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 30, 1995.
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 (423) 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 8, 1996: Common Stock - $44,356,294; 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 8, 1996
Common Stock, $3.00 Par Value 10,465,299 shares
Class B Common Stock, $3.00 Par Value 735,228 shares
Class C Common Stock, $3.00 Par Value 0 shares
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 2, 1996 (Part III).
PART I
ITEM 1. BUSINESS
GENERAL
The Company's strategic objective has been to grow in selected
floorcovering markets and those textile markets where the Company's value-
added products are expected to result in the greatest growth and improved
long-term return on equity. An integral part of the Company's strategy has
been to restructure its textile operations through facility consolidations
or the disposal of assets that the Company does not expect will meet its
long-term return requirements.
In early 1996, the Company announced an agreement in principle to sell
certain operating assets of its Threads USA division ("Threads") to
American & Efird, Inc., a subsidiary of Ruddick Corporation. The
transaction is subject to regulatory approval, the results of certain due
diligence, and the execution of a definitive purchase agreement. The sale
of Threads will allow the Company to concentrate its resources on
accomplishing its strategic objectives. Other actions taken during 1995 in
support of these objectives include the mid-year sale of the Company's
Newton, North Carolina, cotton yarn spinning plant and synthetic yarn
spinning plant consolidations in Ranlo, North Carolina.
During 1995, the Company completed expansions at Carriage Industries in
Calhoun, Georgia and Masland Carpets Atmore, Alabama tufting facility, and
relocated the tufting operations of its Patrick division to Atmore. The
expansions position the Company to take advantage of anticipated growth in
the floorcovering segment. After the sale of Threads, the Company's
business is expected to be approximately two-thirds floorcovering and one-
third textile products.
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, trade legislation enacted under the North American
Free Trade Agreement has increased demand for domestic textile products by
non-domestic cut and sew operations. Additionally, management believes
that consumer buying patterns will continue to be influenced by mass
merchandisers and retailers emphasizing price competition. However, recent
retail sales data reflect sales growth at department stores and specialty
outlets where the Company's high-end, value-added products would be
expected to benefit. 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 - As previously discussed, the Company
entered into an agreement in principle to sell certain operating assets of
Threads, its industrial sewing thread business. Threads manufactures a
full line of products that includes cotton, spun polyester, corespun and
filament threads, which are marketed through an extensive regional
warehouse network as well as to independent wholesale jobbers. After
completion of the anticipated sale, the Company's textile products business
will consist of yarns and knit fabrics.
The Company manufactures and markets yarns and knit fabrics from a variety
of natural and man-made fibers which are 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.
The textile products business is organized into two business groups, the
Yarn Group and the Knit Group. Textile products are focused on narrow
groups of products, related by manufacturing processes, performance
characteristics and end uses. No group of products individually accounts
for as much as 10% of the Company's consolidated revenues for 1995, 1994 or
1993 and no customer's volume exceeded 10% of the Company's total sales for
1995.
The Company's Yarn Group manufactures natural and dyed yarn product lines.
Products produced and marketed through this group 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 Knit Fabric Group knits, dyes and finishes 100 percent cotton
circular knit fabrics for apparel and industrial markets. A portion of the
yarn used for the production of the fabric is supplied by the Company's
yarn facilities. These products are sold primarily by the group's salaried
sales force.
The Company's sales order backlog position in its textile products
businesses, excluding order positions associated with the thread business,
was approximately $44,000,000 on December 30, 1995 compared to
approximately $80,000,000 on December 31, 1994. All of these orders can
reasonably be expected to be filled within the 1996 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 over 100
manufacturers of which the top 5 account for over 65% 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"), Bretlin, a subsidiary of Carriage, Masland
Carpets, Inc. ("Masland"), Patrick, and RHS Carpets ("RHS").
Candlewick is one of the world's largest independent carpet yarn
manufacturers producing premier yarns for floorcovering applications. A
significant portion of its production is utilized in the Company's carpet
manufacturing operations. Candlewick's products sold to external customers
include end-use product manufacturers in the bath rug, automotive and
broadloom carpet markets and 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,
through its Bretlin subsidiary, 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. During 1995, the production of commercial broadloom products,
marketed as Patrick Carpets, was transferred to Masland's Atmore, Alabama
facility.
The residential broadloom products of Patrick Carpet Mills, Inc. continue
to be manufactured and marketed on the West Coast under the tradestyle RHS.
The Company's sales order backlog position in its floorcovering businesses,
excluding Carriage, was approximately $28,000,000 on December 30, 1995
compared to approximately $31,000,000 on December 31, 1994. 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
1996 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 1995, 1994 or 1993 and no
customer's volume exceeded 10 percent of the Company's total sales for
1995.
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 are no material impacts on working capital relating
to seasonality.
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.
OTHER FACTORS
Except for historical information contained herein, certain matters
discussed in this Annual Report on Form 10-K are forward looking and
involve certain risks and uncertainties that could cause actual results to
differ materially from those forward looking statements, including such
factors as consumer spending levels in those markets served by the
Company's products and the level of textile imports.
The Company had approximately 5,900 associates as of the end of fiscal
1995.
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 8, 1996.
Approximate
Location Type of Operation Square Feet
CORPORATE
Administrative:
Chattanooga, TN Administrative 41,000
TEXTILE PRODUCTS
Administrative:
(1) Gastonia, NC Administrative 61,000
Warehousing:
(1) Gastonia, NC
(2 locations) Warehousing 88,000
(1) Sales Branch Warehouses
(3 locations) Warehousing 47,000
Total Warehousing 135,000
Manufacturing:
Chattanooga, TN Yarn Spinning 440,000
Mebane, NC Yarn Spinning 99,000
Ranlo, NC Yarn Spinning 319,000
Tarboro, NC Yarn Spinning 340,000
Chattanooga, TN Package Yarn Dyeing, Bleaching
and Mercerizing 276,000
Tryon, NC Bleaching and Mercerizing 63,000
(1) Gastonia, NC Thread Yarn Dyeing and Finishing 530,000
(1) Arroyo, Puerto Rico Thread Yarn Dyeing and
Finishing 22,000
(1) Gastonia, NC Thread Yarn Spinning 445,000
Jefferson, SC Knitting, and Fabric Dyeing
and Finishing 274,000
Total Manufacturing 2,808,000
FLOORCOVERING
Administrative:
Dalton, GA Administrative 13,000
Calhoun, GA Administrative 60,000
(2) Mobile, AL 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
(3) Roanoke, AL Tufted Yarn Spinning 190,000
Calhoun, GA Carpet Manufacturing,
Distribution 1,439,000
Atmore, AL Carpet Manufacturing,
Distribution 342,000
(2) Mobile, AL Rug Manufacturing, Distribution 400,000
Total Manufacturing 2,983,000
Total 6,240,000
ITEM 2. PROPERTIES - CONTINUED
(1) These properties are currently held for sale pending the completion of
a definitive purchase agreement. See Note K to the consolidated financial
statements.
(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.
(3) 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.
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 1995 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 8, 1996, 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, 54 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, 53 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.
William N. Fry, IV, 37 Executive Vice President and Chief
Executive Vice President and Chief Operating Officer, Candlewick,
Operating Officer, Candlewick, Carriage and Bretlin since January,
Carriage and Bretlin 1996. President, Bretlin from
January, 1995 to January, 1996.
Executive Vice President, Bretlin
from November, 1993 to January,
1995. Business Analyst, Carriage
from July, 1993 to November, 1993.
General Manager, Dyed Yarns from
May, 1992 to July, 1993. Assistant
Plant Manager, Chattanooga Finishing
from July, 1991 to May, 1992.
Assistant to President, Yarn Group
from September, 1990 to July, 1991.
EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Name, Age Business Experience During
and Position Past Five Years
John O. Sturdy, 66 Executive Vice President and
Executive 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.
Philip H. Barlow, 47 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, 38 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.
Paul K. Frierson, 58 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.
EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Name, Age Business Experience During
and Position Past Five Years
George B. Smith, 55 Corporate Vice President and
Corporate Vice President President, Natural/Dyed Yarns
and President, Yarns and 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.
W. Derek Davis, 45 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.
Gary A. Harmon, 50 Treasurer since 1993.
Treasurer Director of Tax and Financial
Planning, 1985 - 1993.
D. Eugene Lasater, 45 Controller since 1988.
Controller
Starr T. Klein, 53 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 8, 1996, the total number of record holders of the Company's
Common Stock was approximately 4,500 and the total number of holders of the
Company's Class B Common Stock was 16. Management of the Company estimates
that there are approximately 3,500 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 30, 1995 and
December 31, 1994 are as follows:
DIXIE YARNS, INC.
QUARTERLY FINANCIAL DATA, DIVIDENDS
AND PRICE RANGE OF COMMON STOCK
(Unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
1995
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $181,646 $177,809 $161,289 $150,099
Gross profit 28,552 26,172 23,395 19,962
Net income (loss) 883 431 (6,030) (47,463)
Earnings (loss) per common and
common equivalent share .06 .03 (.53) (4.24)
Dividends:
Common Stock --- --- --- ---
Class B Common Stock --- --- --- ---
Common Stock prices:
High $ 7.13 $ 7.19 $ 7.13 $ 6.00
Low 4.88 5.50 5.63 3.75
<CAPTION>
1994
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $163,391 $176,843 $172,556 $170,070
Gross profit 18,163 26,084 25,540 17,342
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
<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.
During the fourth quarter of 1995, the Company recognized asset valuation losses of
$53,751 ($44,674, or $3.99 per share after taxes). 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
(dollars in thousands, except per share 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 30, December 31, December 25, December 26, December 28,
1995 1994(1) 1993(2) 1992 1991
<S> <C> <C> <C> <C> <C>
Net sales $670,842 $682,859 $591,408 $469,832 $491,952
Income (loss) from continuing
operations(3,4) (52,179) (3,227) 4,684 5,467 (25,557)
Total assets 396,997 488,320 496,579 397,080 372,807
Long-term debt:
Senior indebtedness 97,383 87,025 87,650 70,023 59,324
Subordinated notes 50,000 50,000 50,000 50,000 50,000
Convertible subordinated debentures 44,782 44,782 44,782 44,782 44,782
Common Stock, subject to put option --- 18,178 18,178 --- ---
Per Share:
Income (loss) from continuing
operations: (3,4)
Primary (4.44) (.24) .41 .62 (2.90)
Fully diluted (4.44) (.24) .40 .62 (2.90)
Cash dividends declared:
Common Stock --- .20 .20 .20 .42
Class B Common Stock --- .20 .20 .20 .42
<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 $51,058, or $4.35 per share, and casualty
insurance gains of $3,298, or $.28 per share, for the year ended December 30, 1995, asset valuation losses of $6,446, or $.49
per share, and a nontaxable life insurance gain of $12,835, or $.97 per share, for the year ended December 31, 1994, and a
restructuring charge of $18,271, or $2.08 per share, for the year ended December 28, 1991. See Note K, Note L, and Note M to
the Consolidated Financial Statements.
(4) Income (loss) from continuing operations excludes a change for the cumulative effect of an accounting change of $1,497, or
$.17 per share, and an extraordinary gain from the early retirement of debt of $452, or $.05 per share, for the year ended
December 28, 1991.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth selected operating data (in millions of dollars)
related to the two business segments of the Company: Textile Products and
Floorcovering (see additional information in Note O to the consolidated
financial statements). Results include $58.4 million of unusual charges which
are discussed in the commentary that follows.
1995 1994 1993
Sales
Textile products $313.7 $332.5 $332.1
Floorcovering 361.5 354.0 260.7
Intersegment elimination (4.4) (3.6) (1.4)
Total sales $670.8 $682.9 $591.4
Operating profit (loss)
Textile products
Excluding unusual items $ (5.4) $(10.9) $ 0.3
Unusual items (58.5) (22.1) 1.3
Textile products operating profit (loss) $(63.9) $(33.0) $ 1.6
Floorcovering
Excluding Unusual items $ 20.1 $ 25.4 $ 22.6
Unusual items 0.1 2.7 1.8
Floorcovering operating profit $ 20.2 $ 28.1 $ 24.4
Combined
Excluding unusual items $ 14.7 $ 14.5 $ 22.9
Unusual items (58.4) (19.4) 3.1
Company operating profit (loss) $(43.7) $ (4.9) $ 26.0
In February, 1996 the Company reached an agreement in principle to sell the
operating assets of its Threads USA division ("Threads") to American & Efird,
Inc., a subsidiary of Ruddick Corporation. The transaction is subject to
regulatory approval, the results of certain due diligence, and the execution of
a definitive purchase agreement. Based on the proposed terms of the sale, the
Company recorded a pre-tax charge in the fourth quarter of 1995 amounting to
$41.5 million, (including $23.4 million related to intangibles) to adjust the
carrying value of Threads' assets to their estimated fair market value.
The Company also recorded pre-tax charges of $22.1 million in 1995 related to
fixed and intangible asset write-downs pertaining to a plant sale, other
textile group consolidations, facilities and equipment taken out of service
and held for disposal, and a floorcovering product line to be discontinued.
Additionally, the Company recognized casualty insurance gains of $5.2 million.
1995 Compared to 1994 - The Company reported a net loss in 1995 of $52.2
million, or $4.44 per share, on sales of $670.8 million compared with a net
loss of $3.2 million, or $.24 per share, on sales of $682.9 million in 1994.
The results for 1995 included the aforementioned special charges aggregating
to $58.4 million ($47.9 million after-tax, or $4.07 per share). Results for
1994 included a nontaxable life insurance gain of $12.8 million and pre-tax
charges of $19.6 million consisting primarily of write-downs for idle
facilities and equipment, related supply parts, inventories of discontinued
product lines, and other expenses partially offset by net casualty insurance
gains. The aggregate effect in 1994 was a pre-tax charge of $6.8 million
($.6 million after-tax gain, or $.05 per share).
The pre-tax effect of the charges, net of casualty insurance gains, described
above attributable to the Company's textile business was $58.5 million in 1995
and $22.1 million in 1994. The results of the Company's floorcovering business
included pre-tax gains of $.1 million in 1995 and $2.7 million in 1994.
Sales in the Company's textile products business declined 6% in 1995 compared
with 1994. The decline in sales occurred in the last half of 1995,
particularly in the fourth quarter, as the Company's customers, primarily
apparel and upholstery fabric manufacturers, were severely affected by a
general slowdown in retail sales of their products. Additionally, sales
volume was negatively impacted as a result of plant consolidations and a plant
sale in the second and third quarters of 1995, respectively. Excluding the
unusual items in 1995 and 1994, operating losses in the textile business were
$5.4 million in 1995 compared with $10.9 million in 1994. The improvement in
1995 resulted from significant cost reductions due to manufacturing
efficiencies and lower selling and administrative costs which more than offset
higher cotton and other raw material costs. Although textile markets remain
weak, the Company believes that operating results will continue to improve due
to increased manufacturing efficiencies, the aforementioned facility
consolidations and sales, and management's continued focus on value-added
textile products in targeted markets.
Although sales in the Company's floorcovering business increased 2% in 1995
compared with 1994, operating profits, excluding unusual items, declined to
$20.1 million in 1995 compared with $25.4 million in 1994. Excess capacity and
a slowdown in demand in the carpet industry resulted in pressure on selling
prices during a period where material costs increased. During 1995, disruption
costs were incurred in floorcovering operations as a result of capacity
expansions at Carriage and Masland. These expansions position the
floorcovering segment to take advantage of anticipated growth. Selling
expense increased in 1995 compared with 1994 to accommodate new product
introductions and to increase staff for anticipated sales growth.
The increase in interest expense of $1.8 million in 1995 compared with 1994
is attributable to the general increase in interest rates. The Company's
effective income tax rate differs from statutory income tax rates due
primarily to nondeductible amortization and write-offs of intangible assets and
the nontaxable life insurance gain in 1994.
1994 Compared with 1993 - Sales for the year ended December 31, 1994 increased
15.8%. The increase in sales was attributable to strong demand in the
Company's floorcovering business 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.
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 life insurance gain of $12.8
million and unusual charges aggregating to $19.6 million ($12.2 million
after-tax) were included in 1994 results. 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 1994 operating loss of the Company's textile business, excluding the
effects of unusual charges of $22.1 million, 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 1994 as demand and manufacturing efficiencies
improved and selling prices strengthened.
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 was due
to strong demand and the acquisitions made in 1993 and 1994. 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 reflected 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 and a partial year in
1993. 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.
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.
LIQUIDITY AND CAPITAL RESOURCES
During the three-year period ended December 30, 1995, cash flow generated from
operating activities totaled $109.1 million and was supplemented by a $28.4
million increase in long-term debt, $24.8 million of proceeds from asset sales
and $16.8 million of life insurance proceeds. These funds financed the
Company's operations, capital expenditures, and business acquisitions.
Capital expenditures (excluding expenditures of $15.2 million related to
casualty losses) were $101.7 million during the three-year period ended
December 30, 1995 and were directed toward upgrading equipment to improve
quality and manufacturing efficiency, as well as expanding manufacturing
capacity and service capability in the Company's floorcovering business.
During this period, charges for depreciation and amortization totaled $102.4
million. Capital expenditures for 1996 are expected to be approximately $10
million less than charges for depreciation and amortization.
The Company's 1995 operating activities generated $30.5 million of cash flow,
while funds generated from asset sales and borrowing under the Company's
revolving credit and term-loan agreement amounted to $7.8 million and $12.5
million, respectively. These funds financed, among other things, capital
expenditures of $30.3 million and $18.3 million to purchase 1.0 million shares
of the Company's Common Stock issued in connection with the acquisition of the
assets of Masland Carpets, Inc. in 1993.
During 1995, insurance proceeds totaling $5.2 million were received from
business interruption claims relating to manufacturing facilities that were
damaged or destroyed by weather-related casualties and a fire in prior years.
The costs and expenses to replace, repair or consolidate production capacities
into other manufacturing facilities related to these events had been recorded
by year end 1994.
After acquiring 46% of the outstanding common stock of Carriage Industries,
Inc. in 1992, the Company acquired the remaining publicly-held shares on
March 12, 1993 in exchange for 2.5 million shares and options to purchase
83,044 shares of the Company's Common Stock and $661,000 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 $750,000 of debt. The holders of the shares issued
in the Masland acquisition exercised their right on July 10, 1995 to put the
shares to the Company at a price of approximately $18 per share. On June 20,
1994, the assets of Patrick of California, 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 30, 1995, the Company's debt structure consisted of $44.8 million
of convertible subordinated debentures, $50.0 million of subordinated notes and
$97.4 million of senior indebtedness, principally under the Company's revolving
credit and term-loan agreement. The convertible subordinated debentures
require annual mandatory sinking fund payments of $2.5 million, beginning in
1998. Principal payments are not required under the Company's subordinated
notes until the year 2000. The revolving credit and term-loan agreement was
renewed for five years in March, 1995. The amended agreement provided for
revolving credit of up to $125.0 million through the five-year commitment
period and a $10.0 million term-loan. Principal payments on the term-loan
are due in quarterly installments of $625,000 beginning in 1996. Under the
terms of the revolving credit agreement, borrowing capacity is permanently
reduced by 50% of the net cash proceeds from certain significant asset sales.
Accordingly, the borrowing line has been reduced by $2.8 million as a result of
the sale of the Company's Newton plant in September, 1995. The Company
anticipates that proceeds from the Threads sale will be used to reduce
outstanding borrowings, thereby offsetting any reduction of the credit line.
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
revolving credit facilities was $38.8 million.
Under restrictions set forth in the Company's subordinated note agreement, and
absent a waiver from the lender or an amendment, future dividends may be paid
only to the extent of 75% of the excess of cumulative income, excluding
extraordinary items, for periods subsequent to December 30, 1995 above $57.4
million. Certain of the financial covenants of the Company's revolving credit
and term-loan agreement were waived or amended effective December 30, 1995 to
recognize the effects of the potential sale of Threads and the economic
conditions affecting the Company's businesses.
The Company's future liquidity requirements are expected to consist primarily
of capital expenditures and seasonal working capital requirements. The
Company's liquidity requirements are expected to be financed from operating
cash flow and existing debt arrangements.
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
None.
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 2, 1996 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 2, 1996 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 2, 1996 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 2, 1996 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.
(4g) Third Amended and Restated Credit Agreement dated
March 31, 1995.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(i) Exhibits Incorporated by Reference - Continued
(10a) Dixie Yarns, Inc. 1983 Incentive Stock Option Plan.
(10b) Dixie Yarns, Inc. Incentive Stock Plan.
(10c) Dixie Yarns, Inc. Nonqualified Defined Contribution
Plan.
(10d) Dixie Yarns, Inc. Nonqualified Employee Savings
Plan.
(10e) Dixie Yarns, Inc. Incentive Compensation Plan.
(10f) Asset Transfer and Restructuring Agreement dated
July 19, 1993, by and among Dixie Yarns, Inc.,
Masland Carpets, Inc., individual management
investors of Masland Carpets, Inc., The Prudential
Insurance Company of America and Pruco Life
Insurance Company.
(10g) Assignment and Bill of Sale dated July 9, 1993, by
and between Dixie Yarns, Inc. and Masland Carpets,
Inc.
(10h) Assignment and Assumption Agreement dated July 9,
1993, by and between Dixie Yarns, Inc. and Masland
Carpets, Inc.
(10i) Stock Rights and Restrictions Agreement dated July
9, 1993, by and among Dixie Yarns, Inc., Masland
Carpets, Inc., The Prudential Insurance Company of
America and Pruco Life Insurance Company of
America.
(10j) Pooling and Servicing Agreement dated as of October
15, 1993, among Dixie Yarns, Inc., Dixie Funding,
Inc. and NationsBank of Virginia, N.A. (as
Trustee).
(10k) Annex X - Definitions, to Pooling and Servicing
Agreement dated as of October 15, 1993, among Dixie
Yarns, Inc., Dixie Funding, Inc. and NationsBank of
Virginia, N.A. (as Trustee).
(10l) Series 1993-1 Supplement, dated as of October 15,
1993, to Pooling and Servicing Agreement dated as
of October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding Inc. and NationsBank of Virginia, N.A. (as
Trustee).
(10m) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and New York Life Insurance and
Annuity Corporation.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(i) Exhibits Incorporated by Reference - Continued
(10n) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and John Alden Life Insurance
Company.
(10o) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and John Alden Life Insurance Company
of New York.
(10p) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and Keyport Life Insurance Company.
(10q) Executive Severance Agreement dated as of
September 8, 1988 as amended.
(10r) Form of Nonqualified Stock Option Agreement Under the
Dixie Yarns, Inc. Incentive Stock Plan.
(10s) Form of Amendment to Nonqualified Stock Option
Agreement Under the Dixie Yarns, Inc. Incentive Stock
Plan.
(21) Subsidiaries of the Registrant.
(ii) Exhibits filed with this report:
(4h) Waiver and First Amendment to Credit Agreement dated
February 27, 1996.
(11) Statement Re: Computation of Earnings Per Share.
(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 28, 1996 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 28, 1996
Daniel K. Frierson
Corporate Vice President,
President of the Candlewick
/s/PAUL K. FRIERSON Group and Director March 28, 1996
Paul K. Frierson
Senior Vice President and
/s/GLENN M. GRANDIN Chief Financial Officer March 28, 1996
Glenn M. Grandin
/s/D. EUGENE LASATER Controller March 28, 1996
D. Eugene Lasater
/s/PAUL K. BROCK Director March 28, 1996
Paul K. Brock
SIGNATURES -- CONTINUED
/s/LOVIC A. BROOKS, JR. Director March 28, 1996
Lovic A. Brooks, Jr.
/s/J. FRANK HARRISON, JR. Director March 28, 1996
J. Frank Harrison, Jr.
/s/JAMES H. MARTIN, JR. Director March 28, 1996
James H. Martin, Jr.
/s/PETER L. SMITH Director March 28, 1996
Peter L. Smith
/s/JOSEPH T. SPENCE, JR. Director March 28, 1996
Joseph T. Spence, Jr.
/s/ROBERT J. SUDDERTH, JR. Director March 28, 1996
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 30, 1995
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 30, 1995 and
December 31, 1994
Consolidated statements of income(loss)--Years ended
December 30, 1995, December 31, 1994, and December 25, 1993
Consolidated statements of cash flows--Years ended
December 30, 1995, December 31, 1994, and December 25, 1993.
Consolidated statements of stockholders' equity--Years ended
December 30, 1995, December 31, 1994, December 25, 1993
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 30, 1995 and December 31, 1994, and
the related consolidated statements of income (loss), stockholders' equity, and
cash flows for each of the three years in the period ended December 30, 1995.
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 30, 1995 and December 31,
1994, and the consolidated results of their operations and cash flows for each
of the three years in the period ended December 30, 1995, 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.
As discussed in Note A to the consolidated financial statements, in 1995
the Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of."
ERNST & YOUNG LLP
Chattanooga, Tennessee
February 22, 1996
DIXIE YARNS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 30, December 31,
1995 1994
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 3,413 $ 1,904
Accounts receivable (less allowance for doubtful
accounts of $3,156 in 1995 and $3,617 in 1994) 17,369 28,918
Inventories 103,253 109,964
Assets held for sale 22,090 ---
Other 10,518 11,939
TOTAL CURRENT ASSETS 156,643 152,725
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 9,128 13,362
Buildings and improvements 72,544 106,482
Machinery and equipment 302,069 361,076
383,741 480,920
Less accumulated amortization and depreciation 190,238 215,406
TOTAL PROPERTY, PLANT AND EQUIPMENT 193,503 265,514
INTANGIBLE ASSETS (less accumulated amortization of
$5,973 in 1995 and $10,659 in 1994) 35,775 63,620
OTHER ASSETS 11,076 6,461
TOTAL ASSETS $396,997 $488,320
<FN>
See notes to consolidated financial statements.
<CAPTION>
December 30, December 31,
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 20,394 $ 33,055
Accrued expenses 23,294 30,148
Current portion of long-term debt 2,171 584
TOTAL CURRENT LIABILITIES 45,859 63,787
LONG-TERM DEBT
Senior indebtedness 97,383 87,025
Subordinated notes 50,000 50,000
Convertible subordinated debentures 44,782 44,782
TOTAL LONG-TERM DEBT 192,165 181,807
OTHER LIABILITIES 11,486 11,676
DEFERRED INCOME TAXES 29,197 42,364
COMMON STOCK, SUBJECT TO PUT OPTION -
1,029,446 shares in 1994 --- 18,178
STOCKHOLDERS' EQUITY
Common Stock ($3 par value per share): Authorized
80,000,000 shares, issued - 13,862,799 shares in
1995 and 13,857,642 shares in 1994 41,588 41,573
Class B Common Stock ($3 par value per share):
Authorized 16,000,000 shares, issued - 735,228
shares in 1995 and 1994 2,206 2,206
Additional paid-in capital 131,618 131,710
Retained earnings 2,447 54,626
Minimum pension liability adjustment (4,116) (4,330)
173,743 225,785
Less Common Stock in treasury at cost - 3,404,123
shares in 1995 and 3,375,990 shares in 1994 55,453 55,277
TOTAL STOCKHOLDERS' EQUITY 118,290 170,508
Commitments - Note N
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $396,997 $488,320
<FN>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(dollars in thousands, except per share data)
<CAPTION>
Year Ended
December 30, December 31, December 25,
1995 1994 1993
<S> <C> <C> <C>
Net sales $670,842 $682,859 $591,408
Cost of sales 572,762 595,732 510,379
GROSS PROFIT 98,080 87,127 81,029
Selling, general and administrative
expenses 82,624 82,293 61,876
Asset valuation losses 63,425 10,397 ---
Life insurance gain --- (12,835) ---
Other (income) expense - net 1,112 5,469 (2,640)
INCOME (LOSS) BEFORE INTEREST AND TAXES (49,081) 1,803 21,793
Interest expense 15,591 13,748 12,773
INCOME (LOSS) BEFORE INCOME TAXES (64,672) (11,945) 9,020
Income tax provision (benefit) (12,493) (8,718) 4,336
NET INCOME (LOSS) $(52,179) $ (3,227) $ 4,684
Net income (loss) per common
and common equivalent share $ (4.44) $ (.24) $ .41
<FN>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
Year Ended
December 30, December 31, December 25,
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $(52,179) $ (3,227) $ 4,684
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 35,980 35,199 31,222
Provision (benefit) for deferred income
taxes (11,416) (7,410) 3,768
Equity in earnings of affiliate --- --- (353)
(Gain) loss on property, plant and
equipment disposals and asset
valuation adjustments 65,037 10,936 (1,994)
Life insurance gain --- (12,835) ---
Changes in operating assets and
liabilities, net of effects of
business combinations:
Accounts receivable (includes
$45,000 sold in 1993) 11,549 (3,532) 43,839
Inventories 3,517 (2,788) 1,453
Other current assets (585) 1,170 (2,615)
Other assets (552) (547) (1,887)
Accounts payable and accrued expenses (21,143) 1,698 (18,860)
Other liabilities 279 (278) 923
NET CASH PROVIDED BY OPERATING ACTIVITIES 30,487 18,386 60,180
CASH FLOWS FROM INVESTING ACTIVITIES
Life insurance proceeds --- 16,761 ---
Net proceeds from sales and insurance
recovery of property, plant and equipment 7,773 2,445 14,582
Purchase of property, plant and equipment
(includes $3,118 in 1994 and $12,061 in
1993 for casualty damages) (30,266) (35,792) (50,886)
Cash payments in connection with business
combinations, net of cash acquired --- (230) (3,999)
NET CASH USED IN INVESTING ACTIVITIES (22,493) (16,816) (40,303)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in credit line
borrowings 2,529 (635) 16,500
Borrowings under term-loan facility 10,000 --- ---
Debt assumed in acquisitions and retired --- --- (32,327)
Common stock acquired (18,457) (191) (339)
Dividends paid --- (2,450) (2,223)
Other (557) (437) 1,133
NET CASH USED IN FINANCING ACTIVITIES (6,485) (3,713) (17,256)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,509 (2,143) 2,621
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 1,904 4,047 1,426
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,413 $ 1,904 $ 4,047
<FN>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except per share data)
<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 26, 1992 $34,027 $2,206 $107,149 $57,842 $(54,865)
Common Stock acquired and
retired - 8,582 shares (26) (92)
Common Stock acquired for
treasury - 15,716 shares (221)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 45,499 shares 137 174
Common Stock issued in connection
with Carriage Industries, Inc.
acquisition - 2,472,894 shares 7,419 23,755
Options issued in connection with
Carriage Industries, Inc. acquisition 698
Net income for the year 4,684
Minimum pension liability adjustment (4,982)
Dividends declared-Common Stock and
Class B Common Stock $.20 per share (2,223)
BALANCE AT DECEMBER 25, 1993 41,557 2,206 131,684 60,303 (4,982) (55,086)
Common Stock acquired for treasury-
19,344 shares (191)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 5,409 shares 16 26
Net (loss) for the year (3,227)
Minimum pension liability adjustment 652
Dividends declared-Common Stock and
Class B Common Stock $.20 per share (2,450)
BALANCE AT DECEMBER 31, 1994 41,573 2,206 131,710 54,626 (4,330) (55,277)
Common Stock acquired for treasury-
28,133 shares (176)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 5,157 shares 15 11
Net (loss) for the year (52,179)
Minimum pension liability adjustment 214
Adjustment for purchase of shares
subject to put option (103)
BALANCE AT DECEMBER 30, 1995 $41,588 $2,206 $131,618 $2,447 $(4,116) $(55,453)
</TABLE>
See notes to consolidated financial statements.
DIXIE YARNS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
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.
Use of Estimates in the Preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
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 textile and floorcovering
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:
1995 1994
At current cost:
Raw materials $ 21,012 $ 28,458
Work-in-process 24,441 28,091
Finished goods 73,314 64,401
Supplies, repair parts and other 6,772 7,858
125,539 128,808
Excess of current cost over LIFO value (22,286) (18,844)
Total inventories $103,253 $109,964
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 1995 and
1994 and increase net income for 1993 by approximately $750 ($.06 per
share), $670 ($.05 per share) and $350 ($.03 per share), respectively.
Property, Plant and Equipment: Property, plant and equipment is stated at
the lower of cost or impaired value. 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 $33,545 in 1995, $32,679 in 1994 and
$29,245 in 1993.
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.
Impairment of Assets: In 1995 the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". The Statement
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets.
There was no material effect on the financial statements from the adoption
because the Company's prior impairment recognition practice was consistent
with the major provisions of the Statement. Under provisions of the
Statement, impairment losses are recognized when expected future cash flows
are less than the assets' carrying value. Accordingly, when indicators of
impairment are present, the Company evaluates the carrying value of
property, plant and equipment and intangibles in relation to the operating
performance and future undiscounted cash flows of the underlying business.
The Company adjusts the net book value of the underlying assets if the sum
of expected future cash flows is less than book value.
Stock Based Compensation: The Company grants stock options for a fixed
number of shares to employees with an exercise price equal to or greater
than the fair value of the shares at the date of grant. The Company
accounts for stock option grants in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees", and
accordingly, recognizes no compensation expense for the stock option
grants.
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 effects
were anti-dilutive for 1995 and 1994, and the additional dilution was less
than 3% for 1993.
Revenue Recognition: The Company recognizes revenue for goods sold at the
time title passes to the customer.
Reclassifications: Certain amounts for 1994 and 1993 have been
reclassified to conform with the 1995 presentation.
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
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 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 (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.
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 cash, and the assumption
of $750 of debt. The Common Stock was issued subject to an agreement which
provided 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 (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 July 10, 1995, the
shares of Common Stock issued in connection with this acquisition were
purchased by the Company for $18,281, pursuant to the exercise of the
holders' put option.
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 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.
A summary of net assets acquired is as follows:
Carriage Masland Patrick
Current assets $49,866 $16,317 $3,410
Property, plant and
equipment 53,441 11,748 524
Other assets 4,619 76 446
Current liabilities (26,803) (7,073) (3,477)
Long-term debt (27,223) (450) ---
Other liabilities and
deferred taxes (12,327) (1,553) (1,472)
Intangible asset 21,699 --- 3,775
Net Assets Acquired
Excluding Cash 63,272 19,065 3,206
Cash 413 557 ---
Net Assets Acquired $63,685 $19,622 $3,206
The following unaudited pro forma summary presents the consolidated results
of operations of the Company 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 $656,302
Income (loss) from continuing operations (3,252) 6,098
Net income (loss) (3,252) 6,098
Per common and common equivalent share:
Income (loss) from continuing operations (.25) .48
Net income (loss) (.25) .48
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 30, 1995 and December 31, 1994, a $45,000 interest
had been sold under this agreement and is reflected as a reduction of
accounts receivable in the accompanying consolidated balance sheets. Costs
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 $2,998 for 1995, $2,983 for 1994, and $574 for
1993, are included in other (income) expense - net.
NOTE D--ACCRUED EXPENSES
Accrued expenses include the following:
1995 1994
Compensation and benefits $ 10,148 $ 13,712
Interest expense 3,364 2,761
NOTE E--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
1995 1994
Senior indebtedness:
Credit line borrowings $ 88,394 $ 85,865
Term-loan 10,000 ---
Other 1,160 1,744
Total senior indebtedness 99,554 87,609
Less current portion (2,171) (584)
Total long-term senior indebtedness 97,383 87,025
Subordinated notes 50,000 50,000
Convertible subordinated debentures 44,782 44,782
Total long-term debt $192,165 $181,807
The Company's unsecured revolving credit and term-loan agreement provides
revolving credit of up to $125,000 (reduced for certain significant asset
sales) through March of 2000 and a $10,000 term-loan payable in quarterly
installments of $625 beginning in 1996. The terms of the agreement provide
for reduction in the revolving credit availability by 50% of the net cash
proceeds from certain significant asset sales, but the credit availability
cannot be reduced below $90,000. The total reduction of the facility for
asset sales through December 30, 1995 was $2,836. The Company anticipates
that proceeds from the Threads sale will be used to reduce outstanding
borrowings, thereby offsetting any reduction of the credit line. Interest
rates available under the facility may be selected by the Company from a
number of options which effectively allow for borrowing 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 are payable on the average daily unused balance
of the revolving credit facility. At December 30, 1995, unused borrowing
capacity under the Company's credit agreements (including amounts available
under a $5,000 short-term credit line) was approximately $38,770.
The Company's subordinated notes are unsecured, bear interest at 9.96%
payable semiannually, and are due in semiannual installments of $2,381
beginning February 1, 2000.
The Company's convertible subordinated debentures bear interest at 7%
payable semiannually, are due in 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. Mandatory sinking fund payments commencing May 15, 1998
will retire $2,500 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, the ratio of debt to
capitalization, payment of dividends and certain other financial ratios.
Under restrictions set forth in the Company's subordinated note agreement,
and absent a waiver from the lender or an amendment, future dividends may
be paid only to the extent of 75% of the excess of cumulative income,
excluding extraordinary items, for periods subsequent to December 30, 1995
above $57,367. Certain of the financial covenants of the Company's
revolving credit and term-loan agreement were waived or amended effective
December 30, 1995 to recognize the effects of the potential sale of the
Company's Thread business and the economic conditions affecting the
Company's businesses.
Approximate maturities of long-term debt for each of the five years
succeeding December 30, 1995 are $2,171 in 1996, $2,642 in 1997, $5,143 in
1998, $5,113 in 1999, and $89,302 in 2000.
Interest payments in 1995, 1994, and 1993 were approximately $14,852,
$13,408, and $12,662, 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:
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets
Cash and cash
equivalents $ 3,413 $ 3,413 $ 1,904 $ 1,904
Financial liabilities
Long-term debt
(including current
portion) 194,336 183,559 182,391 169,429
Common Stock, subject
to put option --- --- 18,178 17,662
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, was 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 at December 24, 1993, and a portion of the liability has been
settled through lump sum payments to electing associates. Losses from
settlements and curtailments were $1,209, $1,575, and $769 during 1995,
1994, and 1993, 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 cost included the following components:
1995 1994 1993
Defined benefit plans:
Service cost $ 30 $ 31 $ 1,316
Interest cost 1,434 1,694 1,625
Actual return on plan assets (3,305) 204 (1,327)
Other components 3,382 116 154
1,541 2,045 1,768
Defined contribution plans 1,715 1,764 410
Net pension expense $ 3,256 $3,809 $ 2,178
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:
1995 1994
Actuarial present value of benefit obligations:
Vested benefits $ 21,003 $ 20,907
Nonvested benefits 6 1
Accumulated benefit obligations $ 21,009 $ 20,908
Plan assets at fair value $ 14,932 $ 14,312
Projected benefit obligation (21,009) (20,908)
Projected benefit obligation in
excess of plan assets (6,077) (6,596)
Unrecognized net loss 6,747 7,412
Remaining unrecognized net transition asset --- (196)
Adjustment to recognize minimum liability (6,747) (7,216)
Pension related liability included in the
consolidated balance sheets $ (6,077) $ (6,596)
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 $4,116 at December 30,
1995 and $4,330 at December 31, 1994.
The weighted average discount rate used in determining the projected
benefit obligation was 7.0% for 1995, 8.0% for 1994, and 7.13% for 1993.
There was no increase in future compensation levels assumed after 1993 due
to the freezing of benefits. 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 provision (benefit) for income tax on income (loss) from continuing
operations consists of the following:
1995 1994 1993
Current Deferred Current Deferred Current Deferred
Federal $(1,825) $ (9,586) $(2,590) $(6,476) $ 21 $3,490
State 748 (1,830) 1,282 (934) 547 278
$(1,077) $(11,416) $(1,308) $(7,410) $568 $3,768
Deferred income taxes reflect 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: 1995 1994
Property, plant and equipment $37,300 $50,047
Inventories 4,107 5,690
Intangible assets 1,425 1,026
Other 3,718 1,474
Total deferred tax liabilities 46,550 58,237
Deferred tax assets:
Post-retirement benefits 3,460 3,875
Other employee benefits 2,814 3,707
Alternative minimum tax 4,305 4,528
Allowances for bad debts,
claims and discounts 2,472 2,699
Net operating loss carryforward 4,183 2,510
Other 2,179 2,620
Valuation reserve --- ---
Total deferred tax assets 19,413 19,939
Net deferred tax liabilities $27,137 $38,298
The net operating loss carryforward of approximately $12,304 can be
utilized to offset future Federal taxable income through the year 2010.
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:
1995 1994 1993
Statutory rate applied to
income (loss) from
continuing operations $(21,988) $(4,181) $3,157
Plus state income taxes net of
Federal tax provision (benefit) (714) 226 536
Total statutory provision (benefit)(22,702) (3,955) 3,693
Increase(decrease) attributable to:
Nondeductible amortization and
impairment of intangible assets 9,816 634 559
Investment income accounted
for on equity method --- --- (96)
Nondeductible portion of
travel and entertainment 267 268 97
Nontaxable life insurance
gain --- (4,492) ---
Capital loss carryback benefit --- (1,200) ---
Effect of federal tax
rate increase on deferred
income taxes --- --- 500
Other items 126 27 (417)
Total tax provision (benefit) $(12,493) $(8,718) $4,336
Income tax refunds received, net of income tax payments, were approximately
$1,072 in 1995. Income tax payments, net of tax refunds received, were
approximately $2,645 and $2,079 in 1994 and 1993, respectively.
NOTE I--COMMON 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% 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 30, 1995, options to
purchase 4,000 shares were exercisable under these 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 $15.25
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 ten-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.
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 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
Granted 716,000 6.50 - 8.00
Cancelled (561,500) 8.00 - 17.00
Outstanding at December 30, 1995 702,000 $ 6.50 - $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 30, 1995, 63,340 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 2,100 in 1995, 3,880 in 1994,
and 12,700 in 1993.
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.
A summary of the option activity under this Plan is as follows:
Number of Option Price
Shares Per Share
Outstanding at December 26, 1992 --- $ --- $ ---
Granted 83,044 3.19 - 5.27
Exercised (10,699) 3.43 - 4.29
Outstanding at December 25, 1993 72,345 3.19 - 5.27
Exercised (1,529) 4.29 - 5.03
Outstanding at December 31, 1994 70,816 3.19 - 5.27
Exercised (3,057) 3.43 - 5.03
Outstanding at December 30, 1995 67,759 $3.19 - $5.27
NOTE K--ASSET VALUATION LOSSES
Asset valuation losses of $63,425 ($51,058, after taxes) were recorded in
1995 and are described below. The losses relating to property, plant and
equipment and related goodwill were $60,033, inventory losses on product
lines to be discontinued were $2,500, and expenses associated with facility
consolidations were $892.
In February, 1996, the Company reached an agreement in principle to sell
the operating assets of its Threads USA division to American & Efird, Inc.,
a subsidiary of Ruddick Corporation. The transaction is subject to
regulatory approval, the results of certain due diligence, and the
execution of a definitive purchase agreement. Based on the proposed terms
of the sale, the Company recorded a pre-tax charge in the fourth quarter of
1995 amounting to $41,480 (including $23,421 related to intangibles) to
adjust the carrying value of Threads' assets to their estimated fair market
value.
Additional 1995 asset valuation losses in the textile segment of $17,988
relate to a plant sale and equipment write-downs and expenses associated
with the consolidation of facilities. During 1995, events and
circumstances indicated that certain other assets of the Company's textile
business might also be impaired. However, the Company's estimate of
undiscounted cash flows indicated that such carrying amounts were expected
to be recovered. Nonetheless, it is possible that the estimate of
undiscounted cash flows may change in the future resulting in the need to
adjust the carrying value of those assets.
The 1995 floorcovering segment results included asset valuation losses of
$3,957 primarily related to equipment and inventories of a product line to
be discontinued.
The carrying value of assets held for sale in the Company's Thread business
is $22,090 and is classified as "Assets held for sale" in the current asset
section of the balance sheet as of December 30, 1995. Other properties
held for sale have a carrying value of $4,396 and are classified in "Other
Assets". Operating losses for the Threads business of $957, excluding the
adjustments described above, were included in the Company's textile segment
results for 1995.
The asset valuation losses in 1994 of $10,397 ($6,446, 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 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 1994 and 1993, certain 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. Substantially all of the
casualty and business interruption insurance claims have been settled, and
insurance proceeds received by the Company through December 30, 1995
amounted to $48,716. Insurance benefits recognized by the Company amounted
to $5,148 in 1995, $10,068 in 1994, and $33,500 in 1993. Casualty
insurance benefits exceeded the book values of the destroyed assets and the
cost to repair damaged assets by $8,210 in 1994 and $13,400 in 1993, and
are reflected in the financial statements as reductions to cost of sales of
$7,941 and $11,600 in 1994 and 1993, respectively, to offset additional
expenses incurred as a result of the casualties and as other income of
$5,148 in 1995, $269 in 1994 and $1,800 in 1993.
NOTE N--COMMITMENTS
The Company had outstanding commitments for purchases of machinery and
equipment and for construction of buildings of approximately $3,816 at
December 30, 1995.
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.
Net Sales Operating Profit(Loss)(1)
1995 1994 1993 1995 1994 1993
Business Segments
Textile products $313,697 $332,482 $332,059 $(63,958) $(33,039) $ 1,629
Floorcovering 361,520 353,960 260,706 20,213 28,117 24,424
Intersegment
elimination (4,375) (3,583) (1,357) (3) --- ---
Total $670,842 $682,859 $591,408 (43,748) (4,922) 26,053
Interest expense 15,591 13,748 12,773
Corporate expenses 5,444 5,915 5,159
Life insurance gain --- (12,835) ---
Other (income) expense - net (111) 195 (899)
Income (loss) before income
taxes $(64,672) $(11,945) $ 9,020
Identifiable Capital
Assets at Year End Expenditures
1995 1994 1993 1995 1994 1993
Business Segments
Textile products $192,134 $265,932 $306,076 $10,222 $ 9,673 $27,504
Floorcovering 189,208 205,444 181,663 19,591 21,912 10,316
Corporate 15,655 16,944 8,840 453 1,089 1,005
Total $396,997 $488,320 $496,579 $30,266 $32,674 $38,825
Depreciation
and Amortization
1995 1994 1993
Business Segments
Textile products $20,095 $22,188 $20,531
Floorcovering 12,590 11,624 8,051
Corporate 860 765 663
Total $33,545 $34,577 $29,245
(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: 1995 -
$1,223; 1994 - $5,274; 1993 - ($1,741). Operating profit (loss) on a
segment basis includes (income) expense related to casualty insurance
(gains) losses and asset valuation losses which were recognized as
follows: 1995 - Textile products - $58,468; Floorcovering - ($91);
1994 - 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> <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 30, 1995
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 Exhibit
August 25, 1993 to Second (4f) to Dixie's Annual Report on form
Amended and Restated 10-K for the year ended December 25,
Revolving Credit and Term 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.
(4g) Third Amended and Restated Incorporated by reference to Exhibit
Credit Agreement dated (4) to Dixie's Quarterly Report on
March 31, 1995. Form 10-Q for the quarter ended
April 1, 1995.*
(4h) Waiver and First Amendment Filed herewith.
to Credit Agreement dated
February 27, 1996.
(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.*
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(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.*
(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.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(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).
(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.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(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.
(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.*
(10r) Form of Nonqualified Stock Incorporated by reference to Exhibit
Option Agreement Under the (10a) to Dixie's Quarterly Report on
Dixie Yarns, Inc. Incentive Form 10-Q for the quarter ended
Stock Plan. July 1, 1995.*
(10s) Form of Amendment to Incorporated by reference to Exhibit
Nonqualified Stock Option (10b) to Dixie's Quarterly Report on
Agreement Under the Dixie Form 10-Q for the quarter ended
Yarns, Inc. Incentive Stock July 1, 1995.*
Plan.
(11) Statement re: Computation Filed herewith.
of Earnings Per Share.
(21) Subsidiaries of the Incorporated by reference to Exhibit
Registrant. (21) to Dixie's Annual Report on form
10-K for the year ended December 31,
1994.*
(23) Consent of Ernst & Young LLP. Filed herewith.
*Commission File No. 0-2585
EXHIBIT (4h)
WAIVER AND FIRST AMENDMENT TO
CREDIT AGREEMENT
THIS WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT, dated
as of February 27, 1996 (this "Amendment"), and effective as of the
Effective Date (as such term is defined below) is entered into by and among
DIXIE YARNS, INC., a Tennessee corporation (referred to herein as the
"Borrower"), SUNTRUST BANK, ATLANTA (formerly known as Trust Company Bank),
a Georgia banking corporation, individually and as Agent (in such capacity,
the "Agent"), NATIONSBANK, N.A. (formerly known as NationsBank, N.A.
(Carolinas), a national banking association, individually and as Lead
Manager and CHEMICAL BANK, a New York banking corporation (collectively,
the "Lenders").
WITNESSETH:
WHEREAS, the Borrower, the Agent and the Lenders are parties to a
certain Third Amended and Restated Credit Agreement dated as of March 31,
995 (the "Credit Agreement;" all terms used herein without definition shall
have the meanings set for in the Credit Agreement) wherein the Lenders
extended to the Borrower certain loan facilities in an aggregate principal
amount at any time outstanding not to exceed $135,000,000 (as subsequently
reduced on September 18, 1995 by an amount equal to $2,835,936);
WHEREAS, the Borrower has requested that the Lenders(i) waive
compliance with a certain financial covenant set forth in the Credit
Agreement for the last fiscal quarter of 1995, (ii) amend the Credit
Agreement to modify certain financial covenants, and (iii) add a certain
financial covenant;
WHEREAS, Lenders have agreed to such waivers and amendments on the
terms and conditions set forth herein;
WHEREAS, the parties wish to amend the Credit Agreement to reflect
these agreements, all upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, for and in consideration of the mutual premises
contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
1. Section 1.01 of the Credit Agreement is hereby amended as follows:
(a) by adding the following definition thereto in appropriate
alphabetical order:
"EBITDA" shall mean, for any period, EBIT for such period,
plus, to the extent deducted in determining Net Income or such period,
the depreciation and amortization expense of the Borrower and its
Subsidiaries for such period determined on a consolidated basis in
accordance with generally accepted accounting principles."
(b) by deleting the definition of "Total Capitalization" in its
entirety and substituting the following in lieu thereof:
"Total Capitalization" shall mean the sum of (i) Total Debt, plus
(ii) Net Worth, plus (iii) for any calculation of Total Capitalization
on or after the last day of fiscal year 1995, an amount not to exceed
$31,400,000 relating to the write-down of assets of T-C Threads, Inc.
and its Subsidiaries."
2. Section 9.11 of the Credit Agreement is hereby amended by deleting
subsections (a) and (c) thereof in its entirety and substituting the
following subsections (a) and (c) in lieu thereof:
"(a) Total Debt to Total Capitalization. Its ratio of Total Debt
to Total Capitalization as of the last day of any fiscal quarter of
the Borrower occurring during the periods set forth below to be
greater than the ratio (expressed as a percentage) set forth opposite
such period:
Period Ratio
Closing Date through the last day of
fiscal year 1996 65%
First day of fiscal year 1997 through the last
day of fiscal year 1997 62.5%
First day of fiscal year 1998 through the last
day of fiscal year 1998 60%
First day of fiscal year 1999 and thereafter 57.5%
(c) Interest Coverage Ratio. Its Interest Coverage Ratio as of
any of the dates set forth below to be less than the ratio set forth
opposite such period below:
Period Ratio
Fiscal quarter ending on or about
March 31, 1995 1.25:1.0
Two preceding fiscal quarters ending on or
about June 30, 1995 1.25:1.0
Three preceding fiscal quarter ending on or
about September 30, 1995 1.25:1.0
Four preceding fiscal quarters ending on or
about December 31, 1995 1.25:1.0
Fiscal Quarter ending on or about March 31, 1996 Not Required
Fiscal Quarter ending on or about June 30, 1996 .75:1.0
Fiscal Quarter ending on or about
September 30, 1996 1.15:1.0
Fiscal Quarter ending on or about
December 31, 1996 1.15:1.0
Two preceding fiscal quarters ending on or about
December 31, 1996 1.15:1.0
Three preceding fiscal quarters ending on or
about March 31, 1997 1.15:1.0
Four preceding fiscal quarters ending on or about
each of June 30, 1997, September 30, 1997, and
December 31, 1997 1.25:1.0
Four preceding fiscal quarters ending on the last
day of each of the fiscal quarters in fiscal
year 1998 1.5:1.0
Four preceding fiscal quarters ending on the last
day of each of the fiscal quarters in fiscal
year 1999 and thereafter 1.75:1.0. "
3. Section 9.11 of the Credit Agreement is hereby further amended by
adding the following subsection (e) thereto:
"(e) EBITDA to Interest Expense Ratio. Its ratio of EBITDA
Interest Expense for the first fiscal quarter of 1996 ending on or
about March 31, 1996 to be less than 2.0:1.0."
4. The Borrower has requested and the Lenders have agreed to waive,
for the fiscal quarter of the Borrower ending on or about December 31, 995,
compliance with the Interest Coverage Ratio set forth in Section 9.11(c) of
the Credit Agreement.
5. The Borrower hereby agrees that nothing herein shall constitute a
waiver by the Lenders of any Default or Event of Default, whether known or
unknown, which may now exist or which may hereafter exist under the Credit
Agreement except as specifically set forth in Section 4 hereof, including
without limitation, any violation of Section 9.11(c) of the Credit
Agreement arising or continuing after the fiscal quarter of the Borrower
ending on or about March 31, 1996. The Borrower represents and warrants to
the Agent and the lenders that as of the date hereof, no Default or Event
of Default exists pursuant to the Credit Agreement which is not expressly
waived herein.
6. Except as expressly amended and modified herein, all terms,
covenants and provisions of the Credit Agreement shall remain unaltered and
in full force and effect, and the parties hereto do expressly ratify and
confirm the Credit Agreement as modified herein. As of the Effective Date,
all future references to the Credit Agreement shall be deemed to refer to
the Credit Agreement as amended hereby.
7. Borrower agrees to pay on demand all reasonable costs and expenses
of the Agent in connection with the preparation, execution and delivery of
the Amendment, including, without limitation, the reasonable fees and out-
of-pocket expenses of counsel for the Agent with respect hereto and with
respect to advising the Agent as to its rights and responsibilities
hereunder.
8. This Amendment shall become effective as of December 30, 1995 (the
"Effective Date") on the first day when this Amendment shall have been
executed by the Borrower and the Required Lenders and delivered to the
Agent in its office in Atlanta, Georgia.
9. This Amendment shall be binding upon the inure to the benefit of
the parties hereto, their respective heirs, successors, successors-in-
title, and assigns.
10. This Amendment shall be governed by and construed in accordance
with the laws of the State of Georgia.
11. This Amendment sets forth the entire understanding of the parties
with respect to the matters set forth herein, and shall supersede any prior
negotiations or agreements, whether written or oral, with respect thereto.
12. This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts and may be delivered
by telecopier. Each counterpart so executed and delivered shall be deemed
an original and all of which taken together shall constitute but one and
the same instrument.
EXECUTED AND DELIVERED by the duly authorized officers of the
parties hereto under seal as of the day and year first above written.
DIXIE YARNS, INC.
By: Gary A. Harmon
Title: Treasurer
Attest: Starr T. Klein
Title: Secretary
SUNTRUST BANK, ATLANTA (formerly
known as Trust Company Bank),
individually and as Agent
By: Jarrette A. White, III
Title: Vice President
By: Ruth E. Whitner
Title: Assistant Vice President
EXECUTED AND DELIVERED by the duly authorized officers of the
parties hereto under seal as of the day and year first above written.
NATIONSBANK, N.A. (formerly known
as NationsBank, N.A. (Carolinas)),
individually and as Lead Manager
By: Alison H. Mewborne
Title: Senior Vice President
CHEMICAL BANK
By: Peter C. Eckstein
Title: Vice President
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
DIXIE YARNS, INC. AND SUBSIDIARIES
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Year End
December 30, December 31, December 25,
1995 1994 1993
PRIMARY:
<S> <C> <C> <C>
Net income (loss) $(52,179) $(3,227) $ 4,684
SHARES:
Weighted average number of common
shares outstanding assuming
conversion of Class B Common Stock 11,744 12,249 11,193
Net effect of dilutive stock
options based on the treasury
stock method using average market
price --- 34 66
Net effect of put option based
on the reverse treasury stock
method using average market price --- 988 202
TOTAL SHARES 11,744 13,271 11,461
PER SHARE AMOUNT $ (4.44) $ (.24) $ .41
FULLY-DILUTED:
Net income (loss) $(52,179) $(3,227) $ 4,684
After-tax interest requirement of
convertible subordinated debentures (A) --- --- ---
ADJUSTED NET INCOME(LOSS) $(52,179) $(3,227) $ 4,684
SHARES:
Weighted average number of common
shares outstanding assuming
conversion of Class B Common Stock 11,744 12,249 11,193
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 66
Net effect of put option based on
the reverse treasury stock method
using year-end market price if lower
than the average market price --- 1,568 401
Effect of assumed conversion of
convertible subordinated
debentures(A) --- --- ---
TOTAL SHARES 11,744 13,851 11,660
PER SHARE AMOUNT (B) $ (4.44) $ (.23) $ .40
<FN>
A) The assumed conversion of convertible subordinated debentures into 1,391 shares with
an after-tax interest requirement of $1,895 for the years ended December 30, 1995,
December 31, 1994 and December 25, 1993, 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 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) pertaining to
options to acquire Common Stock of Dixie Yarns, Inc. issued in connection with
the acquisition of Carriage Industries, Inc., 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 22, 1996, 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 30, 1995.
ERNST & YOUNG LLP
Chattanooga, Tennessee
March 28, 1996
<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 TWELVE MONTHS ENDED DECEMBER 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 3,413
<SECURITIES> 0
<RECEIVABLES> 20,525
<ALLOWANCES> 3,156
<INVENTORY> 103,253
<CURRENT-ASSETS> 156,643
<PP&E> 383,741
<DEPRECIATION> 190,238
<TOTAL-ASSETS> 396,997
<CURRENT-LIABILITIES> 45,859
<BONDS> 192,165
<COMMON> 43,794
0
0
<OTHER-SE> 74,496
<TOTAL-LIABILITY-AND-EQUITY> 396,997
<SALES> 670,842
<TOTAL-REVENUES> 670,842
<CGS> 572,762
<TOTAL-COSTS> 572,762
<OTHER-EXPENSES> 63,425
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,591
<INCOME-PRETAX> (64,672)
<INCOME-TAX> (12,493)
<INCOME-CONTINUING> (52,179)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (52,179)
<EPS-PRIMARY> (4.44)
<EPS-DILUTED> (4.44)
</TABLE>
