ------- ------- -------
Balance at December 28, 1996 ........... 1,000 $35,000 9,000 $ 9,178 $ 7,005 ($1,350)
===== ======= ===== ======= ======= =======
</TABLE>
33
<PAGE> 34
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
10. EMPLOYEE BENEFIT PLANS
Employees Profit Sharing/Retirement Plans
Substantially all associates of the Company are covered by defined
contribution plans. In 1994, 1995, and 1996 (Predecessor Company) the plan was
provided by Springs. The 1996 Successor Company plan operated substantially the
same as the Springs plan. The Company makes contributions to a defined
contribution Profit Sharing Plan annually based upon the profitability of the
Company. The contribution is allocated to participant accounts based upon
participant compensation. The amount of the Company contribution is subject to
approval by the Board of Directors.
In addition, associates are allowed to contribute a percentage of their
compensation to a defined contribution plan and the Company will match a portion
of their contribution. This plan, available to substantially all associates,
contains a matched savings provision that permits pre-tax employee
contributions. Participants can contribute from 1% to 12% of their compensation
and receive a 50% matching employer contribution on up to 4% of the
participant's contribution.
Defined contribution plan expense for 1994, 1995, 1996 (Predecessor) and
1996 (Successor) was $1,974, $1,810, $964 and $1,655, respectively.
Postretirement Benefits Other Than Pensions
The Company participates in a defined benefit postretirement medical plan
which covers substantially all salaried and nonsalaried employees. In 1994, 1995
and 1996 (Predecessor Company) the plan was provided by Springs. The benefit
cost and benefit obligation for these periods was allocated by Springs to the
Predecessor Company. The 1996 Successor Company plan operated identically as the
Springs plan, but was a separate plan on a stand alone company basis. The plan
provides medical coverage to age 65 for employees who retire at age 62 or later,
have at least 25 years of service and participated in the plan prior to
retirement. The plan is funded on a "pay-as-you-go" basis and is contributory,
with retiree contributions adjusted periodically. Postretirement benefit cost
consisted of the following components:
<TABLE>
<CAPTION>
1994 1995 1996 1996
---- ---- ---- ----
(Predecessor) (Successor)
<S> <C> <C> <C> <C>
Service cost .............. $ 89 $138 $ 41 $ 71
Interest cost.............. 287 278 83 229
---- ---- ---- ----
$376 $416 $124 $300
==== ==== ==== ====
</TABLE>
Management believes that the 1994, 1995 and 1996 (Predecessor) allocated
amounts are reasonable and approximate the amounts that would have resulted from
a SFAS 106 calculation of postretirement benefit cost on a separate company
basis. The 1996 Successor amounts were determined on a stand alone company
basis.
The Company has assumed responsibility for the accrued benefits
attributable to employees of the Company. Pursuant to the Agreement, the Company
established employee benefit plans which are substantially similar to Springs'
employee benefit plans.
34
<PAGE> 35
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
10. EMPLOYEE BENEFIT PLANS - (Continued)
The following table sets forth the status of the Company's obligation
under SFAS No. 106 at the end of 1995 and 1996:
<TABLE>
<CAPTION>
Accumulated postretirement benefit
obligation ("APBO") 1995 1996
---- ----
<S> <C> <C>
Retirees .................................... $1,200 $1,473
Fully eligible active plan participants ..... 800 393
Other active participants ................... 2,000 2,145
------ ------
Accumulated postretirement benefit obligation $4,000 $4,011
Unrecognized gain/(loss) .................... 0 (27)
------ ------
Total recorded obligation ................... $4,000 $3,984
====== ======
</TABLE>
The 1995 and 1996 balance sheets include a liability of $4,000 and
$3,984, respectively, which is classified in "Long-Term Benefit Plans, Deferred
Compensation and Other."
For measurement purposes, an 11.4% annual rate of increase in the per
capita cost of covered health care benefits was assumed. This 11.4% rate is
assumed to decrease gradually to 6.3% until the year 2006 and remain at that
level thereafter. If the health care cost trend rate were increased by one
percent, the APBO would increase by 11% and postretirement benefit cost would
increase by approximately 10%. The discount rate used in determining the APBO at
December 28, 1996 was 7.75%.
11. INCOME TAXES
The following tables present the components of the provision for income
taxes, a reconciliation of the statutory U.S. income tax rate to the effective
income tax rate, and the principal items of deferred income tax assets and
liabilities at the end of 1994, 1995, 1996 (Predecessor) and 1996 (Successor).
Components of the total income tax provision were as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1996
---- ---- ---- ----
(Predecessor) (Successor)
<S> <C> <C> <C> <C>
Current federal .......... $6,002 $ 8,622 $3,739 $6,011
Current state ............ 903 1,297 563 1,096
------ ------- ------ ------
Total current ............ 6,905 9,919 4,302 7,107
------ ------- ------ ------
Deferred federal ......... 502 129 56 (18)
Deferred state ........... 75 47 20 (3)
------ ------- ------ ------
Total deferred ........... 577 176 76 (21)
------ ------- ------ ------
Total provision .......... $7,482 $10,095 $4,378 $7,086
====== ======= ====== ======
</TABLE>
The total provision is included in the statements of income as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1996
---- ---- ---- ----
(Predecessor) (Successor)
<S> <C> <C> <C> <C>
Provision on income before income taxes....... $4,896 $ 8,444 $3,595 $5,460
Income from equity investees ................. 728 1,582 783 1,626
Income of discontinued operations ............ 264 69 0 0
Gain on sale of discontinued operations ...... 1,594 0 0 0
------ ------- ------ ------
Total provision .............................. $7,482 $10,095 $4,378 $7,086
====== ======= ====== ======
</TABLE>
35
<PAGE> 36
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
11. INCOME TAXES - (Continued)
The difference between the federal statutory tax rate and the effective
tax rate on income before income taxes was as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1996
---- ---- ---- ----
(Predecessor) (Successor)
<S> <C> <C> <C> <C>
Provision at federal statutory tax rate ......... 35.0% 35.0% 35.0% 35.0%
State income tax, net of federal tax effect...... 3.5 3.4 3.4 4.2
Amortization of acquisition price not
deductible for tax purposes ................. 1.2 0.7 0.7 2.1
Other ........................................... 1.0 0.8 0.9 (0.2)
---- ---- ---- ----
Effective tax rate .............................. 40.7% 39.9% 40.0% 41.1%
==== ==== ==== ====
</TABLE>
Temporary differences and the related balances of deferred tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Employee benefit accruals ........................ $ 1,975 $ 3,356
Deferred compensation ............................ 186 0
Equity investments ............................... 2,562 2,376
Environmental reserve ............................ 67 0
Other items ...................................... 940 419
------- -------
Total deferred tax assets ........................ 5,730 6,151
------- -------
Property ......................................... 6,638 12,185
Equity investments ............................... 12,719 12,551
Inventories ...................................... 2,943 4,362
Other items ...................................... 280 566
------- -------
Total deferred tax liabilities.................... 22,580 29,665
------- -------
Net deferred tax liabilities ..................... $16,850 $23,514
======= =======
</TABLE>
12. EQUITY INVESTMENTS
CS-Interglas AG ("Interglas")---In March 1993, the Company contributed
two European subsidiaries and $8.8 million to Interglas, a company which
manufactures fiber glass, aramid and carbon fabrics, in exchange for a 24.9%
common stock interest and convertible notes with a face value of 20 million
Deutsche marks (the "Convertible Notes"). No gain or loss was recognized as a
result of this exchange. The Company's common stock investment in Interglas had
a carrying value of $12,809 and $14,282 at December 30, 1995 and December
28,1996, respectively.
The Convertible Notes, which had a carrying value of $13,922 and $13,037
at December 30, 1995 and December 28, 1996, respectively, are convertible into
common stock of Interglas at any time after December 31, 1996. At the Company's
option, conversion would result in the Company owning a total of 42% of the
outstanding common stock of Interglas as of December 28, 1996. Interest on the
Convertible Notes, which is included in income from equity investees, is at 8%
through December 31, 1996 and 5% thereafter. Interest income in 1994, 1995 and
1996 was recognized on an accrual basis. If Convertible Notes are not converted,
the principal balance plus outstanding interest becomes due on June 30, 2007.
Asahi-Schwebel Co. Ltd. ("ASCO")--- The Company owns a 39% common equity
interest in ASCO, a company which manufactures fiber glass fabrics. ASCO
operates a facility in Japan and, in 1996, acquired a majority interest in a
fiberglass manufacturer located in Taiwan. The Company's investment in ASCO had
a carrying value of $33,205 and $32,586 at December 30, 1995 and December 28,
1996,
36
<PAGE> 37
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
12. EQUITY INVESTMENTS - (Continued)
respectively. The carrying value at December 28, 1996 exceeds 39% of ASCO's
total equity by approximately $2,700, which is being amortized on a
straight-line basis through 2008.
Clark-Schwebel Tech-Fab Company ("Tech-Fab")---The Company owns a 50%
partnership interest in Tech-Fab, a joint venture which manufactures nonwoven
fabrics using fiber glass and other synthetic materials. The Company's
investment in Tech-Fab had a carrying value of $2,968 and $3,521 at December 30,
1995 and December 28, 1996, respectively.
Combined Summarized Financial Information---The following table provides
combined summarized balance sheet information for these investees as of
December 30, 1995 and December 28, 1996:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Current assets ..................... $139,541 $138,351
Noncurrent assets .................. 101,538 127,221
-------- --------
Total assets ....................... $241,079 $265,572
======== ========
Current liabilities ................ $ 47,883 $ 54,975
Noncurrent liabilities ............. 92,345 85,665
Minority interest .................. 0 9,715
Redeemable equity instrument ....... 21,341 21,341
Equity ............................. 79,510 93,876
-------- --------
Total liabilities and equity........ $241,079 $265,572
======== ========
</TABLE>
The following table provides combined summarized income statement
information for these investees for the years ended December 31, 1994,
December 30, 1995, and December 28, 1996:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Net sales .................... $266,251 $328,145 $317,918
Operating income.............. 8,303 20,761 35,163
Net income ................... 3,045 13,207 16,643
======== ======== ========
</TABLE>
13. MAJOR CUSTOMERS, CERTAIN CONCENTRATIONS, AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
Sales to two customers exceeded 10% of net sales during fiscal 1994,
1995, and 1996. Sales to the two customers represented as a percentage of net
sales 40.2% in 1994, 42.3% in 1995, 43.4% in 1996 (Predecessor), and 43.2% in
1996 (Successor), respectively. Accounts receivable due from the these two
customers as a percent of total accounts receivable was 52% at December 30, 1995
and 57.8% at December 28, 1996. Although the Company's exposure to credit risk
could be affected by conditions or occurrences within these customers' industry,
no indication of such adverse circumstances existed at December 28, 1996.
The Company currently buys substantially all of its fiberglass yarn, an
important component of its products, from two suppliers and substantially all of
its aramid yarn from one supplier. There are a limited number of manufacturers
of fiberglass yarn and aramid yarn.
The Company's financial instruments include cash, short term investments,
accounts receivable, Convertible Notes, accounts payable and long-term debt.
Management estimates that the carrying value of such instruments approximates
fair value, with the exception of the Senior Notes (see Note 4).
37
<PAGE> 38
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
14. COMMITMENTS AND CONTINGENCIES
The Company leases certain machinery and equipment under noncancelable
operating leases. Rent expense attributed to such leases was $432, $384, $177,
and $314 in 1994, 1995, 1996 (Predecessor), and 1996 (Successor), respectively.
Future minimum payments under the non-cancelable operating leases as of
December 28, 1996 were as follows:
<TABLE>
<CAPTION>
<C> <C>
1997 ............................................. $473
1998 ............................................. 217
1999 ............................................. 96
2000 ............................................. 81
2001 ............................................. 79
----
$946
====
</TABLE>
Prior to the Closing Date of the Acquisition, the Company was involved in
administrative proceedings under environmental laws and regulations, including
proceedings under the Comprehensive Environmental Response, Compensation and
Liability Act. On the closing date, Springs assumed all liabilities related to
the costs associated with these environmental matters. The Company had an
accrual of $175 related to these matters as of December 30, 1995. There was no
material provision for environmental matters in 1994, 1995 or 1996.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not materially affect the Company's financial
position or results of operations.
15. DISCONTINUED OPERATIONS
In June 1994, the Company sold substantially all the assets of certain
subsidiaries engaged in a separate line of business which had revenues of
$42,925 for the first six months of 1994. The Company reported a gain on this
transaction of $2,573, net of taxes of $1,594.
In January 1996, the Company sold its equity investment in a company
engaged in a separate line of business for an amount which approximated book
value. The proceeds received were distributed to Springs. The equity earnings
from this investment also are included in Discontinued Operations in the
Company's financial statements.
16. RELATED PARTY TRANSACTIONS
In connection with the Acquisition, certain members of management (the
"Management Investors") made equity contributions to the Company pursuant to a
Management Subscription Agreement which provided the terms under which the
Management Investors could purchase shares in the Company. The Management
Subscription Agreement set forth the share price, vesting provisions,
disposition of shares upon termination of employment, and certain other rights
of the Management Investors with respect to the shares.
38
<PAGE> 39
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
16. RELATED PARTY TRANSACTIONS - (Continued)
The Management Investors purchased $1.8 million, or 18%, of the common
equity in the Company. Approximately $0.8 million of the purchase price was
financed by the Company through a promissory note (the "Note"). The Note bears
interest at a rate of 6.51% annually. Principal and interest payments are
payable annually on April 17 through 2001. The remaining principal and accrued
interest are due in a balloon payment on April 17, 2006. In the event of the
sale or disposition of the shares, net proceeds from the sale or disposition
will be first applied to repayment of the Note.
The Management Investors have entered into a Securityholders Agreement
with the Company and Vestar/CS Holding which contains certain agreements among
such parties with respect to the capital stock and corporate governance of the
Company. The Securityholders Agreement gives Vestar/CS Holding the right to
appoint all members to the Board of Directors of the Company. Additionally, the
Securityholders Agreement restricts the ability of Management Investors to
transfer their equity interest except upon (A) the exercise of their tag along
rights, which allows Management Investors to sell their equity interest when
Vestar/CS Holding sells its equity interest in the Company; (B) a sale of the
Company; (C) the exercise of certain put and call options under the Management
Subscription Agreement; (D) a public sale of the Company's common stock.
The Management Investors have entered into a Voting Trust Agreement with
the Company and Vestar/CS Holding which requires Management Investors to vote
all of their common stock as directed by Vestar/CS Holding for the approval of
any of the following: amendment to the Company's Certificate of Incorporation,
merger, share exchange, combination or consolidation of the Company with any
other person, the sale, lease or exchange of all or substantially all of the
property and assets of the Company, or the reorganization, recapitalization,
liquidation, or dissolution of the Company.
Pursuant to a Management Advisory Agreement (the "Management Agreement"),
Vestar Capital Partners will receive an annual fee and reimbursement of
out-of-pocket expenses for management and financial consulting services provided
to the Company. Such services include advising the Company on the establishment
of effective banking, legal and other business relationships, and assisting
management in developing and implementing strategies for improving the
operational, marketing and financial performance of the Company. The management
advisory fees to be paid per annum will equal the greater of (i) 1.0% of the
consolidated earnings of the Company before interest, taxes, depreciation and
amortization or (ii) $350. Approximately $258 was paid to Vestar pursuant to the
Management Agreement for services rendered between April 18, 1996 and December
28, 1996 (Successor Company).
Upon consummation of the Acquisition, the Company paid to Vestar Capital
Partners an investment banking fee of approximately $1.5 million plus
out-of-pocket expenses for its services in structuring the transaction and
providing financial advice in connection therewith. Additionally, a member of
the Company's Board of Directors received a fee of approximately $600 for his
consulting services in connection with the Acquisition.
39
<PAGE> 40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Prior to the Acquisition, the financial statements for 1994 and 1995 of
Fort Mill A Inc. were audited by Deloitte & Touche LLP. In May 1996, in
connection with the Acquisition and the formation of Clark-Schwebel Holdings,
Inc., the Company engaged Arthur Andersen LLP as its independent accountants.
The consolidated financial statements of the Company for 1996 were audited by
Arthur Andersen LLP. The decision to change accountants was approved by the
audit committee of the Company's Board of Directors. Deloitte & Touche LLP's
report on the financial statements for 1994 and 1995 did not contain an adverse
opinion or a disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles. From the beginning of fiscal
1994 until the change in accountants, there were no disagreements with Deloitte
& Touche LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement(s), if
not resolved to the satisfaction of such accounting firm, would have caused it
to make reference to the subject matter of the disagreement(s) in connection
with its report.
40
<PAGE> 41
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth certain information with respect to members of
the Board of Directors and executive officers of the Company.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Jack P. Schwebel ............ 71 Chairman of the Board
William D. Bennison ......... 52 President and Director
Richard C. Wolfe ............ 48 Executive Vice President and Director
William H. Boyles ........... 52 Vice President--Fiber Glass Sales and Marketing
Donald R. Burnette .......... 48 Chief Financial Officer, Treasurer and Secretary
Harvey A. Morse ............. 43 Vice President--Human Resources
Dieter R. Wachter ........... 52 Vice President--High Performance Fabrics
Norman W. Alpert ............ 38 Director
John D. Howard .............. 44 Director
Sander M. Levy .............. 35 Director
Arthur J. Nagle ............. 58 Director
Daniel S. O'Connell.......... 43 Director
Frank Greenberg ............. 67 Director
Gerard Seelig ............... 70 Director
</TABLE>
All of the above have been Directors since the Acquisition.
Jack P. Schwebel has served as Chairman of the Board of the Company since
the Acquisition. Mr. Schwebel also serves as a director of CS-Interglas and
Asahi-Schwebel. Mr. Schwebel co-founded Clark-Schwebel, Inc. in 1960 and served
as Chairman, President and Chief Executive Officer from 1964 until retiring at
the end of 1992. Mr. Schwebel received a B.S. degree from The Wharton School of
the University of Pennsylvania.
William D. Bennison joined the Company in 1989 as Vice President, Sales
and Marketing, and since 1992 has served as President. Mr. Bennison also serves
as President of CS Tech-Fab and director of CS-Interglas and Asahi-Schwebel. Mr.
Bennison was President of BGF Industries and its predecessor, Burlington Glass
Fabrics Co., from 1981 to 1989. Mr. Bennison received a B.S. degree from Indiana
University and an M.B.A. degree from Columbia University.
Richard C. Wolfe has served as Executive Vice President of the Company
since the Acquisition. Mr. Wolfe joined the Company in 1986 as Vice President,
Manufacturing, and from 1989 to 1996, he served as Senior Vice President of
United States Manufacturing and Operational Functions. Mr. Wolfe received a
B.S. degree from the Georgia Institute of Technology and is a graduate of the
Advanced Management Program of The Harvard Business School.
William H. Boyles joined the Company in 1988 as National Sales Manager
and since 1989 has served as Vice President, Fiber Glass Sales and Marketing.
Prior to 1988, Mr. Boyles was Vice President and General Manager of Uniglass
Industries.
Donald R. Burnette has served as Chief Financial Officer, Treasurer and
Secretary of the Company since the Acquisition. Mr. Burnette was Vice President
and Controller of the Company from 1993 to 1996. From 1987 to 1993,
Mr. Burnette was Vice President of Administration and Controller for the
Wamsutta Home Products Division (a manufacturer of home furnishings) of Springs
Industries. Mr. Burnette served in various financial positions with Springs
Industries from 1978 to 1987. Mr. Burnette received a B.S. degree from Francis
Marion University.
41
<PAGE> 42
Harvey A. Morse has served as Vice President, Human Resources since 1994.
From 1987 to 1994, Mr. Morse served as Director of Human Resources for the
Company, and from 1978 to 1987, he served in various human resource positions
for Springs Industries. Mr. Morse received a bachelor's degree from the
University of North Carolina at Chapel Hill.
Dieter R. Wachter has served as Vice President, High Performance Fabrics
since 1989. Prior to 1989, Mr. Wachter was involved in the development of the
High Performance Fabrics unit and held positions in a variety of areas within
High Performance Fabrics, including sales and marketing. Mr. Wachter graduated
from business school in Zurich, Switzerland.
Norman W. Alpert is a Managing Director of Vestar Capital Partners*
(engaged in merchant banking) and was a founding partner of Vestar at its
inception in 1988. Mr. Alpert is Chairman of the Board of Directors of
International AirParts Corporation and a director of Russell-Stanley
Corporation, Remington Products Company, Aearo Corporation and Prestone Products
Corporation, all companies in which Vestar or its affiliates have a significant
equity interest. Mr. Alpert received an A.B. degree from Brown University.
John D. Howard is Chairman and Chief Executive Officer of Gryphon Capital
Corporation (engaged in merchant banking) and previously was Co-Chief Executive
Officer of Vestar Capital Partners. Mr. Howard is a director of Celestial
Seasonings, Inc., Dyersburg Fabrics, Inc., Access Beyond, Inc. and National
Realty Trust. Mr. Howard received a B.A. degree from Trinity College and an
M.P.P.M. degree from Yale University School of Management.
Sander M. Levy is a Managing Director of Vestar Capital Partners* and was
a founding partner of Vestar at its inception in 1988. Mr. Levy received a B.S.
degree from The Wharton School of the University of Pennsylvania and an M.B.A.
degree from Columbia University.
Arthur J. Nagle is a Managing Director of Vestar Capital Partners* and
was a founding partner of Vestar at its inception in 1988. Mr. Nagle is a
director of Aearo Corporation, Chart House Enterprises, Inc., Russell-Stanley
Corporation, La Petite Holdings Corporation, Remington Products Company, and
Prestone Products Corporation, all companies (other than Chart House
Enterprises, Inc.) in which Vestar or its affiliates have a significant equity
interest. Mr. Nagle received a B.S. degree from Pennsylvania State University
and an M.B.A. degree from Columbia University.
Daniel S. O'Connell is the Chief Executive Officer and founder of Vestar
Capital Partners.* Mr. O'Connell is director of Aearo Corporation, Pinnacle
Automation, Inc., Russell-Stanley Corporation, Prestone Products Corporation,
Remington Products Company, and Anvil Knitwear, Inc., all companies in which
Vestar or its affiliates have a significant equity interest. Mr. O'Connell
received an A.B. degree from Brown University and an M.P.P.M. degree from Yale
University School of Management.
Frank Greenberg was the Chairman of the Board of Directors and Chief
Executive Officer of Burlington Industries Corporation (engaged in textile
manufacturing) from 1986 until his retirement in 1994. Mr. Greenberg now serves
as Chairman of the Board of Burlington. Mr. Greenberg received a B. A. degree
from the University of Chicago.
Gerard L. Seelig has over 35 years of experience in managing worldwide
industrial and technology based businesses. Most recently he was an Executive
Vice President with Allied Signal, Inc. Prior to joining Allied Signal, Inc., he
held Senior Executive positions at ITT (12 years) and Lockheed Corporation (10
years). Mr. Seelig is a Director of International AirParts Corporation, a
company in which Vestar or its affiliates have a significant equity interest,
Simplicity Corporation and Larson-Davis Corporation. Mr. Seelig received a B. S.
degree from Ohio State University and an M.S. degree from New York University.
The term in office of each director ends when his or her successor has
been elected or upon his or her removal or resignation. Each executive officer
serves at the discretion of the Board of Directors.
* Vestar/CS Holding Co., L.L.C., which is an affiliate of Vestar Capital
Partners, is the principal shareholder of the Company.
42
<PAGE> 43
The information set forth under Item 13 "Certain Relationships and
Related Transactions" under the subheading, "Securityholders Agreement and
Voting Trust Agreement", is incorporated herein by reference thereto.
ITEM 11. EXECUTIVE COMPENSATION
The compensation of executive officers of the Company is determined by
the Board of Directors of the Company upon the recommendation of the
Compensation Committee. None of the historical benefit or compensation plans of
Springs Industries is described herein because each was terminated with respect
to the named officers in connection with the Acquisition. The following table
sets forth information concerning compensation received by the five executive
officers of the Company who received the most salary and bonus in 1996 (the
"Named Executive Officers") for services rendered in 1996 and 1995.
43
<PAGE> 44
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
--------------------- ----------------------------------
Restricted
Stock Options All Other
Name and Principal Position Year Salary($) Bonus($) Awards($) SAR's(#) Payouts($) Compensation($)
- --------------------------- ---- --------- -------- ---------- -------- ---------- ---------------
(1) (2) (3)
<S> <C> <C> <C> <C> <C> <C> <C>
William D. Bennison ....... 1996 199,250 239,100 -- -- -- 626,325(4)
President .............. 1995 191,211 133,848 4,859 6,000 33,317 38,600(5)
Schwebel, Jack P.(6) ...... 1996 170,192 204,230 -- -- -- 9,873(4)
Chairman of the Board .. 1995 -- -- -- -- -- --
Wolfe, Richard C .......... 1996 161,000 193,200 -- -- -- 254,483(4)
Executive Vice President 1995 153,846 92,308 4,859 4,000 22,846 27,640(5)
Boyles, William H ......... 1996 125,077 125,077 -- -- -- 14,594(4)
Vice President ......... 1995 118,500 56,000 2,916 -- -- 12,500(5)
Burnette, Donald R ........ 1996 114,000 114,000 -- -- -- 82,275(4)
Chief Financial Officer, 1995 106,385 63,832 2,916 -- -- 12,851(5)
Treasurer & Secretary
</TABLE>
(1) Under a Springs Industries' restricted stock award plan, certain of the
Named Executive Officers were awarded restricted shares of Springs
Industries Class A Common Stock. The dollar value shown in the table for
these shares is based on the $38.875 per share closing market price on
the date of grant of such shares. The number of such shares is as
follows: Mr. Bennison, 125: Mr. Wolfe, 125: Mr. Boyles, 75; and Mr.
Burnette, 75. One-third of these shares vested in 1994, one-third in 1995
and one-third in 1996. Dividends were paid on all restricted stock
holdings.
(2) On February 16, 1995, Messrs. Bennison and Wolfe received options to
purchase 6,000 and 4,000 shares of Springs Industries Class A Common
Stock, respectively, pursuant to the Springs Industries, Inc. 1991
Incentive Stock Plan.
(3) Messrs. Bennison and Wolfe received cash payments pursuant to performance
unit awards granted under an incentive stock plan of Springs Industries
of $16,659 and $11,423, respectively. Messrs. Bennison and Wolfe received
shares of Springs Industries Class A Common Stock under the Restated and
Amended Springs Industries, Inc. Deferred Unit Stock Plan with a value on
the date of issuance of $16,658 and $11,423, respectively.
(4) In connection with the Acquisition, benefits payable under certain
executive compensation plans of Springs Industries were accelerated and
paid in cash to Messrs. Bennison, Wolfe, Boyles and Burnette on the
closing date of the Acquisition as follows: Mr. Bennison received
$613,452 under the Springs Industries Incentive Stock Plan, Deferred Unit
Stock Plan, Contingent Compensation Plan and Excess Benefit Plan; Mr.
Wolfe received $241,619 under the Springs Industries Incentive Stock
Plan, Deferred Unit Stock Plan, Contingent Compensation Plan, and Excess
Benefit Plan; Mr. Boyles received $1,721 under the Springs Industries
Excess Benefit Plan; and Mr. Burnette received $69,402 under the Springs
Industries Deferred Unit Stock Plan and Excess Benefit Plan.
Additionally, the Named Executive Officers participated in the Company's
Profit Sharing and 401(k) match programs. The payments made pursuant to
these programs for 1996 were as follows: Mr. Bennison - $12,873, Mr.
Schwebel - $9,873, Mr. Wolfe $12,873, Mr. Boyles - $12,873, Mr. Burnette
- $12,873. The payments made pursuant to all the above programs are
listed under All Other Compensation for 1996.
(5) The Named Executive Officers participated in Springs Industries' profit
sharing, 401(k) match, contingent compensation and excess benefit
programs. The aggregate payments made by Springs Industries pursuant to
such programs are listed under All Other Compensation for 1995.
(6) Represents compensation from April 18, 1996 to the end of the year.
44
<PAGE> 45
MANAGEMENT EQUITY PARTICIPATION
In connection with the Acquisition, in order to provide financial
incentives for certain of its employees, the Company entered into a management
subscription agreement with each of the Management Investors (each, a
"Management Subscription Agreement"). The Management Subscription Agreement
provides for certain rights with respect to shares of Common Stock of
Clark-Schwebel Holdings, Inc. purchased by the Management Investors (the
"Purchased Shares").
At Closing, the Management Investors purchased an aggregate of $1.8
million of Purchased Shares representing 18% of the fully diluted Common Stock
of Clark-Schwebel Holdings, Inc. Approximately $0.8 million of the purchase
price of the Purchased Shares was financed by the Company. As a result, Messrs.
Bennison (President), Wolfe (Executive Vice President), Boyles (Vice President)
and Burnette (Chief Financial Officer) owe the Company $120,000, $210,000,
$95,000 and $90,000 respectively, pursuant to notes that bear interest at 6.51%
per annum, have a term of 10 years and are subject to mandatory prepayment in
the event the employment of such Management Investor terminates. Each of these
notes is secured by a pledge of the relevant Management Investor's Common Stock
of Clark-Schwebel Holdings, Inc. Upon the termination of employment of the
holder, the Purchased Shares will be subject to certain call provisions
exercisable by the Company and/or Vestar/CS Holding at a purchase price that
varies depending upon the reason for the termination and the number of years
from the Acquisition. Upon the termination of the holder's employment due to
disability, death or retirement, the holder will have the right, subject to
certain limitations, to cause the Company to purchase the holder's Common Stock
of Clark-Schwebel Holdings, Inc. at a price that varies according to the number
of years that have elapsed following the Acquisition.
COMPENSATION OF DIRECTORS
Mr. Schwebel receives base annual compensation of $250,000 plus bonus for
his services as Chairman of the Board. Directors of the Company who are neither
employees of the Company nor affiliated with Vestar receive annual compensation
of $12,500 plus $2,500 per Board meeting attended plus $1,250 for each Board
Committee meeting. Other directors do not receive any compensation for services
in such capacity.
Compensation Committee Interlocks and Insider Participation
Messrs. Greenberg, Nagle and Levy are the members of the Compensation
Committee which reviews and makes recommendations to the Board of Directors
regarding the compensation and benefits of the Company's executive officers and
key employees.
Since the Acquisition, each of these individuals has had an interest
in transactions or business relationships involving the Company. See the
information contained in Item 13, "Certain Relationships and Related
Transactions", which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the Clark-Schwebel, Inc.'s issued and outstanding capital stock is
owned by Clark-Schwebel Holdings, Inc. ("Holdings"). Set forth below is certain
information regarding the beneficial ownership of Holdings Participating
Preferred Stock and Holdings Common Stock by each person known by Holdings to
beneficially own 5.0% or more of the outstanding shares of either Holdings
Participating Preferred Stock or Holdings Common Stock, each director and Named
Executive Officer and all directors and Executive Officers as a group. Except as
indicated below, the address for each of the persons listed below is c/o
Clark-Schwebel, Inc., 2200 South Murray Avenue, Anderson, South Carolina, 29622.
45
<PAGE> 46
<TABLE>
<CAPTION>
Holdings
Participating Holdings Common
Preferred Stock Stock
------------------- ---------------------
Name Number Percentage Number Percentage
- ---- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Vestar/CS Holding Company, L.L.C.(1)(2) ... 1,000 100.0% 7,200 80.0%
c/o Vestar Equity Partners
245 Park Avenue, 41st Floor
New York, New York 10167
William D. Bennison(2) .................... 0 0 480 5.3%
Richard C. Wolfe(2) ....................... 0 0 360 4.0%
William H. Boyles(2) ...................... 0 0 120 1.3%
Donald R. Burnette(2) ..................... 0 0 150 1.6%
Jack P. Schwebel(3) ....................... 0 0 0 0
Norman W. Alpert(4) ....................... 1,000 100.0% 7,200 80.0%
John D. Howard ............................ 0 0 0 0
Sander M. Levy(4) ......................... 1,000 100.0% 7,200 80.0%
Arthur J. Nagle(4) ........................ 1,000 100.0% 7,200 80.0%
Daniel S. O'Connell(4) .................... 1,000 100.0% 7,200 80.0%
Frank Greenberg ........................... 0 0 0 0
Gerard L. Seelig .......................... 0 0 0 0
Directors and Executive Officers as a group
(14 persons) ............................ 1,000 100.0% 8,460 94.0%
</TABLE>
(1) The sole manager of Vestar/CS Holding is Vestar. The sole general partner
of Vestar is Vestar Associates L.P., a limited partnership whose sole
general partner is Vestar Associates Corporation ("VAC"). In such
capacity, VAC exercises sole voting and investment power with respect to
all of the shares of Holdings held of record by Vestar/CS Holding.
Messrs. Alpert, Levy, Nagle and O'Connell, who are directors of the
Company, are affiliated with Vestar in the capacities described under
"Management--Directors and Executive Officers of the Company" and are
directors, executive officers and stockholders of VAC. Individually, no
stockholder, director or officer of VAC is deemed to have or share such
voting or investment power with respect to shares of Holdings held of
record by Vestar/CS Holding within the meaning of Rule 13d-3 under the
Exchange Act. Accordingly, no part of the shares of Holdings
Participating Preferred Stock or Holdings Common Stock is beneficially
owned by Messrs. Alpert, Levy, Nagle or O'Connell or any other
stockholder, director or officer of VAC.
(2) Messrs. Bennison, Wolfe, Boyles, and Burnette have entered into the
Securityholders Agreement which contains certain agreements with respect
to the capital stock and corporate governance of the Company and the
Voting Trust Agreement (as defined herein) pursuant to which Messrs.
Bennison, Wolfe, Boyles and Burnette have agreed to vote their shares as
directed by Vestar/CS Holding with respect to certain matters. All
outstanding shares of Holdings Participating Preferred Stock and Holdings
Common Stock are held by Vestar/CS Holding, as trustee under the Voting
Trust Agreement. Each of Messrs. Bennison, Wolfe, Boyles and Burnette is
also party to a Management Subscription Agreement. See the information
under the subheading, "Management Equity Participation", in Item 11,
"Executive Compensation".
(3) Each of Mr. Schwebel's three adult children owns 1.94% of the fully
diluted Holdings Common Stock which shares are not included in the table
above as beneficially owned by Mr. Schwebel. Mr. Schwebel has no voting
or investment power with respect to the shares owned by any of his
daughters, and accordingly no part of such shares is beneficially owned
by Mr. Schwebel.
(4) Messrs. Alpert, Levy, Nagle and O'Connell are affiliated with Vestar/CS
Holdings in the capacities described in Note (1) above and under
"Management--Directors and Executive Officers of the Company." Beneficial
ownership of Holdings capital stock for each of these individuals
includes the 1,000 shares of Holdings Participating Preferred Stock and
7,200 shares of Holdings Common Stock included in the above table
beneficially owned by Vestar/CS Holdings, of which such persons disclaim
beneficial ownership. Each such person's business address is c/o Vestar
Equity Partners, L.P., 245 Park Avenue, 41st Floor, New York, New York
10167.
46
<PAGE> 47
The information set forth under Item 13, "Certain Relationships and
Related Transactions", under the subheading, "Securityholders Agreement and
Voting Trust Agreement" is incorporated herein by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisition
The information set forth in Item I, "Business" under the subheading,
"The Acquisition" is incorporated herein by reference thereto.
In connection with the Acquisition, Vestar/CS Holding Company, L.L.C.
and the executive officers of the Company acquired the Holdings Common Stock
and, in the case of Vestar/CS Holding Company, L.L.C., the Holdings
Participating Preferred Stock shown under Item 12, "Security Ownership of
Certain Beneficial Owners and Management", and Messrs. John Howard, Frank
Greenberg and Gerard Seelig (directors of the Company) acquired membership
interests in Vestar/CS Holding Company, L.L.C.. Each of Messrs. Norman Alpert,
John Howard, Sander Levy, Arthur Nagle and Daniel O'Connell (directors of the
Company) has a direct or indirect pecuniary interest in Vestar which is a member
and the sole manager of Vestar/CS Holding.
Securityholders Agreement and Voting Trust Agreement
In connection with the Acquisition, Vestar/CS Holding, the Management
Investors entered into a securityholders agreement (the "Securityholders
Agreement") which contains certain agreements among such parties with respect to
the capital stock and corporate governance of the Company.
Pursuant to the Securityholders Agreement, Vestar/CS Holding has the
right to appoint all members to the Board of Directors of the Company; provided
that two of the directors designated by Vestar/CS Holding shall be elected from
the management of the Company. In addition, pursuant to the Securityholders
Agreement and a voting trust agreement (the "Voting Trust Agreement"), the
Management Investors will vote all of their Holdings Common Stock as directed by
Vestar/CS Holding for the approval of any amendment to Holdings' Certificate of
Incorporation, the merger, share exchange, combination or consolidation of the
Company with any other person, the sale, lease or exchange of all or
substantially all of the property and assets of the Company and its subsidiaries
on a consolidated basis or the reorganization, recapitalization, liquidation,
dissolution or winding-up of the Company.
The Securityholders Agreement contains certain provisions which, with
certain exceptions, (i) restrict the ability of the Management Investors to
transfer their respective equity interest in Holdings except pursuant to, among
other bases, an exercise of tag-along rights upon the sale of Holdings Common
Stock held by Vestar/CS Holding, a sale of the Company, the exercise of certain
put and call options under the Management Subscription Agreements, or a public
sale of Holdings Common Stock; and (ii) restrict the ability of Vestar/CS
Holding to transfer its securities of the Company, except pursuant to, among
other bases, the tag-along rights of the Management Investors, a public sale of
Holdings Common Stock, or a sale of the Company.
The Securityholders Agreement contains certain provisions which, subject
to certain exceptions, grant Vestar/CS Holding, subsequent to the first public
sale of Holdings Common Stock, the right to demand registration of Holdings
Common Stock under the Securities Act (a "Demand Right"). Vestar/CS Holding will
be able to exercise such Demand Right four times. All persons party to the
Securityholders Agreement will have the right to participate, or "piggyback," in
certain registrations initiated by Holdings or pursuant to a Demand Right.
47
<PAGE> 48
Other Relationships
Upon consummation of the Acquisition, the Company paid to Vestar Capital
Partners an investment banking fee of approximately $1.5 million plus
out-of-pocket expenses for its services in structuring the transaction and
providing financial advice in connection therewith. Each of Messrs. Alpert, Levy
and Nagle (all of whom are directors of the Company) is a Managing Director and
Mr. O'Connell (a director of the Company), is the Chief Executive Officer of
Vestar. Each of Messrs. Alpert, Levy, Nagle and O'Connell, four of the directors
of the Company, benefits from any payments received by Vestar Capital Partners.
Upon consummation of the Acquisition, the Company paid to Frank
Greenberg, a transaction fee of $600,000 for Mr. Greenberg's services in
connection with the transaction. Mr. Greenberg is a director of the Company.
Pursuant to a management advisory agreement (the "Management Agreement"),
Vestar Capital Partners will receive an annual fee and reimbursement of
out-of-pocket expenses for management and financial consulting services provided
to the Company. Such services include advising the Company on the establishment
of effective banking, legal and other business relationships, and assisting
management in developing and implementing strategies for improving the
operational, marketing and financial performance of the Company. The management
advisory fees to be paid per annum will equal the greater of (i) after fiscal
1996, 1.0% of the consolidated earnings of the Company before interest, taxes,
depreciation and amortization or (ii) $350,000. Approximately $258,000 was paid
to Vestar Capital Partners pursuant to the Management Agreement in 1996.
48
<PAGE> 49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Financial Statements
Included in Part II, Item 8
Consolidated Balance Sheets as of December 30, 1995
and December 28, 1996
Consolidated Statements of Income for the years ended
December 28, 1996, December 30, 1995 and December 31,
1994
Consolidated Statements of Cash Flow for the years
ended December 28, 1996, December 30, 1995 and
December 31, 1994
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
Schedule I - Condensed Financial Information of
Registrant
Schedule II - Valuation and Qualifying Accounts
(3) List of Exhibits Filed with Form 10-K.
10.7 - 1996 Executive Bonus Plan. +
10.8 - 1997 Exceutive Bonus Plan. +
12.1 - Ratio of Earnings to Fixed Charges
21.1 - Subsidiaries of the Registrants.
27 - Financial Data Schedule
(electronic filing only)
Exhibits Incorporated by Reference
The Exhibits listed below have been filed with the Commission and are
incorporated herein by reference to the exhibit number and file number of such
documents which are stated in parentheses.
Exhibit
2.1 - Agreement and Plan of Merger, dated as of February 24, 1996, among
Springs Industries, Inc., Fort Mill A Inc., Vestar/CS Holding Company,
L.L.C. and Clark-S Acquisition Corporation (incorporated by reference to
Exhibit 2.1 to the Registrant's Registration Statement on Form S-4, Reg.
No. 333-4723 ("the S-4")).
2.2 - Amendment No. 1 to Agreement and Plan of Merger, among Springs
Industries, Inc., Fort Mill A, Inc., Vestar/CS Holding Company, L.L.C.
and Clark-S Acquisition Corporation (incorporated by reference to Exhibit
2.2 to the S-4).
49
<PAGE> 50
2.3 - Form of Management Common Stock Subscription Agreement, dated as of
April 17, 1996, between Clark-Schwebel Holdings, Inc. and the Management
Investors (incorporated by reference to Exhibit 2.3 to the S-4). +
3.1 - Amended and Restated Certificate of Incorporation of Clark-Schwebel
Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the S-4).
3.2 - By-laws of Clark-Schwebel Holdings, Inc. (incorporated by reference to
Exhibit 3.2 to the S-4).
3.3 - Certificate of Incorporation of Clark-Schwebel, Inc. (incorporated by
reference to Exhibit 3.3 to the S-4).
3.4 - By-laws of Clark-Schwebel, Inc. (incorporated by reference to Exhibit
3.4 to the S-4).
4.1 - Indenture, dated as of April 17, 1996, among Clark-Schwebel Holdings,
Inc., Clark-S Acquisition Corporation, CS Finance Corporation of Delaware
and Fleet National Bank, as Trustee. (incorporated by reference to
Exhibit 4.1 to the S-4).
4.2 - First Supplemental Indenture, dated as of April 18, 1996, between
Clark-Schwebel, Inc. and Fleet National Bank (incorporated by reference
to Exhibit 4.2 to the S-4).
4.3 - Forms of Series A and Series B 10 1/2% Senior Notes (included in
Exhibit 4.1 as Exhibit A thereto) (incorporated by reference to Exhibit
4.3 to the S-4).
4.4 - Purchase Agreement, dated as of April 12, 1996, among Clark-Schwebel
Holdings, Inc., Clark-S Acquisition Corporation, CS Finance Corporation
of Delaware, Donaldson, Lufkin & Jenrette Securities Corporation, Bear,
Stearns & Co. Inc., CS First Boston Corporation and Lazard Freres & Co.
LLC. (incorporated by reference to Exhibit 4.4 to the S-4).
4.5 - Registration Rights Agreement, dated as of April 17, 1996, by and among
Clark-Schwebel Holdings, Inc., Clark-S Acquisition Corporation, CS
Finance Corporation of Delaware, Donaldson, Lufkin & Jenrette Securities
Corporation, Bear, Stearns & Co. Inc., CS First Boston Corporation and
Lazard Freres & Co. LLC. (incorporated by reference to Exhibit 4.5 to the
S-4).
4.6 - Securityholders Agreement, dated April 17, 1996, by and among
Clark-Schwebel Holdings, Inc., Vestar/CS Holding Company, L.L.C. and
certain other parties thereto (incorporated by reference to Exhibit 4.6
to the S-4).
4.7 - Form of Holdings Guarantee (included in Exhibit 4.1 as Exhibit D
thereto) (incorporated by reference to Exhibit 4.7 to the S-4).
4.8 - Form of Subsidiary Guarantee (included in Exhibit 4.1 as Exhibit C
thereto) (incorporated by reference to Exhibit 4.8 to the S-4).
9.1 - Voting Trust Agreement, made as of April 17, 1996, by and among
Clark-Schwebel Holdings, Inc., Vestar/CS Holding Company, L.L.C. and
other parties thereto (incorporated by reference to Exhibit 9.1 to the
S-4).
10.1 - Credit Agreement, dated as of April 17, 1996, among the several banks
and other financial institutions from time to time parties thereto and
Chemical Bank (the "Agent") (incorporated by reference to Exhibit 10.1 to
the S-4).
10.2 - Form of Security Agreement, dated as of April 17, 1996, made by each
Guarantor in favor of the Agent (incorporated by reference to Exhibit
10.4 to the S-4).
50
<PAGE> 51
10.3 - Form of Pledge Agreement, dated as of April 17, 1996, made by each
Guarantor in favor of the Agent (incorporated by reference to Exhibit
10.5 to the S-4).
10.4 - Form of Guarantee Agreement, dated as of April 17, 1996, made by each
Guarantor in favor of the Agent (incorporated by reference to Exhibit
10.6 to the S-4).
10.5 - Management Agreement, dated as of April 17, 1996, between
Clark-Schwebel Holdings, Inc., Clark-Schwebel, Inc., and Vestar Capital
Partners (incorporated by reference to Exhibit 10.8 to the S-4).
10.6 - Form of Intellectual Property Security Agreement, among Clark-Schwebel
Holdings, Inc., Clark- Schwebel, Inc. and the other parties thereto
(incorporated by reference to Exhibit 10.9 to the S-4).
+ This is a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No report on Form 8-K was filed during the fiscal quarter ended
December 28, 1996.
51
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CLARK-SCHWEBEL HOLDINGS, INC.
-----------------------------
(Registrant)
Date: March 27, 1997 By: /s/ Donald R. Burnette
-------------------------- --------------------------------
Name: Donald R. Burnette
Title: Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date March 27, 1997 /s/ William D. Bennison
-------------------------- --------------------------------------
Name: William D. Bennison
Title: President
Date March 27, 1997 /s/ Donald R. Burnette
-------------------------- --------------------------------------
Name: Donald R. Burnette
Title: Vice President and
Chief Financial Officer
Date March 27, 1997 /s/ Kyle J. Davidson
-------------------------- --------------------------------------
Name: Kyle J. Davidson
Title: Controller
Date March 27, 1997 /s/ Jack P. Schwebel
-------------------------- --------------------------------------
Name: Jack P. Schwebel
Title: Chairman of the Board
Date March 27, 1997 /s/ Richard C. Wolfe
-------------------------- --------------------------------------
Name: Richard C. Wolfe
Title: Executive Vice President and
Director
Date March 27, 1997 /s/ Norman W. Alpert
-------------------------- --------------------------------------
Name: Norman W. Alpert
Title: Director
Date March 27, 1997 /s/ John D. Howard
-------------------------- --------------------------------------
Name: John D. Howard
Title: Director
Date March 27, 1997 /s/ Sander M. Levy
-------------------------- --------------------------------------
Name: Sander M. Levy
Title: Director
52
<PAGE> 53
Date March 27, 1997 /s/ Arthur J. Nagle
-------------------------- --------------------------------------
Name: Arthur J. Nagle
Title: Director
Date March 27, 1997 /s/ Daniel S. O'Connell
-------------------------- --------------------------------------
Name: Daniel S. O'Connell
Title: Director
Date March 27, 1997 /s/ Frank Greenberg
-------------------------- --------------------------------------
Name: Frank Greenberg
Title: Director
Date March 27, 1997 /s/ Gerard L. Seelig
-------------------------- --------------------------------------
Name: Gerard L. Seelig
Title: Director
53
<PAGE> 54
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
No annual report to security-holders covering the Registrant's last
fiscal year has been sent to security-holders.
No proxy statement, form of proxy or other proxy soliciting material
has been sent to more than 10 of the Registrant's security-holders with respect
to any annual or other meeting of security-holders.
54
<PAGE> 55
EXHIBIT INDEX
10.7 - 1996 Executive Bonus Plan. +
10.8 - 1997 Executive Bonus Plan. +
12.1 - Ratio of Earnings to Fixed Charges.
21.1 - Subsidiaries of the Registrant.
27 - Financial Data Schedule.
(electronic filing only)
55
<PAGE> 56
CLARK-SCHWEBEL HOLDINGS, INC. AND SUBSIDIARY
SCHEDULE 1 - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Dollars in Thousands)
Summarized Financial Information---The following table provides summarized
financial information for Clark-Schwebel, Inc., the operating company, on a
stand alone basis. The balance sheet information is as of December 28, 1996 and
the income statement information is for the period of April 18, 1996 through
December 28, 1996.
<TABLE>
<CAPTION>
1996
----
(Successor)
<S> <C>
Current assets ................................. $ 64,038
Noncurrent assets .............................. 176,662
---------
Total assets ................................... 240,700
Less:
Current liabilities ............................ (38,881)
Noncurrent liabilities ......................... (152,019)
---------
Net assets ..................................... $ 49,800
=========
Net sales ...................................... $ 152,003
Gross profit ................................... 33,398
Income from continuing operations .............. 10,135
Net income ..................................... 6,998
=========
Condensed Statement of Cash Flows:
Operating activities ........................... $ 41,127
Investing activities ........................... (194,930)
Financing activities ........................... 157,434
---------
Net change in cash ............................. $ 3,631
=========
Dividends from Asahi-Schwebel Co., Ltd. ........ $ 303
=========
</TABLE>
All assets of Clark-Schwebel, Inc., the operating company, represent
restricted net assets with the exception of the foreign equity investments and
distributions received from the foreign equity investments. Except in limited
circumstances, Clark-Schwebel, Inc. is prohibited from transferring restricted
net assets to Clark-Schwebel Holdings, Inc. in the form of cash dividends,
loans, or advances without the consent of a third party lender. The amount of
unrestricted net assets at December 28, 1996 is $61,221, which represents the
book value of the foreign equity investments ($59,906) and distributions
received in the form of cash from the foreign equity investments ($1,315).
<PAGE> 57
CLARK-SCHWEBEL HOLDINGS, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column C Column D Column E
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
Description of Period Expenses Accounts Deductions Period
- -------------------------------------------------------------------------------------------------------------------------------
(A) (B) (C)
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 28, 1996:
36.5 week period ended December 28, 1996 (Successor) $ 655 160 38 $ 853
15.5 week period ended April 17, 1996 (Predecessor) $2,133 (84) 6 (1,400) $ 655
Year ended December 30, 1995 (Predecessor) $ 641 1,842 (349) $2,133
Year ended December 31, 1994 (Predecessor) $ 430 240 (29) $ 641
</TABLE>
(A) - The allowance for doubtful accounts was reduced as of the April 17,
1996 Acquisition Date by $160 to reflect management's estimate of the
reserve for bad debts as of the Acquisition Date.
(B) - Uncollectible accounts, net of recoveries
(C) - As part of Acquisition Agreement, Springs Industries, the former parent
company of Fort Mill A Inc. agreed to retain the accounts receivable from
one customer (which totaled $2,782 as of December 30, 1995) and related
$1,400 reserve. The asset and related reserve were transferred to Springs
at April 17, 1996, the Acquisition Date.
<PAGE> 1
EXHIBIT 10.7
CLARK-SCHWEBEL, INC.
1996 EXECUTIVE BONUS POOL
Attached is the 1996 Executive Bonus Plan as submitted by management and
recommended by the Compensation and Benefit Committee.
1. The plan is based on EBITDA. As EBITDA escalates, an increasing % of
EBITDA is earned for bonus payments. The % earned ranges from 1.8%
(minimum) to 4.05% (maximum) beginning at $41M.
2. Entry level EBITDA is established at $24M, which at 1.8% generates a
pool of $432K. Performance below this level would require Board
approval for lower levels of discretionary payout or zero.
3. A secondary pool of 10% would be set aside to reward management members
outside the incentive plan. (In the past, these awards have been
recommended by the responsible Vice President, based on individual
special performance.)
4. The plan participant pool would be split between earned @ 70% and
discretionary @ 30%. Payout of the discretionary portion would be
determined by the appropriate Vice President and President, based on
individual goals and performance against those goals.
5. There will be five levels of participation ranging from a maximum
payout of 40% to 120% of annual base salary, based on level of function
responsibility.
6. The maximum bonus pool will be calculated by multiplying the base pay
(W-2 base pay) of each individual by their level of participation.
<PAGE> 2
CLARK-SCHWEBEL, INC.
1996
INCENTIVE PLAN
EARNING THE POOL
<TABLE>
<CAPTION>
NET
% SECONDARY PRIMARY
EBITDA EARNED POOL POOL POOL
------ ------ ---- ---- ----
<S> <C> <C> <C> <C>
24,000 1.80 432 43 389
25,000 2.25 563 56 507
26,000 2.70 702 70 632
27,000 2.79 754 75 679
28,000 2.88 806 80 726
29,000 2.97 861 86 775
30,000 3.06 918 92 826
31,000 3.15 977 98 879
32,000 3.24 1,037 104 933
33,000 3.33 1,099 110 989
34,000 3.42 1,163 116 1,047
35,000 3.51 1,229 123 1,106
36,000 3.60 1,296 130 1,166
37,000 3.69 1,365 136 1,229
38,000 3.78 1,436 144 1,292
39,000 3.87 1,509 151 1,358
40,000 3.96 1,584 158 1,426
41,000 4.05 1,661 166 1,495
42,000 4.05 1,706 170 1,531
43,000 4.05 1,741 174 1,567
</TABLE>
PARTICIPATION LEVELS AS A % OF BASE SALARY
PLAN LEVEL I. 120%
II. 100%
III. 80%
IV. 60%
V. 40%
<PAGE> 1
EXHIBIT 10.8
CLARK-SCHWEBEL, INC.
1997 EXECUTIVE BONUS POOL
Attached is the 1997 Bonus Plan as submitted by management and recommended by
the Compensation and Benefit Committee.
1. The plan is based on EBITDA. From $0 - $27.0M EBITDA, the pool is $0K,
or Board discretion. A table is attached that reflects the % of bonus
pool earned at various levels of EBITDA up to $50M or 125% of pool.
2. A secondary pool of 10% would be set aside to reward management members
outside the incentive plan. (In the past, these awards have been
recommended by the responsible Vice President, based on individual
special performance.)
3. The plan participant pool would be split between earned @ 70% and
discretionary @ 30%. Payout of the discretionary portion would be
determined by the appropriate Vice President and President, based on
individual goals and performance against those goals.
4. There will be five levels of participation ranging from 40% to 120% of
annual base salary based on level of responsibility.
5. The bonus allocation pool will be calculated by multiplying the base
pay (W-2 base pay) of each individual by their level of participation.
The earned bonus of 70% is then allocated to participants based on the
allocation pool while the 30% discretionary portion is based on
individual's performance as determined by their respective manager.
<PAGE> 2
CLARK-SCHWEBEL, INC.
BONUS POOL SCHEDULE
EARNING THE POOL
<TABLE>
<CAPTION>
% EARNED
EBITDA POOL POOL
------ ---- ----
<S> <C> <C>
0 - 26.9 Board Discretion Bonus Discretion
27.0 25 465.0
33.0 50 930.8
38.0 75 1395.0
44.0 100 1860.0
50.0 125 2325.0
</TABLE>
PARTICIPATION LEVELS AS A % OF BASE SALARY
PLAN LEVEL I. 120%
II. 100%
III. 80%
IV. 60%
V. 40%
<PAGE> 1
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------------------------------------
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
(Predecessor) (Successor)
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes $ 3,238 $8,620 $12,037 $21,189 $8,988 $12,969
Equity income (loss) (297) 13 529 3,393 82 1,811
------- ------ ------- ------- ------ -------
Income before income taxes and
extraordinary items 2,941 8,633 12,566 24,582 9,070 14,780
Fixed charges:
Cash interest expense 473 401 401 401 148 9,458
Dividends on preferred stock N/A N/A N/A N/A N/A 5,185
Amortization of bond issue costs 14 21 21 21 6 411
Amortization of deferred debt 0 0 0 0 0 192
Interest expense on rental
expense 401 194 144 128 41 124
------- ------ ------- ------- ------ -------
Total fixed charges 888 616 566 550 195 15,370
======= ====== ======= ======= ====== =======
Income before income taxes,
extraordinary items and fixed
charges 3,829 9,249 13,132 25,132 9,265 30,150
======= ====== ======= ======= ====== =======
Ratio of earnings to fixed
charges 4.3 15.0 23.2 45.7 47.5 2.0
======= ====== ======= ======= ====== =======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Subsidiaries of Clark-Schwebel Holdings, Inc.:
Clark-Schwebel, Inc., a Delaware corporation
Subsidiaries of Clark-Schwebel, Inc.:
Clark-Schwebel Holding Corporation, a New York corporation
Clark-Schwebel Foreign Sales Corporation, a U.S. Virgin Islands corporation
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996<F1>
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 4,064
<SECURITIES> 0
<RECEIVABLES> 25,794
<ALLOWANCES> 0
<INVENTORY> 33,625
<CURRENT-ASSETS> 64,075
<PP&E> 67,936
<DEPRECIATION> 5,841
<TOTAL-ASSETS> 240,737
<CURRENT-LIABILITIES> 38,885
<BONDS> 123,440
0
35,000
<COMMON> 9,178
<OTHER-SE> 5,655
<TOTAL-LIABILITY-AND-EQUITY> 240,737
<SALES> 220,914
<TOTAL-REVENUES> 220,914
<CGS> 173,563
<TOTAL-COSTS> 173,563
<OTHER-EXPENSES> 15,185
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,209
<INCOME-PRETAX> 21,957
<INCOME-TAX> 9,055
<INCOME-CONTINUING> 16,709
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,709
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>The results of operations for the year ended December 28, 1996 represent the
combined results of Clark-Schwebel Holdings, Inc. ("Company") for the period of
April 18, 1996 through December 28, 1996 (successor company) and the results of
Fort Mill A, Inc. for the period of December 31, 1995 through April 17, 1996
(predecessor company). A change in ownership resulted from a leveraged buyout
on April 17, 1996, and the transaction resulted in a new basis of accounting
for the Company. Therefore, the results of operations for year ended
December 28, 1996 are not fully comparable to preceding reporting periods. This
schedule contains summary financial information from the Company's financial
statements and is qualified in its entirety by reference to such financial
statements.
</FN>
</TABLE>
