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 31, 1994.
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 10, 1995: Common Stock - $69,680,418; 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 10, 1995
Common Stock, $3.00 Par Value 11,507,998 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 4, 1995 (Part III).
PART I
ITEM 1. BUSINESS
GENERAL
An integral part of the Company's strategy has been to restructure its
textile products operations and expand its floorcovering businesses. A
significant portion of the restructuring included consolidation of
manufacturing into fewer facilities. The Company has pursued its strategy
of expanding its floorcovering business with the acquisitions of Carriage
Industries and Masland Carpets in 1993 and the acquisition of Patrick
Carpet Mills in 1994. Each of the Company's segments, Textile products and
Floorcoverings, represents approximately 50% of the Company's total sales.
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 is
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 eventually increase demand for domestic
textile products by encouraging utilization of domestic products by non-
domestic cut and sew operations. Additionally, management believes
consumer buying patterns will continue to be influenced by mass
merchandisers and retailers emphasizing price competition. 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 1994, 1993 or 1992
and no customer's volume exceeded 10 percent of the Company's total sales
for 1994.
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 Company's 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 (synthetic) 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
businesses was approximately $83,000,000 on December 31, 1994 compared to
approximately $79,000,000 on December 25, 1993. All of these orders can
reasonably be expected to be filled within the 1995 fiscal year.
Although the competition in the Company's textile business varies depending
on the markets involved, a substantial portion of 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 domestic carpet industry is composed of
approximately 100 manufacturers of which the top 5 account for over 60% 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 the 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 small boat industries.
There is a high degree of competition within the domestic carpet industry
which also faces 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"), Masland Carpets, Inc. ("Masland"), and
Patrick Carpet Mills, Inc. ("Patrick").
Candlewick is one of the world's largest independent carpet yarn
manufacturers producing premier yarns for floorcovering applications. Its
customers include end-use product manufacturers in the bath rug, automotive
and broadloom carpet markets. Candlewick competes through product quality,
innovation, and customer service. 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 own trucking fleet 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 requires quality, service, and innovation in styling
and product design. Additionally, price is becoming an increasingly
important competitive factor, particularly in the Company's contract
business.
Patrick is a West Coast manufacturer of both commercial and residential
broadloom products with a broad geographic distribution. During 1995,
Patrick's manufacturing operations will be consolidated into Masland's
Atmore, Alabama facility.
The Company's sales order backlog position in its floorcovering businesses,
excluding Carriage, was approximately $31,000,000 on December 31, 1994
compared to approximately $37,000,000 on December 25, 1993. Approximately
90% of orders received by Carriage are shipped within the same week. All
of the order backlog can reasonably be expected to be filled within the
1995 fiscal year.
The Company's floorcovering businesses own a variety of trademarks under
which their 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 1994, 1993 or 1992 and no customer's volume exceeded 10
percent of the Company's total sales for 1994.
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 6,900 associates as of the end of fiscal
1994.
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 10, 1995.
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
Newton, NC Yarn Spinning 252,000
Ranlo, NC Yarn Spinning 482,000
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
Total Manufacturing 3,223,000
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
Atmore, AL Carpet Manufacturing 262,000
Mobile, AL(2) Rug Manufacturing, Distribution 400,000
Total Manufacturing 2,480,000
Total 6,159,000
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 1994 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 10, 1995, 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, 53 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 Company. Brother of
Paul K. Frierson.
Glenn M. Grandin, 52 Senior Vice President and Chief
Senior Vice President and Financial Officer since February,
Chief Financial Officer 1995. Senior Vice President and
Chief Financial Officer, Signal
Apparel Company, from October, 1992
to February, 1995. Senior Vice
President/Chief Financial Officer,
Alma Industries, Inc., from April,
1992 to August, 1992. Consultant
from January, 1991 to March, 1992.
Vice President/Chief Financial
Officer, Pannill Knitting Co., from
October, 1988 to December, 1990.
Philip H. Barlow, 46 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
to 1993. Director of Sales and
Marketing, Carriage, 1986 - 1988.
David C. Clarke, 37 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.
EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Name, Age Business Experience During
and Position Past Five Years
C. Pat Driver, 54 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.
Paul K. Frierson, 57 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.
George B. Smith, 54 Corporate Vice President and
Corporate Vice President President, Natural/Dyed Yarns
and President, Natural/Dyed Yarns and Knits since March, 1994.
and Knits President, Natural and Dyed Yarn
Group from August, 1993 to March,
1994. 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 O. Sturdy, 65 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.
EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Name, Age Business Experience During
and Position Past Five Years
W. Derek Davis, 44 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.
Jon A. Faulkner, 35 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 A. Harmon, 49 Treasurer since 1993.
Treasurer Director of Tax and Financial
Planning, 1985 - 1993.
D. Eugene Lasater, 44 Controller since 1988.
Controller
Starr T. Klein, 52 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 10, 1995, the total number of record holders of the Company's
Common Stock was approximately 5,400 and the total number of holders of the
Company's Class B Common Stock was 18. Management of the Company estimates
that there are approximately 4,300 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 31, 1994 and
December 25, 1993 are as follows:
DIXIE YARNS, INC.
QUARTERLY FINANCIAL DATA, DIVIDENDS
AND PRICE RANGE OF COMMON STOCK
(Unaudited)
(dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
1994
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $164,750 $178,318 $173,924 $171,543
Gross profit 19,522 27,559 26,907 18,815
Net income (loss) (4,342) 118 501 496
Earnings (loss) per common and
common equivalent share (.33) .01 .04 .04
Dividends:
Common Stock .05 .05 .05 .05
Class B Common Stock .05 .05 .05 .05
Common Stock prices:
High $ 11.00 $ 10.25 $ 9.75 $ 9.00
Low $ 9.25 $ 8.25 $ 8.25 $ 6.75
<CAPTION>
1993
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
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
<FN>
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. The operating results of Carriage, Masland and Patrick are included
subsequent to their acquisitions in March 1993, July 1993 and June 1994,
respectively. During the fourth quarter of 1994, the Company recognized asset
valuation losses of $10,397 (6,446, or $.47 per share after taxes) and a nontaxable
life insurance gain of $12,835 ($.94 per share).
The discussion of restrictions on payment of dividends is included in Note E to the
Consolidated Financial Statements included herein.
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.
<CAPTION>
Year Ended
December 31, December 25, December 26, December 28, December 29,
1994(1) 1993(2) 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net sales $688,534,425 $594,601,350 $469,832,466 $491,952,433 $556,207,313
Income (loss) from continuing
operations(3,4) (3,226,725) 4,684,359 5,467,421 (25,557,215) 6,644,109
Total assets 488,320,030 496,578,881 397,080,239 372,806,621 394,041,690
Long-term debt:
Senior indebtedness 87,024,633 87,649,871 70,022,500 59,323,800 28,987,400
Subordinated notes 50,000,000 50,000,000 50,000,000 50,000,000 50,000,000
Convertible subordinated debentures 44,782,000 44,782,000 44,782,000 44,782,000 47,000,000
Common Stock, subject to put option 18,177,958 18,177,958 --- --- ---
Per Share:
Income (loss) from continuing
operations: (3,4)
Primary (.24) .41 .62 (2.90) .70
Fully diluted (.24) .40 .62 (2.90) .70
Cash dividends declared:
Common Stock .20 .20 .20 .42 .68
Class B Common Stock .20 .20 .20 .42 .68
<FN>
(1) Includes the results of operations of Patrick Carpet Mills, Inc. subsequent to June 20, 1994. See Note B to the Consolidated
Financial Statements.
(2) 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.
(3) Income (loss) from continuing operations includes asset valuation losses of $6,446,000, or $.49 per share, and a nontaxable
life insurance gain of $12,835,000, or $.97 per share, for the year ended December 31, 1994, 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 K and Note L to the Consolidated Financial
Statements.
(4) Income (loss) from continuing operations excludes a charge for the cumulative effect of an accounting change 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
RESULTS OF OPERATIONS
1994 Compared with 1993 - Sales for 1994 were $688.5 million compared with
sales of $594.6 million in 1993, a 15.8% increase. The increase in sales
is attributable to strong demand in the Company's floorcovering business
and the acquisitions made in 1993 and 1994.
Although sales increased significantly, operations resulted in a net loss
of $3.2 million, or $.24 per share, in 1994, compared with net income of
$4.7 million, or $.41 per share, in 1993. Operating results for 1994 were
negatively affected by weak market conditions and higher costs in the
Company's textile business. A nontaxable gain of $12.8 million resulting
from the receipt of insurance proceeds on the life of the former Chairman
of Carriage Industries, Inc. was included in 1994. Results for 1994 also
included charges aggregating to $19.6 million ($12.2 million after-tax)
consisting of $10.4 million for write-downs of idle facilities and
machinery and equipment permanently taken out of service during 1994, $2.0
million for supply parts for the idled equipment, $2.2 million for write-
downs of inventories pertaining to discontinued product lines, and $1.7
million of other inventory related losses. The remainder of the charges
relate primarily to expenses and losses associated with a union campaign at
one of the Company's plants and certain other liabilities, partially offset
by net casualty insurance gains.
The pretax effect of the charges plus casualty losses attributable to the
Company's textile business was $22.1 million. Insurance settlements, which
exceeded casualty losses and the portion of the charges attributable to the
Company's floorcovering business, resulted in a $2.7 million net gain for
this business segment. Results for 1993 were positively affected by a $1.3
million gain from the sale of assets in the Company's textile business and
a $1.8 million gain from casualty insurance settlements attributable to the
Company's floorcovering business.
The following table sets forth selected operating data (in millions of
dollars) related to the two business segments of the Company (see
additional information in Note O to the consolidated financial statements).
1994 1993 1992
Sales - Textile products $332.5 $332.1 $347.8
- Floorcovering 359.6 263.9 123.1
- Intersegment elimination (3.6) (1.4) (1.1)
Total sales $688.5 $594.6 $469.8
Operating profit (loss)
- Textile products $(33.0) $ 1.6 $ 15.4
- Floorcovering $ 28.1 $ 24.4 $ 7.9
The 1994 operating loss of the Company's textile business, excluding the
effects of the charges of $22.1 million described above, was $10.9 million,
compared with an operating profit of $.3 million in the prior year,
excluding the 1993 gain from asset sales. Textile results for 1994 were
negatively affected by weak demand and lower selling prices for cotton
products in the first half of 1994 and higher cotton costs throughout the
year. Operating losses were significantly reduced in the second half of
the year as demand and manufacturing efficiencies improved and selling
prices strengthened. Although cotton costs have continued to rise, both
order backlogs and margins are stronger in the first quarter of 1995.
Operating profits of the floorcovering business, excluding the $2.7 million
net gain in 1994 and the $1.8 million gain in 1993, increased to $25.4
million in 1994, compared with $22.6 million in 1993. The 36.3% increase
in sales is due to strong demand and inclusion of the operations of
Carriage Industries, Inc., Masland Carpets, Inc. and Patrick Carpet Mills,
Inc. subsequent to their acquisitions on March 12, 1993, July 9, 1993 and
June 20, 1994, respectively. Operating profits improved principally as a
result of the additional sales volume.
The increase in consolidated selling, general and administrative expenses
as a percentage of sales in 1994 reflects the higher selling and product
distribution costs associated with the specialized floorcovering markets
serviced by Carriage, Masland and Patrick and cost incurred to support
sales growth in these businesses.
Other expense included the annual costs of $3.0 million associated with the
sale of trade accounts receivable for a full year in 1994. Other income
for 1993 was positively affected by $4.8 million of gains from asset sales,
casualty insurance proceeds and the Company's portion of earnings of
nonconsolidated entities.
Interest expense increased in 1994 as the result of higher interest rates.
The Company's effective income tax rate differs from the statutory income
tax rate due primarily to the nontaxable life insurance gain and
nondeductible amortization of intangible assets.
The Company anticipates that demand for floorcovering products will remain
strong during 1995. The Company's textile operations are expected to
continue in a highly price competitive environment, but demand is
anticipated to remain strong and recent cost cutting efforts should produce
higher margins. Management expects higher sales as well as profitable
operations in both of the Company's business segments in 1995.
1993 Compared with 1992 - Sales for the year ended December 25, 1993
increased 26.6%. The increase in 1993 sales is attributable to the
Company's floorcovering business, which includes the Company's carpet yarn
manufacturing operation and, subsequent to their 1993 acquisitions, the
operations of Carriage Industries, Inc. and Masland Carpets, Inc. 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 the effect of weak retail apparel markets and the sale
of a dyed yarn facility in the first quarter of 1993.
Net income was $4.7 million, or $.41 per share, in 1993 compared with net
income of $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 profit 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 casualty 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 noncash 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.
LIQUIDITY AND CAPITAL RESOURCES
During the three-year period ended December 31, 1994, funds generated from
operating activities (including $45.0 million from the sale of accounts
receivable) totaled $120.7 million, funds raised through long-term debt
amounted to $27.7 million and proceeds from asset sales generated an
additional $18.8 million. These cash flows together with $16.8 million of
life insurance proceeds funded the Company's operations, capital
expenditures and business acquisitions during the three-year period.
Capital expenditures (excluding expenditures of approximately $15.2 million
related to casualty losses) were approximately $97.8 million during the
three-year period ended December 31, 1994 and were directed primarily
toward upgrading equipment to improve quality and enhance manufacturing
efficiency, as well as capacity expansions. During this period, charges
for depreciation and amortization amounted to approximately $91.5 million.
Capital expenditures for 1995 are budgeted to remain below anticipated
charges for depreciation and amortization and will be concentrated on
expanding the capacity of the Company's floorcovering business.
Funds generated from operating activities were $18.4 million in 1994 and
were supplemented by $16.8 million of life insurance proceeds and $2.4
million of proceeds from the sale of assets. These funds financed, among
other things, $32.7 million of normal capital expenditures, $3.1 million of
storm and fire related capital expenditures, and dividend payments.
During 1993 and 1994, a number of the Company's manufacturing facilities
were damaged or destroyed by weather-related casualties and a fire. By the
end of 1994, the damaged facilities have either been replaced, repaired or
their production capacity consolidated into other manufacturing facilities
and all costs and expenses related to the casualties had been recorded.
Costs and expenses associated with the damaged facilities amounted to $41.5
million. The casualty losses were covered by insurance. Through the end
of 1994, settlements have been reached for the majority of the insurance
claims and insurance reimbursements amounting to $43.6 million had been
received. Unpaid insurance claims, primarily related to business
interruptions, are expected to be settled in 1995.
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 and 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 of 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. On June 20, 1994, the
assets of Patrick Carpet Mills, Inc. were acquired for $3.2 million.
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. A
$45.0 million interest has been sold under this agreement and the sale is
reflected as a reduction of accounts receivable in the Company's balance
sheet. The cost of this program was fixed at 6.08% per annum of the
undivided interest sold plus administrative fees typical in such
transactions. In addition, the Company is generally responsible for credit
losses associated with sold receivables.
At December 31, 1994, the Company's debt structure consisted of $44.8
million of convertible subordinated debentures, $50.0 million of
subordinated notes and $87.0 million of senior indebtedness, principally
under a revolving credit and term loan agreement. The convertible
subordinated debentures require annual mandatory sinking fund payments of
$2.5 million, beginning in 1998. Payments are not required under the
Company's subordinated notes until the year 2000. The revolving credit and
term-loan agreement was renewed for another five years in 1995. The
amended agreement provides for revolving credit of up to $125.0 million
through the five year commitment period and a $10.0 million term loan which
may be utilized under certain circumstances. Interest rates available
under the facility are selected by the Company from a number of options
which effectively allow for borrowings at rates equal to or lower than the
greater of the lender's prime rate or the federal funds rate plus .5%. At
year end, the available unused borrowing capacity under the revolving
credit facility was approximately $39.1 million.
Under restrictions set forth in one of the Company's loan agreements and as
a result of the Company's 1994 loss, future dividends may be paid only to
the extent that 75% of cumulative income before extraordinary items for
periods subsequent to December 31, 1994 exceeds $3.9 million. Such
restrictions may be waived at the discretion of the Company's lender.
Although the dividend restriction was waived for the first quarter of 1995,
the Board of Directors elected not to pay the first quarter dividend and
has indicated an intention to suspend quarterly dividends until the
Company's operating results return to appropriate levels.
The Company's future liquidity requirements are expected to consist
primarily of capital expenditures, seasonal working capital requirements,
funds necessary to finance expansion and the possible repurchase of the
Common Stock issued in connection with the acquisition of Masland Carpets,
Inc. The Company's liquidity requirements for 1995 are expected to be
financed from operating cash flow and existing credit arrangements.
Funding of longer term liquidity may be supplemented by the 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 4, 1995 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 4, 1995 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 4, 1995 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 4, 1995 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.
(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.
(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.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(i) Exhibits Incorporated by Reference - Continued
(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.
(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.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(i) Exhibits Incorporated by Reference - Continued
(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:
(11) Statement Re: Computation of Earnings Per Share.
(21) Subsidiaries of the Registrant.
(23) Consent of Ernst & Young LLP.
(b) Reports on Form 8-K--No reports on Form 8-K have been filed by the
registrant during the last quarter of the period covered by this
report.
(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 30, 1995 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 30, 1995
Daniel K. Frierson
Corporate Vice President,
President of the Candlewick
/s/PAUL K. FRIERSON Group and Director March 30, 1995
Paul K. Frierson
Senior Vice President and
/s/GLENN M. GRANDIN Chief Financial Officer March 30, 1995
Glenn M. Grandin
/s/D. EUGENE LASATER Controller March 30, 1995
D. Eugene Lasater
/s/PAUL K. BROCK Director March 30, 1995
Paul K. Brock
SIGNATURES -- CONTINUED
/s/LOVIC A. BROOKS, JR. Director March 30, 1995
Lovic A. Brooks, Jr.
/s/J. FRANK HARRISON, JR. Director March 30, 1995
J. Frank Harrison, Jr.
/s/JAMES H. MARTIN, JR. Director March 30, 1995
James H. Martin, Jr.
/s/PETER L. SMITH Director March 30, 1995
Peter L. Smith
/s/JOSEPH T. SPENCE, JR. Director March 30, 1995
Joseph T. Spence, Jr.
/s/ROBERT J. SUDDERTH, JR. Director March 30, 1995
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 31, 1994
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 31, 1994 and
December 25, 1993
Consolidated statements of income(loss)--Years ended
December 31, 1994, December 25, 1993, and December 26, 1992
Consolidated statements of cash flows--Years ended
December 31, 1994, December 25, 1993, and December 26, 1992.
Consolidated statements of stockholders' equity--Years ended
December 31, 1994, December 25, 1993, December 26, 1992
The following consolidated financial statement schedule of Dixie Yarns,
Inc. and subsidiaries is included in Item 14(d):
Schedule II--Valuation and qualifying accounts
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 31, 1994 and December 25, 1993,
and the related consolidated statements of income (loss), stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1994. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, 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 31, 1994 and
December 25, 1993, and the consolidated results of their operations and
cash flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Chattanooga, Tennessee
February 23, 1995,
except for Note E, as to which the date is
March 24, 1995
DIXIE YARNS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 25,
1994 1993
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,904,386 $ 4,047,459
Accounts receivable (less allowance for doubtful
accounts of $3,617,000 in 1994 and $3,900,000
in 1993) 28,917,507 26,553,831
Inventories 109,964,409 105,809,888
Other 11,939,224 11,667,083
TOTAL CURRENT ASSETS 152,725,526 148,078,261
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 13,361,962 12,346,361
Buildings and improvements 106,482,362 105,198,798
Machinery and equipment 361,075,901 350,751,015
480,920,225 468,296,174
Less accumulated amortization and depreciation 215,406,139 193,037,707
265,514,086 275,258,467
INTANGIBLE ASSETS (less accumulated amortization
of $10,658,901 in 1994 and $8,742,059 in 1993) 63,619,720 62,722,113
OTHER ASSETS 6,460,698 10,520,040
TOTAL ASSETS $488,320,030 $496,578,881
<CAPTION>
December 31, December 25,
1994 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 33,055,489 $ 32,245,506
Accrued expenses 30,148,365 26,518,429
Current portion of long-term debt 583,599 446,829
TOTAL CURRENT LIABILITIES 63,787,453 59,210,764
LONG-TERM DEBT
Senior indebtedness 87,024,633 87,649,871
Subordinated notes 50,000,000 50,000,000
Convertible subordinated debentures 44,782,000 44,782,000
181,806,633 182,431,871
OTHER LIABILITIES 11,676,098 13,037,877
DEFERRED INCOME TAXES 42,364,128 48,038,943
COMMON STOCK, SUBJECT TO PUT OPTION -
1,029,446 shares 18,177,958 18,177,958
STOCKHOLDERS' EQUITY
Common Stock ($3 par value per share): Authorized
80,000,000 shares, issued and outstanding, including
shares in treasury - 13,857,642 shares in 1994 and
13,852,233 shares in 1993 41,572,926 41,556,699
Class B Common Stock ($3 par value per share):
Authorized 16,000,000 shares, issued and outstanding -
735,228 shares in 1994 and 1993 2,205,684 2,205,684
Additional paid-in capital 131,709,579 131,684,054
Retained earnings 54,626,472 60,302,834
Minimum pension liability adjustment (4,329,565) (4,981,943)
225,785,096 230,767,328
Less Common Stock in treasury at cost - 3,375,990
shares in 1994 and 3,356,646 shares in 1993 55,277,336 55,085,860
170,507,760 175,681,468
Commitments - Note N
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $488,320,030 $496,578,881
<FN>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<CAPTION>
Year Ended
December 31, December 25, December 26,
1994 1993 1992
<S> <C> <C> <C>
Net sales $688,534,425 $594,601,350 $469,832,466
Cost of sales 595,731,868 510,378,826 412,246,551
GROSS PROFIT 92,802,557 84,222,524 57,585,915
Selling, general and administrative
expenses 82,053,001 59,910,691 32,469,983
Asset valuation losses 10,397,136 --- ---
Corporate expenses 5,915,227 5,159,000 5,600,000
Life insurance gain (12,835,313) --- ---
Other (income) expense - net 5,469,020 (2,640,156) (256,021)
INCOME BEFORE INTEREST AND TAXES 1,803,486 21,792,989 19,771,953
Interest expense 13,748,211 12,772,630 10,824,344
INCOME (LOSS) BEFORE INCOME TAXES (11,944,725) 9,020,359 8,947,609
Income tax provision (benefit) (8,718,000) 4,336,000 3,480,188
NET INCOME (LOSS) $ (3,226,725) $ 4,684,359 $ 5,467,421
Net income (loss) per common
and common equivalent share $ (.24) $ .41 $ .62
<FN>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended
December 31, December 25, December 26,
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $(3,226,725) $ 4,684,359 $ 5,467,421
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities
Depreciation and amortization 35,198,522 31,221,998 25,041,941
Provision (benefit) for deferred
income taxes (7,410,000) 3,768,000 2,023,188
Equity in earnings of affiliate --- (353,000) (586,000)
(Gain) loss on property, plant
and equipment disposals and
valuation adjustments 10,935,754 (1,994,510) (1,371,960)
Life insurance gain (12,835,313) --- ---
Changes in operating assets and liabilities,
net of effects of business combinations:
Accounts receivable (includes
$45 million sold in 1993) (3,532,109) 43,839,084 (2,050,734)
Inventories (2,788,075) 1,452,857 7,712,869
Other current assets 1,169,840 (2,614,774) 295,393
Other assets (546,574) (1,887,097) 452,274
Accounts payable and accrued expenses 1,698,502 (18,859,652) 5,385,942
Other liabilities (278,357) 923,090 (262,485)
NET CASH PROVIDED BY OPERATING ACTIVITIES 18,385,465 60,180,355 42,107,849
CASH FLOWS FROM INVESTING ACTIVITIES
Life insurance proceeds 16,761,099 --- ---
Net proceeds from sales and
insurance recovery of property,
plant and equipment 2,445,174 14,582,419 1,755,516
Purchase of property, plant and equipment
(includes $3.1 million in 1994 and
$12.1 million in 1993 for
casualty damages) (35,791,803) (50,885,812) (26,324,316)
Equity investment in Carriage
Industries, Inc. --- --- (27,350,050)
Cash payments in connection with business
combinations, net of cash acquired (230,179) (3,999,546) ---
NET CASH USED IN INVESTING ACTIVITIES (16,815,709) (40,302,939) (51,918,850)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in credit
line borrowings (635,389) 16,500,000 10,700,000
Debt assumed in acquisitions and retired --- (32,327,167) ---
Capital stock acquired (191,476) (339,268) (229,636)
Dividends paid (2,449,637) (2,223,385) (1,745,573)
Other (436,327) 1,133,878 175,516
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (3,712,829) (17,255,942) 8,900,307
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,143,073) 2,621,474 (910,694)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 4,047,459 1,425,985 2,336,679
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,904,386 $ 4,047,459 $ 1,425,985
<FN>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Class B Additional Pension Common
Common Common Paid-In Retained Liability Stock In
Stock Stock Capital Earnings Adjustment Treasury
<S> <C> <C> <C> <C> <C> <C>
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, Inc.
acquisition - 2,472,894 shares 7,418,682 23,754,688
Options issued in connection with
Carriage Industries, Inc. 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)
Common Stock acquired for
treasury - 19,344 shares (191,476)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 5,409 shares 16,227 25,525
Net (loss) for the year (3,226,725)
Minimum pension liability adjustment 652,378
Dividends declared - Common Stock and
Class B Common Stock $.20 per share (2,449,637)
BALANCE AT DECEMBER 31, 1994 $41,572,926 $2,205,684 $131,709,579 $54,626,472 $(4,329,565) $(55,277,336)
<FN>
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 to a wide variety of
manufacturers and retailers located primarily throughout the United States.
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 including potential losses on receivables sold (see
Note C). 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:
1994 1993
At current cost:
Raw materials $ 28,458,113 $ 25,274,771
Work-in-process 28,091,398 24,602,923
Finished goods 64,400,494 62,664,139
Supplies, repair parts and other 7,857,904 9,792,498
128,807,909 122,334,331
Excess of current cost over LIFO value (18,843,500) (16,524,443)
$109,964,409 $105,809,888
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 decrease the net loss for 1994 and
increase net income for 1993 and 1992 by approximately $670,000 ($.05 per
share), $350,000 ($.03 per share) and $506,000 ($.06 per share),
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 $32,679,344 in 1994, $29,245,367 in 1993 and $23,712,953
in 1992. Property, plant and equipment is stated on the basis of cost.
However, 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.
Intangible Assets: The excess of the purchase price over the fair market
value of identifiable net assets acquired in business combinations is
recorded as goodwill and is amortized using the straight-line method over
40 years. The carrying value of goodwill will be reviewed if facts and
circumstances suggest that it may be impaired. Impairment will be
measured, and goodwill reduced, for any deficiency of estimated
undiscounted cash flows during the amortization period related to the
business acquired.
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 the assumed conversion 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
reflect the maximum potential dilution of per share earnings which would
have occurred assuming, if dilutive, the exercise of stock options, the put
option, and the conversion of the subordinated debentures. These
computations were anti-dilutive for 1994 and the additional dilution was
less than 3% for 1993 and 1992.
Revenue Recognition: The Company recognizes revenue at the time title to
the goods passes to the customer.
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 estimated 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
subject to put option issued) was allocated to the net tangible assets of
Masland based on the estimated fair market values of the assets acquired.
On June 20, 1994, the Company acquired certain assets and assumed certain
liabilities of Patrick of California, Inc. ("Patrick"). The purchase price
of $3,206,444 was allocated to the net tangible assets of Patrick 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 estimated fair market value of Patrick's net tangible assets was
recorded as an intangible asset and is being amortized using the straight-
line method over 40 years.
A summary of net assets acquired is as follows:
Carriage Masland Patrick
Current assets $49,865,747 $16,316,797 $3,352,752
Property, plant and
equipment 53,440,710 11,748,152 524,088
Other assets 4,618,971 76,181 445,706
Current liabilities (26,802,995) (7,072,437) (2,741,417)
Long-term debt (27,222,687) (450,000) ---
Other liabilities and
deferred taxes (12,326,472) (1,553,215) (1,039,134)
Intangible asset 21,699,203 --- 2,664,449
Net Assets Acquired
Excluding Cash 63,272,477 19,065,478 3,206,444
Cash 412,606 556,714 ---
Net Assets Acquired $63,685,083 $19,622,192 $3,206,444
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions of Carriage, Masland and Patrick 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 are
presented 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.
1994 1993
Net sales $695,369,000 $656,302,000
Income (loss) from continuing operations (3,252,000) 6,098,000
Net income (loss) (3,252,000) 6,098,000
Per common and common equivalent share:
Income (loss) from continuing operations (.25) .48
Net income (loss) (.25) .48
Prior to March 12, 1993, the Company's investment in Carriage was accounted
for using the equity method. Accordingly, net income for 1993 included the
Company's proportionate share of Carriage's earnings of approximately
$320,000 after taxes.
NOTE C - SALE OF ACCOUNTS RECEIVABLE
On October 15, 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 31, 1994 and December 25, 1993, a $45,000,000
interest had been sold under this agreement and is reflected as a reduction
of accounts receivable in the accompanying consolidated balance sheets.
Fees of this program were fixed at 6.08% per annum on the amount of the
interest sold plus administrative fees typical in such transactions. These
costs, which were approximately $2,983,000 for 1994 and $574,000 for 1993,
are included in other (income) expense - net.
NOTE D - ACCRUED EXPENSES
Accrued expenses include the following:
1994 1993
Compensation and benefits $ 13,712,006 $ 11,775,625
Interest expense 2,761,233 2,632,072
NOTE E - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
1994 1993
Senior debt:
Credit line borrowings $ 85,864,611 $ 86,500,000
Other 1,743,621 1,596,700
87,608,232 88,096,700
Less current portion 583,599 446,829
87,024,633 87,649,871
Subordinated notes 50,000,000 50,000,000
Convertible subordinated debentures 44,782,000 44,782,000
$181,806,633 $182,431,871
The Company's unsecured revolving credit and term-loan agreement was
renewed for five years in March of 1995. The amended agreement provides
for a revolving credit facility of up to $125,000,000 through the five-year
commitment period and a $10,000,000 term-loan facility that may be utilized
under certain circumstances. The terms of the agreement provide for the
potential reduction in revolving credit availability by 50% of the net cash
proceeds from certain significant asset sales. However, the revolving
credit availability may not be reduced below $90,000,000. Interest rates
available under the facility may be selected by the Company from a number
of options which effectively allow for borrowings at rates equal to or
lower than the greater of the lender's prime rate or the federal funds rate
plus .50%. Commitment fees, ranging from .25% to .375% per annum on the
revolving credit line and .20% to .30% per annum on the term-loan facility,
are payable on the average daily unused balance of the credit facilities.
At December 31, 1994, unused borrowing capacity under the revolving credit
facility was approximately $39,135,000.
The Company's subordinated notes are unsecured, bear interest of 9.96%
payable semiannually, and are due in semiannual installments of $2,381,000
beginning February 1, 2000.
The Company's convertible subordinated debentures bear interest of 7%
payable semiannually, are due 2012, and 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
debentures annually and approximately 70% of the debentures prior to
maturity. The convertible debentures are subordinated in right of payment
to all other indebtedness of the Company.
The Company's long-term debt and credit arrangements contain financial
covenants relating to minimum net worth, debt to capitalization, dividends
and certain financial ratios. Under restrictions set forth in the
Company's subordinated note agreement, future dividends may be paid only to
the extent that 75% of cumulative income before extraordinary items for
periods subsequent to December 31, 1994 exceeds $3,892,000.
Approximate maturities of long-term debt for each of the five years
succeeding December 31, 1994 are $584,000 in 1995, $296,000 in 1996,
$142,000 in 1997, $2,643,000 in 1998, and $2,613,000 in 1999.
Interest payments in 1994, 1993, and 1992 were approximately $13,408,000,
$12,662,000, and $11,077,000, respectively.
NOTE F - FAIR VALUE OF FINANCIAL INSTRUMENTS
All of the Company's financial instruments are held or issued for purposes
other than trading. The carrying amounts and estimated fair values of the
Company's financial instruments are summarized as follows:
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets
Cash and cash
equivalents $ 1,904,386 $ 1,904,386 $ 4,047,459 $4,047,459
Financial liabilities
Long-term debt
(including current
portion) 182,390,232 169,429,000 182,878,700 178,974,000
Common Stock, subject
to put option 18,177,958 17,662,000 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 the Company's
convertible debentures. The fair value of the Company's Common Stock,
subject to put option, is based on current interest rates and future cash
flows.
NOTE G - 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.
Participants in the Company's largest defined benefit plan became eligible
to participate in a 401(k) defined contribution plan effective in 1994.
All accrued benefits under the defined benefit plan were fully vested and
frozen as of December 24, 1993, and a portion of the liability of the
defined benefit plan was settled through lump sum payments to electing
associates. Losses from settlements and the curtailment were $1,574,833,
$768,680 and $358,626 during 1994, 1993 and 1992, respectively.
The Company's practice is to fund its defined benefit plans in accordance
with minimum contribution requirements of the Employee Retirement Income
Security Act of 1974. Costs of the defined contribution plans are based on
several factors including each participant's compensation, the operating
performance of the Company and matching Company contributions.
The net periodic pension costs included the following components:
1994 1993 1992
Defined benefit plans:
Service cost $ 30,385 $ 1,315,353 $ 1,446,829
Interest cost 1,694,169 1,625,217 1,841,940
Actual return on plan assets
- (gain)/loss 204,189 (1,326,794) (1,227,989)
Other components 116,232 153,850 (1,056,697)
2,044,975 1,767,626 1,004,083
Defined contribution plans 1,763,621 410,559 ---
Net pension expense $ 3,808,596 $ 2,178,185 $ 1,004,083
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:
1994 1993
Actuarial present value of benefit obligations:
Vested benefits $20,907,205 $24,092,792
Nonvested benefits 498 1,336
Accumulated benefit obligations $20,907,703 $24,094,128
Plan assets at fair value $14,312,055 $16,138,289
Projected benefit obligation (20,907,703) (24,094,128)
Projected benefit obligation in
excess of plan assets (6,595,648) (7,955,839)
Unrecognized net loss 7,412,057 8,764,390
Remaining unrecognized net transition asset (196,217) (462,761)
Adjustment to recognize minimum liability (7,215,840) (8,301,629)
Pension related liability included in the
consolidated balance sheets $(6,595,648) $(7,955,839)
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 representing the excess of the
accumulated benefit obligation over the fair value of plan assets and
accrued pension liability. This additional liability, net of the related
income tax benefit, reduced stockholders' equity by $4,329,565 at December
31, 1994 and $4,981,943 at December 25, 1993.
The weighted average discount rate used in determining the projected
benefit obligation was 8.0% for 1994, 7.13% for 1993 and 8.5% for 1992.
There was no increase in future compensation levels assumed after 1993 (due
to the freezing of benefits), and a 4% rate of increase was used for 1992.
The assumed long-term rate of return on plan assets was 8.5% for each year
presented.
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).
The provision (benefit) for income tax on income (loss) from continuing
operations consist of the following:
1994 1993 1992
Current Deferred Current Deferred Current Deferred
Federal $(2,590,000) $(6,476,000) $ 21,000 $3,490,000 $1,209,000 $1,879,953
State 1,282,000 (934,000) 547,000 278,000 248,000 143,235
$(1,308,000) $(7,410,000) $568,000 $3,768,000 $1,457,000 $2,023,188
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 1994 1993
Property, plant and equipment $50,047,000 $52,792,000
Inventories 5,690,000 8,634,000
Intangible assets 1,026,000 ---
Other 1,474,000 404,000
Total deferred tax liabilities 58,237,000 61,830,000
Deferred Tax Assets
Post-retirement benefits $ 3,875,000 $ 4,073,000
Other employee benefits 3,707,000 3,925,000
Alternative minimum tax 4,528,000 3,361,000
Allowances for bad debts,
claims and discounts 2,699,000 2,727,000
Restructuring --- 730,000
Net operating loss carryforward 2,510,000 ---
Other 2,620,000 1,737,000
Valuation reserve --- ---
Total deferred tax assets 19,939,000 16,553,000
Net deferred tax liabilities $38,298,000 $45,277,000
The net operating loss carryforward of approximately $7,383,000 can be
utilized to offset future Federal taxable income through the year 2009.
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:
1994 1993 1992
Statutory rate applied to
income (loss) from
continuing operations $(4,181,000) $3,157,000 $ 3,042,000
Plus state income taxes net of
Federal tax provision (benefit) 226,000 536,000 258,000
(3,955,000) 3,693,000 3,300,000
Increase(decrease) attributable to:
Nondeductible amortization
of intangible assets 634,000 559,000 423,000
Investment income accounted
for on equity method --- (96,000) (153,000)
Nondeductible portion of
travel and entertainment 268,000 97,000 63,000
Nontaxable life insurance
gain (4,492,000) --- ---
Capital loss carryback benefit (1,200,000) --- ---
Effect of federal tax
rate increase on deferred
income taxes --- 500,000 ---
Other items 27,000 (417,000) (152,812)
(4,763,000) 643,000 180,188
Total tax provision (benefit) $(8,718,000) $4,336,000 $ 3,480,188
Income tax payments, net of tax refunds received, in 1994, 1993 and 1992
were approximately $2,645,000, $2,079,000, and $1,024,000, respectively.
NOTE I - 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 and 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.
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 31, 1994, options to
purchase 182,000 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 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
Granted 10,000 10.25
Cancelled (90,412) 10.75 - 30.75
Outstanding at December 31, 1994 547,500 $10.25 - $19.50
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 31, 1994, 64,740 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 3,880 in 1994, 12,700 in 1993
and 1,800 in 1992.
In 1993, 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, and during 1994, options for 1,529 shares
were exercised at prices ranging from $4.29 - $5.03 per share. At December
31, 1994, options for 70,816 shares at prices ranging from $3.19 - $5.27
per share remain exercisable.
NOTE K - ASSET VALUATION LOSSES
The asset valuation losses in 1994 of $10,397,136 ($6,446,136 after taxes)
relate to idle facilities and machinery and equipment permanently taken out
of service during the year.
NOTE L - LIFE INSURANCE GAIN
The Company recorded a nontaxable gain of $12,835,313 in the fourth quarter
of 1994 from the receipt of insurance proceeds on the life of the former
Chairman of Carriage Industries, Inc.
NOTE M - CASUALTY DAMAGE
During 1993 and 1994, a number of the Company's manufacturing facilities
were damaged or destroyed by weather-related casualties and a fire. By the
end of 1994, all of the damaged facilities were either replaced, repaired
or their production capacities consolidated into other manufacturing
facilities, and all costs associated with the casualties had been recorded.
Each damaged facility was covered by insurance. The majority of the
casualty insurance claims have been settled or partially settled, and
insurance proceeds received by the Company through December 31, 1994
amounted to $43,568,487. Insurance benefits recognized by the Company
amounted to $33,500,000 in 1993 and $10,068,487 in 1994. Casualty
insurance benefits exceeded the book values of the destroyed assets and the
cost to repair damaged assets by $13,400,000 in 1993 and $8,210,000 in
1994, and are reflected in the financial statements as reductions to cost
of sales of $11,600,000 and $7,941,000 in 1993 and 1994, respectively, to
offset additional expenses incurred as a result of the casualties and as
other income of $1,800,000 in 1993 and $269,000 in 1994. Additional
insurance claims, primarily related to business interruptions, are expected
to be settled in 1995.
NOTE N - COMMITMENTS
The Company had outstanding commitments for purchases of machinery and
equipment and expenditures for construction of buildings of approximately
$17,159,000 at December 31, 1994.
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.
(dollar amounts in thousands)
Net Sales Operating Profit(Loss)(1)
1994 1993 1992 1994 1993 1992
Business Segments
Textile products $332,482 $332,059 $347,802 $(33,039) $ 1,629 $15,352
Floorcovering 359,635 263,899 123,107 28,117 24,424 7,913
Intersegment
elimination (3,583) (1,357) (1,077) --- --- ---
Total $688,534 $594,601 $469,832 (4,922) 26,053 23,265
Interest expense 13,748 12,773 10,824
Corporate expenses 5,915 5,159 5,600
Life insurance gain (12,835) --- ---
Other (income) expense - net 195 (899) (2,107)
Income (loss) before income
taxes $(11,945) $ 9,020 $ 8,948
Identifiable Capital
Assets at Year End Expenditures
1994 1993 1992 1994 1993 1992
Business Segments
Textile products $265,932 $306,076 $310,594 $ 9,673 $27,504 $24,072
Floorcovering 205,444 181,663 73,973 21,912 10,316 1,854
Corporate 16,944 8,840 12,513 1,089 1,005 398
Total $488,320 $496,579 $397,080 $32,674 $38,825 $26,324
Depreciation
and Amortization
1994 1993 1992
Business Segments
Textile products $22,188 $20,531 $19,851
Floorcovering 11,624 8,051 3,189
Corporate 765 663 673
Total $34,577 $29,245 $23,713
(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: 1994 -
$5,274; 1993 - ($1,741); 1992 - $1,851. Operating profit (loss) on a
segment basis for 1994 includes (income) expense related to casualty
insurance (gains) losses and asset valuation losses which were
recognized as follows: Textile products - $14,143;
Floorcovering - $(4,015).
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
DIXIE YARNS, INC. AND SUBSIDIARIES
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 31, 1994:
Reserves deducted from asset
accounts:
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $3,900,000 $ 829,049 $ 605,249 (1) $1,717,298 (2) $ 3,617,000
Provision to reduce
inventories to net
realizable value 7,336,929 1,801,971 (3) 913,025 (1) -0- 10,051,925
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
<FN>
(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>
ANNUAL REPORT ON FORM 10-K
ITEM 14 (c)
EXHIBITS
YEAR ENDED DECEMBER 31, 1994
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 (4e) 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 Incorporated by reference to
August 25, 1993 to Second Exhibit (4f) to Dixie's Annual
Amended and Restated Report on form 10-K for the year
Revolving Credit and Term ended December 25, 1993.*
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 LLP. Filed herewith.
*Commission File No. 0-2585
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
DIXIE YARNS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year End
December 31, December 25, December 26,
1994 1993 1992
PRIMARY:
<S> <C> <C> <C>
Net income (loss) $(3,226,725) $4,684,359 $5,467,421
SHARES:
Weighted average number of common
shares outstanding assuming
conversion of Class B Common Stock 12,249,041 11,192,720 8,727,231
Net effect of dilutive stock
options based on the treasury
stock method using average market
price 34,272 65,836 28,805
Net effect of put option based
on the reverse treasury stock
method using average market price 987,861 202,875 ---
TOTAL SHARES 13,271,174 11,461,431 8,756,036
PER SHARE AMOUNT $ (.24) $ .41 $ .62
FULLY-DILUTED:
Net income (loss) $(3,226,725) $ 4,684,359 $5,467,421
After-tax interest requirement of
convertible subordinated debentures (A) --- --- ---
ADJUSTED NET INCOME(LOSS) $(3,226,725) $ 4,684,359 $5,467,421
SHARES:
Weighted average number of common
shares outstanding assuming
conversion of Class B Common Stock 12,249,041 11,192,720 8,727,231
Net effect of dilutive stock options
based on the treasury stock method
using year-end market price if higher
than the average market price 34,262 66,084 44,492
Net effect of put option based on
the reverse treasury stock method
using year-end market price if lower
than the average market price 1,567,405 401,259 ---
Effect of assumed conversion of
convertible subordinated
debentures(A) --- --- ---
TOTAL SHARES 13,850,708 11,660,063 8,771,723
PER SHARE AMOUNT (B) $ (.23) $ .40 $ .62
<FN>
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 years ended December 31,
1994 and December 25, 1993, and into 1,390,745 shares with an after-tax interest
requirement of $1,923,739 for the year ended December 26, 1992 has been excluded from
the computation since the effect was anti-dilutive.
B) Fully diluted earnings per share for 1994 reported as $(.24) due to calculated
earnings per share reflecting anti-dilution.
</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
Patrick Carpet Mills, Inc. California
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 23, 1995, except for
Note E, as to which the date is March 24, 1995, with respect to the
consolidated financial statements and schedule of Dixie Yarns, Inc.
included in the Annual Report (Form 10-K) for the year ended December 31,
1994.
ERNST & YOUNG LLP
Chattanooga, Tennessee
March 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated condensed financial statements of Dixie Yarns, Inc. at and for
the fiscal year ended December 31, 1994 and is qualified in its entirety
by refernece to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,904,386
<SECURITIES> 0
<RECEIVABLES> 32,534,507
<ALLOWANCES> 3,617,000
<INVENTORY> 109,964,409
<CURRENT-ASSETS> 152,725,526
<PP&E> 480,920,225
<DEPRECIATION> 215,406,139
<TOTAL-ASSETS> 488,320,030
<CURRENT-LIABILITIES> 63,787,453
<BONDS> 181,806,633
<COMMON> 43,778,610
18,177,958
0
<OTHER-SE> 126,729,150
<TOTAL-LIABILITY-AND-EQUITY> 488,320,030
<SALES> 688,534,425
<TOTAL-REVENUES> 688,534,425
<CGS> 595,731,868
<TOTAL-COSTS> 595,731,868
<OTHER-EXPENSES> 10,397,136
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,748,211
<INCOME-PRETAX> (11,944,725)
<INCOME-TAX> (8,718,000)
<INCOME-CONTINUING> (3,226,725)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,226,725)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
