SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 25, 1993.
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 _______.
Commission File Number: 0-2585
Dixie Yarns, Inc.
(Exact name of registrant as specified in its charter)
Tennessee 62-0183370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 South Watkins Street
Chattanooga, Tennessee 37404
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 698-2501
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $3.00 Par Value
(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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or other information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
-Continued-
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Continued)
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 11, 1994: Common Stock - $103,901,205; Class B
Common Stock - No market exists for the shares of Class B Common Stock, which
is neither registered under Section 12 of the Act nor subject to section 15(d)
of the Act.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of the latest practicable date.
Class Outstanding as of March 11, 1994
Common Stock, $3.00 Par Value 11,521,733 shares (1)
Class B Common Stock, $3.00 Par Value 735,228 shares
Class C Common Stock, $3.00 Par Value 0 shares
(1) The shares outstanding include the 1,029,446 shares issued subject to put
option pursuant to the acquisition of the assets of Masland Carpets, Inc. on
July 9, 1993
Documents Incorporated By Reference
Specified portions of the following document are incorporated by reference:
Proxy Statement of the registrant for annual meeting of shareholders to be held
May 5, 1994 (Part III).
PART I
ITEM 1. BUSINESS
GENERAL
An integral part of the Company's strategy during the past two years has been
to restructure its operations and expand into floorcovering. Today, the
Company operates in two business segments - Textile products and Floorcovering -
with approximately half of its sales in each segment. Prior to the acquisitions
of Carriage and Masland in 1993, the Company's single line of business, textile
products, included the Company's Candlewick carpet yarn operations. With the
expansion into the floorcovering business, the Company's carpet yarn operations
are now included in the floorcovering segment. Financial information relating
to the Company's business segments have been restated for all periods presented
and are set forth in Note (O) to the Company's consolidated financial
statements.
TEXTILES
TEXTILE INDUSTRY - The domestic textile industry manufactures products for a
variety of end uses, including home furnishings (domestics, drapery and
upholstery), industrial products, transportation applications and apparel. The
industry, which encompasses yarn preparation, fabric formation and product
distribution, is structured with various degrees of vertical integration,
depending upon the particular products involved. The textile industry is made
up of a great number of companies, none of which are believed to have sales
that comprise as much as 10% of the total market.
The domestic apparel market, which includes a substantial portion of the
customers for the Company's products, is continually faced with competition
from imports; however, management believes that implementation of the North
American Free Trade Agreement may increase demand for domestic textile
products by continuing to encourage utilization of such products by
non-domestic cut and sew operations. Additionally, management believes
consumer buying patterns continue to be influenced by mass merchandisers and
retailers emphasizing price competition for value-added products. The
domestic textile industry also services the home furnishing and other
industries in a number of applications which are impacted by housing sales as
well as by domestic automotive production levels.
THE COMPANY'S TEXTILE PRODUCTS - The Company manufactures and markets yarns,
threads and knit fabrics from a variety of natural and man-made fibers.
Textile products are primarily sold to manufacturers of apparel, domestics,
drapery and upholstery, hosiery, industrial fabrics, transportation and other
industries.
The Company produces a wide variety of products, with a significant focus on
high-end value added products. Although the textile products business is
organized into three business groups, substantial sales and customer overlap
exists among the groups. Textile products are focused on narrow groups of
products, related by manufacturing processes, performance qualities and end
uses. No group of such products individually accounts for as much as 10% of
Dixie's consolidated revenues for 1993, 1992 or 1991 and no customer's volume
exceeded 10 percent of the Company's total sales for 1993.
The Company's Yarn Group ("Yarn Group") is comprised of the Natural and Dyed
Yarn Group and the Synthetics Yarn Group. Products produced and marketed
through these groups include ring spun, open end and air jet single and plied
yarns which are sold to manufacturers of premium-price apparel, high-end home
furnishings, and industrial products. A portion of the yarn produced by the
yarn spinning facilities is further processed by the Company's mercerizing and
package dyeing facilities. Cotton is the primary fiber for both natural, and
mercerized and package dyed markets served. Other markets served include
products manufactured from man-made (synthetics) fibers, many of which are high
technology fibers that impart strength, heat resistance, stretch and/or
characteristics relating to comfort and insulation properties. Natural, dyed
and synthetic yarns are marketed through a combination of salaried sales force
and, to a lesser extent, commissioned sales agents.
The Company's Industrial Sewing Thread Group ("Threads USA") is one of three
major domestic manufacturers and marketers of industrial sewing thread, with a
full line of products that includes cotton, spun polyester, corespun and
filament threads. Thread products are sold directly by the Company's sales
personnel through an extensive regional warehouse network as well as to
independent wholesale jobbers.
The Company's Knit Fabric Group ("Caro Knit") knits, dyes and finishes 100
percent cotton circular knit fabrics for apparel and industrial markets. A
majority of the yarn used for the production of the knit fabric is supplied by
the Company's yarn facilities. Knit products are sold primarily by its own
salaried sales force.
The Company's sales order backlog position in its textile products business was
approximately $79,000,000 on December 25, 1993 compared to approximately
$102,000,000 on December 26, 1992. All of these orders can reasonably be
expected to be filled within the 1994 fiscal year.
Although the competition faced by the Company's textile business varies
depending on the markets involved, a substantial portion of the Company's
products in the Company's domestic textile products business is faced with
competition from imports.
The Company owns a number of patents used in its textile business, and patent
protection is sought as a matter of course when machinery or process
improvements are made that are considered patentable. However, in the opinion
of the Company, its textile operations are not materially dependent upon
patents and patent applications.
FLOORCOVERING
THE CARPET INDUSTRY - The carpet industry is composed of approximately 100
manufacturers of which the top 5 account for over 50% of total sales in the
industry. The industry has two primary markets, residential and commercial,
with the residential market making up the largest portion of industry's sales.
A substantial portion of industry shipments is made in response to replacement
demand. The residential market consists of broadloom carpets, rugs and
bathmats in a broad range of styles, colors, textures and yarns. The carpet
industry also manufactures carpet for the automotive, recreational vehicle and
recreational boat industries.
The carpet industry is highly competitive with competition principally from 100
domestic manufacturers of carpets and rugs. Carpet manufacturers also face
competition from the hard surface floorcovering industry. The principal
methods of competition within the carpet industry are quality, style, price
and service.
THE COMPANY'S FLOORCOVERING BUSINESS - The Company's floorcovering business
manufactures and markets carpet yarns and floorcovering products for specialty
markets through Candlewick Yarns ("Candlewick"), Carriage Industries, Inc.
("Carriage") and Masland Carpet, Inc. ("Masland").
Candlewick is one of the world's largest independent carpet yarn
manufacturers. Its customers include end-use product manufacturers in the
bath rug, automotive and broadloom carpet markets. Candlewick is a producer
of premier yarns for floorcovering applications. It competes through product
quality and innovation. Its product development center and relationships
with fiber suppliers have been developed to provide customers a means to
evaluate yarn and fiber variations. Candlewick has a significant share of
the bath rug yarn market due to the breadth of its product line, service
capabilities, quality and history of innovation. Products of Candlewick are
marketed through its own salaried sales force.
Carriage is a vertically integrated carpet manufacturer serving specialized
markets. Its highly diversified markets include: original equipment
manufacturers of manufactured housing, recreational vehicles, and small boats;
the exposition/trade show market; contract/residential market; and the home
center/needlebond market. Carriage's manufacturing operations include yarn
extrusion, yarn processing,tufting, needlebonding, dyeing, finishing and
finished product transportation through its own trucking fleet. Its product
line is marketed by a staff of salaried sales personnel and to a lesser extent
commission sales representatives.
Carriage competes only in selected portions of the floorcovering market.
Competition is based not only on price, but also on quality of goods, customer
service and reputation for reliability. The Company has developed a broad
array of specialized products of varying styles, widths, colors and backing.
Rapid, just-in-time delivery of customer orders is an important part of the
Company's customer service program. The Company controls delivery of its
products through its trucking fleet of 68 tractor-trailers and utilization of
regional distribution centers for finished goods.
Masland markets broadloom products for specification by the architectural and
design communities and residential carpet and designer rugs to a select group
in interior design showrooms and high-end specialty retailers. Each of the
markets served require quality, service, innovation in styling and product
design. Competition within its business is based primarily on quality,
service and styling, with price becoming an increasingly important factor,
particularly in the Company's contract business.
The Company's sales order backlog position in its floorcovering business was
approximately $37,000,000 on December 25, 1993 compared to approximately
$24,000,000 on December 26, 1992. All of these orders can reasonably be
expected to be filled within the 1994 fiscal year.
The Company's floorcovering business owns a variety of trademarks under which
its products, particularly those sold by Masland, are marketed. While such
trademarks are important to Masland's business, there is no one trademark,
other than the name Masland itself, which is of material importance to the
segment.
There was no single class of products exceeding 10 percent of the Company's
sales volume for 1993, 1992 or 1991 and no customer's volume exceeded 10
percent of the Company's total sales for 1993.
SEASONALITY
Within the varied markets serviced by the Company, there are a number of
seasonal production cycles, but the Company's business as a whole is not
considered to be significantly affected by seasonal factors. Correspondingly,
there appear to be no material impacts on working capital relating to
seasonality or other business dynamics.
ENVIRONMENTAL
While compliance with current federal, state and local provisions regulating
the discharge of material into the environment may require additional
expenditures by the Company, these expenditures are not expected to have a
material effect on capital expenditures, earnings or the competitive position of
the Company.
RAW MATERIALS
The Company obtains natural and synthetic raw materials from a number of
domestic suppliers. Cotton fiber is purchased at market rates from numerous
cotton merchants and directly from cotton growing cooperatives under short-term
supply contracts at costs which are significant factors in the Company's
pricing
of its products. Man-made fibers are purchased from major chemical suppliers.
Although the Company's procurement of raw materials is subject to variations in
price and availability due to agricultural and other market conditions and in
the price of petroleum used to produce man-made fibers, the Company believes
that its sources of raw materials are adequate and that it is not materially
dependent on any single supplier.
UTILITIES
The Company uses electricity as its principal energy source, with oil or
natural gas used in some facilities for finishing operations as well as
heating. During the past five years the Company has not experienced any
material problems in obtaining electricity, natural gas or oil at
anticipated prices. Nevertheless, energy shortages of extended duration
could have an adverse effect on the Company's operations.
The Company had approximately 7,300 associates as of the end of fiscal 1993.
ITEM 2. PROPERTIES
The following table lists the Company's facilities according to location, type
of operation and approximate total floor space as of March 11, 1994.
Approximate
Location Type of Operation Square Feet
CORPORATE
Administrative:
Chattanooga, TN Administrative 41,000
TEXTILE PRODUCTS
Administrative:
Gastonia, NC Administrative 61,000
Warehousing:
Gastonia, NC (2 locations) Warehousing 88,000
Sales Branch Warehouses
(4 locations) Warehousing 54,000
Total Warehousing 142,000
Manufacturing:
Chattanooga, TN Yarn Spinning 440,000
Mebane, NC Yarn Spinning 99,000
Ranlo, NC Yarn Spinning 482,000
Saxapahaw, NC Yarn Spinning 264,000
Tarboro, NC Yarn Spinning 340,000
Chattanooga, TN Package Yarn Dyeing, Bleaching
and Mercerizing 276,000
Tryon, NC Bleaching and Mercerizing 63,000
Gastonia, NC Thread Yarn Dyeing and Finishing 530,000
Arroyo, Puerto Rico Thread Yarn Dyeing and
Finishing 22,000
Gastonia, NC Thread Yarn Spinning 445,000
Jefferson, SC Knitting, and Fabric Dyeing
and Finishing 274,000
Newton, NC Yarn Spinning and Knitting 252,000
Total Manufacturing 3,487,000
FLOORCOVERING
Administrative:
Dalton, GA Administrative 13,000
Calhoun, GA Administrative 60,000
Mobile, AL(2) Administrative 20,000
Total Administrative 93,000
Warehousing:
Ringgold, GA Warehousing 119,000
Manufacturing:
Lemoore, CA Tufted Yarn Spinning 322,000
Ringgold, GA Tufted Yarn Spinning 290,000
Roanoke, AL (1) Tufted Yarn Spinning 190,000
Calhoun, GA Carpet Manufacturing 1,016,000
Chatsworth, GA Carpet Manufacturing 24,000
Atmore, AL Carpet Manufacturing 262,000
Mobile, AL(2) Rug Manufacturing, Distribution 400,000
Total Manufacturing 2,504,000
Total 6,447,000
ITEM 2. PROPERTIES - CONTINUED
(1) This property is currently leased. Under the provisions of the Roanoke, AL
lease, the Company is acquiring title to the property over the term of the
lease, which is expected to terminate in 2004.
(2) This property is currently leased. Under the provision of the Mobile, AL
lease, the Company will acquire the property at the end of the lease.
In addition to the facilities listed above, the Company owns or leases various
administrative, storage, warehouse and office spaces.
In the opinion of the Company, its manufacturing facilities are well maintained
and the machinery is efficient and competitive. Operations at each plant
generally vary between 120 hours and 168 hours per week. There are no material
encumbrances on any of the Company's operations.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or its
subsidiaries are a party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of 1993 to a vote of
the shareholders.
Pursuant to instruction G of Form 10-K the following is included as an
unnumbered item to Part I.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions and offices held by the executive officers of the
registrant as of March 11, 1994, are listed below along with their business
experience during the past five years.
Name, Age Business Experience During
and Position Past Five Years
Daniel K. Frierson, 52 Director since 1973, Chairman of
Chairman of the Board, President the Board since 1987 and Chief
and Chief Executive Officer, Executive Officer since 1980.
Director, Member of Executive Director of the American National
Committee Bank & Trust Co.. Brother of
Paul K. Frierson
Phil Barlow, 45 Corporate Vice President and
Corporate Vice President and President of Carriage Industries,
President, Carriage Industries, Inc. Inc. since 1993. Vice President of
Sales and Marketing, Carriage, 1988-
1993. Director of Sales and
Marketing, Carriage, 1986 - 1988.
David C. Clarke, 36 Corporate Vice President and
Corporate Vice President and President, Threads USA since
President, Threads USA February, 1994. Executive Vice
President of Sales, Threads USA,
from September, 1992 to February,
1994. Vice President of Direct
Sales, Threads USA, from November,
1991 to September, 1992. Director
of Direct Sales, Threads USA, from
February, 1991 to November, 1991.
Director of Sales, American Thread
Company, from 1989 - 1991.
C. Pat Driver, 53 Corporate Vice President and
Corporate Vice President and President, Synthetic Yarn Group
President, Synthetic Yarns since June, 1992. Corporate Vice
President and President, Dixie
Yarns Group, from 1989 to June,
1992. President, Carpet Yarns,
Group (Candlewick), 1983 - 1989.
EXECUTIVE OFFICERS OF THE REGISTRANT -- CONT.
Name, Age Business Experience During
and Position Past Five Years
Paul K. Frierson, 56 Director since 1988. Corporate
Corporate Vice President and Vice President and President,
President, Candlewick Yarns, Carpet Yarns Group (Candlewick)
Director since 1989. Executive Vice
President of Candlewick from
1984 - 1989. Director of
Nationsbank/Chattanooga. Brother
of Daniel K. Frierson.
Charles P. McCamy, 40 Corporate Vice President and
Corporate Vice President and President, Caro Knit Group
President, Caro Knit since December, 1992. Vice
President of Manufacturing, Caro
Knit Group, from January, 1991 to
December, 1992. Vice President of
Manufacturing, Great American
Knitting Mills, 1989 - 1990.
George B. Smith, 53 Corporate Vice President and
Corporate Vice President President, Natural and Dyed Yarn
and President, Natural and Dyed Yarns Group since August, 1993.
President Natural Yarn Group from
October, 1992 to August, 1993.
Self-employed (Consulting and
Commission Sales) June, 1990 to
November, 1992. Corporate Vice
President, Avondale Mills, Inc.,
1986 - 1990. President, Avondale
Yarn Division, 1989 - 1990.
President, Avondale Fabric Division,
1986-1989.
John Sturdy, 64 Corporate Vice President and
Corporate Vice President President, Masland Carpets, Inc.,
and President, Masland Carpets, Inc. 1993. President & Chief Executive
Officer, Masland Carpets, Inc.,
1991 - 1993. President & Chief
Operating Officer, The Harbinger
Company, Inc., subsidiary of
Horizon Industries, Inc. 1984 -
1991.
W. Derek Davis, 43 Corporate Vice President of Human
Corporate Vice President - Resources since January, 1991.
Human Resources Corporate Employee Relations
Director, 1990 - 1991. Employee
Relations Director, Dixie Yarns
Group and Carpet Yarns Group
(Candlewick), 1988 - 1990.
EXECUTIVE OFFICERS OF THE REGISTRANT -- CONT.
Name, Age Business Experience During
and Position Past Five Years
Jon Faulkner, 34 Corporate Vice President of
Corporate Vice President - Administration since 1993. Director
Administration of Management Information Systems,
1990 - 1993. Manager of Warehouses
and Distribution, Threads USA,
1989 - 1990.
Gary Harmon, 48 Treasurer since 1993.
Treasurer Director of Tax and Financial
Planning, 1985 - 1993.
D. Eugene Lasater, 43 Controller since 1988
Controller
Starr T. Klein, 51 Secretary since November, 1992.
Secretary Assistant Secretary, 1987 - 1992.
The executive officers of the registrant are elected annually by the Board of
Directors at its first meeting held after each annual meeting of the Company's
shareholders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS
MATTERS
The Company's Common Stock trades on the over-the-counter National Market
System with the NASDAQ symbol DXYN. No market exists for the Company's
Class B Common Stock.
As of March 11, 1994, the total number of record holders of the Company's
Common Stock was approximately 6,200 and the total number of holders of the
Company's Class B Common Stock was 19. Management of the Company estimates
that there are approximately 4,700 shareholders who hold the Company's Common
Stock in nominee names. Dividends and Price Range of Common Stock for the
four quarterly periods in the years ended December 25, 1993 and December 26,
1992 are as follows:
<TABLE>
QUARTERLY FINANCIAL DATA, DIVIDENDS
AND PRICE RANGE OF COMMON STOCK
(Unaudited)
(dollar amounts in thousands, except per share data)
<CAPTION>
<S> <C> <C> <C> <C>
1993
Quarter 1st 2nd 3rd 4th
Net sales $120,777 $161,439 $152,530 $159,855
Gross profit 15,407 23,288 24,673 20,855
Net income 907 2,062 841 874
Earnings per common and
common equivalent share .10 .18 .07 .07
Dividends:
Common Stock .05 .05 .05 .05
Class B Common Stock .05 .05 .05 .05
Common Stock prices:
High $ 15.38 $ 16.75 $ 13.50 $ 11.38
Low $ 12.25 $ 10.75 $ 10.50 $ 8.75
1992
Quarter 1st 2nd 3rd 4th
Net sales $119,149 $123,462 $113,965 $113,256
Gross profit 14,304 15,188 15,004 13,090
Net income 212 1,262 2,048 1,945
Earnings per common and
common equivalent share .02 .14 .23 .22
Dividends:
Common Stock .05 .05 .05 .05
Class B Common Stock .05 .05 .05 .05
Common Stock prices:
High $ 12.00 $ 14.25 $ 14.13 $ 13.00
Low $ 7.50 $ 9.75 $ 9.25 $ 9.25
The total of quarterly earnings per share does not equal the annual earnings
per share due primarily to Common Stock purchased and issued during the
respective periods. Gross profit, net income and earnings per share have
been restated to reflect the adoption of Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes," in 1993. The operating
results of Carriage and Masland are included subsequent to acquisitions in
arch and July of 1993, respectively.
The discussion of restrictions on payment of dividends is included in Note
(E) to Consolidated Financial Statements included herein.
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
related consolidated financial statements and notes thereto included under
Items 8, 14(a) (1) and (2) and 14 (d) of the report on Form 10-K.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended
December 25, December 26, December 28, December 29, December 30,
1993(1) 1992(2) 1991(2) 1990(2) 1989(2)
Net sales $594,601,350 $469,832,466 $491,952,433 $556,207,313 $570,840,490
Income(loss) from continuing
operations(3,4) 4,684,359 5,467,421 (25,557,215) 6,644,109 11,530,227
Total assets 496,578,881 397,080,239 372,806,621 394,041,690 385,710,694
Long-term debt:
Senior indebtedness 87,649,871 70,022,500 59,323,800 28,987,400 60,925,900
Subordinated notes 50,000,000 50,000,000 50,000,000 50,000,000 ---
Convertible subordinated debentures 44,782,000 44,782,000 44,782,000 47,000,000 50,000,000
Common Stock, subject to put option 18,177,958 --- --- --- ---
Per Share:
Income(loss) from continuing
operations: (3,4)
Primary .41 .62 (2.90) .70 1.11
Fully diluted .40 .62 (2.90) .70 1.11
Cash dividends declared:
Common Stock .2000 .2000 .4200 .6800 .6800
Class B Common Stock .2000 .2000 .4200 .6800 .6633
(1) Includes the results of operations of Carriage Industries, Inc. and Masland Carpets, Inc. subsequent to their acquisitions on
March 12, 1993 and July 9, 1993, respectively. See Note (B) to the Consolidated Financial Statements.
(2) Results for 1989 through 1992 have been restated to reflect the adoption of SFAS No. 109, "Accounting for Income Taxes." See
Note (H) to the Consolidated Financial Statements.
(3) Income(loss) from continuing operations includes a restructuring charge of $18,271,000, or $2.08 per share, for the year
ended December 28, 1991 and a charge for losses on plant closings of $1,143,000, or $.12 per share, for the year ended
December 29, 1990. See Note (I) to the Consolidated Financial Statements.
(4) Income(loss) from continuing operations excludes a charge for the cumulative effect of an accounting charge of $1,497,000, or
$.17 per share, and an extraordinary gain from the early retirement of debt of $452,000, or $.05 per share, for the year
ended December 28, 1991 and an extraordinary gain from the early retirement of debt of $699,000, or $.07 per share, for the
year ended December 29, 1990.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
GENERAL
An integral part of the Company's strategy has been to restructure its textile
operations and expand into floorcovering. Today, the Company operates in two
business segments - Textile products and Floorcovering - with approximately
half of its sales in each segment.
Restructuring - During the latter part of 1991, the Company accrued the
estimated cost to restructure its operations of approximately $28.3 million
($18.3 million after-tax) and began implementation of a plan to reduce costs in
its operations by consolidating manufacturing facilities and expanding to seven-
day scheduled operations. Cost of the restructuring incurred through 1993,
consisted of approximately $13.5 million to write-down certain assets to
estimated fair market value, approximately $3.2 million for severance payments
and approximately $11.1 million for other direct costs of the restructuring.
Five smaller manufacturing facilities were closed and one was sold. Production
and equipment from the discontinued facilities were consolidated into larger,
more efficient units and virtually every textile and carpet yarn facility was
impacted by the restructuring. Disruptions associated with product and
machinery changes had a negative impact on operating profits, particularly in
1993. Substantially all of the planned changes have been completed; however,
additional costs are anticipated in 1994 until operations reach planned
efficiency levels.
Expansion into floorcovering - The carpet industry has been consolidating for a
number of years and the Company intends to participate in the industry's
consolidation by acquiring carpet companies that serve specialty markets. The
acquisition of Carriage Industries, Inc. was completed on March 12, 1993 and
Masland Carpets, Inc. was acquired on July 9, 1993. Both Carriage and Masland
produce floorcovering products for specialty markets. Carriage is a vertically
integrated manufacturer of specialized floorcovering for the manufactured
housing, recreational vehicle and small boat industries, the exposition/trade
show market, the contract/residential market, and the home center/needlebond
market. Masland manufactures high-end residential and contract commercial
carpet and designer rugs for interior designers, architects and specialty
retailers.
RESULTS OF OPERATIONS
1993 Compared with 1992 - Sales for the year ended December 25, 1993 increased
approximately 27%. The increase in 1993 sales is attributable to the Company's
floorcovering business, which now includes the Company's carpet yarn
manufacturing operations and subsequent to their 1993 acquisitions, the
operations of Carriage Industries, Inc. and Masland Carpets, Inc.. The dollar
volume of sales of the Company's textile products declined 4.5% in 1993,
although unit volume increased. The decline in sales of textile products is
attributable to weak retail apparel markets and the sale of a dyed yarn
facility in the first quarter of 1993.
Net income was $4.5 million, or $.41 per share, in 1993 compared with $5.5
million, or $.62 per share, in 1992. Operating income for 1993 was 9.2% of
sales in the Company's floorcovering business and .5% of sales for textile
products, compared with 6.4% and 4.4%, respectively, in 1992. In addition to
the 1993 acquisitions, floorcovering enjoyed strong growth and favorable
conditions in the markets it serves throughout 1993. The decrease in operating
profits for textile products in 1993 is principally due to weak demand for
apparel products and raw material price increases that could not be passed
along to customers resulting in price and margin erosion, particularly in the
third and fourth quarters of 1993. Disruptions associated with production and
operating consolidations have had a negative impact on profits of the Company's
textile business.
The increase in gross profits and selling, general and administrative expenses
as a percent of sales in 1993 reflects the traditional higher margins and
higher selling and product distribution costs associated with the specialized
floorcovering markets serviced by Carriage and Masland.
The increase in other income in 1993 is principally the result of approximately
$1.8 million of storm insurance proceeds and gains from assets disposals.
Interest expense increased in 1993 due to the higher levels of debt. The
Company's effective income tax rate differs from the statutory income tax rates
due primarily to nondeductible amortization of intangible assets. Also in
1993, a non-cash income tax charge of approximately $.5 million, or $.04 per
share, resulted from the effect of the increase in the statutory federal
income tax rate on deferred income taxes established in prior years.
During the first quarter of 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" and changed its
method of accounting for income taxes to the liability method. In connection
with the change in method of accounting, financial statements for periods
subsequent to 1986 were restated as if the new method had been in effect during
those periods. The effect of the change was to decrease 1992 net income by
approximately $.2 million, or $.03 per share, and increase the 1991 net loss by
approximately $.2 million, or $.02 per share.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which requires, under certain conditions, the adoption of accrual
accounting for postemployment benefits no later than 1994. The Company
sponsors no such plans and the new standard is not expected to affect the
Company's financial statements.
1992 Compared with 1991 - Dollar sales decreased in 1992 although unit volume
increased. The decrease in dollar volume of sales was attributable to the
Company's textile products business, which declined in 1992 due to the effect
of adverse economic conditions in high-end markets and a greater portion of
unit sales consisting of lower priced products. Operating profits, excluding
the effect of the restructuring charge in 1991, increased in both the Company's
floorcovering and textile products segments increased as a result of reductions
in raw materials costs, manufacturing costs, and selling, general and
administrative expenses.
Interest expense decreased in 1992 due to lower interest rates. The Company's
effective income tax rate differs from the statutory income tax rate due
primarily to nondeductible amortization of intangible assets.
Net income for 1991 was negatively impacted by an $18.3 million after-tax
charge to record the estimated cost of product and facility consolidations
associated with the planned restructuring of operations and a $1.5 million
after-tax charge for the cumulative effect of the change in method of
accounting for postretirement benefits other than pensions when Statement of
Financial Accounting Standards No. 106 was adopted.
LIQUIDITY AND CAPITAL RESOURCES
During the three year period ended December 25, 1993, funds generated from
operating activities totaled $117.2 million and funds raised through additional
long-term debt amounted to $56.4 million. These cash flows funded the
Company's operations, capital expenditures, and cash used in business
acquisitions.
Funds generated from operating activities (including $45 million from the sale
of accounts receivables) were $60.2 million in 1993 and were supplemented by
$16.5 million of additional senior indebtedness and $9.2 million (exclusive of
insurance proceeds) from the disposal of assets. These funds financed, among
other things, $38.8 million of capital expenditures (exclusive of storm and
fire related expenditures), the retirement of $36.3 million of debt and
expenses related to acquisitions, and dividend payments.
On March 13, 1993 a severe winter storm damaged a substantial portion of
Carriage's manufacturing facilities, and in August 1993, a fire destroyed
Bretlin's Chatsworth, Georgia needlebond facility. Carriage and Bretlin have
substantially completed the rebuilding of their damaged facilities.
Expenditures to replace or repair damaged facilities, costs, and certain losses
associated with the storm and fire were approximately $33.5 million in 1993.
Both losses were covered by insurance. Through the end of 1993, insurance
reimbursements of approximately $28.1 million had been received. Although the
insurance recovery for the storm and fire damage has not been concluded,
coverage continues to appear adequate.
Capital expenditures were approximately 128% of depreciation and amortization
expenses during the three year period ended December 25, 1993 and were directed
toward upgrading equipment, improving quality, and providing for greater
production efficiency and flexibility.
Capital expenditures for 1994 are expected to be below the level of
depreciation and amortization expenses and will be concentrated in the
Company's floorcovering business.
The Company acquired approximately 46% of the outstanding common stock of
Carriage Industries, Inc. in 1992 for $27.4 million cash and acquired
Carriage's remaining, publicly-held shares on March 12, 1993 in exchange for
approximately 2.5 million shares of the Company Common Stock, options to
purchase approximately .1 million shares of the Company's Common Stock, and
approximately $.7 million cash. On July 9, 1993, the assets of Masland
Carpets, Inc. were acquired in exchange for approximately 1.0 million shares
of the Company's Common Stock, $1.1 million cash, and the assumption of
approximately $.8 million of debt. The holders of the shares issued in the
Masland acquisition have the right, after two years, to put the shares to the
Company at a price of approximately $18 per share.
In October 1993, the Company entered into a seven-year agreement to sell an
undivided interest in a revolving pool of its trade accounts receivable. At
December 25, 1993, a $45,000,000 interest had been sold under this agreement,
and the sale is reflected as a reduction of accounts receivable. The cost of
this program are based upon rating agencies' assessment of the quality of the
receivables pool and the purchasers' level of investment and are fixed at 6.08%
per annum plus administrative fees typical in such transactions. In addition,
the Company is generally responsible for credit losses associated with sold
receivables.
At December 25, 1993, the Company's debt structure consisted of $44.8 million
of convertible subordinated debentures, $ 50.0 million of subordinated notes,
and $86.5 million of senior indebtedness, principally under a revolving
credit and term loan agreement. The convertible subordinated debentures
require mandatory sinking fund payments beginning in 1998. Payments are not
required under the Company's subordinated notes until 2000. The revolving
credit and term loan agreement provides revolving credit up to $125.0 million
until September 30, 1995, at which time the outstanding balance, at the
Company's election, may be converted into a term loan payable in semi-annual
installments over five years. At year-end, the available unused borrowing
capacity under the agreement was approximately $38.5 million.
The Company's future liquidity requirements are expected to consist primarily
of capital expenditures, seasonal working capital requirements, and funds
necessary to finance the Company's expansion in the floorcovering business.
These liquidity requirements are expected to be financed from operating cash
flows, existing credit arrangements, issuance of capital stock, and public or
private debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The supplementary financial information as required by Item 302 of Regulation
S-K is included in PART II, ITEM 5 of this report and the remaining response is
included in a separate section of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section entitled "Information about Nominees for Directors" in the Proxy
Statement of the registrant for the annual meeting of shareholders to be held
May 5, 1994 is incorporated herein by reference. Information regarding the
executive officers of the registrant is presented in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation Information" in the Proxy
Statement of the registrant for the annual meeting of shareholders to be
held May 5, 1994 is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Principal Shareholders", as well as the beneficial
ownership table (and accompanying notes) from the section entitled "Information
About Nominees for Directors" in the Proxy Statement of the registrant for the
annual meeting of shareholders to be held May 5, 1994 is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions Between the Company and Directors
and Officers" in the Proxy Statement of the registrant for the annual meeting
of shareholders to be held May 5, 1994 is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) and (2)-- The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Listing of Exhibits:
(i) Exhibits Incorporated by Reference:
(3a) Restated Charter of Dixie Yarns, Inc.
(3b) Amended and Restated By-Laws of Dixie Yarns, Inc.
(4a) Second Amended and Restated Revolving Credit and Term
Loan Agreement dated January 31, 1992 by and among
Dixie Yarns, Inc., and Trust Company Bank,
NationsBank of North Carolina, N.A. and Chemical Bank.
(4b) Loan Agreement dated February 6, 1990, between Dixie
Yarn, Inc. and New York Life Insurance Company and New
York Life Insurance and Annuity Corporation.
(4c) Form of Indenture, Dated May 15, 1987 between Dixie
Yarns, Inc. and Morgan Guaranty Trust Company of New
York as trustee.
(4d) Revolving Credit Loan Agreement dated as of September
16, 1991 by and among Ti-Caro, Inc. and Trust Company
Bank, individually and as Agent, NCNB National Bank and
Chemical Bank.
(4e) First Amendment to Revolving Credit Loan Agreement
dated as of August 19, 1992 by and among Ti-Caro,
Inc., T-C Threads, Inc. and Trust Company Bank,
individually and as agent, NCNB National Bank, and
Chemical Bank.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(3) Listing of Exhibits:
(10a) Dixie Yarns, Inc. 1983 Incentive Stock Option Plan.
(10b) Dixie Yarns, Inc. Incentive Stock Plan.
(10c) Dixie Yarns, Inc. Nonqualified Defined Contribution
Plan.
(10d) Dixie Yarns, Inc. Nonqualified Employee Savings Plan.
(10e) Dixie Yarns, Inc. Incentive Compensation Plan.
(10f) Asset Transfer and Restructuring Agreement dated
July 19, 1993, by and among Dixie Yarns, Inc., Masland
Carpets, Inc., individual management investors of
Masland Carpets, Inc., The Prudential Insurance Company
of America and Pruco Life Insurance Company
(10g) Assignment and Bill of Sale dated July 9, 1993, by and
between Dixie Yarns, Inc. and Masland Carpets, Inc.
(10h) Assignment and Assumption Agreement dated July 9, 1993,
by and between Dixie Yarns, Inc. and Masland Carpets,
Inc.
(10i) Stock Rights and Restrictions Agreement dated July 9,
1993, by and among Dixie Yarns, Inc., Masland Carpets,
Inc., The Prudential Insurance Company of America and
Pruco Life Insurance Company of America.
(10j) Pooling and Servicing Agreement dated as of October 15,
1993, among Dixie Yarns, Inc., Dixie Funding, Inc. and
NationsBank of Virginia, N.A. (as Trustee).
(10k) Annex X - Definitions, to Pooling and Servicing
Agreement dated as of October 15, 1993, among Dixie
Yarns, Inc., Dixie Funding, Inc. and NationsBank of
Virginia, N.A. (as Trustee).
(10l) Series 1993-1 Supplement, dated as of October 15, 1993,
to Pooling and Servicing Agreement dated as of October
15, 1993, among Dixie Yarns, Inc., Dixie Funding Inc.
and NationsBank of Virginia, N.A. (as Trustee).
(10m) Certificate Purchase Agreement dated October 15, 1993,
among Dixie Yarns, Inc., Dixie Funding, Inc. and New
York Life Insurance and Annuity Corporation.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(3) Listing of Exhibits --Continued
(10n) Certificate Purchase Agreement dated October 15, 1993,
among Dixie Yarns, Inc., Dixie Funding, Inc. and John
Alden Life Insurance Company.
(10o) Certificate Purchase Agreement dated October 15, 1993,
among Dixie Yarns, Inc., Dixie Funding, Inc. and John
Alden Life Insurance Company of New York.
(10p) Certificate Purchase Agreement dated October 15, 1993,
among Dixie Yarns, Inc., Dixie Funding, Inc. and
Keyport Life Insurance Company.
(10q) Executive Severance Agreement dated as of September 8,
1988 as amended.
(ii) Exhibits filed with this report:
(4f) First Amendment, dated August 25, 1993 to Second
Amended and Restated Revolving Credit and Term Loan
Agreement dated January 31, 1992, by and among Dixie
Yarns, Inc. and Trust Company Bank, NationsBank of
North Carolina, N.A. and Chemical Bank.
(11) Statement Re: Computation of Earnings Per Share.
(21) Subsidiaries of the Registrant.
(23) Consent of Ernst & Young.
(b) Reports on Form 8-K--The following reports on Form 8-K have been filed by
the registrant during the last quarter of the period covered by this report:
Current Report on Form 8-K, dated October 15, 1993 reporting the sale of an
undivided interest in a revolving pool of its trade accounts receivable.
(c) Exhibits--The response to this portion of Item 14 is submitted as a
separate section of this report. See Item 14 (a) (3) (ii) above.
(d) Financial Statement Schedules--The response to this portion of Item 14 is
submitted as a separate section of this report.
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.
DIXIE YARNS, INC.
March 24, 1994 BY: /s/DANIEL K. FRIERSON
Daniel K. Frierson,
Chairman of the Board,
President and Chief
Executive 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.
Chairman of the Board,
President, Director and
/s/DANIEL K. FRIERSON Chief Executive Officer March 24, 1994
Daniel K. Frierson
Corporate Vice-President,
President of the Candlewick
/s/PAUL K. FRIERSON Group and Director March 24, 1994
Paul K. Frierson
/s/D. EUGENE LASATER Controller March 24, 1994
D. Eugene Lasater
/s/GARY A. HARMON Treasurer March 24, 1994
Gary A. Harmon
/s/PAUL K. BROCK Director March 24, 1994
Paul K. Brock
SIGNATURES -- CONTINUED
/s/LOVIC A. BROOKS, JR. Director March 24, 1994
Lovic A. Brooks, Jr.
/s/J. FRANK HARRISON, JR. Director March 24, 1994
J. Frank Harrison, Jr.
/s/JAMES H. MARTIN, JR. Director March 24, 1994
James H. Martin, Jr.
/s/PETER L. SMITH Director March 24, 1994
Peter L. Smith
/s/JOSEPH T. SPENCE, JR. Director March 24, 1994
Joseph T. Spence, Jr.
/s/ROBERT J. SUDDERTH, JR. Director March 24, 1994
Robert J. Sudderth, Jr.
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (a)(1) AND (2) AND ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 25, 1993
DIXIE YARNS, INC.
CHATTANOOGA, TENNESSEE
FORM 10-K--ITEM 14(a)(1) and (2)
DIXIE YARNS, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Dixie Yarns, Inc. and
subsidiaries are included in Item 8:
Report of Independent Auditors
Consolidated balance sheets--December 25, 1993 and December 26, 1992
Consolidated statements of income(loss)--Years ended December 25,
1993, December 26, 1992, and December 28, 1991
Consolidated statements of cash flows--Years ended December 25, 1993,
December 26, 1992, and December 28, 1991.
Consolidated statements of stockholders' equity--Years ended
December 25, 1993, December 26, 1992, December 28, 1991
The following consolidated financial statement schedules of Dixie Yarns, Inc.
and subsidiaries are included in Item 14(d):
Schedule V--Property, plant and equipment
Schedule VI--Accumulated depreciation, depletion, and amortization of
property, plant and equipment
Schedule VIII--Valuation and qualifying account
Schedule X--Supplementary income statement information
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions, or are inapplicable, or the information is otherwise
shown in the financial statements or notes thereto, and therefore have been
omitted.
Report of Independent Auditors
Board of Directors
Dixie Yarns, Inc.
We have audited the accompanying consolidated balance sheets of Dixie
Yarns, Inc. and subsidiaries as of December 25, 1993 and December 26, 1992, and
the related consolidated statements of income (loss), stockholders' equity, and
cash flows for each of the three years in the period ended December 25, 1993.
Our audits also included the financial statement schedules listed in the Index
at Item 14(a). These financial statements and schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedules 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, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Dixie Yarns, Inc. and subsidiaries at December 25, 1993 and December 26,
1992, and the consolidated results of its operations and cash flows for each
of the three years in the period ended December 25, 1993, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Note (H) to the consolidated financial statements, in 1993
the Company changed its method of accounting for income taxes.
ERNST & YOUNG
Chattanooga, Tennessee
February 17, 1994
<TABLE>
DIXIE YARNS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
<S> <C> <C>
December 25, December 26,
1993 1992
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,047,459 $ 1,425,985
Accounts receivable (less allowance for doubtful
accounts of $3,900,000 in 1993 and $4,200,000
in 1992) 26,553,831 50,415,020
Inventories 105,809,888 67,086,327
Other 11,667,083 4,067,430
TOTAL CURRENT ASSETS 148,078,261 122,994,762
PROPERTY, PLANT AND EQUIPMENT
On the basis of cost
Land and improvements 12,346,361 9,754,481
Buildings and improvements 105,198,798 81,597,789
Machinery and Equipment 350,751,015 286,908,460
468,296,174 378,260,730
Less accumulated amortization and depreciation 193,037,707 180,466,651
275,258,467 197,794,079
INTANGIBLE ASSETS (less accumulated amortization of
$8,742,059 in 1993 and $7,116,742 in 1992) 62,722,113 42,648,228
INVESTMENT IN AFFILIATE 27,936,050
OTHER ASSETS 10,520,040 5,707,120
TOTAL ASSETS $496,578,881 $397,080,239
</TABLE>
<TABLE>
<S> <C> <C>
December 25, December 26,
1993 1992
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 32,245,506 $ 24,007,294
Accrued expenses 26,518,429 21,010,085
Current portion of long-term debt 446,829 1,300
TOTAL CURRENT LIABILITIES 59,210,764 45,018,679
LONG-TERM DEBT
Senior indebtedness 87,649,871 70,022,500
Subordinated notes 50,000,000 50,000,000
Convertible subordinated debentures 44,782,000 44,782,000
182,431,871 164,804,500
OTHER LIABILITIES 13,037,877 3,093,503
DEFERRED INCOME TAXES 48,038,943 37,804,231
COMMON STOCK, SUBJECT TO PUT OPTION -
1,029,446 shares 18,177,958
STOCKHOLDERS' EQUITY
Common Stock ($3 par value per share): Authorized
80,000,000 shares, issued and outstanding, including
shares in treasury - 13,852,233 shares in 1993 and
11,342,422 shares in 1992 41,556,699 34,027,266
Class B Common Stock ($3 par value per share):
Authorized 16,000,000 shares, issued and outstanding-
735,228 shares in 1993 and 1992 2,205,684 2,205,684
Additional paid-in capital 131,684,054 107,149,489
Retained earnings 60,302,834 57,841,860
Minimum pension liability adjustment (4,981,943)
230,767,328 201,224,299
Less Common Stock in treasury at cost - 3,356,646
shares in 1993 and 3,340,930 shares in 1992 55,085,860 54,864,973
175,681,468 146,359,326
Commitments - Note N
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $496,578,881 $397,080,239
</TABLE>
See notes to consolidated financial statements.
<TABLE>
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<CAPTION>
<S> <C> <C> <C>
Year Ended
December 25, December 26, December 28,
1993 1992 1991
Net sales $594,601,350 $469,832,466 $491,952,433
Cost of sales 510,378,826 412,246,551 443,015,737
84,222,524 57,585,915 48,936,696
Selling, general and administrative
expenses 59,910,691 32,469,983 36,702,948
Restructuring and plant closing costs --- --- 28,275,877
Corporate expenses 5,159,000 5,600,000 7,700,000
Other income (expense) - net 2,640,156 256,021 (1,491,092)
21,792,989 19,771,953 (25,233,221)
Interest expense 12,772,630 10,824,344 12,180,429
INCOME(LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY GAIN, AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 9,020,359 8,947,609 (37,413,650)
Income tax provision (benefit) 4,336,000 3,480,188 (11,856,435)
INCOME (LOSS) BEFORE EXTRAORDINARY
GAIN AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 4,684,359 5,467,421 (25,557,215)
Extraordinary gain from debt retirement
(less applicable income taxes
of $288,000) 451,706
Cumulative effect of accounting change
(less applicable income taxes
of $898,000) (1,497,195)
NET INCOME (LOSS) $ 4,684,359 $ 5,467,421 $(26,602,704)
Per common and common
equivalent share:
Income (loss) before extraordinary
gain and cumulative effect of
accounting change $ .41 $ .62 $ (2.90)
Extraordinary gain .05
Cumulative effect of accounting
change (.17)
Net income (loss) $ .41 $ .62 $ (3.02)
See notes to consolidated financial statements.
</TABLE>
<TABLE>
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
<S> <C> <C> <C>
Year Ended
December 25, December 26, December 28,
1993 1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 4,684,359 $ 5,467,421 $(26,602,704)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization 31,221,998 25,041,941 24,418,389
Provision (benefit) for deferred
income taxes 3,768,000 2,023,188 (12,553,435)
Equity in earnings of affiliate (353,000) (586,000) --
(Gain) loss on property, plant
and equipment disposals (1,994,510) (1,371,960) 120,000
Restructuring and plant closing costs --- --- 27,102,088
Extraordinary gain from debt
retirement --- -- (451,706)
Cumulative effect of accounting change --- -- 1,497,195
Changes in operating assets and liabilities,
net of effects of business combinations:
Accounts receivable (includes
$45 million sold in 1993) 43,839,084 (2,050,734) 7,532,675
Inventories 1,452,857 7,712,869 934,448
Other current assets (2,614,774) 295,393 1,696,554
Other assets (1,887,097) 452,274 3,109,202
Accounts payable and accrued expenses (18,859,652) 5,385,942 (12,177,436)
Other liabilities 923,090 (262,485) 276,793
NET CASH PROVIDED BY OPERATING ACTIVITIES 60,180,355 42,107,849 14,902,063
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sales and
insurance recovery of property,
plant and equipment 14,582,419 1,755,516 2,578,782
Purchase of property, plant and equipment
(includes $12.1 million in 1993 for
storm/fire damages) (50,885,812) (26,324,316) (38,306,024)
Equity investment in Carriage
Industries, Inc. --- (27,350,050) ---
Cash payments in connection with business
combinations, net of cash acquired (3,999,546) --- ---
NET CASH USED IN INVESTING ACTIVITIES (40,302,939) (51,918,850) (35,727,242)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in credit line borrowings 16,500,000 10,700,000 36,900,000
Debt assumed in acquisitions and retired (32,327,167) --- ---
Repayment of senior debt and repurchase of
convertible subordinated notes --- -- (8,946,575)
Capital stock acquired (339,268) (229,636) (3,217,191)
Dividends paid (2,223,385) (1,745,573) (3,690,585)
Other 1,133,878 175,516 154,804
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (17,255,942) 8,900,307 21,200,453
INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS 2,621,474 (910,694) 375,274
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 1,425,985 2,336,679 1,961,405
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,047,459 $ 1,425,985 $ 2,336,679
See notes to consolidated financial statements.
</TABLE>
<TABLE>
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class B Additional Pension Common
Common Common Paid-In Retained Liability Stock In
Stock Stock Capital Earnings Adjustment Treasury
BALANCE AT DECEMBER 30, 1990 $33,912,783 $2,205,684 $107,116,277 $82,839,357 $(51,602,871)
Restatement for the cumulative effect of
change in method of accounting - Note (H) 1,573,944
BALANCE AT DECEMBER 30, 1990 AS RESTATED 33,912,783 2,205,684 107,116,277 84,413,301 (51,602,871)
Common Stock acquired and
retired - 6,463 shares (19,389) (59,423)
Common Stock acquired for treasury-
242,675 shares (3,138,379)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 22,900 shares 68,700 87,104
Net income (loss) for the year (26,602,704)
Dividends declared-Common Stock and
Class B Common Stock $.42 per share (3,690,585)
BALANCE AT DECEMBER 28, 1991 33,962,094 2,205,684 107,143,958 54,120,012 (54,741,250)
Common Stock acquired and
retired - 7,876 shares (23,628) (82,285)
Common Stock acquired for
treasury - 9,900 shares (123,723)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 29,600 shares 88,800 87,816
Net income for the year 5,467,421
Dividends declared-Common Stock and
Class B Common Stock $.20 per share (1,745,573)
BALANCE AT DECEMBER 26, 1992 34,027,266 2,205,684 107,149,489 57,841,860 (54,864,973)
Common Stock acquired and
retired - 8,582 shares (25,746) (92,635)
Common Stock acquired for
treasury - 15,716 shares (220,887)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 45,499 shares 136,497 174,481
Common Stock issued in connection
with Carriage Industries
acquisition - 2,472,894 shares 7,418,682 23,754,688
Options issued in connection with
Carriage Industries acquisition 698,031
Net income for the year 4,684,359
Minimum pension liability adjustment (4,981,943)
Dividends declared-Common Stock and
Class B Common Stock $.20 per share (2,223,385)
BALANCE AT DECEMBER 25, 1993 $41,556,699 $2,205,684 $131,684,054 $60,302,834 $(4,981,943) $(55,085,860)
See notes to consolidated financial statements.
</TABLE>
DIXIE YARNS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of Dixie Yarns, Inc. and its wholly-owned subsidiaries (the
"Company"). Significant intercompany accounts and transactions have been
eliminated in consolidation.
Cash Equivalents: Highly liquid investments with original maturities of three
months or less when purchased are reported as cash equivalents.
Credit and Market Risk: The Company sells products primarily to manufacturers
located throughout the United States who produce products for a wide variety of
end users. The Company performs ongoing credit evaluations of its customers
and generally does not require collateral. An allowance for doubtful
accounts is maintained at a level which management believes is sufficient to
cover potential credit losses. The Company invests its excess cash in short-
term investments and has not experienced any losses on those investments.
Inventories: Substantially all inventories are stated at cost determined by
the last-in, first-out (LIFO) method, which is less than market.
Inventories are summarized as follows:
1993 1992
At current cost:
Raw materials $ 25,274,771 $ 19,619,417
Work-in-process 24,602,923 15,662,366
Finished goods 62,664,139 41,338,244
Supplies, repair parts and other 9,792,498 10,329,674
122,334,331 86,949,701
Excess of current cost over LIFO value (16,524,443) (19,863,374)
$105,809,888 $67,086,327
During 1993 and 1992, the reduction of certain inventory quantities resulted in
liquidations of LIFO inventory quantities carried at lower costs prevailing in
prior years. The effect of these reductions was to increase net income by
approximately $350,000 ($.03 per share) and $506,000 ($.06 per share) for 1993
and 1992, respectively.
Property, Plant and Equipment: Provision for depreciation and amortization of
property, plant and equipment has been computed using the straight-line method
for financial reporting purposes and in accordance with the applicable
statutory recovery methods for tax purposes. Depreciation and amortization
of property, plant and equipment for financial reporting purposes totaled
$29,245,367 in 1993, $23,712,953 in 1992, and $22,847,307 in 1991. When
events occur that change the extent or manner in which long-lived assets are
used, such as a restructuring of the Company's operations, evidence of
physical defects, or technological obsolescence, such impaired assets are
written down to their estimated fair market value. If such assets are
permanently taken out of service, they are no longer depreciated.
DIXIE YARNS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Intangible Assets: The excess of the purchase price over the fair market value
of identifiable net assets acquired in business combinations is being amortized
using the straight-line method over 40 years. The carrying value of goodwill
will be reviewed if the facts and circumstances suggest that it may be
impaired. Impairment will be measured, and goodwill reduced, for any
deficiency of estimated cash flows during the amortization period related to
the business acquired.
Income Taxes: The Company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," in 1993. See Note (H).
Earnings per Share: Primary earnings per common and common equivalent share is
computed using the weighted average number of shares of Common Stock
outstanding and includes the effects of Class B Common Stock and the
potentially dilutive effects of the exercise of stock options and the put
option. Fully-diluted earnings per share reflects the maximum potential
dilution of per share earnings which would have occurred assuming the
exercise of stock options, the put option, and the conversion of
subordinated debentures into shares of Common Stock. For 1993, 1992 and
1991, the additional dilution computed was less than 3%.
Revenue recognition: The Company recognizes revenue at the time title passes
to the customer.
Postemployment Benefits: The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits," which requires, under certain conditions, the
adoption of accrual accounting for postemployment benefits no later than
1994. The Company sponsors no such plans and the new standard is not
expected to affect the Company's financial statements.
Reclassifications: In order to conform to the 1993 presentation, certain
operating group expenses for 1992 and 1991 which had previously been reported
as cost of sales, were reclassified to selling, general and administrative
expenses in the accompanying consolidated statements of income (loss). In
addition, corporate expenses have been segregated from selling, general and
administrative expenses.
NOTE B - BUSINESS COMBINATIONS
On September 4, 1992, the Company acquired approximately 46% of the outstanding
shares of Carriage Industries, Inc. ("Carriage") for $27,400,446 cash ($13.25
per share plus expenses) and on March 12, 1993 acquired the remaining shares of
Carriage. The Company issued 2,472,884 shares of its Common Stock, options to
purchase 83,044 shares of its Common Stock, and approximately $661,000 cash in
exchange for the remaining shares and options for shares of Carriage. The
acquisition was accounted for as a purchase effective March 12, 1993, and
accordingly, the results of operations and accounts of Carriage subsequent to
March 12, 1993 are included in the Company's consolidated financial
statements. The total purchase price of $63,685,083 (the Company's initial
cash investment in Carriage, expenses of the acquisition, and the estimated
fair value of the Company's Common Stock and options exchanged) was allocated
to the net tangible assets of Carriage based on the estimated fair market
values of the assets acquired. As required by the purchase method of
accounting, the excess amount of the purchase price over the fair market
value of Carriage's net tangible assets was recorded as an intangible asset
and is being amortized using the straight-line method over 40 years.
On July 9, 1993, the Company acquired the operating assets and liabilities of
Masland Carpets, Inc. ("Masland") in exchange for 1,029,446 shares of the
Company's Common Stock, approximately $1,100,000 cash, and the assumption of
$750,000 of debt. The Common Stock was issued subject to an agreement which
provides certain registration rights respecting the Common Stock, as well as
the right, after two years, to put the shares to the Company at a price of
$18.06 per share (reduced by dividends paid). The acquisition was accounted
for as a purchase effective July 9, 1993, and accordingly, the results of
operations and accounts of Masland subsequent to July 9, 1993 are included in
the Company's consolidated financial statements. The total purchase price of
$19,622,192 (cash paid, expenses of the acquisition, and estimated fair value
of the Company's Common Stock issued subject to put option) was allocated to
the net tangible assets of Masland based on the estimated fair market values
of the assets acquired.
A summary of net assets acquired is as follows:
Carriage Masland
Current assets $ 49,865,747 $ 16,316,797
Property, plant and equipment 53,440,710 11,748,152
Other assets 4,618,971 76,181
Current liabilities (26,802,995) (7,072,437)
Long-term debt (27,222,687) (450,000)
Other liabilities and deferred taxes (12,326,472) (1,553,215)
Intangible asset 21,699,203 ---
Net Assets Acquired Excluding Cash 63,272,477 19,065,478
Cash 412,606 556,714
Net Assets Acquired $63,685,083 $19,622,192
The following unaudited pro forma summary presents the consolidated results of
operations as if the acquisitions of Carriage and Masland had occurred at the
beginning of each period presented after giving effect to certain adjustments,
including amortization of cost in excess of net tangible assets acquired,
interest expense on debt to finance the acquisitions and related income taxes.
The pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results that would have occurred had the
acquisitions occurred at the beginning of the periods presented or of results
which may occur in the future.
1993 1992
Net sales $641,950,000 $637,680,000
Income from continuing operations 6,218,000 8,628,000
Net income (1) 6,218,000 4,099,000
Per common and common equivalent share:
Income from continuing operations .49 .67
Net income (1) .49 .32
(1) Net income for the fiscal year ended December 26, 1992 includes losses of
$3,537,000 after taxes ($.28 per share) on operations of and disposal of a
Carriage segment held for sale and a loss of $992,000 after taxes ($.08 per
share) to record the cumulative effect of the adoption of Statement of
Financial Accounting Standards No. 106,"Employers Accounting for
Postretirement Benefits Other than Pensions" by Masland.
Prior to the merger, the Company's initial investment in Carriage was accounted
for by the equity method. Accordingly, net income for 1993 and 1992 includes
the Company's proportionate share of Carriage's earnings for periods prior to
the merger of approximately $320,000 and $538,000 after taxes, respectively.
Condensed unaudited historical financial information of Carriage at and for the
twelve months ended December 27, 1992 and December 29, 1991 is summarized as
follows:
1992 1991
Income statement information:
Net sales $133,363,000 $105,976,000
Gross profit 36,096,000 24,936,000
Income from continuing operations 4,697,000 726,000
Net income 1,160,000 974,000
Balance sheet information:
Current assets 41,920,000 ---
Non-current assets 44,827,000 ---
Current liabilities 18,811,000 ---
Non-current liabilities 33,617,000 ---
NOTE C --SALE OF ACCOUNTS RECEIVABLE
In October 1993, the Company entered into a seven-year agreement to sell an
undivided interest in a revolving pool of its trade accounts receivable. At
December 25, 1993, a $45,000,000 interest had been sold under this agreement,
reflected as a reduction of accounts receivable in the accompanying
consolidated balance sheets. The costs of this program, which were
approximately $570,000 in 1993, are based upon rating agencies' assessment of
the quality of the receivables pool and the purchasers' level of investment
and are fixed at 6.08% per annum plus administrative fees typical in such
transactions. These costs are included in other expense. The Company
maintains allowances for doubtful accounts at a level which management
believes is sufficient to cover potential credit losses relating to trade
accounts receivable, including receivables sold.
NOTE D--ACCRUED EXPENSES
Accrued expenses consists of the following:
1993 1992
Compensation and benefits $ 11,775,625 $ 9,156,692
Interest expense 2,632,072 2,486,885
Restructuring expense 487,376 3,641,046
Other 11,623,356 5,725,462
$ 26,518,429 $21,010,085
NOTE E--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
1993 1992
Senior Debt:
Credit line borrowings $ 86,500,000 $ 70,000,000
Other 1,596,700 23,800
88,096,700 70,023,800
Less current portion 446,829 1,300
87,649,871 70,022,500
Subordinated notes 50,000,000 50,000,000
Convertible subordinated debentures 44,782,000 44,782,000
$182,431,871 $164,804,500
The Company's revolving credit and term loan agreement provides for borrowings
of up to $125,000,000 until September 30, 1995, at which time the outstanding
balance, at the Company's election, may be converted into a term loan payable
in semi-annual installments over five years. The Company may select from
several interest rate options which effectively allow for borrowings at rates
equal to or lower than the lender's prime rate. A commitment fee of 1/4% per
annum is payable on the average daily unused balance of the revolving credit
line. At December 25, 1993, the Company's unused borrowing capacity under
the arrangement was approximately $38,500,000.
The Company's subordinated notes are unsecured, bear interest of 9.96% payable
semiannually, and are due in semiannual installments $2,381,000 beginning
February 1, 2000.
The convertible subordinated debentures bear interest of 7% payable
semiannually and are due 2012. The debentures are convertible by the holder
into shares of Common Stock of the Company at an effective conversion price
of $32.20 per share, subject to adjustment under certain circumstances. The
debentures are redeemable at the Company's option through May 15, 1997, in
whole or in part, at prices ranging from 102.8% to 100.7% of their principal
amount. Subsequent to that date the debentures may be redeemed at 100% of
their principal amount. Mandatory sinking fund payments commencing May 15,
1998, will retire $2,500,000 principal amount of the debenture annually and
approximately 70% of the debentures prior to maturity. The debentures are
subordinated in right of payment to all other indebtedness of the Company.
During 1991, the Company repurchased $2,218,000 face value of the debentures
resulting in an extraordinary after-tax gain of $451,706 ($.05 per share).
The Company's long-term debt and credit arrangements include restrictions
relating to minimum net worth, debt to capital ratio, and other financial
ratios. The agreements also limit the amount of cash dividends that may be
paid. Retained earnings available for payment of dividends amounted to
approximately $978,000 at December 25, 1993.
Approximate maturities of long-term debt for each of the five years succeeding
December 25, 1993, assuming conversion of amounts outstanding under the
revolving credit arrangement to a term loan as discussed above, are $447,000 in
1994, $459,000 in 1995, $16,471,000 in 1996 $16,317,000 in 1997, and
$18,818,000 in 1998.
Interest payments in 1993, 1992, and 1991 were approximately $12,662,000,
$11,077,000, and $11,947,000, respectively.
NOTE F--FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
1993 1992
Carrying Fair Carrying Fair
Amount Value Amount Value
Cash and cash equivalents $ 4,047,459 $ 4,047,459 $ 1,425,985 $ 1,425,985
Long-term debt (including
current portion) 182,878,700 178,974,000 164,805,800 157,893,000
Common Stock, subject
to put option 18,177,958 18,177,958 --- ---
The carrying amounts of cash and cash equivalents approximate fair values
due to the short-term maturity of these instruments. The fair values of the
Company's long-term debt were estimated using discounted cash flow analysis
based on incremental borrowing rates for similar types of borrowing
arrangements and quoted market rates for public debt. The fair value of the
Company's Common Stock, subject to put option, was based on current interest
rates, future cash flows, and the quoted market prices of the Company's
Common Stock.
NOTE G--CAPITAL STOCK
Holders of Class B Common Stock have the right to twenty votes per share on
matters that are submitted to Shareholders for approval and to dividends in an
amount not greater than dividends declared and paid on Common Stock. Class B
Common Stock is restricted as to transferability; however, the Class B Common
Stock may be converted into Common Stock on a one share for one share basis.
The Company's Charter authorizes 200,000,000 shares of Class C Common Stock, $3
par value per share, and 16,000,000 shares of Preferred Stock. No shares of
Class C Common Stock or Preferred Stock have been issued. Also see Note (B)
NOTE H--INCOME TAXES
In 1993, the Company adopted Statement of Financial Accounting Standard No.
109, "Accounting for Income Taxes," which requires the liability method of
accounting for income taxes. The Company restated financial statements for
periods subsequent to December 26, 1986, to reflect application of the new
method. The effect of the change was to decrease income from continuing
operations and net income for 1992 by approximately $200,000 ($.03 per share)
and increase the loss from continuing operations and net loss for 1991 by
approximately $200,000 ($.02 per share).
The provision (benefit) for income tax on income (loss) from continuing
operations consist of the following:
1993 1992 1991
Current Deferred Current Deferred Current Deferred
Federal $ 21,000 $3,490,000 $1,209,000 $1,879,953 $492,000 $(11,501,838)
State 547,000 278,000 248,000 143,235 205,000 (1,051,597)
$ 568,000 $3,768,000 $1,457,000 $2,023,188 $697,000 $(12,553,435)
Deferred income taxes reflects the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the tax bases of those assets and liabilities. Significant
components of the Company's deferred tax liabilities and assets are as follows:
Deferred Tax Liabilities 1993 1992
Property, plant and equipment $52,792,000 $41,419,000
Inventories 8,634,000 7,018,000
Other 404,000 1,235,000
Total deferred tax liabilities 61,830,000 49,672,000
Deferred Tax Assets
Post-retirement benefits 4,073,000 95,000
Other employee benefits 3,925,000 3,169,000
Alternative minimum tax 3,361,000 1,871,000
Allowances for bad debts, claims and discounts 2,727,000 1,983,000
Restructuring 730,000 5,765,000
Other 1,737,000 810,000
Valuation reserve --- ---
Total deferred tax assets 16,553,000 13,693,000
Net deferred tax liabilities $45,277,000 $35,979,000
Differences between the provision (benefit) for income taxes and the amount
computed by applying the statutory federal income tax rate to income (loss)
from continuing operations are reconciled as follows:
1993 1992 1991
Statutory rate applied to
income (loss) from
continuing operations $3,157,000 $ 3,042,000 $(12,721,000)
Plus state income taxes net of
federal tax provision (benefit) 536,000 258,000 (559,000)
3,693,000 3,300,000 $(13,280,000)
Increase(decrease) attributable to:
Non deductible amortization
of intangible assets resulting
from business combinations 559,000 423,000 423,000
(Gain) loss accounted
for on equity method (96,000) (153,000) 1,457,000
Effect of Federal tax
rate increase on deferred
income taxes 500,000 --- ---
Other items (320,000) (89,812) (456,435)
643,000 180,188 1,423,565
Total tax provision (benefit) $4,336,000 $3,480,188 $(11,856,435)
Income tax payments, net of tax refunds received, in 1993, 1992, and 1991 were
approximately $2,079,000, $1,024,000, and $5,066,000, respectively.
NOTE I--RESTRUCTURING AND PLANT CLOSING COSTS
In the fourth quarter of 1991, the Company developed and began implementation
of a plan to restructure the Company's manufacturing facilities and support
services areas and accrued associated costs of $28,276,000 ($18,271,000 or
$2.08 per share after taxes). The plan included, among other things,
production and machinery consolidations into fewer facilities, information
systems conversions and personnel reductions.
As of the end of 1993, the restructuring was substantially complete. Total
costs incurred through 1993 consisted of approximately $13,533,000 to write-
down certain assets to estimated fair market value, approximately $3,156,000
for severance payments, and approximately $11,100,000 for other direct costs,
including product consolidations, equipment relocation, systems conversions,
and other related expenses.
NOTE J--STOCK PLANS
The Company's 1990 Incentive Stock Plan reserves 770,000 shares of Common Stock
for sale or award to key associates under stock options, stock appreciation
rights, restricted stock performance grants, or other awards. Outstanding
options are exercisable at a cumulative rate of 25% to 33 1/3% per year after
the second year from the date the options are granted. Options outstanding
were granted at prices at or above market price on the date of grant and
include grants under the 1983 Incentive Stock Plan, under which no further
options may be granted. At December 25, 1993, options to purchase 126,662
shares were exercisable under these plans.
A summary of the option activity under the 1990 and 1983 Incentive Stock Plans
is as follows:
Number of Option Price
Shares Per Share
Outstanding at December 29, 1990 423,874 $ 4.58 - $33.83
Granted 35,000 13.00 - 13.50
Exercised (19,650) 4.58 - 6.42
Cancelled (56,600) 5.83 - 14.00
Outstanding at December 28, 1991 382,624 4.58 - 33.83
Granted 254,000 10.75 - 11.00
Exercised (27,800) 4.58 - 5.83
Cancelled (68,412) 10.75 - 33.83
Outstanding at December 26, 1992 540,412 5.83 - 30.75
Granted 197,000 12.50 - 15.25
Exercised (22,100) 5.83
Cancelled (87,400) 10.75 - 30.75
Outstanding at December 25, 1993 627,912 $10.75 - $30.75
The Company also has a stock purchase plan which authorizes 108,000 shares of
Common Stock for purchase by supervisory associates at the market price
prevailing at the time of purchase. At December 25, 1993, 65,940 shares
remained available for issue. Shares sold under this plan are held in escrow
until paid for and are subject to repurchase agreements which give the Company
the right of first refusal at the prevailing market price. Numbers of shares
sold under the plan were 12,700 in 1993, 1,800 in 1992, and 3,300 in 1991.
The Company issued options for the purchase of 83,044 shares of Common Stock,
which were immediately exercisable at prices ranging from $3.19 - $5.27 per
share, in connection with the acquisition of Carriage. During 1993, options
for 10,699 shares were exercised at prices ranging from $3.43 - $4.29 per
share. At December 25, 1993, options for 72,345 shares at prices ranging
from $3.19 - $5.27 per share remain exercisable.
NOTE K--PENSION PLANS
The Company has defined benefit and defined contribution pension plans which
cover essentially all associates. Benefits for associates participating in the
defined benefit plans are based on years of service and compensation during the
period of participation. Plan assets consist primarily of cash equivalents and
publicly traded stocks and bonds. The Company's practice is to fund defined
benefit plans in accordance with minimum requirements of the Employee
Retirement Income Security Act of 1974. Contributions and costs of the defined
contribution plans are based on several factors including a percentage of each
participant's compensation, the operating performance of the Company, and
matching of participant contributions by the Company.
Participants in the Company's largest defined benefit plan became eligible
participants in a newly established 401(k) defined contribution plan effective
in 1994. All accrued benefits under the defined benefit plan became fully
vested and were frozen as of December 24, 1993. A portion of the liability of
the defined benefit plan was settled through lump sum payments to electing
associates. Losses incurred as a result of these settlements and the
curtailment described above totaled $768,680 and $358,626 during 1993 and 1992,
respectively. Settlement losses of $196,580 included in the 1993 amount were a
direct result of the Company's restructuring plan and were charged to the
restructuring reserve established in 1991.
The net periodic pension cost included the following components:
1993 1992 1991
Defined benefit plans:
Service cost $ 1,315,353 $ 1,446,829 $ 1,522,052
Interest cost 1,625,217 1,841,940 2,000,193
Actual return on plan assets (1,326,794) (1,227,989) (5,022,036)
Other Components 153,850 (1,056,697) 2,777,701
1,767,626 1,004,083 1,277,910
Defined contribution plans 410,559 --- ---
Net periodic pension expense $ 2,178,185 $ 1,004,083 $ 1,277,910
The following table sets forth the funded status of the Company's defined
benefit retirement plans and related amounts included in the Company's
consolidated balance sheets:
1993 1992
Actuarial present value of benefit obligations:
Vested benefits $24,092,792 $14,753,954
Nonvested benefits 1,336 1,284,875
Accumulated benefit obligations $24,094,128 $16,038,829
Plan assets at fair value $16,138,289 $18,540,107
Projected benefit obligation (24,094,128) (17,902,255)
Projected benefit obligation (in excess
of) or less than plan assets (7,955,839) 637,852
Unrecognized net loss 8,764,390 2,918,403
Remaining unrecognized net transition asset (462,761) (995,762)
Adjustment to recognize minimum liability (8,301,629) ---
Pension related (liability) asset included
in the consolidated balance sheets $(7,955,839) $ 2,560,493
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions," the Company has
recorded an additional minimum liability at December 25, 1993 representing
the excess of the accumulated benefit obligation over the fair value of plan
assets and accrued pension costs. This additional liability reduced
stockholders' equity by $4,981,943 (net of income tax benefit of $3,319,686).
The increased liability in 1993 results primarily from decreasing the assumed
discount rate used in determining the projected benefit obligation from 8.5%
to 7.13%.
The weighted average discount rate used in determining the projected benefit
obligation was 7.13% for 1993, 8.5% for 1992, and 9% for 1991. There was no
increase in future compensation levels assumed for 1993 (due to the freezing of
benefits), and a 4% and 5% rate of increase was used for 1992 and 1991,
respectively. The assumed long-term rate of return on plan assets was 8.5% for
1993 and 1992, and 9% for 1991.
NOTE L--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company and one of its subsidiaries provided medical, dental and life
insurance coverage for retirees under postretirement benefit plans.
The parent company provides medical and dental benefits until age 65 to early
retirees who have met specified age and service requirements. It pays a
portion of these costs for participants who retired prior to 1992 and also
pays a portion of the life insurance premiums for a certain group of
retirees. No new retirees may become eligible for the life insurance
benefits. For measurement purposes, a 12% annual rate of increase in the
per capita claims cost for the medical and dental plans was used for 1993,
1992, and 1991. The discount rate used to determine the accumulated
postretirement benefit obligations was 7.5% for 1993, 8.5% for 1992, and 9%
for 1991. During 1993, the Company settled a portion of its postretirement
benefit obligation under the life insurance plan through the payment of lump-
sum distributions made to beneficiaries of insured participants. Losses
incurred as a result of these settlements totaled $73,049.
A subsidiary also provides medical, dental and life insurance plans for all
retired associates who have completed required service and age requirements.
The subsidiary pays the full cost of these benefits for associates who retired
prior to June 1992. Eligible retirees after this date pay a portion of these
benefits at the equivalent rates under COBRA. The weighted-average annual
assumed rates of increase in the per capita cost of covered medical and dental
benefits is 15% and 12% in 1993 for pre-65 and post-65 benefits, respectively,
gradually declining to 6% in 2005, and remaining at that level thereafter. The
accumulated postretirement benefit obligations were determined using an 8%
weighted average discount rate.
The components of net periodic postretirement benefit cost are as follows:
1993 1992 1991
Medical Life Medical Life Medical Life
and Dental Insurance and Dental Insurance and Dental Insurance
Plans Plans Plans Plans Plans Plans
Interest cost $107,295 $102,863 $103,719 $63,318 $112,076 $80,964
Service cost 17,766 1,641 --- --- --- ---
Amortization
of net loss --- 8,942 --- --- --- ---
Settlement
losses --- 73,049 --- --- --- ---
Net periodic
postretirement
benefit
cost $125,061 $186,495 $103,719 $63,318 $112,076 $80,964
The following table sets forth the funded status of the Company's defined
benefit retirement plans and related amounts included in the Company's
consolidated balance sheets:
1993 1992
Life Life
Medical Insurance Medical Insurance
Plans Plans Plans Plans
Accumulated postretirement
benefit obligations:
Retirees $(1,564,521) $(1,400,126) $(865,400) $(1,141,876)
Active participants (476,711) (69,941) --- ---
(2,041,232) (1,470,067) (865,400) (1,141,876)
Plan assets --- --- --- ---
Accumulated postretirement
benefit obligation in
excess of plan assets (2,041,232) (1,470,067) (865,400) (1,141,876)
Unrecognized net actuarial
loss due to past
experience different from
assumptions made 151,957 431,861 --- 318,645
Accrued postretirement
benefit liability
included in the
consolidated
balance sheet $(1,889,275) $(1,038,206) $(865,400) $ (823,231)
The assumed rate used to measure the per capita claims cost can have a
significant effect on the amounts reported. Increasing the assumed rate by one
percentage point in each year would increase the accumulated postretirement
benefit obligation and net periodic postretirement benefit cost by
approximately $170,000 and $14,000, respectively.
NOTE M --STORM AND FIRE DAMAGE
On March 13, 1993, a severe winter storm substantially damaged Carriage's
manufacturing facilities, including machinery. On August 4, 1993, a fire
destroyed Carriage's Bretlin needlebond facility. Both losses were covered by
insurance and the total insurance benefits recognized during 1993 were
$33,500,000, including approximately $5,400,000 accrued as a receivable. The
Company spent approximately $17,900,000 in 1993 to replace and repair capital
assets which had been destroyed or damaged. Insurance proceeds in excess of
the net book value of destroyed assets and the repair costs of damaged
assets were approximately $13,400,000 and are reflected in the financial
statements as other income ($1,800,000) and a reduction to cost of sales
($11,600,000) to offset extra expenses and losses incurred as a result of
the storm and fire. The insurance claims have not been concluded.
NOTE N--COMMITMENTS
The Company had outstanding commitments for purchases of machinery and
equipment of approximately $11,686,000 at December 25, 1993.
NOTE O --INDUSTRY SEGMENT INFORMATION
The Company operates in two industry segments: textile products and
floorcovering. Textile products include yarns, industrial sewing threads and
knit fabrics. Floorcovering includes carpet for manufactured housing,
recreational vehicles, high-end residential and commercial markets, rugs and
yarns. Prior to the acquisitions of Carriage and Masland in 1993, the
Company's single line of business, textile products, included the Company's
Candlewick sales yarn operations serving the broadloom and rug manufacturing
markets. With the expansion into production and sales of finished
floorcovering products through the Carriage and Masland acquisitions, the
operations of Candlewick are now included in the floorcovering segment.
Accordingly, a restatement of the Company's financial information, by
segment, is reflected for the periods presented in the consolidated
financial statements.
(dollar amounts in thousands)
Net Sales Operating Profit(Loss)(1)
1993 1992 1991 1993 1992 1991
Business Segments
Textile products $332,059 $347,802 $370,825 $ 1,629 $15,352 $(14,631)
Floorcovering 263,899 123,107 122,273 24,424 7,913 1,416
Intersegment
elimination (1,357) (1,077) (1,146) --- --- ---
Total $594,601 $469,832 $491,952 26,053 23,265 (13,215)
Interest expense 12,773 10,824 12,180
Corporate expenses 5,159 5,600 11,448
Other income (expense)-net(1) 899 2,107 (571)
Income (loss)
before income taxes $ 9,020 $ 8,948 $(37,414)
Identifiable Capital
Assets at Year End Expenditures
1993 1992 1991 1993 1992 1991
Business Segments
Textile products $306,076 $310,594 $311,039 $27,504 $24,072 $34,109
Floorcovering 181,663 73,973 47,332 10,316 1,854 3,475
Corporate 8,840 12,513 14,436 1,005 398 722
Total $496,579 $397,080 $372,807 $38,825 $26,324 $38,306
Depreciation
and Amortization
1993 1992 1991
Business Segments
Textile products $20,531 $19,851 $18,109
Floorcovering 8,051 3,189 3,312
Corporate 663 673 1,426
Total $29,245 $23,713 $22,847
(1) Net gains (losses) included in operating profit (loss) on a segment basis
but classified in "other income (expense) - net" in the Company's
Consolidated Statements of Income (Loss) are as follows: 1993 - $1,741;
1992 - $(1,851); 1991-$(920). Operating loss for 1991 includes
restructuring costs as follows: Textile products - $23,306;
Floorcovering - $ 1,222; Corporate - $3,748.
<TABLE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
DIXIE YARNS, INC. AND SUBSIDIARIES
<CAPTION>
<S> <C> <C> <C> <C> <C>
COL. A COL. B COL. C COL. D COL. E COL. F
CLASSIFICATION Balance at Additions Other Changes-Add Balance at
Beginning of Period at Cost Retirements (Deduct)-Describe End of Period
Year ended December 25, 1993:
Land and improvements 9,754,481 3,559,478 (2) 967,598 -0- 12,346,361
Buildings and improvements 81,597,789 33,438,645 (2) 9,828,502 (9,134) 105,198,798
Machinery and equipment 286,908,460 79,076,551 (2) 19,654,214 4,420,218 (4) 350,751,015
TOTALS $378,260,730 $116,074,674 $30,450,314 $4,411,084 $468,296,174
Year ended December 26, 1992:
Land and improvements 9,371,375 655,364 62,925 (209,333) (4) 9,754,481
Buildings and improvements 79,830,875 904,339 15,862 878,437 (4) 81,597,789
Machinery and equipment 265,521,942 24,764,613 (3) 5,419,298 2,041,203 (4) 286,908,460
TOTALS $354,724,192 $26,324,316 $5,498,085 $ 2,710,307 $378,260,730
Year ended December 28, 1991:
Land and improvements 9,364,729 320,035 313,389 -0- 9,371,375
Buildings and improvements 78,594,047 1,974,175 737,347 -0- 79,830,875
Machinery and equipment 255,441,550 36,011,814 (3) 7,794,545 (18,136,877) (5) 265,521,942
TOTALS $343,400,326 $38,306,024 $8,845,281 $(18,136,877) $354,724,192
</TABLE>
<TABLE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
DIXIE YARNS, INC. AND SUBSIDIARIES
CONTINUED
<CAPTION>
<S> <C> <C> <C> <C> <C>
COL. A COL. B COL. C COL. D COL. E COL. F
CLASSIFICATION Balance at Additions Other Changes-Add Balance at
Beginning of Period at Cost Retirements (Deduct)-Describe End of Period
(1) Certain amounts previously reported have been restated to reflect adoption of SFAS No. 109, "Accounting for Income Taxes."
See Note (H) to the Consolidated Financial Statements.
(2) In addition to machinery and equipment replacements and improvements, includes assets acquired in connection with business
combinations. See Note (B) to the Consolidated Financial Statements. Also includes $12.1 million expended to replace
storm/fire damaged assets. See Note (M) to the Consolidated Financial Statements.
(3) Machinery and equipment replacements and improvements.
(4) Represents reclassification of previous writedown and net book value of assets traded.
(5) Represents writedown of assets to net realizable value.
Depreciable lives in effect for the principal classes of property are generally as follows:
Acquired after 1980 Acquired before 1981
Land improvements 10 to 20 years 20 years
Buildings and improvements 20 to 30 years 10 to 45 years
Machinery and equipment 3 to 12 years 3 to 9 years
</TABLE>
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND EQUIPMENT
DIXIE YARNS, INC. AND SUBSIDIARIES
<CAPTION>
<S> <C> <C> <C> <C> <C>
COL. A COL. B COL. C COL. D COL. E COL. F
CLASSIFICATION Balance at Additions Other Changes-Add Balance at
Beginning of Period at Cost Retirements (Deduct)-Describe End of Period
Year ended December 25, 1993:
Land and improvements 1,588,558 149,399 (200,450) -0- 1,537,507
Buildings and improvements 22,874,336 2,779,738 (1,204,918) 4,611 24,453,767
Machinery and equipment 156,003,757 26,316,230 (15,087,537) (186,017) 167,046,433
TOTALS $180,466,651 $29,245,367 $(16,492,905) $(181,406) $193,037,707
Year ended December 26, 1992:
Land and improvements 1,435,281 153,100 -0- 177 1,588,558
Buildings and improvements 20,391,522 2,487,749 4,759 (176) 22,874,336
Machinery and equipment 139,990,311 21,072,104 5,058,611 (47) 156,003,757
TOTALS $161,817,114 $23,712,953 $5,063,370 $ (46) $180,466,651
Year ended December 28, 1991:
Land and improvements 1,286,920 149,761 1,400 -0- 1,435,281
Buildings and improvements 18,107,364 2,426,897 142,739 -0- 20,391,522
Machinery and equipment 124,678,643 20,270,649 4,958,981 -0- 139,990,311
TOTALS $144,072,927 $22,847,307 $5,103,120 $ -0- $161,817,114
Certain amounts previously reported have been restated to reflect adoption of SFAS No. 109, "Accounting for Income Taxes." See
Note (H) to the Consolidated Financial Statements.
</TABLE>
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
DIXIE YARNS, INC. AND SUBSIDIARIES
<CAPTION>
<S> <C> <C> <C> <C> <C>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
(1) (2)
DESCRIPTION Balance at Charged to Charged to Deductions- Balance at
Beginning of Costs and Other Accounts Describe End of Period
Period Expenses -Describe
Year ended December 25, 1993:
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts $4,200,000 $ -0- $1,494,483 (1) $1,794,483 (2) $3,900,000
Provision to reduce
inventories to net
realizable value 4,230,000 -0- 5,410,780 (1) 2,303,851 (3) 7,336,929
Year ended December 26, 1992:
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts $4,086,000 $ 422,488 $ -0- $ 308,488 (2) $4,200,000
Provision to reduce
inventories to net
realizable value 5,976,000 -0- -0- 1,746,000 (3) 4,230,000
Year ended December 28, 1991:
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts $3,032,000 $2,043,984 $ -0- $ 989,984 (2) $4,086,000
Provision to reduce
inventories to net
realizable value 2,293,609 3,682,391 (3) -0- -0- 5,976,000
(1) Increase in reserves in connection with business combinations. See Note (B) to the Consolidated Financial Statements.
(2) Uncollectible accounts written off, net of recoveries, and for 1993, reductions credited to costs and expenses.
(3) Provision for current items net of reductions for previous items.
</TABLE>
SCHEDULE X-SUPPLEMENTARY INCOME STATEMENT INFORMATION
DIXIE YARNS, INC. AND SUBSIDIARIES
COL. A COL. B
ITEM Charged to Costs and Expenses
Year Ended
December 25, December 26, December 28,
1993 1992 1991
Maintenance and repairs $27,010,840 $23,209,089 $24,945,876
Amounts for depreciation and amortization of intangible assets, preoperating
costs and similar deferrals; taxes, other than payroll and income taxes;
royalties and advertising costs are not presented as such amounts are less than
1% of total sales and revenues.
ANNUAL REPORT ON FORM 10-K
ITEM 14 (c)
EXHIBITS
YEAR ENDED DECEMBER 25, 1993
DIXIE YARNS, INC.
CHATTANOOGA, TENNESSEE
Exhibit Index
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(3a) Restated Charter of Dixie Incorporated by reference to
Yarns, Inc. Exhibit (3a) to Dixie's Annual
Report on Form 10-K for the year
ended December 30, 1989.*
(3b) Amended and Restated By- Incorporated by reference to
Laws of Dixie Yarns, Inc. Exhibits (3b) and (3c) to Dixie's
Annual Report on Form 10-K for
the year ended December 29,
1990.*
(4a) Second Amended and Restated Incorporated by reference to
Revolving Credit and Term Exhibit (4a) to Dixie's Annual
Loan Agreement, dated Report on Form 10-K for the
January 31, 1992, by and year ended December 28, 1991.*
among Dixie Yarns, Inc. and
Trust Company Bank, NationsBank
of North Carolina, N.A. and
Chemical Bank.
(4b) Loan Agreement, dated Incorporated by reference to
February 6, 1990 between Exhibit (4d) to Dixie's Annual
Dixie Yarns, Inc. and New Report on Form 10-K for the
York Life Insurance Company year ended December 30, 1989.*
and New York Life Annuity
Corporation.
(4c) Form of Indenture, dated Incorporated by reference to
May 15, 1987 between Dixie Exhibit 4.2 to Amendment No. 1
Yarns, Inc. and Morgan of Dixie's Registration
Guaranty Trust Company of Statement No. 33-140 78 on Form
New York as Trustee. S-3, dated May 19, 1987.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(4d) Revolving Credit Loan Incorporated by reference to
Agreement dated as of Exhibit (4d) to Dixie's Annual
September 16, 1991 by Report on Form 10-K for the
and among Ti-Caro, Inc. and year ended December 28, 1991.*
Trust Company Bank,
individually and as agent,
NCNB National Bank, and
Chemical Bank.
(4e) First Amendment to Revolving Incorporated by reference to
Credit Loan Agreement dated Exhibit 4(e) to Dixie's Annual
as of August 19, 1992 by and Report on form 10-K for the
among Ti-Caro, Inc., T-C year ended December 26, 1992.*
Threads, Inc. and Trust
Company Bank, individually
and as agent, NCNB National
Bank, and Chemical Bank.
(4f) First Amendment, dated Filed herewith
August 25, 1993 to Second
Amended and Restated
Revolving Credit and Term
Loan Agreement dated
January 31, 1992, by and among
Dixie Yarns, Inc. and Trust
Company Bank, NationsBank of
North Carolina, N.A. and
Chemical Bank.
(10a) Dixie Yarns, Inc. 1983 Incorporated by reference to
Incentive Stock Option Exhibit (10c) to Dixie's Annual
Plan. Report on Form 10-K for the year
ended December 28, 1985.*
(10b) Dixie Yarns, Inc. Incentive Incorporated by reference to
Stock Plan. Exhibit (10) to Dixie's Quarterly
Report on Form 10-Q for the
quarter ended March 31, 1990.*
(10c) Dixie Yarns, Inc. Nonquali- Incorporated by reference to
fied Defined Contribution Exhibit (10c) to Dixie's Annual
Plan. Report on form 10-K for the
year ended December 26, 1992.*
(10d) Dixie Yarns, Inc. Nonquali- Incorporated by reference to
fied Employee Savings Plan. Exhibit (10d) to Dixie's Annual
Report on form 10-K for the
year ended December 26, 1992.*
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10e) Dixie Yarns, Inc. Incentive Incorporated by reference to
Compensation Plan. Exhibit (10e) to Dixie's Annual
Report on form 10-K for the
year ended December 26, 1992.*
(10f) Asset Transfer and Restruc- Incorporated by reference to
turing Agreement dated Exhibit (2a) to Dixie's Current
July 9, 1993, by and among Report on Form 8-K dated
Dixie Yarns, Inc., Masland July 9, 1993.*
Carpets, Inc., individual
management investors of
Masland Carpets, Inc., The
Prudential Insurance Company
of America and Pruco Life
Insurance Company.
(10g) Assignment and Bill of Sale Incorporated by reference to
dated July 9, 1993, by and Exhibit (2b) to Dixie's Current
between Dixie Yarns, Inc. Report on Form 8-K dated July 9,
and Masland Carpets, Inc. 1993.*
(10h) Assignment and Assumption Incorporated by reference to
Agreement dated July 9, 1993, Exhibit (2c) to Dixie's Current
by and between Dixie Yarns, Report on Form 8-K dated July 9,
Inc. and Masland Carpets, 1993.*
Inc.
(10i) Stock Rights and Restrictions Incorporated by reference to
Agreement dated July 9, 1993, Exhibit (2d) to Dixie's Current
by and among Dixie Yarns, Report on Form 8-K dated July 9,
Inc., Masland Carpets, Inc., 1993.*
The Prudential Insurance
Company of America and Pruco
Life Insurance Company.
(10j) Pooling and Servicing Incorporated by reference to
Agreement dated as of Exhibit (2a) to Dixie's
October 15, 1993, among Current Report on Form 8-K
Dixie Yarns, Inc., Dixie dated October 15, 1993.*
Funding, Inc. and
NationsBank of Virginia,
N.A. (as Trustee).
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10k) Annex X - Definitions, to Incorporated by reference to
Pooling and Servicing Exhibit (2b) to Dixie's
Agreement dated as of Current Report on Form 8-K
October 15, 1993, among dated October 15, 1993.*
Dixie Yarns, Inc., Dixie
Funding, Inc. and
NationsBank of Virginia,
N.A. (as Trustee).
(10l) Series 1993-1 Supplement, Incorporated by reference to
dated as of October 15, Exhibit (2c) to Dixie's
1993, to Pooling and Current Report on Form 8-K
Servicing Agreement dated as dated October 15, 1993.*
of October 15, 1993, among
Dixie Yarns, Inc., Dixie
Funding, Inc. and
NationsBank of Virginia,
N.A. (as Trustee).
(10m) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2d) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and New York Life Insurance
and Annuity Corporation.
(10n) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2e) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and John Alden Life
Insurance Company.
(10o) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2f) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and John Alden Life
Insurance Company of New
York.
(10p) Certificate Purchase Incorporated by reference to
Agreement dated October 15, Exhibit (2g) to Dixie's
1993, among Dixie Yarns, Current Report on Form 8-K
Inc., Dixie Funding, Inc. dated October 15, 1993.*
and Keyport Life Insurance
Company.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10q) Executive Severance Incorporated by reference to
Agreement dated as of Exhibit (19) to Dixie's Quarterly
September 8, 1988 as Report on Form 10-Q for the
amended. quarter ended March 27,1993.*
(11) Statement re: Computation Filed herewith.
of Earnings Per Share.
(21) Subsidiaries of the Filed herewith.
Registrant.
(23) Consent of Ernst & Young. Filed herewith.
*Commission File No. 0-2585
EXHIBIT 4(f)
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS FIRST AMENDMENT to Second Amended and Restated Revolving Credit
and Term Loan Agreement, dated as of August 25, 1993 (the "First Amendment"),
by and among DIXIE YARNS, INC. (the "Borrower"), a Tennessee corporation, TRUST
COMPANY BANK, a Georgia banking corporation, NATIONSBANK OF NORTH CAROLINA,
N.A. a national banking association, and CHEMICAL BANK, a New York banking
corporation (collectively, the "Banks" and individually, a "Bank"), and TRUST
COMPANY BANK, as agent for the Banks (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the Borrower, the Banks and the Agent are parties to a
certain Second Amended and Restated Revolving Credit and Term Loan Agreement,
dated as of January 31, 1992 (the "Agreement") pursuant to which the Banks
agreed to lend and the Borrower agreed to borrow revolving credit loans and
term loans in an aggregate principal amount not to exceed $125,000,000; and
WHEREAS, the Borrower has requested and the Banks have agreed to amend
the Agreement to allow the Borrower to enter into a receivables securitization
program substantially on the term outlined in the Term Sheet (the "Term Sheet")
attached hereto as Exhibit "A" (the "Securitization Program") subject to the
terms and conditions set forth herein;
NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand
paid by the Borrower to the Banks, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, agree as follows:
I.
Section 1.01 of the Agreement is hereby amended as follows:
(a) The definition of "Funded Debt" is hereby amended by adding the
following sentence thereto:
"Notwithstanding any provision of this Agreement to the contrary,
Funded Debt shall include the face amount of all interests in the trust from
time to time established pursuant to the Securitization Program which interests
are owned by Persons other than Dixie Yarns, Inc. or Dixie Funding, Inc."
(b) The following definitions are hereby inserted in alphabetical
order:
"FINANCIAL OFFICER" of any corporation shall mean the chief or
principal financial officer, principal accounting officer, treasurer or
controller of such corporation.
"SECRUITIZATION DOCUMENTS" shall mean all documents from time to time
executed in connection with the Securitization Program, including without
limitation that certain Pooling and Servicing Agreement among Dixie Funding,
Inc. as transferor, Dixie Yarns, Inc. as servicer and NationsBank of Virginia,
N.A., as Trustee for the Certificateholders as such document is originally
executed or as thereafter amended, modified or supplemented.
"SECURITIZATION PROGRAM" shall mean that certain accounts receivable
purchase program established by the Borrower and its wholly-owned subsidiary,
Dixie Funding, Inc., for the sale of the accounts receivable of the Borrower
and certain of its Subsidiaries to Dixie Funding, Inc. for further transfer
to a trust or series of trusts in return for certain interests in such trust or
trusts with such interests in an aggregate amount not to exceed $60,000,000 to
be sold to certain third party investors with all other interests in such trust
or trusts to be retained by Dixie Funding, Inc. or Dixie Yarns, Inc.
II.
Section 5.10 of the Agreement is hereby amended by deleting all
references therein to the "chief financial officer" of the Borrower and
substituting in lieu thereof references to the "Financial Officer".
III.
Subsection 6.01(m) of the Agreement is hereby deleted in its entirety
and the following subsections (m) and (n) substituted in lieu thereof:
"(m) Liens on accounts receivable securing the obligations of the
Borrower and its Subsidiaries pursuant to the Securitization Program; PROVIDED
THAT, the obligations secured by such Liens held by third-party investors does
not exceed $60,000,000 in the aggregate; plus
"(n) extensions, renewals or replacements of any Lien referred to in
clauses (a) through (m) of this Section 6.01, provided that the principal
amount of the Debt or obligations secured thereby is not increased and that any
such extension, renewal or replacement is limited to the property originally
encumbered by the Lien."
IV.
Subsection 6.02(g) of the Agreement is hereby deleted in its entirety
and substituting of the following subsections (g), (h) and (i) in lieu thereof:
"(g) the Threads Loan and the guarantee thereof by Ti-Caro, Inc.; plus
(h) Debt from Dixie Funding, Inc. to the Borrower in the form of a
revolving note and subordinated notes issued in payment for the transfer of
receivables pursuant to the terms of the Securitization Program; plus
(i) Debt from Carriage Industries, Inc. to the Borrower in the form
of Intercompany Advances in an aggregate principal amount not to exceed
$32,000,000 at any one time outstanding."
V.
Section 6.03 of the Agreement is hereby amended as follows:
(a) Subsection 6.03(a) of the Agreement is hereby deleted in its
entirety and the following subsection (a) substituted in lieu thereof:
"(a) make or permit to remain outstanding Intercompany Advances
permitted by Section 6.02(a), (b), (h) and (i) and Intercompany Advances from a
Subsidiary to Borrower; plus"
(b) Subsection 6.03(m) of the Agreement is hereby deleted in its
entirety and the following subsections (m) and (n) substituted in lieu thereof:
"(m) each of the Borrower and Ti-Caro, Inc. may permit to remain
outstanding in favor of the Banks, its respective guarantee of the Threads
Loan; plus
(n) the Borrower may make initial investments in Dixie Funding, Inc.
in order to establish Dixie Funding, Inc. as a wholly-owned Subsidiary and
Dixie Funding, Inc. may transfer accounts receivable acquired by it, directly
or indirectly, from the Borrower and certain Subsidiaries to a trust or series
of trusts in return for certain certificates of ownership interests in such
trust or trusts pursuant to the terms of the Securitization Program."
VI.
Section 6.04(e) of the Agreement is hereby deleted in its entirety and
the following subsections (e) and (f) substituted in lieu thereof:
(e) In addition to exchanges permitted pursuant to Section 6.03(1)
hereof, Borrower and its Subsidiaries may, in any one fiscal year, sell at then
current market value, assets (including stock of a Subsidiary) (i) having a
book value less than twenty-five percent (25%) of the Net Tangible Assets as of
the end of the most recent preceding fiscal quarter, and (ii) which contributed
less than twenty-five percent (25%) of Net Income Before Interest and Taxes of
Borrower for the immediately preceding four fiscal quarters; PROVIDED, HOWEVER,
following any sale of the stock of a Subsidiary which results in a minority
interest in such former Subsidiary, any resulting investment in such former
Subsidiary must be permitted pursuant to Section 6.03(i) hereof; plus
(f) The Borrower may sell its accounts receivable and accounts
receivable purchased from other Subsidiaries to Dixie Funding, Inc. and Dixie
Funding, Inc. may transfer such accounts receivable to a trust or series of
trusts in return for cash and certain ownership interests in such trust or
trusts pursuant to the terms of the Securitization Program."
VII.
Section 6.08 of the Agreement is hereby deleted in its entirety and
the following substituted in lieu thereof:
"SECTION 6.08. SALE OR DISCOUNT OF RECEIVABLES. Except for the
Securitization Program and maturity factoring arrangements contemplated by
Section 6.01(i) hereof, sell or permit any Subsidiary to sell with recourse or
discount or otherwise sell for less than the face value thereof, any of its
notes or accounts receivable."
VIII.
The Agreement is amended by adding the following Section 6.12:
"SECTION 6.12. AMENDMENT OF SECURITIZATION DOCUMENTS. Except as
otherwise provided in Section 7.01(e) hereof, shall not amend, modify or waive
and material provision of the Securitization Documents as in effect on the date
hereof or the definition of "Termination Event" without the prior written
consent of the Required Banks."
IX.
This First Amendment shall not be effective unless and until each of
the following conditions has been satisfied: (i) the receipt by the Agent of a
fully executed counterpart of this First Amendment; (ii) the execution of the
Securitization Documents and establishment of the Securitization Program in
accordance with the terms of the Term Sheet and otherwise on terms and
conditions acceptable to the Banks; and (iii) evidence satisfactory to the
Banks that the proceeds of the initial sale of the Investor Certificates (as
such term is defined in the Securitization Documents) has been or will be used
to repay the indebtedness of Carriage Industries, Inc. listed on Exhibit "B".
X.
Upon and after the effective date of this Fist Amendment, all
references to the Agreement shall mean the Agreement as amended by this First
Amendment. Except as expressly provided in this First Amendment, the execution
and delivery of this First Amendment does not and will not amend, modify or
supplement any provision of or constitute a consent to a waiver of
noncompliance with the provisions of the Agreement, and except as
specifically provided in this First Amendment, the Agreement shall remain in
full force and effect.
XI.
All the representations and warranties set forth in Article IV of the
Agreement are true and correct as if made on the date hereof except for matters
occurring since the date of the Agreement not reflected in the schedules; all
of such matters have been reported to the Banks if required by Article V of the
Agreement and do not otherwise violate the terms of the Agreement. No Default
or Event of Default exists under the Agreement as of the date hereof.
XII.
This First Amendment shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
XIII.
This First Amendment shall be governed by, and construed in accordance
with, the laws of the State of Georgia.
XIV.
This First Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which, taken
together, shall constitute one and the same instrument.
XV.
This First Amendment constitutes the entire understanding of the
parties with respect to the subject matter hereof, and any other prior or
contemporaneous agreements, whether written or oral, with respect thereto are
expressly superseded hereby.
IN WITNESS WHEREOF the parties hereto have caused this First Amendment
to be executed and delivered by their duly authorized officers as of the day
and year first above written.
DIXIE YARNS, INC.
TRUST COMPANY BANK, individually and as
Agent
NATIONSBANK OF NORTH CAROLINA, N.A.
CHEMICAL BANK
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
DIXIE YARNS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year End
December 25, December 26, December 28,
1993 1992 1991
PRIMARY:
Net income (loss) $ 4,684,359 $5,467,421 $(26,602,704)
SHARES:
Weighted average number of Common
Shares outstanding assuming
conversion of Class B Common Stock 11,192,720 8,727,231 8,768,200
Net effect of dilutive stock
options based on the treasury
stock method using average market
price 65,836 28,805 29,108
Net effect of put option based
on the reverse treasury stock
method using average market price 202,875 --- ---
TOTAL SHARES 11,461,431 8,756,036 8,797,308
PER SHARE AMOUNT $ .41 $ .62 $ (3.02)
FULLY-DILUTED:
Net income (loss) $ 4,684,359 $5,467,421 $(26,602,704)
After-tax interest requirement of
convertible subordinated debentures(A) --- --- ---
ADJUSTED NET INCOME(LOSS) $ 4,684,359 $5,467,421 $(26,602,704)
SHARES:
Weighted average number of Common
Shares outstanding assuming
conversion of Class B Common Stock 11,192,720 8,727,231 8,768,200
Net effect of dilutive stock options
based on the treasury stock method
using year-end market price if higher
than the average market price 66,084 44,492 28,661
Net effect of put option based on
the reverse treasury stock method
using year end market price if lower
than the average market price 401,259 --- ---
Effect of assumed conversion of
dilutive convertible subordinated
debentures(A) --- --- ---
TOTAL SHARES 11,660,063 8,771,723 8,796,861
PER SHARE AMOUNT $ .40 $ .62 $ (3.02)
A) The assumed conversion of convertible subordinated debentures into 1,390,745 shares
with an after-tax interest requirement of $1,894,739 for the year ended December 25,
1993, into 1,390,745 shares with an after-tax interest requirement of $1,923,739 for the
year ended December 26, 1992, and into 1,397,450 shares with an after-tax interest
requirement of $1,933,852 for the year ended December 28, 1991, has been excluded from
the computation since the effect was anti-dilutive.
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
DIXIE SUBSIDIARY STOCK SUMMARY
DIXIE YARNS, INC. SUBSIDIARIES
STATE/COUNTRY
OF
SUBSIDIARY INCORPORATION
Dixie Exports, Inc. USVI
Carriage Industries, Inc. Georgia
Masland Carpets, Inc. Alabama
Candlewick - Ringgold, Inc. Tennessee
Candlewick - Lemoore, Inc. Tennessee
Candlewick - Roanoke/Tennessee, Inc. Tennessee
Dixie Funding, Inc. Tennessee
T-C Threads, Inc. Tennessee
Threads of Puerto Rico, Inc. North Carolina
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-30473) pertaining to the Employee Stock Purchase Plan of Dixie
Yarns, Inc., the Registration Statement (Form S-8 No. 33-59564), the
Registration Statement (Form S-8 No. 33-42615) pertaining to the Incentive Stock
Option Plan of Dixie Yarns, Inc., and Post-Effective Amendment Number 2 to the
Registration Statements (Form S-8 No. 2-20604 and No. 2-56744) pertaining to the
Employee Stock Purchase Plan and Employee Stock Option Plan of Dixie Yarns, Inc.
of our report dated February 17, 1994, with respect to the consolidated
financial statements and schedules of Dixie Yarns, Inc. included in the Annual
Report (Form 10-K) for the year ended December 25, 1993.
ERNST & YOUNG
Chattanooga, Tennessee
March 25, 1994
