SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the thirteen weeks ended April 30, 1994
Transition Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-6761
COLLINS & AIKMAN GROUP, INC.
A Delaware Corporation (IRS Employer Identification
No. 38-1954600)
8320 University Executive Park, Suite 102
Charlotte, North Carolina 28262
Telephone (704) 548-2350
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 .
As of June 13, 1994, the number of outstanding shares of the Registrant's common
stock, $0.10 par value, was 47,808,123 shares.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 30, May 1,
1994 1993
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 390,446 $ 339,043
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,492 260,095
Selling, general and administrative expenses . . . . . . . . . . . . . . 60,159 57,894
349,651 317,989
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,795 21,054
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . 21,677 20,898
Income from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,118 156
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,804 5,452
Income (loss) from continuing operations . . . . . . . . . . . . . . . . 15,314 (5,296)
Discontinued operations:
Loss from operations, net of income tax expense
of $540 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (1,327)
Loss on disposal, net of income tax expense of $0 - (1,881)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,314 $ (8,504)
</TABLE>
See accompanying notes.
I-1
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
April 30, January 29,
1994 1994
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 135,266 $ 78,363
Accounts and notes receivable, net . . . . . . . . . . . . . . . . . 212,708 200,368
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189,709 176,062
Receivable from sale of business . . . . . . . . . . . . . . . . . . - 70,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,831 53,397
Total current assets . . . . . . . . . . . . . . . . . . . . . . 587,514 578,190
Property, plant and equipment, at cost less
accumulated depreciation and amortization of
$301,203 and $290,514 . . . . . . . . . . . . . . . . . . . . . . . . 294,684 292,600
Goodwill, net of accumulated amortization of
$138,311 and $133,645 . . . . . . . . . . . . . . . . . . . . . . . . 607,376 612,042
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,880 57,378
$1,549,454 $1,540,210
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,043 $ 3,789
Current maturities of long-term debt . . . . . . . . . . . . . . . . 163,715 25,895
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 78,188 85,591
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 158,128 140,514
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,097 2,671
Total current liabilities . . . . . . . . . . . . . . . . . . . . 407,171 258,460
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586,720 733,448
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 640 640
Other, including postretirement benefit obligation . . . . . . . . . . . 331,858 337,186
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . .
Redeemable preferred stock (aggregate preference in
liquidation $129) . . . . . . . . . . . . . . . . . . . . . . . . . . 132 132
Preferred stock (aggregate preference in
liquidation $45,145) . . . . . . . . . . . . . . . . . . . . . . . . 181 181
Common stock (47,808 shares issued and outstanding) . . . . . . . . . . . 4,781 4,781
Other paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 1,001,162 1,001,126
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . (767,994) (782,179)
Foreign currency translation adjustments . . . . . . . . . . . . . . . . (1,323) 309
Pension equity adjustment . . . . . . . . . . . . . . . . . . . . . . . . (13,874) (13,874)
Total stockholder's equity . . . . . . . . . . . . . . . . . . . 222,933 210,344
$1,549,454 $1,540,210
</TABLE>
See accompanying notes.
I-2
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 30, May 1,
1994 1993
OPERATING ACTIVITIES
<S> <C> <C>
Income (loss) continuing operations . . . . . . . . . . . . . . . . . . $ 15,314 $ (5,296)
Adjustments to derive cash flow from continuing
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 17,586 20,133
Increase in accounts and notes receivable . . . . . . . . . . . (12,340) (24,747)
Decrease (increase) in inventories . . . . . . . . . . . . . . (13,647) 689
Increase (decrease) in accounts payable . . . . . . . . . . . . (7,403) 626
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . 18,537 9,166
Net cash provided by continuing
operating activities . . . . . . . . . . . . . . . . . 18,047 571
Loss from discontinued operations . . . . . . . . . . . . . . . . . . . - (3,208)
Adjustments to derive cash flow from discontinued
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . - 5,495
Net change in receivables, inventory and
accounts payable . . . . . . . . . . . . . . . . . . . . . - (14,854)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . (8,540) (25,203)
Net cash used in discontinued operating
activities . . . . . . . . . . . . . . . . . . . . . . (8,540) (37,770)
INVESTING ACTIVITIES
Proceeds from businesses sold . . . . . . . . . . . . . . . . . . . . . 67,212 49,243
Additions to property, plant and equipment . . . . . . . . . . . . . . (15,286) (7,267)
Sales of property, plant and equipment . . . . . . . . . . . . . . . . 4,519 815
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,464 (2,659)
Net cash provided by investing activities . . . . . . . . . 58,909 40,132
FINANCING ACTIVITIES
Issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . 1,037 36,689
Reduction of long-term debt . . . . . . . . . . . . . . . . . . . . . . (10,336) (23,800)
Net reduction of short-term borrowings . . . . . . . . . . . . . . . . (821) (6,300)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,393) (8,119)
Net cash used in financing activities . . . . . . . . . . . (11,513) (1,530)
Increase in cash and cash equivalents . . . . . . . . . . . . . . . . . 56,903 1,403
Cash and cash equivalents at beginning of period . . . . . . . . . . . 78,363 80,141
Cash and cash equivalents at end of period . . . . . . . . . . . . . . $ 135,266 $ 81,544
</TABLE>
See accompanying notes.
I-3
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT
(Unaudited)
A. Acquisition by Collins & Aikman Holdings Corporation:
On October 25, 1988, the Company, Collins & Aikman Holdings II
Corporation (formerly WCI Holdings II Corporation) ("Holdings II") and Collins &
Aikman Holdings Corporation (formerly WCI Holdings Corporation) ("Holdings")
entered into an Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement"). Pursuant to the Merger Agreement, Holdings, a corporation
indirectly jointly owned by Blackstone Capital Partners L.P. ("Blackstone
Partners") and Wasserstein Perella Partners, L.P. ("WP Partners"), and their
respective affiliates, acquired approximately 80% of the shares of common stock
of the Company on December 8, 1988 following a cash tender offer. Pursuant to
the Merger Agreement, on April 13, 1989, a wholly owned subsidiary of Holdings
was merged into the Company (the "Merger"), and the Company became a direct
wholly owned subsidiary of Holdings.
B. Basis of Presentation:
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries. In the opinion of management, the
accompanying condensed consolidated financial statements reflect all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
presentation of financial position and results of operations. Results of
operations for interim periods are not necessarily indicative of results for the
full year. Certain reclassifications have been made to conform to the current
presentation of continuing operations.
C. Discontinued Operations:
As of the end of fiscal 1992, the Company reclassified its Builders
Emporium home improvement retail chain and its Engineering Group as discontinued
operations. In March 1993, the Company sold the Engineering Group for
approximately $51 million. Builders Emporium's inventory was sold during the
third and fourth quarters of fiscal 1993 and substantially all accounts
receivable and accounts payable balances were settled as of January 29, 1994.
Remaining assets and liabilities of Builders Emporium relate primarily to real
estate and workers compensation self-insurance liabilities, which continue to be
liquidated.
The Company's Kayser-Roth Corporation subsidiary ("Kayser-Roth") was
reclassified as a discontinued operation at the end of the fiscal quarter ended
October 30, 1993 and was sold on January 28, 1994 for a total price of $170
million (subject to post-closing purchase price adjustment). A portion of the
proceeds was used to repay $66 million of borrowings under a Kayser-Roth credit
facility. In connection with the sale, the Company received a 90-day $70
million senior unsecured bridge note from the purchaser, which was paid with
accrued interest on April 27, 1994. Kayser-Roth has been reclassified as a
discontinued operation for the quarter ended May 1, 1993.
At the end of the second fiscal quarter ended July 31, 1993, Group
decided to retain the Dura Convertible division of Wickes Manufacturing Company
and accordingly Dura has been reclassified as a continuing operation for the
quarter ended May 1, 1993.
I-4
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
Interest expense has been allocated to discontinued operations based on
the ratio of net book value (including reserves for loss on disposal) of
discontinued operations to consolidated invested capital. Interest allocated to
discontinued operations was $5.0 million for the quarter ended May 1, 1993. No
interest was allocated to discontinued operations in the quarter ended April 30,
1994.
The Company incurred fees during the first quarter of 1994 to Blackstone
Partners of $100,000 for advisory services in connection with the sale of
Builders Emporium's inventory, real estate and other assets. In addition,
during the first quarter of 1994, the Company incurred expenses of $2.5 million
for services performed by Blackstone Partners and WP Partners in connection with
a comprehensive review of the Company's liabilities associated with discontinued
operations, including surplus real estate, postretirement and workers
compensation liabilities.
The majority of Builders Emporium's leased properties have been assigned to
third parties. In addition, Group has assigned leases in connection with the
divestiture of Kayser-Roth, the Engineering Group, Wickes Manufacturing Company
and other divested businesses. Although Group has obtained releases from the
lessors of certain properties, Group remains contingently liable under most of
the leases. Group's future liability for these leases, in management's opinion,
based on the facts presently known to it, will not have a material effect on the
Company's consolidated financial condition or future results of operations.
D. Inventories:
Inventory balances are summarized as follows (in thousands):
<TABLE>
<CAPTION>
April 30, January 29,
1994 1994
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . $ 73,592 $ 70,762
Work in process . . . . . . . . . . . . . . . . . . . . . . . 27,038 24,739
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . 89,079 80,561
$ 189,709 $ 176,062
</TABLE>
E. Interest Expense, Net:
Interest expense for the quarters ended April 30, 1994 and May 1, 1993 is
net of interest income of $2.3 million and $1.0 million, respectively.
F. Long-Term Debt:
During the first quarter of 1994, the Company incurred expenses of $2.75
million for services performed by WP Partners and $3.25 million for services
performed by Blackstone Partners in connection with the Company's review of
refinancing and strategic alternatives as well as certain other advisory
services. These fees are included in "selling, general and administrative
expenses."
I-5
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Concluded)
(Unaudited)
For additional information, including information regarding the proposed
initial public common stock offering and recapitalization of Holdings, see "PART
I - FINANCIAL INFORMATION, Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations" elsewhere herein.
G. Commitments and Contingencies:
See "PART II - OTHER INFORMATION, Item 1. Legal Proceedings." The ultimate
outcome of the legal proceedings to which the Company is a party will not, in
the opinion of the Company's management based on the facts presently known to
it, have a material effect on the Company's consolidated financial condition or
future results of operations.
See also "PART I - FINANCIAL INFORMATION, Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations - Environmental
Matters" and Note C to Condensed Consolidated Financial Report elsewhere herein.
I-6
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PROPOSED RECAPITALIZATION
As part of a proposed recapitalization (the "Recapitalization"), the
Company's parent, Holdings, filed a registration statement on Form S-2 covering
the sale in a public offering of 25 million shares of Holdings' common stock
(the "Holdings Common Stock"). Of the 25 million shares of Holdings Common
Stock offered, 20 million shares are being sold by Holdings and 5 million shares
are being sold by Blackstone Partners and WP Partners (the "Selling
Stockholders"). Holdings will not receive any of the proceeds from the sale of
the shares being sold by the Selling Stockholders. The Selling Stockholders
have also granted the underwriters in the public offering an option for 30 days
to purchase up to an additional 3,750,000 shares of Holdings Common Stock.
The Recapitalization, if it occurs, would result in the defeasance and
redemption, or repayment, of all outstanding indebtedness and preferred stock of
Group other than $22.6 million of mortgage and other debt which would remain
outstanding. The sources of capital for the Recapitalization are proceeds of
the public offering, available cash and amounts to be available under certain
proposed new credit facilities (the "New Credit Facilities").
The New Credit Facilities will consist of (i) a Closing Date Term Loan
Facility in an aggregate principal amount of $450 million with a term of eight
years (including a $45 million Canadian borrowing), (ii) a Delayed Draw Term
Loan Facility in an aggregate principal amount of $25 million with a term of
eight years (which may be drawn in full or in part on or prior to the first
anniversary of the closing date), (iii) a Revolving Facility in an aggregate
principal amount of up to $150 million with a term of seven years and (iv) a
Receivables Facility in an aggregate principal amount of $150 million with a
term of seven years. These facilities will include various restrictive
covenants including maintenance of EBITDA (i.e. earnings before interest, taxes,
depreciation and amortization) and interest coverage ratios, leverage and
liquidity tests and various other restrictive covenants which are typical for
such facilities.
In connection with the Recapitalization, Holdings II, currently the sole
common stockholder of Holdings, will be merged into Holdings and Holdings will
change its name to Collins & Aikman Corporation. Concurrently, the Company will
be merged into its wholly-owned subsidiary, Collins & Aikman Corporation ("C&A
Co."), which will change its name to Collins & Aikman Products Co. The Company
believes that the Recapitalization, which will reduce its interest expense, is
in its best interests.
GENERAL
After the acquisition of Group by Holdings in 1988, the Company
implemented a restructuring plan designed to focus on certain businesses and to
eliminate unnecessary corporate overhead. The Company accordingly divested 27
business units
I-7
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
which in 1988 contributed 73% of net sales. The aggregate proceeds from these
divestitures were $1,643 million, and enabled the Company to reduce total
indebtedness from $1,862 million at October 29, 1988 to $753.5 million at April
30, 1994. In addition, the Company reduced and consolidated corporate staffs.
Throughout this period, the Company made substantial investments to enhance the
competitive position of its three continuing business segments and to strengthen
its position as a low-cost producer.
All references to a year with respect to the Company refer to the fiscal
year of the Company which ends on the last Saturday of January of the following
year.
RESULTS OF OPERATIONS
The Company's continuing business segments consist of Automotive
Products, which supplies interior trim products to the North American automotive
industry; Interior Furnishings, which manufactures residential upholstery in
the United States; and Wallcoverings, which produces residential wallcoverings
in the United States. The Company's net sales in the first quarter of fiscal
1994 were $390.4 million, with approximately $223.0 million (57.1%) in
Automotive Products, $107.1 million (27.4%) in Interior Furnishings, and $60.3
million (15.5%) in Wallcoverings.
The industries in which the Company competes are cyclical. Automotive
Products is influenced by the level of North American vehicle production.
Interior Furnishings is primarily influenced by the level of residential,
institutional and commercial construction and renovation. Wallcoverings is also
influenced by levels of construction and renovation and by trends in home
remodeling.
FIRST QUARTER OF 1994 COMPARED TO FIRST QUARTER OF 1993
Net Sales and Operating Income
Net sales increased 15.2% to $390.4 million in the first quarter of 1994
from $339.0 million in the corresponding period of 1993. The overall increase
in net sales reflected improvement in Automotive Products and Interior
Furnishings offset by a decrease in net sales at Wallcoverings.
Automotive Products' net sales increased 27.6% in the first quarter of
1994 to $223.0 million as compared to $174.7 million in the first quarter of
1993. The increase in net sales is due to a 12% increase in North American auto
build as compared to the first quarter of 1993 and to new fabric placements
obtained in the third quarter of 1993 as well as increased production of several
of the car lines served by the Company, including the Ford Mustang and the
General Motors Cadillac, which exceeded the overall increase in the North
American auto build. Operating income of the Automotive Products segment
increased 132% to $32.3 million as compared to $13.9 million in the first
quarter of 1993.
I-8
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
Interior Furnishings' net sales increased 4.0% in the first quarter of
1994 to $107.1 million as compared to $103.0 million in the first quarter of
1993 as a result of increases at the segment's Decorative Fabrics and
Floorcoverings groups. Net sales of the Decorative Fabrics group increased by
2.7% in the first quarter of 1994 to $84.2 million as compared to $82.0 million
in the first quarter of 1993 due to an improvement in product mix on a stable
unit volume. The Floorcoverings group's net sales increased 9.1% to $22.9
million as a result of increased installations. Operating income of the
Interior Furnishings segment increased 39.3% to $12.7 million as compared to
$9.1 million in the first quarter of 1993.
Wallcoverings' net sales decreased 1.7% in the first quarter of 1994 to
$60.3 million as compared to $61.4 million in the first quarter of 1993 due to
sluggish demand by chain stores which was partially offset by modest growth in
independent retailer ("dealer") business. Management believes that the growth
in dealer business reflects benefits of the Company's initiative begun in late
1993 to increase product offerings. Operating income of the Wallcoverings
segment increased 65.8% to $4.5 million for the first quarter of 1994 as
compared to $2.7 million for the first quarter of 1993.
Gross Margin and Selling, General and Administrative Expenses
Automotive Products' gross margin increased to 21.6% in the first quarter
of 1994 from 17.9% in the first quarter of 1993, and selling, general and
administrative expenses decreased from 9.9% to 7.1% of sales, due to improved
absorption of fixed costs over a greater sales volume and due to continuing
costs reduction initiatives.
Interior Furnishings' gross margin increased to 29.7% from 26.8% as a
result of improved product mix in the Decorative Fabrics and Floorcoverings
groups as well as increased absorption of fixed costs.
Wallcoverings' gross margin increased to 34.7% from 32.6% as a result of
continuing cost reduction initiatives and improved manufacturing efficiencies.
Total Operating Expenses
Total operating expenses were $349.7 million and $318.0 million in the
first quarter of 1994 and the first quarter of 1993, respectively, including
$8.7 million and $4.7 million of unallocated corporate expenses, respectively.
Unallocated corporate expenses in the first quarter of 1994 include $3.2 million
of expenses incurred for the performance of services by Blackstone Partners and
$2.8 million for the performance of services by WP Partners in connection with
the Company's review of refinancing and other strategic alternatives as well as
certain other advisory services. Operating expenses allocated to the Company's
three business segments totaled $340.9 million or 87.3% of sales in the first
quarter of 1994 compared to $313.3 million or 92.4% of sales in the first
quarter of 1993. This 5.1 percentage
I-9
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
point improvement is primarily the result of the allocation of fixed costs over
a larger sales volume, improved manufacturing productivity, and continuing cost
reduction initiatives at both the operating and corporate level. Operating
expenses in the first quarter of 1994 and the first quarter of 1993 included
goodwill amortization of $4.7 million and $5.8 million, respectively.
Interest Expense
Interest expense allocated to continuing operations, net of interest
income of $2.3 million in the first quarter of 1994 and $1.0 million in the
first quarter of 1993, increased to $21.7 million during the first quarter of
1994 compared to $20.9 million in the first quarter of 1993. Interest expense,
including amounts allocated to discontinued operations in 1993 and excluding
interest income, decreased to $24.0 million during the first quarter of 1994
compared to $27.6 million in the first quarter of 1993. The decrease in
interest expense was due primarily to a decrease in the Company's average
borrowings.
Income Taxes
In the first quarter of 1994 income taxes of $3.8 million consisted of
foreign and state taxes. This amount compared to a foreign and state tax
provision of $5.5 million in the first quarter of 1993.
Discontinued Operations
The Company's loss from discontinued operations, including losses on
disposals of $1.9 million, was $3.2 million for the first quarter of 1993.
Net Income
The combined effect of the foregoing resulted in net income of $15.3
million in the first quarter of 1994 compared to a net loss of $8.5 million in
the first quarter of 1993.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1994, the Company had cash and cash equivalents totaling
$135.3 million compared to $78.4 million at January 29, 1994. The increase in
the Company's cash balance is principally due to the receipt of the cash
proceeds of $71.2 million from the repayment of the Kayser-Roth note referred to
below. The Company's principal sources of funds are cash generated from
continuing operating activities and borrowings under bank credit facilities.
Net cash provided by the operating activities of its continuing operations was
$18.0 million for the quarter ended April 30, 1994. C&A Co. had $59.5 million
of borrowing availability under a credit facility at April 30, 1994. Based on
financial covenants in that credit facility, approximately $42 million could be
paid to Group as a dividend. The Company's Canadian subsidiaries had $8.1
million of borrowing availability under a bank demand line of credit at April
30, 1994.
I-10
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
During the fourth quarter of 1993, the Company sold Kayser-Roth for
approximately $170 million including a $70 million note. A portion of the
proceeds was used to repay $66 million of borrowings under a Kayser-Roth credit
facility. The Company's Engineering Group, which was discontinued in 1992, was
sold during the first quarter of 1993 for approximately $51 million.
Additionally, the Company has nearly completed the disposition of the real
estate, inventory and other assets of Builders Emporium, which the Company
discontinued at the end of 1992. The Kayser-Roth sale is subject to post-
closing purchase price adjustment. On April 27, 1994, the Kayser-Roth note was
paid with accrued interest. Group intends to use these cash proceeds of $71.2
million for general corporate purposes, including possibly the repurchase of a
portion of its 15% Subordinated Notes due 1994 or other debt in open market or
privately negotiated transactions.
During the first quarter of 1994, the Company used cash from continuing
operations and new borrowings of $1.0 million to repay $10.3 million of
outstanding indebtedness. During the first quarter of 1993, the Company
incurred new long-term indebtedness of $36.7 million and repaid existing
indebtedness of $23.8 million.
The Company's principal uses of funds for the next several years will be
to fund principal and interest payments on its indebtedness, net working capital
increases and capital expenditures. The Company makes capital expenditures on a
recurring basis for replacement and improvements. As of April 30, 1994, the
Company had approximately $43.0 million in outstanding capital commitments.
Capital expenditures during the first quarter of 1994 aggregated $15.3 million.
During 1994, the Company anticipates capital expenditures will aggregate
approximately $80 million as compared to $44.9 million, $38.2 million
and $38.9 million, during 1993, 1992 and 1991, respectively. This increase
is due primarily to the planned acquisition of additional machinery and
equipment at Decorative Fabrics' Mastercraft division as part of an $85 million
five-year capital investment plan that was initiated this year for the
purpose of expanding production capacity at Mastercraft to accommodate
anticipated growth. Secondarily, this increase is due to the planned
completion of an Automotive Products facility in Mexico for approximately $6.0
million. The Company's capital expenditures in future years will depend
upon demand for the Company's products and changes in technology. The Company
currently estimates that capital expenditures in 1995 will exceed $60 million.
The Company has significant obligations relating to postretirement,
casualty, environmental, lease and other liabilities of discontinued
operations. In connection with the sale and acquisition of certain businesses,
the Company has indemnified the purchasers and sellers for certain
environmental liabilities, lease obligations and other matters. In addition,
the Company is contingently liable with respect to certain lease and other
obligations assumed by certain purchasers and may be required to honor such
obligations if such purchasers are unable or unwilling to do so. Management
anticipates that the net cash requirements of its discontinued operations
will be approximately $15.0 million for the remainder of 1994. However,
because the requirements of the Company's discontinued operations are
largely a function of contingencies, it is possible that the actual net
cash requirements of the Company's discontinued operations could differ
materially from management's estimates. Management believes that the
Company's needs relating to discontinued operations can
I-11
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
be adequately funded in 1994 by net cash provided by operating activities from
continuing operations and by borrowings under bank credit facilities.
From time to time, the Company evaluates acquisitions. The Company
expects to fund any future acquisitions with net cash provided by operating
activities, borrowings under bank credit facilities or the issuance of
securities.
If the Recapitalization is effected, the Company expects to have
approximately $548 million of outstanding indebtedness and unused borrowing
availability of approximately $95 million under the New Credit Facilities after
giving effect to the Recapitalization. Management believes that, if the
Recapitalization is effected, cash flow from operations and funds available
under the New Credit Facilities will be sufficient to fund the Company's long-
and short-term liquidity requirements, including working capital, capital
expenditures and debt service requirements. However, even if the
Recapitalization is effected, the Company and its subsidiaries will continue to
have substantial indebtedness outstanding which could (i) adversely affect the
Company's ability to obtain additional financing, (ii) decrease the amount of
cash flow available for working capital, capital expenditures, acquisitions,
general corporate or other purposes, (iii) place the Company at a competitive
disadvantage and (iv) render the Company more vulnerable to increases in
interest rates or economic downturns.
As part of the Recapitalization as proposed, all the outstanding public
debt and preferred stock of the Company would be defeased and redeemed. In
addition, the C&A Co. Credit Agreement described below would be terminated and
all borrowings thereunder would be prepaid.
If the Recapitalization is not successful, management believes that the
Company has sufficient liquidity to meet its cash requirements through 1994 and
into 1995. To meet long-term cash requirements, the Company will require
alternative financing or proceeds from asset sales. There can be no assurance
as to the timing of any such financing or asset sales or the proceeds the
Company could realize therefrom. Restrictions in existing debt agreements of
the Company could limit the ability of the Company to effect future financings
and asset sales.
Since January 26, 1991, no additional dividends could be paid by Group to
Holdings under the most restrictive provisions in the existing debt agreements
of Group. Under these provisions, which are contained in the indenture, as
amended (the "11-7/8% Indenture"), governing the 11-7/8% Senior Subordinated
Debentures due 2001 (the "11-7/8% Securities"), as of April 30, 1994, Group
would have needed to earn an additional $853 million of consolidated net income
(as defined in the 11-7/8% Indenture) in order to eliminate the deficit in its
dividend capacity (assuming no change in the other factors used to determine
Group's dividend capacity).
At April 30, 1994, the Company had total outstanding long-term
indebtedness of $750.4 million (including the current portion of $163.7 million,
$137.4 million of which is due on May 1, 1995) at varying interest rates between
5% and 15% per annum. Cash interest expense on that indebtedness for the
remainder of 1994 will be approximately $78.7 million. Cash interest paid
during the first quarter of 1994 and
I-12
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
1993 aggregated $8.5 million and $14.7 million, respectively.
The maturities of long-term debt of the Company during the remainder of
1994 and for 1995 and 1996 are $20.6 million, $170.9 million and $63.3 million,
respectively. Under the terms of the 11-7/8% Indenture, the Company is required
to redeem $138 million aggregate principal amount of 11-7/8% Securities on each
June 1 from 1993 through 2000 ("Mandatory Redemptions") and to repay the
remaining outstanding 11-7/8% Securities at maturity on June 1, 2001. Under the
terms of the 11-7/8% Indenture, if Adjusted Net Worth (as such term is defined
in the 11-7/8% Indenture) is equal to or less than $700 million on the last day
of any fiscal quarter (the "Minimum Equity Test"), the Company will be required
to begin on the last day of the second fiscal quarter thereafter (unless the
Minimum Equity Test is satisfied at the end of the intervening fiscal quarter)
semi-annual redemptions ("Accelerated Redemptions") of $138 million aggregate
principal amount of 11-7/8% Securities until all the 11-7/8% Securities are
redeemed or until the Minimum Equity Test is again satisfied. The Company can
reduce its obligation to make any cash Mandatory Redemption or Accelerated
Redemption payment through the application of previously redeemed or purchased
and canceled 11-7/8% Securities as permitted by the 11-7/8% Indenture. The
Company has previously delivered for cancellation $1,033 million in aggregate
principal amount of 11-7/8% Securities, which are available for such purpose.
The Company satisfied the Minimum Equity Test at April 30, 1994. On that date,
Adjusted Net Worth was $768 million. If the Company had not satisfied the
Minimum Equity Test at that date and did not subsequently satisfy such test, the
first cash redemption payment (after giving effect to credits for previously
acquired 11-7/8% Securities) would be required at the end of the fiscal quarter
ending April 1997. By comparison, if the Company continues to satisfy the
Minimum Equity Test at all times or cures any failure of such test prior to any
accelerated cash redemption payment becoming due, no cash redemption payment
will be required until June 1, 2000.
Group's C&A Co. subsidiary consummated a $225 million credit agreement
with a syndicate of banks on May 22, 1991 that expires on May 15, 1998 (the "C&A
Co. Credit Agreement"). In the first quarter of 1994, C&A Co. made net
principal repayments under the C&A Co. Credit Agreement of $9.5 million.
Availability under the C&A Co. Credit Agreement is determined monthly based upon
C&A Co.'s receivables balance. The C&A Co. Credit Agreement permits C&A Co. to
pay dividends to Group only if C&A Co. satisfies a minimum liquidity requirement
of $25 million and then limits the amount of total dividends to $175 million
plus 90% (or 100% if certain specified ratios are met) of C&A Co.'s net income
(excluding the impact of Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions")
subsequent to April 27, 1991. As of April 30, 1994, an additional $59.5 million
was available to C&A Co. under the C&A Co. Credit Agreement. Although, as of
that date, approximately $93 million of additional dividends could be paid to
Group under the dividend restriction in the C&A Co. Credit Agreement, other
financial covenants in the C&A Co. Credit Agreement would limit the amount of
dividends to approximately $42 million. C&A Co. and its subsidiaries are
separate corporate entities and the assets of C&A Co. and its subsidiaries are
available first and foremost to satisfy the claims of the creditors of C&A Co.
and such subsidiaries. At April 30, 1994, receivables and fixed assets pledged
as collateral under the C&A Co. Credit Agreement aggregated approximately $172
million
I-13
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Continued)
and $98 million, respectively.
Group's Canadian subsidiaries have a bank demand line of credit that made
available to them approximately $13.7 million at April 30, 1994, of which
approximately $5.6 million was outstanding as of that date.
Group's Board of Directors has authorized expenditures for the voluntary
repurchase from time to time of Group's outstanding publicly traded debt
securities. There were no repurchases of publicly traded debt during 1993 or the
first quarter of 1994. Repurchases of publicly traded debt may be made from
time to time through open market or privately negotiated transactions. The
Company expects to fund any such additional repurchases out of the proceeds of
the Kayser-Roth note referred to above, cash from operating activities or
borrowings under existing or new lines of credit. Such repurchases may occur
prior to the consummation of the proposed Recapitalization (which, if effected
as proposed, would result in the defeasance and redemption of such debt) or at
any other time, depending on market conditions, available cash and other factors
that the Board of Directors of Group in its sole discretion deems relevant to
the advisability of repurchasing publicly traded debt.
ENVIRONMENTAL MATTERS
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and certain other damages related to on-
site and off-site soil and groundwater contamination. The Company's management
believes that it has obtained, and is in material compliance with, all material
environmental permits and approvals necessary to conduct its various
businesses. Environmental compliance costs for continuing businesses currently
are accounted for as normal operating expenses or capital expenditures of the
business units. In the opinion of management, based on the facts presently
known to it, such environmental compliance costs will not have a material
adverse effect on the Company's consolidated financial condition
or results of operations.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a potentially responsible party
("PRP") in a number of proceedings. The Company may be named as a PRP at other
sites in the future, including with respect to divested and acquired
businesses. It is a normal risk of operating a manufacturing business that
liability may be incurred for investigating and remediating on-site and
off-site contamination. The Company is currently engaged in investigation
or remediation at certain sites. In estimating the total cost of investigation
and remediation, the Company has considered, among other things, the Company's
prior experience in remediating contaminated sites, remediation efforts
by other parties, data released by the Environmental Protection Agency,
the professional judgment of the Company's environmental experts, outside
environmental specialists and other experts, and the likelihood that other
parties which have been named as PRPs will have the financial resources
to fulfill their obligations at sites
I-14
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (Concluded)
where they and the Company may be jointly and severally liable. Under the
scheme of joint and several liability, the Company could be liable for the full
costs of investigation and remediation even if additional parties are found to
be responsible under the applicable laws. It is difficult to estimate the total
cost of investigation and remediation due to various factors including
incomplete information regarding particular sites and other PRP's, uncertainty
regarding the extent of environmental problems and the Company's share, if any,
of liability for such problems, the selection of alternative compliance
approaches, the complexity of environmental laws and regulations and changes in
cleanup standards and techniques. When it has been possible to provide
reasonable estimates of the Company's liability with respect to environmental
sites, provisions have been made in accordance with generally accepted
accounting principles. Excluding sites at which the Company's participation is
anticipated to be de minimis or otherwise insignificant or where the Company is
being indemnified by a third party for the liability, there are 15 sites where
the Company is participating in the investigation or remediation of the site,
either directly or through financial contribution, and nine additional sites
where the Company is alleged to be responsible for costs of investigation or
remediation. The Company's current estimate of its liability for these 24 sites
is approximately $29.5 million. As of April 30, 1994, the Company has
established reserves of approximately $30.3 million for the estimated future
costs related to all its known environmental sites. In the opinion of
management, based on the facts presently known to it, the environmental costs
and contingencies will not have a material adverse effect on the Company's
consolidated financial condition or results of operations. However, there can
be no assurance that the Company has identified or properly assessed all
potential environmental liability arising from the activities or properties of
the Company, its present and former subsidiaries and their corporate
predecessors.
For additional information regarding the foregoing, see "PART II - OTHER
INFORMATION, Item 1. Legal Proceedings" elsewhere herein.
I-15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material developments in legal proceedings involving
Group or its subsidiaries since those reported in Group's Annual Report on Form
10-K for the fiscal year ended January 29, 1994.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Please note that in the following description of exhibits, the title of
any document entered into, or filing made, prior to and in some cases on July
15, 1992 reflects the name of the entity a party thereto or filing, as the case
may be, at such time. Accordingly, documents and filings described below may
refer to WCI Holdings II Corporation, WCI Holdings Corporation or Wickes
Companies, Inc., if such documents and filings were made prior to and in some
cases on July 15, 1992.
Exhibit
Number Description
4.1 - Specimen certificate representing the 15-1/2% Junior Cumulative
Exchangeable Redeemable Preferred Stock of Collins & Aikman
Group, Inc. (formerly named Wickes Companies, Inc.) is hereby
incorporated by reference to Exhibit 4.1 of Wickes Companies,
Inc.'s Report on Form 10-K for the fiscal year ended January 28,
1989 (SEC File No. 1-6761).
4.2 - Specimen certificate of Common Stock, par value $0.10 per share,
of Collins & Aikman Group, Inc. (formerly named Wickes Companies,
Inc.) is hereby incorporated by reference to Exhibit 4(a) of
Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year
ended January 30, 1988 (SEC File No. 1-6761).
4.3 - Indenture dated as of January 26, 1985, pursuant to which 7-
1/2%/10% Debentures due 2005 of Collins & Aikman Group, Inc.
(formerly named Wickes Companies, Inc.) were issued is hereby
incorporated by reference to Exhibit T3-C of Wickes Companies,
Inc.'s Application for Qualification of Indentures under the
Trust Indenture Act of 1939 on Form T-3, as amended, dated
January 2, 1985 (SEC File No. 22-13520).
4.4 - Indenture dated as of May 1, 1985, pursuant to which 11-3/8%
Usable Subordinated Debentures due 1997 of Collins & Aikman
Group, Inc. (formerly named Wickes Companies, Inc.) were issued
is hereby incorporated by reference to Exhibit 4(f) of Wickes
Companies, Inc.'s Current Report on Form 8-K dated May 21, 1985
(SEC File No. 1-6761).
4.5 - Indenture dated as of May 1, 1985, pursuant to which 15%
Subordinated Notes due 1995 of Collins & Aikman Group, Inc.
(formerly named Wickes Companies, Inc.) were issued is hereby
incorporated by reference to Exhibit 4(g) of Wickes Companies,
Inc.'s Current Report on Form 8-K dated May 21, 1985 (SEC File
No. 1-6761).
II-1
Exhibit
Number Description
4.6 - Indenture dated as of June 1, 1986, pursuant to which 11-7/8%
Senior Subordinated Debentures due 2001 of Collins & Aikman
Group, Inc. (formerly named Wickes Companies, Inc.) were issued
is hereby incorporated by reference to Exhibit 4 to Amendment No.
3 to Wickes Companies, Inc.'s Registration Statement on Form S-3
(Registration No. 33-4401) filed June 5, 1986.
4.7 - First Supplemental Indenture dated as of January 29, 1993, by and
between Collins & Aikman Group, Inc. and Bank One, Columbus, NA
regarding 11-7/8% Senior Subordinated Debentures due 2001 of
Collins & Aikman Group, Inc. (formerly named Wickes Companies,
Inc.) is hereby incorporated by reference to Exhibit 4.11 of
Collins & Aikman Group Inc.'s Report on Form 10-K for the fiscal
year ended January 30, 1993.
4.8 - Second Supplemental Indenture dated as of January 29, 1993, by
and between Collins & Aikman Group, Inc. and Bank One, Columbus,
NA regarding 11-7/8% Senior Subordinated Debentures due 2001 of
Collins & Aikman Group, Inc. (formerly named Wickes Companies,
Inc.) is hereby incorporated by reference to Exhibit 4.12 of
Collins & Aikman Group Inc.'s Report on Form 10-K for the fiscal
year ended January 30, 1993.
4.9 - Second Amendment and Restatement of Credit Agreement dated as of
April 8, 1994, among Collins & Aikman Group, Inc. and Continental
Bank, N.A., Individually and as Issuing Bank, is hereby
incorporated by reference to Exhibit 4.9 of Collins & Aikman
Group Inc.'s Report on Form 10-K for the fiscal year ended
January 29, 1994.
4.10 - Credit Agreement dated as of May 15, 1991, among Collins & Aikman
Corporation, certain subsidiaries of Collins & Aikman
Corporation, the financial institutions party thereto and
Continental Bank N.A., as Agent,is hereby incorporated by
reference to Exhibit 4.18 of Wickes Companies, Inc.'s Report on
Form 10-Q for the quarter ended April 27, 1991.
4.11 - First Amendment to Credit Agreement dated as of March 11, 1992,
among Collins & Aikman Corporation, certain subsidiaries of
Collins & Aikman Corporation, the financial institutions party
thereto and Continental Bank N.A., as Agent, is hereby
incorporated by reference to Exhibit 4.21 of Wickes Companies
Inc. Report on Form 10-K for the fiscal year ended January 25,
1992.
Collins & Aikman Group, Inc. agrees to furnish to the Commission
upon request in accordance with Item 601(b)(4)(iii)(A) of
Regulation S-K copies of instruments defining the rights of
holders of long-term debt of Collins & Aikman Group, Inc. or any
of its subsidiaries, which debt does not exceed 10% of the total
assets of Collins & Aikman Group, Inc. and its subsidiaries on a
consolidated basis.
II-2
Exhibit
Number Description
10.1 - Stockholders Agreement dated as of December 6, 1988, among
Blackstone Capital Partners L.P., Wasserstein Perella Partners,
L.P., WCI Holdings II Corporation, WCI Holdings Corporation and
WCI Acquisition Corporation is hereby incorporated by reference
to Exhibit 10.1 of the Registration Statement on Form S-4 of WCI
Holdings Corporation and Wickes Companies, Inc. (Registration No.
33-27143) filed February 22, 1989.
10.2 - Amendment No.1 to Stockholders Agreement dated as of May 1, 1992
to Stockholders Agreement dated as of December 6, 1988, among
Blackstone Capital Partners L.P., Wasserstein Perella Partners,
L.P., Collins & Aikman Holdings II Corporation, Collins & Aikman
Holdings Corporation, and Collins & Aikman Group, Inc. is hereby
incorporated by reference to Exhibit 10.5 of Collins & Aikman
Group, Inc.'s Report on Form 10-Q for the quarter ended October
24, 1992.
10.3 - Employment Agreements dated as of June 16, 1989 between Wickes
Companies, Inc. and certain executive officers is hereby
incorporated by reference to Exhibit 10.1 of Wickes Companies,
Inc.'s Report on Form 10-K for the fiscal year ended January 27,
1990.
10.4 - First Amendment to Employment Agreements dated as of March 20,
1990 between Wickes Companies, Inc. and certain executive
officers is hereby incorporated by reference to Exhibit 10.2 of
Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year
ended January 27, 1990.
10.5 - Employment Agreement dated as of July 18, 1990 between Wickes
Companies, Inc. and an executive officer is hereby incorporated
by reference to Exhibit 10.3 of Wickes Companies, Inc.'s Report
on Form 10-K for the fiscal year ended January 26, 1991.
10.6 - Agreement dated as of February 25, 1993 and First Amendment dated
as of March 29, 1993 between Collins & Aikman Group, Inc. and a
former executive officer is hereby incorporated by reference to
Exhibit 10.8 of Collins & Aikman Group Inc.'s Report on Form 10-K
for the fiscal year ended January 30, 1993.
10.7 - Employment Agreement dated as of May 1, 1991 between Kayser-Roth
Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.6 of Collins & Aikman Group Inc.'s Report
on Form 10-K for the fiscal year ended January 30, 1993.
10.8 - First Amendment to Employment Agreement dated as of May 1, 1991
between Kayser-Roth Corporation and an executive officer is
hereby incorporated by reference to Exhibit 10.7 of Collins &
Aikman Group, Inc.'s Report on Form 10-Q for the quarter ended
July 31, 1993.
II-3
Exhibit
Number Description
10.9 - Letter Agreement dated as of May 16, 1991 and Employment
Agreement dated as of July 22, 1992 between Collins & Aikman
Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.5 of Collins & Aikman Group Inc.'s Report
on Form 10-K for the fiscal year ended January 30, 1993.
10.10 - First Amendment to Employment Agreement dated as of February 24,
1994 between Collins & Aikman Corporation and an executive
officer is hereby incorporated by reference to Exhibit 10.7 of
the Registration Statement on Form S-2 of Collins & Aikman
Holdings Corporation (File No. 33-53179) filed April 19, 1994.
10.11 - Letter Agreements dated as of May 16, 1991 between Collins &
Aikman Corporation and certain executive officers is hereby
incorporated by reference to Exhibit 10.14 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation
(File No. 33-53179) filed April 19, 1994.
10.12 - Employment Agreement dated as of February 1, 1992 between Collins
& Aikman Corporation and an executive officer is hereby
incorporated by reference to Exhibit 10.15 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation
(File No. 33-53179) filed April 19, 1994.
10.13 - Amendment dated as of May 19, 1994 to Agreement dated as of
February 1, 1992 between Collins & Aikman Corporation and an
executive officer.
10.14 - Agreement dated as of March 23, 1992 between Collins & Aikman
Group, Inc. and an executive officer is hereby incorporated by
reference to Exhibit 10.4 of Collins & Aikman Group Inc.'s Report
on Form 10-K for the fiscal year ended January 30, 1993.
10.15 - First Amendment to Agreement dated as of April 4, 1994 between
Collins & Aikman Group, Inc. and an executive officer is hereby
incorporated by reference to Exhibit 10.14 of Collins & Aikman
Group, Inc.'s Report on Form 10-K for the fiscal year ended
January 29, 1994.
10.16 - Employment Agreement dated as of April 27, 1992 between Collins &
Aikman Corporation and an executive officer is hereby
incorporated by reference to Exhibit 10.16 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation
(File No. 33-53179) filed April 19, 1994.
10.17 - Letter Agreement dated as of August 12, 1992 between Collins &
Aikman Group, Inc. and an executive officer is hereby
incorporated by reference to Exhibit 10.7 of Collins & Aikman
Group Inc.'s Report on Form 10-K for the fiscal year ended
January 30, 1993.
II-4
Exhibit
Number Description
10.18 - Employment Agreement dated as of March 1, 1993 between Imperial
Wallcoverings, Inc. and an executive officer is hereby
incorporated by reference to Exhibit 10.17 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation
(File No. 33-53179) filed April 19, 1994.
10.19 - Employment Agreement dated as of October 1, 1993 between Collins
& Aikman Corporation and an executive officer is hereby
incorporated by reference to Exhibit 10.18 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation
(File No. 33-53179) filed April 19, 1994.
10.20 - The Wickes Equity Share Plan, is hereby incorporated by reference
to Exhibit 10.8 of Collins & Aikman Group Inc.'s Report on Form
10-K for the fiscal year ended January 30, 1993.
10.21 - Warrant Agreement dated as of January 8, 1994 by and between
Collins & Aikman Group, Inc. and Legwear Acquisition Corporation
is hereby incorporated by reference to Exhibit 10.20 of Collins &
Aikman Holdings Corporation's Form 10-K for the fiscal year ended
January 29, 1994.
10.22 - 1993 Employee Stock option Plan is hereby incorporated by
reference to Exhibit 10.12 of the Registration Statement on Form
S-2 of Collins & Aikman Holdings Corporation (File No. 33-53179)
filed April 19, 1994.
10.23 - 1994 Employee Stock option Plan is hereby incorporated by
reference to Exhibit 10.13 of the Registration Statement on Form
S-2 of Collins & Aikman Holdings Corporation (File No. 33-53179)
filed April 19, 1994.
10.24 - Acquisition Agreement dated as of November 22, 1993 as amended
and restated as of January 28, 1994, among Collins & Aikman
Group, Inc., Kayser-Roth Corporation and Legwear Acquisition
Corporation is hereby incorporated by reference to Exhibit 2.1 of
Collins & Aikman Group, Inc.'s Current Report on Form 8-K dated
February 10, 1994.
(b) Reports on Form 8-K.
On February 10, 1994, the Company filed a Current Report on Form 8-K
dated January 28, 1994, reporting under Item 2 thereof ("Acquisition or
Disposition of Assets") the sale of all of the outstanding stock of the
Company's wholly-owned subsidiary Kayser-Roth Corporation to Legwear Acquisition
Corporation, a corporation organized by Grupo Synkro, S.A. de C.V. of Mexico
City, Mexico. Pro forma financial statements of the Company were filed with the
report.
II-5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLLINS & AIKMAN GROUP, INC.
(Registrant)
Dated: June 13, 1994 By: /s/ DAVID J. McKITTRICK
David J. McKittrick
(On behalf of the Registrant and
as Principal Financial and
Accounting Officer)
AMENDMENT, dated as of May 19, 1994 to AGREEMENT dated as of February
1, 1992 (the "Agreement") between Collins & Aikman Corporation (the "Company")
and Andrew Major ("Employee").
WHEREAS, the Company and Employee desire to amend the Agreement as
hereinafter provided;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
hereto hereby agree as follows:
1. Section 1 of the Agreement is hereby amended to read in its entirety
as follows:
"1. Term of Employment. The Company hereby agrees to employ Employee
and Employee hereby accepts employment for a period commencing February 1,
1992 and ending June 1, 1994 (the "Retirement Date"), subject to the terms
and conditions of this Agreement. The termination of Employee's employment
with the Company on the Retirement Date shall constitute a voluntary
retirement by Employee."
2. The heading of Section 3 of the Agreement is hereby amended to read in
its entirety as follows:
"3. Salary and Bonus Plan".
3. Section 3.2 of the Agreement is hereby amended to replace the words
"fiscal years 1993 and 1994" in the second sentence thereof with the words
"fiscal year 1993" and to delete the words "and 1994" in the third sentence
thereof.
4. Section 3.3 of the Agreement is hereby deleted.
5. Sections 6.1 and 6.2 of the Agreement are hereby deleted, any
references to such Sections are hereby deleted, and Section 6 of the Agreement
is hereby amended to read in its entirety as follows:
"6. Severance Amount. If Employee's employment with the Company ends
on the Retirement Date, the Company shall pay Employee the amount of
$325,000 (the "Severance Amount") on a periodic basis during the year
following his Retirement Date in accordance with normal pay practice.
Payment of the Severance Amount shall be in lieu of any severance or bonus
policy of the Company or any of its affiliates and Employee shall be
entitled to no severance or bonus other than the Severance Amount."
<END OF PAGE 1>
6. Section 7.2(b) of the Agreement is hereby amended to read in its
entirety as follows:
"(b) For good and valuable consideration, Employee agrees that until
September 1, 1994, he shall not engage, or enter into an agreement or
understanding to engage, directly or indirectly, in any business activity
that is competitive with any business of the Company or any of its
subsidiaries. Without limiting the generality of the foregoing, Employee
shall not while he is employed hereunder and until September 1, 1994
compete with the Company in any way whatsoever or directly or indirectly
(whether for compensation or otherwise), alone or as an agent, principal,
partner, officer, employee, trustee, director, shareholder or in any other
capacity, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or furnish any capital to,
or be connected in any manner with or provide any services as a consultant
for, any business which competes with the business of the Company or its
subsidiaries as it may be conducted from time to time. In addition, prior
to September 1, 1994, Employee shall not, directly or indirectly, publicly
announce or make known any intention to engage in any such activity in the
future."
7. Section 7 of the Agreement is hereby amended to add the following at
the end thereof:
"7.4 Cooperation. During his employment and at any time thereafter,
Employee shall promptly notify the Company of any threatened, pending or
completed investigation, claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative ("Proceeding"), in which he may
be involved, whether as an actual or potential party or witness or
otherwise, or with respect to which he may receive requests for
information, by reason of his future, present or past association with the
Company or any affiliate of the Company. Employee shall cooperate fully
with the Company and any affiliate of the Company in connection with any
Proceeding at no expense to the Company or any affiliate of the Company
other than the reimbursement of Employee's reasonable out-of-pocket
expenses. Employee shall not disclose any confidential or privileged
information in connection with any Proceeding without the written consent
of the Company and shall give prompt notice to the Company of any request
therefor.
7.5 Hiring. For good and valuable consideration and in order to
protect the Company's legitimate business interests (including its
interests in not having its confidential information appropriated),
Employee agrees that until June 1, 1995, Employee shall not, directly or
indirectly (including, without limitation, in his capacity as an agent,
principal, partner, officer, employee, director or shareholder of another
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person or entity), hire, consult with, contract with or engage the services
of, or attempt to hire, consult with, contract with or engage the services
of, or influence or attempt to influence any other person or entity to
hire, consult with, contract with or engage the services of, or to attempt
to hire, consult with, contract with or engage the services of, (i) any
person who is or was employed by the Company or any of its subsidiaries at
any time during the term of this Agreement or (ii) any designer, sales
representative or consultant used by the Company's Decorative Fabrics group
at any time during the term of this Agreement. Employee represents to the
Company that he has no agreement or understanding, directly or indirectly,
to hire, consult with, contract with or engage the services of, or has not
influenced or attempted to influence any other person to hire, consult
with, contract with or engage the services of, the services of any of the
persons described in clauses (i) or (ii) of the previous sentence.
7.6 Return of Documents. On June 1, 1994, or the earlier request of
the Company, Employee shall return any documents, records, data, books or
materials of the Company or its subsidiaries or affiliates in his
possession or control and any of his workpapers containing confidential
information (including, without limitation, customer lists, pricing data
and trade secrets) of the Company or its subsidiaries or affiliates, and
shall not retain any copies thereof.
7.7 Cancellation of Options. In consideration of the payments to be
made hereunder, Employee agrees that he shall not be granted any options
under the Collins & Aikman Holdings Corporation 1993 Employee Stock Option
Plan (the "1993 Option Plan"), the Collins & Aikman Holdings Corporation
1994 Employee Stock Option Plan (the "1994 Option Plan") or any other
option plan of the Company of any of its affiliates, and any options
granted or deemed granted prior to the date hereof shall be unvested and
null and void.
7.8 Specific Enforcement. Employee acknowledges that
his failure to comply with the provisions of Sections 7.1, 7.2, 7.3, 7.4,
7.5 and 7.6 of this Agreement will result in irreparable and continuing
damage for which there will be no adequate remedy at law and that, in the
event of a failure of Employee so to comply, the Company shall be entitled,
without the necessity of giving notice, proving actual damages or securing
or posting any bond, to injunctive relief in addition to all other remedies
which may otherwise be available to the Company and to such other and
further relief as may be proper and necessary to ensure compliance with the
provisions of said Sections."
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8. Section 8 of the Agreement is hereby amended to read in its entirety
as follows:
"8. Release. For good and valuable consideration, Employee on behalf
of himself and his heirs unconditionally releases the Company and its
subsidiaries and affiliates and the directors, officers, employees,
stockholders, represen- tatives and agents of the Company and its
subsidiaries and affiliates, and each of their respective successors,
assigns and heirs, and any and all other related entities and individuals,
and each of them in any and all capacities, from any and all claims,
liabilities, demands and obligations of any nature, whether known or
unknown, arising out of his future, present or past association with the
Company or any of its subsidiaries or affiliates, or the termination of any
such association (other than those related to post-retirement benefits
under pension, profit-sharing, savings or retirement plans of the Company
and other than those explicitly provided for by this Agreement) including,
without limitation, any claims, liabilities, demands and obligations
arising out of or related to (i) the 1993 Option Plan or the 1994 Option
Plan, (ii) the Collins & Aikman Group, Inc. (formerly, Wickes Companies,
Inc.) Equity Share Plan (or any other shadow equity plan), (iii) any
severance or bonus plan of the Company, (iv) any alleged legal restrictions
on the Company's rights to terminate its employees, such as any implied
contract of employment or termination contrary to public policy (including,
without limitation, the Age Discrimination in Employment Act) and (v)
contract, tort or property rights (including, without limitation, breach of
contract, breach of the implied covenant of good faith and fair dealing,
tortious interference with contract or current or prospective economic
advantage, fraud, deceit, misrepresentation, defamation, wrongful
termination, infliction of emotional distress, breach of fiduciary duty and
any other common law claim of any kind whatsoever). Employee hereby waives
any and all rights arising under any Federal or state statute, rule or
principle of common law or equity to prosecute or assert in any manner, and
agrees not to prosecute or assert in any manner, any claim, liability,
demand or obligation which is the subject of the foregoing release. From
time to time, upon the request of the Company, Employee shall execute and
deliver all such documents as the Company may deem necessary or desirable
to effectuate the foregoing release, waiver and agreement."
9. All references in the Agreement to this "Agreement" shall mean the
Agreement, as amended hereby. Except as expressly amended hereby, the Agreement
shall continue in full force and effect in accordance with the provisions
thereof.
10. In executing this Amendment, Employee has not relied upon any
statement, representation or promise, whether written or oral,
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of the Company or any of its subsidiaries or affiliates, or of any
representative or attorney for the Company or any of its subsidiaries or
affiliates, except for statements expressly set forth in this Amendment.
11. Employee acknowledges that he was advised that he had a period of
twenty-one (21) calendar days in which to consider and execute this Amendment.
Employee further acknowledges and understands that he has seven calendar days
from the date on which he executes this Amendment to revoke it. Accordingly,
this Amendment shall not become effective or enforceable until the revocation
period has expired. To the extent that it has not otherwise done so, the
Company hereby advises Employee to consult with an attorney prior to executing
this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
/s/ Andrew Major
ANDREW MAJOR
COLLINS & AIKMAN CORPORATION
by /s/ Ronald T. Lindsay
Name: RONALD T. LINDSAY
Title: Vice President
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