FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995
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 (423) 698-2501
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of November 1, 1995
Common Stock, $3 Par Value 10,459,176 shares
Class B Common Stock, $3 Par Value 735,228 shares
Class C Common Stock, $3 Par Value 0 shares
DIXIE YARNS, INC 2
INDEX
Part I. Financial Information: Page No.
Consolidated Condensed Balance Sheets --
September 30, 1995 and December 31, 1994 3
Consolidated Statements of Income (Loss) --
Three Months Ended September 30, 1995
and October 1, 1994 5
Consolidated Statements of Income (Loss) --
Nine Months Ended September 30, 1995
and October 1, 1994 6
Consolidated Condensed Statements of Cash Flows --
Nine Months Ended September 30, 1995
and October 1, 1994 7
Notes to Consolidated Condensed Financial Statements 9
Management's Discussion and Analysis of Results of
Operations and Financial Condition 11
Part II. Other Information:
Item 6 - Exhibits and Reports on Form 8-K 14
PART I - ITEM 1 3
FINANCIAL INFORMATION
DIXIE YARNS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1995 1994
_____________ ____________
(dollar amounts in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,990 $ 1,904
Accounts receivable (less allowance for
doubtful accounts of $3,139 in 1995
and $3,617 in 1994) 34,713 28,918
Inventories 114,340 109,964
Other 12,055 11,939
_____________ ____________
TOTAL CURRENT ASSETS 163,098 152,725
PROPERTY, PLANT AND EQUIPMENT 478,567 480,920
Less accumulated amortization and
depreciation 229,166 215,406
_____________ ____________
NET PROPERTY, PLANT AND EQUIPMENT 249,401 265,514
INTANGIBLE ASSETS (less accumulated
amortization of $12,106 in 1995
and $10,659 in 1994) 63,284 63,620
OTHER ASSETS 6,601 6,461
_____________ ____________
TOTAL ASSETS $ 482,384 $ 488,320
_____________ ____________
_____________ ____________
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 4
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1995 1994
_____________ ____________
(dollar amounts in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 31,731 $ 33,055
Accrued expenses 25,518 30,148
Current portion of long-term debt 2,236 584
_____________ ____________
TOTAL CURRENT LIABILITIES 59,485 63,787
LONG-TERM DEBT
Senior indebtedness 106,115 87,025
Subordinated notes 50,000 50,000
Convertible subordinated debentures 44,782 44,782
_____________ ____________
TOTAL LONG-TERM DEBT 200,897 181,807
OTHER LIABILITIES 12,724 11,676
DEFERRED INCOME TAXES 43,684 42,364
COMMON STOCK, SUBJECT TO PUT OPTION -
1,029,446 shares in 1994 -0- 18,178
STOCKHOLDERS' EQUITY
Common Stock - issued and outstanding,
including shares in treasury,
13,862,799 shares in 1995 and
13,857,642 shares in 1994 41,589 41,573
Class B Common Stock - issued and
outstanding, 735,228 shares in 1995
and 1994 2,206 2,206
Additional paid-in capital 131,617 131,710
Retained earnings 49,911 54,626
Minimum pension liability adjustment (4,330) (4,330)
_____________ ____________
220,993 225,785
Less Common Stock in treasury at cost -
3,393,523 shares in 1995 and
3,375,990 shares in 1994 55,399 55,277
_____________ ____________
TOTAL STOCKHOLDERS' EQUITY 165,594 170,508
_____________ ____________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 482,384 $ 488,320
_____________ ____________
_____________ ____________
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 5
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
Three Months Ended
_________________________________
September 30, October 1,
1995 1994
______________ ______________
(dollar amounts in thousands,
except per share data)
Net sales $ 161,289 $ 172,556
Cost of sales 137,894 147,016
____________ ____________
GROSS PROFIT 23,395 25,540
Selling, general and
administrative expenses 21,346 19,852
Other income (expense) - net (6,894) (997)
____________ ____________
INCOME (LOSS) BEFORE INTEREST AND TAXES (4,845) 4,691
Interest expense 3,985 3,503
____________ ____________
INCOME (LOSS) BEFORE INCOME TAXES (8,830) 1,188
Income tax provision (benefit) (2,800) 687
____________ ____________
NET INCOME (LOSS) $ (6,030) $ 501
____________ ____________
____________ ____________
Per common and common
equivalent share:
Net income (loss) $ (0.53) $ 0.04
Cash dividends declared:
Common stock $ 0.00 $ 0.05
Class B common stock $ 0.00 $ 0.05
See Notes to Consolidated Condensed Financial Statements
DIXIE YARNS, INC. 6
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
Nine Months Ended
_________________________________
September 30, October 1,
1995 1994
______________ ______________
(dollar amounts in thousands,
except per share data)
Net sales $ 520,744 $ 512,789
Cost of sales 442,625 443,004
____________ ____________
GROSS PROFIT 78,119 69,785
Selling, general and
administrative expenses 63,947 60,950
Other income (expense) - net (7,916) (3,499)
____________ ____________
INCOME BEFORE INTEREST AND TAXES 6,256 5,336
Interest expense 12,097 10,261
____________ ____________
INCOME (LOSS) BEFORE INCOME TAXES (5,841) (4,925)
Income tax provision (benefit) (1,125) (1,202)
____________ ____________
NET INCOME (LOSS) $ (4,716) $ (3,723)
____________ ____________
____________ ____________
Per common and common
equivalent share:
Net income (loss) $ (0.40) $ (0.28)
Cash dividends declared:
Common stock $ 0.00 $ 0.15
Class B common stock $ 0.00 $ 0.15
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 7
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
_____________________________
September 30, October 1,
1995 1994
_____________ ____________
(dollar amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (4,716) $ (3,723)
Depreciation and amortization 27,527 26,864
Provision for deferred
income taxes 880 1,123
Loss on property, plant and equipment 9,058 37
_____________ ____________
32,749 24,301
Changes in operating assets and
liabilities, net of effects
of business combination (16,638) (16,549)
_____________ ____________
NET CASH PROVIDED BY OPERATING
ACTIVITIES 16,111 7,752
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of
property, plant and equipment 6,359 -0-
Purchase of property, plant and
equipment (24,750) (26,397)
Cash payments in connection with
business combination -0- (324)
____________ ____________
NET CASH USED IN INVESTING ACTIVITIES (18,391) (26,721)
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 8
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITED)
Nine Months Ended
_____________________________
September 30, October 1,
1995 1994
_____________ ____________
(dollar amounts in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in credit
line borrowings 21,185 18,871
Repurchase common stock,
subject to put option (18,281) -0-
Dividends paid -0- (1,837)
Capital stock acquired (122) (186)
Other (416) (334)
_____________ ____________
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,366 16,514
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 86 (2,455)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,904 4,047
_____________ ____________
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,990 $ 1,592
_____________ ____________
_____________ ____________
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 11,344 $ 10,297
_____________ ____________
_____________ ____________
Income taxes paid, net of
refunds received $ (1,248) $ 1,483
_____________ ____________
_____________ ____________
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 9
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial statements which do not include all of the
information and footnotes required in annual financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 1995
are not necessarily indicative of the results that may be expected for the
entire year.
NOTE B - RECLASSIFICATIONS
Net sales, selling, general and administrative expenses and corporate
expenses for 1994 have been reclassified to conform with the 1995
presentation.
NOTE C - INVENTORIES
Inventories are summarized as follows:
September 30, December 31,
1995 1994
_____________ ____________
(dollar amounts in thousands)
At current cost
Raw materials $ 28,256 $ 28,458
Work-in-process 28,778 28,091
Finished goods 71,757 64,401
Supplies, repair parts
and other 7,317 7,858
____________ ____________
136,108 128,808
Excess of current cost
over LIFO value (21,768) (18,844)
____________ ____________
$ 114,340 $ 109,964
____________ ____________
____________ ____________
NOTE D - DEBT AND CREDIT ARRANGEMENTS 10
The Company's revolving credit facility, which was renewed in the first
quarter of 1995, provides for aggregate borrowings of up to $125.0 million
in addition to the availability of a $10.0 million term-loan facility which
was utilized to fund the stock repurchase on July 10, 1995 (see Note E.)
Under the terms of the revolving credit agreement, borrowing capacity is
permanently reduced by a portion of the proceeds from certain significant
asset dispositions. Accordingly, aggregate availability has been reduced
by $2.8 million as a result of the sale of the Newton plant (see Note G.)
At September 30, 1995, available unused borrowing capacity under the
Company's revolving credit agreements was approximately $30.1 million.
NOTE E - COMMON STOCK, SUBJECT TO PUT OPTION
On July 10, 1995, 1,029,446 shares of common stock issued in connection
with the Company's 1993 acquisition of Masland Carpets, Inc. were
repurchased for $18.3 million, pursuant to the exercise of the holders' put
option. The repurchase was funded under the company's revolving credit and
term-loan facilities.
NOTE F - STOCK PLANS
On May 4, 1995 the Board of Directors acted, effective as of such date, to
reprice outstanding options granted prior to 1995 under the Company's 1990
Incentive Stock Plan. Options to purchase 516,000 shares of the Company's
Common Stock, originally granted at prices ranging from $10.25 to $14.00
per share, were amended to provide for a revised exercise price of $8.00
per share, which was above the market price of $6.25 per share on the
effective date of the amendment. The expiration date of the repriced
options was also amended to provide for a new 10 year term commencing on
May 4, 1995, under which the options become exercisable at a cumulative
rate of 25% per year beginning on May 4, 1997.
NOTE G - OTHER INCOME (EXPENSE) - NET
Other income (expense) - net for the quarter and nine months ended
September 30, 1995 included pre-tax gains of $2.3 million and $5.2 million,
respectively, from casualty insurance proceeds while the nine months
included a pre-tax charge of $1.8 million related to costs associated with
consolidation of the Company's synthetic yarn manufacturing facilities.
The quarter and nine months ended September 30, 1995 also included a pre-
tax loss of $8.1 million on the sale of the Company's Newton, North
Carolina yarn spinning facility for $5.8 million on September 18, 1995.
PART I - ITEM 2 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following is presented to update the discussion of results of
operations and financial condition included in the Company's 1994 Annual
Report.
RESULTS OF OPERATIONS
For the quarter ended September 30, 1995, the Company had a net loss of
$6.0 million, or $.53 per share, on sales of $161.2 million compared to net
income of $.5 million, or $.04 per share, on sales of $172.6 million in the
third quarter of 1994. Results for the 1995 quarter included an after-tax
loss of $5.2 million on the sale of the Company's Newton, North Carolina
yarn spinning facility and an after-tax gain of $1.4 million from casualty
insurance proceeds.
The Company had a net loss of $4.7 million, or $.40 per share, on sales of
$520.7 million for the nine months ended September 30, 1995, compared to a
net loss of $3.7 million, or $.28 per share, on sales of $512.8 million for
the first nine months of 1994. The 1995 results include after-tax gains of
$3.2 million from casualty insurance proceeds and after-tax losses of $5.2
million on the Newton sale and $1.1 million on the consolidation of the
Company's synthetic yarn operations.
The loss on the Newton plant sale, the consolidation costs associated with
the Company's synthetic yarn manufacturing facilities and the casualty
insurance gains are classified in "Other income (expense) - net" on the
Company's financial statements.
Selling, general and administrative expenses increased $1.5 million and
$3.0 million in the third quarter and first nine months of 1995 compared to
the corresponding periods in 1994, respectively. These increases relate to
higher selling costs in the Company's floorcovering businesses as a result
of sales staff expansion and increased expenses related to the introduction
of new products.
Interest expense increased by $.4 million and $1.8 million in the quarter
and nine months ended September 30, 1995, respectively, when compared to
the third quarter and first nine months of 1994. The increase is
attributable to the general increase in interest rates.
12
The following table sets forth selected operating data (in millions of
dollars) related to the two business segments of the Company. Operating
profit or loss for each segment excludes general corporate overhead,
certain items classified as other income (expense), interest expense, and
income taxes.
Quarter Ended Nine Months Ended
Sept 30, Oct 1, Sept 30, Oct 1,
1995 1994 1995 1994
Sales - Textile products $ 74.0 $ 83.4 $248.8 $252.0
- Floorcovering 88.7 90.6 275.2 263.8
- Intersegment elimination (1.5) (1.4) (3.3) (3.0)
Total sales $161.2 $172.6 $520.7 $512.8
Operating profit/(loss)
- Textile products $ (8.9) $ (0.6) $ (9.4) $ (9.7)
- Floorcovering 5.3 6.5 19.7 18.7
Total operating profit/(loss) $ (3.6) $ 5.9 $ 10.3 $ 9.0
Operating results in the third quarter of 1995 for the Company's textile
products businesses included a charge of $8.1 million related to the sale
of the Company's Newton yarn spinning facility and a gain of $1.1 million
from casualty insurance proceeds. Without these items, operating results
reflected a loss of $1.9 million in the current quarter compared to a loss
of $.6 million in the third quarter of 1994. The Company's customers,
primarily apparel and upholstery fabric manufacturers, have been severely
affected by a general slowdown in retail sales of their products, which has
contributed to the decline in the Company's third quarter results compared
to the same period in the previous year. Additionally, the first nine
months of 1995 included a charge of $1.8 million for consolidation of the
Company's synthetic yarn operations. Excluding this charge and the items
referenced above, textile products operating results for the first nine
months of 1995 showed a loss $.6 million compared to a loss of $9.7 million
for the corresponding period in 1994, reflecting manufacturing improvements
accomplished in the textile products segment.
Floorcovering operating profits included gains from casualty insurance
proceeds of $1.2 million and $4.1 million for the third quarter and first
nine months of 1995, respectively. Excluding these gains, the third
quarter of 1995 reflected operating profits of $4.1 million compared to
$6.5 million for the corresponding quarter of 1994, while the first nine
months of the year reflected operating profits of $15.6 million compared to
$18.7 million for the same period in 1994. Excess capacity in the carpet
industry and a slowdown in demand have resulted in pressure on the
floorcovering segment selling prices at a time when material costs have
risen. Additionally, selling expense has increased compared to the prior
year.
Weak demand in markets served by both the textile products and
floorcovering segments is expected to continue into early 1996. Without
improvement in sales volume, operating results are not expected to improve
significantly.
13
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1995, $16.1 million generated by operating
activities was supplemented by $21.2 million in borrowings under the
Company's revolving credit and term loan agreement and $5.8 million from
the sale of the Newton yarn spinning facility. These funds were used to
fund $24.8 million of capital expenditures and the $18.3 million stock
repurchase.
The Company's revolving credit agreement provides for a permanent reduction
of availability in an amount equal to fifty percent of net proceeds related
to significant asset dispositions. Accordingly, availability was reduced
by $2.8 million as a result of the Newton plant sale. At September 30,
1995, total unused borrowing capacity was $30.1 million. If fourth quarter
operations continue at third quarter levels, a waiver of the interest
coverage covenant under the Company's revolving credit agreement may be
necessary.
PART II. OTHER INFORMATION 14
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Exhibits Incorporated by Reference
None.
(ii) Exhibits Filed with this Report
(11) Statement re: Computation of Earnings Per Share.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the registrant
during the three month period ended September 30, 1995.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIXIE YARNS, INC.
__________________________
(Registrant)
November 13, 1995
____________________
(Date)
/s/GLENN M. GRANDIN
__________________________
Glenn M. Grandin
Senior Vice President and
Chief Financial Officer
QUARTERLY REPORT ON FORM 10-Q 16
ITEM 6(a)
EXHIBITS
QUARTER ENDED SEPTEMBER 30, 1995
DIXIE YARNS, INC.
CHATTANOOGA, TENNESSEE
Exhibit Index
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(11) Statement re: Computation Filed herewith.
of Earnings Per Share.
EXHIBIT (11)
EXHIBIT 11
DIXIE YARNS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Nine Months Ended
_______________________ _______________________
Sept 30, Oct 1, Sept 30, Oct 1,
1995 1994 1995 1994
___________ ___________ ___________ ___________
PRIMARY:
NET INCOME (LOSS) $(6,029,833) $ 500,961 $(4,715,757) $(3,722,942)
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Weighted average number
of Common Shares
outstanding assuming
conversion of Class B
Common Stock 11,293,135 12,243,400 11,926,586 12,249,896
Net effect of dilutive
stock options based
on the treasury stock
method using average
market price -0- 33,716 -0- 36,519
Net effect of put
options based on the
reverse treasury
stock method using
average market price -0- 1,018,544 -0- 871,815
___________ ___________ ___________ ___________
TOTAL SHARES 11,293,135 13,295,660 11,926,586 13,158,230
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
PER SHARE AMOUNT $ (.53) $ .04 $ (.40) $ (.28)
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
FULLY DILUTED:
Net income (loss) $(6,029,833) $ 500,961 $(4,715,757) $(3,722,942)
After-tax interest
requirement of
convertible
subordinated
debentures (A) -0- -0- -0- -0-
___________ ___________ ___________ ___________
ADJUSTED NET
INCOME (LOSS) $(6,029,833) $ 500,961 $(4,715,757) $(3,722,942)
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
EXHIBIT 11
DIXIE YARNS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE - CONTINUED
Three Months Ended Nine Months Ended
_______________________ _______________________
Sept 30, Oct 1, Sept 30, Oct 1,
1995 1994 1995 1994
___________ ___________ ___________ ___________
FULLY DILUTED - CONT.
Weighted average number
of Common Shares
outstanding assuming
conversion of Class B
Common Stock 11,293,135 12,243,400 11,926,586 12,249,896
Net effect of dilutive
stock options based on
the treasury stock method
using quarter end market
price if higher than the
average market price -0- 33,708 -0- 36,492
Net effect of put options
based on the reverse
treasury stock method
using quarter end market
price if lower than the
average market price -0- 1,173,943 -0- 1,173,943
Net effect of conversion
of convertible
subordinated
debentures (A) -0- -0- -0- -0-
___________ ___________ ___________ ___________
TOTAL SHARES 11,293,135 13,451,051 11,926,586 13,460,331
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
PER SHARE AMOUNT $ (.53) $ .04 $ (.40) $ (.28)
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
(A) Conversion of convertible subordinated debentures to 1,390,745 shares
with an after-tax interest requirement of $472,538 for the three months
ended September 30, 1995, and October 1, 1994, respectively and of
$1,417,613 for the nine months ended September 30, 1995, and October 1,
1994, respectively has been excluded from computation since the effect was
anti-dilutive.
<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 NINE MONTHS ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,990
<SECURITIES> 0
<RECEIVABLES> 37,852
<ALLOWANCES> 3,139
<INVENTORY> 114,340
<CURRENT-ASSETS> 163,098
<PP&E> 478,567
<DEPRECIATION> 229,166
<TOTAL-ASSETS> 482,384
<CURRENT-LIABILITIES> 59,485
<BONDS> 200,897
<COMMON> 43,795
0
0
<OTHER-SE> 127,287
<TOTAL-LIABILITY-AND-EQUITY> 482,384
<SALES> 520,744
<TOTAL-REVENUES> 520,744
<CGS> 442,625
<TOTAL-COSTS> 442,625
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,097
<INCOME-PRETAX> (5,841)
<INCOME-TAX> (1,125)
<INCOME-CONTINUING> (4,716)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,716)
<EPS-PRIMARY> (.40)
<EPS-DILUTED> (.40)
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