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
For the fiscal year ended December 27, 1997.
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
The Dixie Group, 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 6, 1998: Common Stock - $114,315,162; 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 6, 1998
Common Stock, $3.00 Par Value 10,597,219 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 April 30, 1998 (Part III).
PART I
ITEM 1. BUSINESS
GENERAL
The Company's sales in 1992 were $470 million and consisted of yarns,
thread, and fabrics, sold to industrial manufacturers, all of which
required further processing by the Company's customers prior to reaching
the consumer. The Company has expanded into a group of businesses with
total sales in excess of $650 million, approximately two-thirds of which
are sold into selected floorcovering markets and the remainder into certain
textile and apparel markets. Over fifty percent of the Company's products
are supplied to its customers in the final form used by the ultimate
consumer.
The Company expanded into the floorcovering business through the
acquisitions of Carriage Industries, Inc. and Masland Carpets, Inc. in 1993
and Patrick Carpet Mills, Inc. in 1994. In early fiscal 1997, the Company
acquired the assets and business of Danube Carpet Mills, Inc. and in
October 1997, the Company acquired the needlebond and artificial turf
assets and business of General Felt Industries, Inc. based in Dalton,
Georgia.
Since the later part of 1992, the Company has sold or closed a substantial
number of textile facilities, including the sale of the Company's thread
business. In late 1996, the Company announced its intent to sell its
Tarboro, North Carolina textile spinning facility. The facility is still
held for sale but continues to operate. In each case, the Company has
either exited specific markets or product lines in an effort to focus on
higher-margin products. Where applicable, equipment and operations have
been consolidated into existing facilities in order to continue the
production and sale of products that fit the Company's strategy. The
Company has pursued growth in selected finished apparel markets in order to
take advantage of its vertical manufacturing capabilities. The Company
believes that vertical expansion into selected finished apparel markets
will provide value to its customers through a quality controlled, quick
response production and distribution process.
In an effort to pursue new markets in the floorcovering business, the
Company is launching a new product line in 1998 which involves the
manufacture and sale of carpet pad which will be made by recycling the
Company's synthetic materials by-products.
FLOORCOVERING
THE CARPET INDUSTRY - Based on information compiled by the national trade
association representing carpet and rug manufacturers, the domestic carpet
and rug industry is composed of over 100 manufacturers of which the top 10
account for approximately 75% of the industry's production. 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, and textures. The
commercial market consists primarily of broadloom carpets for a variety of
institutional applications. 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
consists of four distinct specialty businesses including products for a
variety of floorcovering applications and proprietary yarn for the tufting
industry. Each business is described below.
Masland Carpets is a manufacturer of specialty carpets and rugs for the
high-end residential and commercial marketplaces. Masland's products are
marketed to the architectural and interior design community and specialty
floorcovering showrooms. Masland competes in each of these markets through
quality, service, and innovation in styling and product design. Masland's
business includes a product line designed to cater to value oriented
commercial customers where style, design, and quality are required.
Masland's product lines are marketed by its own sales force.
Carriage Industries is a vertically integrated carpet manufacturer
supplying tufted broadloom carpet for customers of the manufactured/modular
housing, recreational vehicle, van conversion, and exposition trade show
industries. Carriage creates specialty products geared to specifications
that maximize efficiency and minimize waste for their customers with a
just-in-time delivery approach through its own trucking fleet. The
acquisition of Danube Carpet Mills increased Carriage's sales in the
manufactured housing and recreational vehicle industries and provided the
opportunity to be more competitive by expanding its core business.
Carriage's product lines are marketed by a staff of salaried sales
personnel.
Bretlin is a manufacturer of indoor/outdoor needlebond carpet and runners,
floormats, decorative accent rugs, commercial/industrial polypropylene
needlebond carpet, and synthetic fiber cushion. Its products are marketed
to home centers, mass merchants, floorcovering groups or co-ops,
distributors, and independent floorcovering retailers. The needlebond and
artificial turf assets and business acquired from General Felt Industries
in October 1997 are complementary to Bretlin's existing manufacturing
capabilities and product lines. High service standards in terms of speed
and accuracy in filling orders for its customers are key competitive
factors for Bretlin. Products of Bretlin are marketed primarily through
its own sales force, and to a lesser extent, commission sales
representatives.
Candlewick Yarns produces yarn for the tufting industry. Candlewick's yarn
systems are sold for applications in residential and commercial carpet,
bath and decorative accent rugs, and automotive floorcovering. Candlewick
competes in markets that emphasize product quality, innovation, and
customer service. Candlewick's relationships with fiber suppliers and its
product development center allow customers a means to evaluate yarn and
fiber variations to achieve product enhancement and product
differentiation. Approximately 35% of Candlewick's yarn production is used
internally by the Company's other floorcovering businesses. Products to
outside customers are marketed through Candlewick's own salaried sales
force.
The Company's sales order backlog position in its floorcovering businesses,
excluding Carriage, was approximately $27,300,000 at December 27, 1997 and
$28,000,000 at December 28, 1996. 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 1998 fiscal year.
The Company's floorcovering businesses own a variety of trademarks under
which their products are marketed. While such trademarks are important to
the Company's businesses, there is no one trademark, other than the name
"Masland", which is of material importance to the floorcovering business.
TEXTILES/APPAREL
TEXTILE INDUSTRY - The domestic textile industry encompasses yarn
preparation, fabric formation, and product distribution. The industry is
structured with various degrees of vertical integration depending on the
products involved. Textile products are manufactured for a variety of end
uses including home furnishings, industrial products, transportation
applications, and apparel. The textile industry is made up of a great
number of companies, none of which are believed to have sales that comprise
as much as 10% of the total market.
The domestic apparel market, which includes a substantial portion of the
customers for the Company's textile products, is continually faced with
competition from imports. Additionally, the Company believes that consumer
buying patterns will continue to be influenced by mass merchandisers and
retailers emphasizing price competition. The domestic textile industry
also services the home furnishing and other industries in a number of
applications which are impacted by housing sales as well as domestic
automotive production levels.
Apparel industry information continues to reflect an increase in the supply
of apparel into domestic markets from Mexico and the Caribbean Basin
compared with Asian suppliers. The Company believes a substantial portion
of this increase has resulted from enacted trade legislation and has
increased the demand for domestic textile products as a source of fabric
for the manufacture of finished apparel. The Company also believes that
merchandisers in the domestic apparel industry prefer a supply of complete
finished apparel products. The Company's textile and apparel products are
generally concentrated into markets and distribution chains whose customers
favor higher-end products. These factors are expected to benefit the high-
end value added products of the Company's textile business and support the
Company's strategy to grow its package finished apparel business by
utilizing the Company's vertical yarn and fabric capabilities and sewing
resources in Central America.
THE COMPANY'S TEXTILE/APPAREL BUSINESS - The Company's textile/apparel
group is comprised of three separate businesses that compete to varying
degrees in several textile markets. Products include high quality yarns,
knit fabric, and upper-end knit sport finished apparel. The Company
intends to utilize its vertical capacity capabilities to further expand its
finished knit apparel products. Each business is discussed below.
Dixie Yarns spins, dyes, and processes value-added cotton and high
performance specialty synthetic yarns to select manufacturers of high-end
upholstery, home furnishings, premium sportswear, hosiery, sweaters,
underwear, and automotive body cloth. Products manufactured by the Yarn
Group are primarily made from cotton fiber but also include products made
from branded specialty synthetic fibers which impart strength, heat
resistance, stretch and/or characteristics relating to comfort and
insulation properties. A portion of the yarn produced is further processed
by the Company's mercerizing and package dye facility. Natural, dyed, and
synthetic yarns are marketed through a combination of salaried sales force
and, to a lesser extent, commissioned sales agents.
Caro Knit produces 100% cotton knit fabrics. Markets served by Caro Knit's
customers include manufacturers of apparel for sportswear, golf shirts,
activewear/athletic, and impressions (print-ons). The higher-end products
made from Caro Knit fabric compete on the basis of design, fabric
consistency, and color. The Company has invested in state-of-the-art
dyeing and finishing facilities to achieve optimum color consistency. Caro
Knit supplies 100% of the fabric to the Company's recently established
finished apparel business. Caro Knit products are sold primarily by the
group's salaried sales force.
C-Knit Apparel produces and markets finished knit apparel products catering
to sports apparel, branded lines, golf related manufacturers, and
advertising specialty and screen printers. C-Knit utilizes the vertical
yarn and fabric manufacturing capabilities of the Company along with
cutting and contract sewing in order to control the quality and delivery
process. C-Knit products are marketed through its own salaried sales
force.
The Company's sales order backlog position in its textile/apparel
businesses was approximately $42,900,000 on December 27, 1997 compared to
$56,500,000 on December 28, 1996. All of these orders can reasonably be
expected to be filled within the 1998 fiscal year.
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.
CUSTOMER AND PRODUCT CONCENTRATION
There was no single class of products exceeding 10 percent of the Company's
consolidated sales volume for 1997, 1996, or 1995 and no single customer's
sales volume exceeded 10 percent of the Company's consolidated sales volume
for 1997.
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. Consequently,
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.
EMPLOYMENT LEVEL
The Company had approximately 4,600 associates as of the end of fiscal
1997.
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 6, 1998.
Approximate
Location Type of Operation Square Feet
FLOORCOVERING
Administrative:
Dalton, GA Administrative 13,000
Calhoun, GA Administrative 22,000
Mobile, AL Administrative 20,000
Total Administrative 55,000
Warehousing:
Ringgold, GA Warehousing 119,000
Manufacturing:
Lemoore, CA Tufted Yarn Spinning 322,000
Ringgold, GA Tufted Yarn Spinning 290,000
(1) Roanoke, AL Tufted Yarn Spinning 190,000
Calhoun, GA Carpet Manufacturing,
Distribution 1,086,000
Needlebond Manufacturing,
Distribution 347,000
(2) Dalton, GA Carpet Manufacturing,
Distribution 511,000
Atmore, AL Carpet Manufacturing,
Distribution 342,000
Mobile, AL Rug Manufacturing, Distribution 400,000
(3) LaFayette, GA Carpet Padding Manufacturing 73,000
Total Manufacturing 3,561,000
TEXTILE/APPAREL
Manufacturing:
Chattanooga, TN Yarn Spinning 440,000
Mebane, NC Yarn Spinning 99,000
Ranlo, NC Yarn Spinning 319,000
(4) Tarboro, NC Yarn Spinning 340,000
Chattanooga, TN Package Yarn Dyeing, Bleaching
and Mercerizing 276,000
Jefferson, SC Fabric Knitting, Dyeing and
Finishing 274,000
Total Manufacturing 1,748,000
CORPORATE
Administrative:
Chattanooga, TN Administrative 41,000
Total 5,524,000
ITEM 2. PROPERTIES - CONTINUED
(1) This property is currently leased. Under the provisions of the
Roanoke, AL lease, the Company is acquiring title to the property over the
term of the lease, which is expected to terminate in 2004.
(2) The Company is currently leasing 63,000 square feet for carpet
manufacturing.
(3) The Company is in the process of converting this operation to a carpet
padding manufacturing operation. No production is being performed in this
location as of March 6, 1998.
(4) Currently operating; "held for sale".
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 1997 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 6, 1998, 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, 56 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 SunTrust Bank,
Committee Chattanooga, N.A. Brother of
Paul K. Frierson.
Glenn A. Berry, 50 Executive Vice President and Chief
Executive Vice President and Financial Officer since January
Chief Financial Officer 1997. Vice President, Lighting
Products Group, MagneTek, Inc.,
from March 1995 to December 1996.
Vice President, Allied Signal
Laminate Systems, 1986 to 1994.
William N. Fry, IV, 39 Executive Vice President and Chief
Executive Vice President and Chief Operating Officer, Floorcovering
Operating Officer, Floorcovering Business since January 1997.
Business Executive Vice President and Chief
Operating Officer, Candlewick,
Carriage and Bretlin since January
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.
EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Name, Age Business Experience During
and Position Past Five Years
George B. Smith, 57 Executive Vice President and
Executive Vice President Chief Operating Officer, Textile/
and Chief Operating Officer, Apparel Business since September
Textile/Apparel Business 1996. Executive Vice President
and President, Natural/Dyed Yarns
and Knits since March 1994.
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) from June 1990 to
November 1992.
Philip H. Barlow, 48 Vice President and President of
Vice President and President, Carriage Industries, Inc. since
Carriage Industries, Inc. 1993. Vice President of Sales and
Marketing, Carriage, 1988 to 1993.
Director of Sales and Marketing,
Carriage, 1986 to 1988.
Kenneth L. Dempsey, 39 Vice President and President,
Vice President and President, Masland Carpets, Inc. since
Masland Carpets, Inc. January 1997. Vice President of
Marketing, Masland, 1991 to 1996.
Director of Marketing, The Harbinger
Company, Inc., subsidiary of Horizon
Industries, Inc., 1982 to 1991.
Paul K. Frierson, 60 Director since 1988. Vice President
Vice President and President, and President, Candlewick Yarns
Candlewick Yarns, Director since 1989. Director of
NationsBank/Chattanooga. Brother of
Daniel K. Frierson.
Jeffrey L. Gregg, 34 Vice President and President of
Vice President and President, Bretlin, Inc. since January 1998.
Bretlin, Inc. Vice President of Operations,
Carriage Industries, Inc. from May
1996 to January 1998. Chief
Operating Officer and Chief
Financial Officer, The Geiger Group,
Inc. from July 1991 to April 1996.
W. Derek Davis, 47 Vice President of Human Resources
Vice President, Human since January 1991. Corporate
Resources Employee Relations Director,
1990 to 1991.
EXECUTIVE OFFICERS OF THE REGISTRANT - CONTINUED
Name, Age Business Experience During
and Position Past Five Years
Gary A. Harmon, 52 Treasurer since 1993.
Treasurer Director of Tax and Financial
Planning, 1985 to 1993.
D. Eugene Lasater, 47 Controller since 1988.
Controller
Starr T. Klein, 55 Secretary since November 1992.
Secretary Assistant Secretary, 1987 to 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 6, 1998, the total number of record holders of the Company's
Common Stock was approximately 4,100 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 3,100 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 27, 1997 and
December 28, 1996 are as follows:
<TABLE>
THE DIXIE GROUP, INC.
QUARTERLY FINANCIAL DATA, DIVIDENDS
AND PRICE RANGE OF COMMON STOCK
(Unaudited)
(dollars in thousands, except per share data)
<CAPTION>
1997
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $162,360 $169,163 $159,940 $170,380
Gross profit 27,213 29,831 26,136 26,812
Net income 2,981 3,300 3,012 2,326
Earnings per share
Basic .27 .29 .27 .21
Diluted .26 .29 .25 .19
Dividends:
Common Stock --- --- --- ---
Class B Common Stock --- --- --- ---
Common Stock prices:
High $ 8.13 $ 9.88 $ 15.88 $ 14.75
Low 6.38 6.00 9.63 9.13
<CAPTION>
1996
Quarter 1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Net sales $161,520 $167,962 $145,400 $140,199
Gross profit 24,260 30,429 24,958 20,229
Net income (loss) (991) 1,320 2,030 (13,572)
Earnings (loss) per share
Basic (.09) .12 .18 (1.21)
Diluted (.09) .12 .18 (1.21)
Dividends:
Common Stock --- --- --- ---
Class B Common Stock --- --- --- ---
Common Stock prices:
High $ 5.13 $ 5.38 $ 5.13 $ 8.13
Low 3.81 4.25 3.88 4.38
<FN>
The total of quarterly earnings per share may not equal the annual earnings per share
due primarily to Common Stock purchased and issued during the respective periods.
During the fourth quarter of 1996, the Company recognized asset valuation losses of
$18,995 ($13,074, or $1.17 per share after taxes).
The discussion of restrictions on payment of dividends is included in Note F to the
Consolidated Financial Statements included herein.
</FN>
ITEM 6. SELECTED FINANCIAL DATA
(dollars in thousands, except per share data)
<FN>
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 27, December 28, December 30, December 31, December 25,
1997(1) 1996 1995 1994 1993(2)
<S> <C> <C> <C> <C> <C>
Net sales $661,843 $615,081 $670,842 $682,859 $591,408
Income (loss) from continuing
operations(2) 11,619 (11,213) (52,179) (3,227) 4,684
Total assets 386,614 328,135 396,997 488,320 496,579
Long-term debt:
Senior indebtedness 68,528 34,036 97,383 87,025 87,650
Subordinated notes 50,000 50,000 50,000 50,000 50,000
Convertible subordinated debentures 42,282 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)
Basic 1.03 (1.00) (4.44) (.26) .42
Diluted .99 (1.00) (4.44) (.26) .41
Cash dividends declared:
Common Stock --- --- --- .20 .20
Class B Common Stock --- --- --- .20 .20
<FN>
(1) Includes the results of operations of Danube and GFI Dalton subsequent to their acquisitions on December 31, 1996 and
October 2, 1997, respectively.
(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.
(3) Income (loss) from continuing operations includes asset valuation losses of $13,074, or $1.17 per share, for the year ended
December 28, 1996, 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 $.53 per share, and a nontaxable life
insurance gain of $12,835, or $1.05 per share, for the year ended December 31, 1994. See Note B, Note L, and Note N to the
Consolidated Financial Statements.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company's strategy includes expanding its floorcovering business,
focusing its textile/apparel business on higher margin markets (including
vertical growth through finished apparel) and increasing the production and
sale by both businesses of products that are sold in the form used by the
ultimate consumer.
The Company continued the expansion of its floorcovering business through
two acquisitions which were completed during fiscal 1997. The Company
acquired the assets and business of Danube Carpet Mills, Inc. ("Danube")
early in fiscal 1997 for $20.9 million cash. Danube manufactured carpet
for the manufactured housing, recreational vehicle, and van conversion
industries. The Danube manufacturing and distribution facilities were
closed and their operations merged into existing facilities of the
Company's Carriage Carpet and Candlewick Yarns operations. On October 2,
1997, the Company acquired the needlebond and artificial turf assets and
business of General Felt Industries based in Dalton, Georgia ("GFI Dalton")
for $40.9 million. The acquired assets and business were merged with the
Company's Bretlin operation.
The Company recorded unusual charges for years before 1997 related to the
strategic realignment of its manufacturing facilities, product lines, and
businesses to support the objectives of focusing on higher margin markets
and increasing its sales of products in the form used by the ultimate
consumer. The results for 1996 included charges of $20.6 million ($14.3
million after-tax, or $1.27 per share), primarily related to the write-down
of the Company's Tarboro textile spinning facility, which is being held for
sale, costs associated with the sale of the Company's thread business, and
costs to consolidate operations and exit certain lower-margin product
lines. In 1995, net charges of $58.4 million ($47.9 million after-tax, or
$4.07 per share), were recorded principally related to the disposal of the
Company's thread business, asset impairment losses, a plant sale, and
facility consolidations.
The Company reported net income of $11.6 million, or $.99 per share, in
1997. Including the unusual items described above, the Company reported a
net loss of $11.2 million, or $1.00 per share, in 1996 and a net loss of
$52.2 million, or $4.44 per share, in 1995. Excluding these items, net
income was $3.1 million, or $.27 per share, in 1996 and the net loss was
$4.3 million, or $.37 per share, in 1995.
The following table reflects selected operating data related to the two
business segments of the Company: Floorcovering and Textile/Apparel (see
additional information in Note P to the consolidated financial statements).
The effects of the unusual items have been reported separately in order to
more clearly understand the operations of each segment.
(dollars in millions)
1997 1996 1995
Sales
Floorcovering $433.3 $366.4 $361.5
Textile/Apparel 229.7 252.0 313.7
Intersegment elimination (1.2) (3.3) (4.4)
Total sales $661.8 $615.1 $670.8
Operating profit (loss)
Floorcovering
Excluding unusual items $ 30.7 $ 25.4 $ 20.1
Unusual items --- (1.9) 0.1
Floorcovering operating profit 30.7 23.5 20.2
Textile/Apparel
Excluding unusual items 8.8 (1.3) (5.4)
Unusual items --- (18.7) (58.5)
Textile/Apparel operating profit (loss) 8.8 (20.0) (63.9)
Combined
Excluding unusual items 39.5 24.1 14.7
Unusual items --- (20.6) (58.4)
Company operating profit (loss) $ 39.5 $ 3.5 $(43.7)
1997 Compared to 1996 (excluding unusual items) - Operating profits in the
Company's floorcovering business were $30.7 million for 1997, an increase
of $5.3 million or 21%, compared with 1996. Sales in the floorcovering
business were $433.3 million in 1997 compared with $366.4 million in 1996,
an increase of 18%. The increase in sales was primarily a result of the
1997 acquisitions. The improvement in operating profits resulted from
incremental volume increases due to the Danube acquisition and volume
improvements in the segment's high-end residential and commercial markets.
Additional improvements in profitability related to the GFI Dalton
acquisition are anticipated in fiscal 1998.
Operating profits in the Company's textile/apparel business were $8.8
million in 1997, compared with an operating loss of $1.3 million in 1996.
Textile/Apparel sales decreased in 1997 by $22.3 million compared with
1996. Excluding sales from the Company's thread business, which was sold
in June 1996, sales increased $27.4 million in 1997 compared with 1996. A
significant portion of this sales growth resulted from the implementation
of the Company's strategy of growing finished apparel sales in its
textile/apparel business. The improved profitability in 1997 compared with
1996 reflects favorable costs of raw materials and lower manufacturing
costs in the segment's yarn business. Approximately $3.5 million, or 35%
of the improved costs in the yarn business resulted from the discontinuance
of depreciation expense associated with the Tarboro facility in 1997, under
provisions of the accounting guidance for assets held for sale. The
Company's periodic market value review indicated no adjustment to the
facility's carrying value.
Other corporate and miscellaneous expenses not included in the Company's
operating segments increased $2.2 million in 1997 compared with 1996. The
increase included, among other items, costs associated with the Company's
leadership training process, benefit related costs, and costs associated
with the Company's name change.
The Company's effective income tax rate was 38.2% for the 1997 tax
provision and 27.9% for the 1996 tax benefit. The rate difference is
primarily related to the non-deductible goodwill impairment recorded in
1996 which received no tax benefit.
1996 Compared to 1995 (excluding unusual items) - Operating profits in the
Company's floorcovering business increased by $5.3 million or 26% in 1996
compared with 1995. During this period, sales in the floorcovering
business increased by 1%. The improvement in operating profit was
attributable to a shift in sales mix to higher-margin products, as well as
a $2.8 million gain from liquidation of LIFO inventories.
Operating losses for the Company's textile/apparel business declined $4.1
million in 1996 compared with 1995, despite a 20% decline in net sales.
The improved results in 1996 were attributable to the exit of lower-margin
product lines and businesses and reduced manufacturing, selling and
administrative expenses. The decline in sales is principally attributable
to the sale of the Company's thread business on June 3, 1996.
Interest expense declined in 1996 compared with 1995 by $2.6 million due to
a $62.9 million reduction in debt, which was funded by the proceeds from
the sale of the Company's thread business and operating cash flows.
LIQUIDITY AND CAPITAL RESOURCES
During the three year period ended December 27, 1997, cash flows generated
from operating activities totaled $134.4 million, with an additional $36.4
million generated from the sale of assets. These funds were used to
finance the Company's operations, fund capital expenditures, repurchase
stock, and reduce debt.
During 1997, as sales increased by $46.8 million, the dollar value of
inventories decreased $10.6 million, including inventories to support the
Danube and GFI Dalton acquisitions. This reflects the Company's ongoing
emphasis to effectively manage its working capital.
Capital expenditures were $74.4 million during the three year period ended
December 27, 1997 and were directed toward upgrading equipment to improve
quality and manufacturing efficiency, as well as expanding manufacturing
capacity and service capabilities in the Company's floorcovering business.
During this period, charges for depreciation and amortization totaled $86.7
million.
In 1993, approximately 1.0 million shares of the Company's Common Stock
were issued under a put option arrangement relating to the acquisition of
Masland Carpet, Inc. The holders exercised their right on July 10, 1995 to
put the shares to the Company at a price of approximately $18.00 per share.
In October 1993, the Company entered into a seven year agreement and sold a
$45.0 million undivided interest in a revolving pool of its trade accounts
receivable. The sale is reflected as a reduction of accounts receivable in
the Company's balance sheets. No further interest has been sold under this
agreement subsequent to the original sale. 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
at risk for credit losses associated with sold receivables and provides for
such in the Company's financial statements.
At December 27, 1997, the Company's debt structure consisted of $44.8
million of convertible subordinated debentures, $50.0 million of
subordinated notes and $71.2 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 agreement provides for revolving credit of up to $125.0
million (before reduction for certain significant asset sales) 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
which began in March 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 $25.5 million as a result of the sales of the
Company's Newton plant in September 1995 and thread business in June 1996.
Interest rates available under the facility are selected by the Company
from a number of options which effectively allow for borrowings at rates
equal to or lower than the greater of the lender's prime rate or the
federal funds rate plus .5%. At year end, the available unused borrowing
capacity under the Company's credit agreements (including amounts available
under a $5,000 short-term credit line) was $39.0 million.
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.
The Company's subordinated note agreement was amended to provide for the
payment of dividends, subject to specified earnings levels, for periods
after December 31, 1997. In February 1998, the Board of Directors approved
a quarterly dividend of $.05 per share payable in March 1998.
Availability under the Company's existing debt arrangements and expected
operating cash flows are deemed adequate to finance the Company's future
liquidity requirements, which are anticipated to consist primarily of
capital expenditures and seasonal working capital needs.
In February 1998, the Company received a commitment letter from its
principal senior lenders agreeing to replace its unsecured revolving credit
and term-loan facility with a new unsecured credit facility that would
provide for revolving credit of up to $100.0 million through a five year
commitment period and a $60.0 million, seven year term-loan. The new
credit facility is expected to have financial covenants and interest rates
similar to those of the Company's existing revolving credit and term-loan
facility. The transaction, which is subject to certain contingencies,
including the execution of a mutually acceptable credit agreement, is
expected to be completed in early April 1998. Assuming the transaction is
completed as structured in the commitment letter, the Company's committed
borrowing capacity would be increased by approximately $50.0 million.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information".
The Statement is effective for fiscal 1998 and includes provisions
requiring companies to report segment information using a "management
approach", which modifies the required disclosures and business
segmentation approach used in a company's public financial statements.
Statement No. 131 will have no effect on the consolidated results of
operations or financial condition of the Company. Reporting provisions
under the new statement are first required for fiscal 1998 financial
statements. The Company has not made a final determination if, or to what
degree, compliance with the Statement will require changes in its current
business segmentation for financial reporting purposes.
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting For the Costs of Computer
Software Developed For or Obtained For Internal Use". Adoption of the SOP
is required for the Company at the beginning of fiscal 1999. Provisions of
the Statement require the capitalization of certain costs incurred after
the date of adoption in connection with developing or obtaining software
for internal use. Early adoption of the SOP is permitted, and accordingly
the Company plans to adopt effective with the beginning of fiscal 1998.
The Company has historically expensed internal software development costs
as incurred but after adoption of the Statement will capitalize and
amortize such costs over the expected useful life of the associated
software.
YEAR 2000 SYSTEMS ISSUES
The Company has electronic business systems in place at each primary
business group. Systems platforms and architecture differ between the
business groups. The Company has actively planned its various systems for
year 2000 compliance for several years in its design, purchase, and
installation processes. Year 2000 compliance plans are formalized and
include specific testing and monitoring. Costs for testing and conversion
for compliance is not considered material to the Company's operations.
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
April 30, 1998 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
April 30, 1998 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) in the Proxy Statement of the
registrant for the annual meeting of shareholders to be held April 30, 1998 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 April 30, 1998 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 The Dixie Group, Inc.
(3b) Amended and Restated By-Laws of Dixie Yarns, Inc.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(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 Yarns, 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.
(4h) Waiver and First Amendment to Credit Agreement dated
February 27, 1996.
(4i) Waiver and Modification Agreement dated November 1,
1996.
(4j) Waiver Letter dated December 13, 1996.
(4k) Second Amendment dated September 7, 1997 to the Third
Amended and Restated Credit Agreement dated March 31,
1995.
(10a) Dixie Yarns, Inc. Nonqualified Defined Contribution
Plan.
(10b) Dixie Yarns, Inc. Nonqualified Employee Savings
Plan.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(10c) Dixie Yarns, Inc. Incentive Compensation Plan.
(10d) 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).
(10e) 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).
(10f) 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).
(10g) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and New York Life Insurance and
Annuity Corporation.
(10h) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and John Alden Life Insurance
Company.
(10i) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and John Alden Life Insurance Company
of New York.
(10j) Certificate Purchase Agreement dated
October 15, 1993, among Dixie Yarns, Inc., Dixie
Funding, Inc. and Keyport Life Insurance Company.
(10k) Asset Purchase Agreement dated May 23, 1996, by and
among T-C Threads, Inc. d/b/a Threads USA, Threads of
Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird, Inc.
(10l) Amendment, dated May 31, 1996, to Asset Purchase
Agreement dated May 23, 1996, by and among T-C Threads,
Inc. d/b/a Threads USA, Threads of Puerto Rico, Inc.,
Productos para la Industria de la Maquila, S. A.,
PRIMA, Hilos y Accessorios, S. A. de C. V., and Dixie
Yarns, Inc. and American & Efird, Inc.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(10m) Second Amendment, dated June 3, 1996, to Asset Purchase
Agreement dated May 23, 1996, by and among T-C Threads,
Inc., d/b/a Threads USA, Threads of Puerto Rico, Inc.,
Productos para la Industria de la Maquila, S. A.,
PRIMA, Hilos y Accessorios, S. A. de C. V., and Dixie
Yarns, Inc. and American & Efird, Inc.
(10n) Yarn and Finished Goods Agreement dated as of June 3,
1996, by and among T-C Threads, Inc. d/b/a Threads USA,
Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc. and
American & Efird, Inc.
(10o) Accounts Receivable Agreement dated as of June 3, 1996,
by and among T-C Threads, Inc. d/b/a Threads USA,
Threads of Puerto Rico, Inc., Productos para la
Industria de la Maquila, S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V., and Dixie Yarns, Inc. and
American & Efird, Inc.
(10p) Noncompetition Agreement dated as of June 3, 1996, by
and among T-C Threads, Inc. d/b/a Threads USA, Threads
of Puerto Rico, Inc., Productos para la Industria de la
Maquila, S. A., PRIMA, Hilos y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc. and American & Efird, Inc.
(10q) Asset Purchase Agreement dated as of August 29, 1997
among The Dixie Group, Inc., Bretlin, Inc., Foamex L.P.
and General Felt Industries, Inc.
(10r) Dixie Yarns, Inc. Incentive Stock Plan as amended.
(10s) Form of Nonqualified Stock Option Agreement Under the
Dixie Yarns, Inc. Incentive Stock Plan.
(10t) Form of Amendment to Nonqualified Stock Option
Agreement Under the Dixie Yarns, Inc. Incentive Stock
Plan.
(10u) Form of Stock Option Agreement Under the Dixie Yarns,
Inc. Incentive Stock Plan as amended.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K -
CONTINUED
(ii) Exhibits filed with this report:
(4l) Amendment to 9.96% Senior Subordinated notes due
February 1, 2010.
(4m) Letter agreement dated February 17, 1998 re: Amendment
to 9.96% Senior Subordinated Notes due February 1,
2010.
(10v) Form of Stock Rights and Restrictions Agreement for
Restricted Stock Award Under Incentive Stock Plan as
Amended.
(10w) The Dixie Group, Inc. Stock Ownership Plan as amended.
(10x) Form of Stock Subscription Agreement Under Stock
Ownership Plan of The Dixie Group, Inc.
(10y) The Dixie Group, Inc. Directors Stock Plan.
(21) Subsidiaries of the Registrant.
(23) Consent of Ernst & Young LLP.
(b) Reports on Form 8-K--No reports on Form 8-K have been filed by the
registrant during the last quarter of the period covered by this
report.
(c) Exhibits--The response to this portion of Item 14 is submitted as a
separate section of this report. See Item 14 (a) (3) (ii) above.
(d) Financial Statement Schedules--The response to this portion of Item 14
is submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
THE DIXIE GROUP, INC.
March 25, 1998 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 25, 1998
Daniel K. Frierson
Vice President,
President of Candlewick
/s/PAUL K. FRIERSON Yarns and Director March 25, 1998
Paul K. Frierson
Executive Vice President and
/s/GLENN A. BERRY Chief Financial Officer March 25, 1998
Glenn A. Berry
/s/D. EUGENE LASATER Controller March 25, 1998
D. Eugene Lasater
/s/J. DON BROCK Director March 25, 1998
J. Don Brock
SIGNATURES -- CONTINUED
/s/PAUL K. BROCK Director March 25, 1998
Paul K. Brock
/s/ LOVIC A. BROOKS, JR. Director March 25, 1998
Lovic A. Brooks, Jr.
/s/JAMES H. MARTIN, JR. Director March 25, 1998
James H. Martin, Jr.
/s/JOHN W. MURREY, III Director March 25, 1998
John W. Murrey, III
/s/PETER L. SMITH Director March 25, 1998
Peter L. Smith
/s/ROBERT J. SUDDERTH, JR. Director March 25, 1998
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 27, 1997
THE DIXIE GROUP, INC.
CHATTANOOGA, TENNESSEE
FORM 10-K--ITEM 14(a)(1) and (2)
THE DIXIE GROUP, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of The Dixie Group, Inc. and
subsidiaries are included in Item 8:
Report of Independent Auditors
Consolidated balance sheets--December 27, 1997 and
December 28, 1996
Consolidated statements of operations--Years ended
December 27, 1997, December 28, 1996, and December 30, 1995
Consolidated statements of cash flows--Years ended
December 27, 1997, December 28, 1996, and December 30, 1995
Consolidated statements of stockholders' equity--Years ended
December 27, 1997, December 28, 1996, and December 30, 1995
The following consolidated financial statement schedule of The Dixie Group,
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
The Dixie Group, Inc.
We have audited the accompanying consolidated balance sheets of The
Dixie Group, Inc. and subsidiaries as of December 27, 1997 and December 28,
1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
December 27, 1997. 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 The Dixie Group, Inc. and subsidiaries at December 27, 1997 and
December 28, 1996, and the consolidated results of their operations and
cash flows for each of the three years in the period ended December 27,
1997, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Chattanooga, Tennessee
February 19, 1998
<TABLE>
THE DIXIE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
<CAPTION>
December 27, December 28,
1997 1996
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,848 $ 1,988
Accounts receivable (less allowance for doubtful
accounts of $3,207 in 1997 and $3,614 in 1996) 29,450 14,628
Inventories 82,661 93,226
Assets held for sale 10,000 10,350
Other 11,977 10,520
TOTAL CURRENT ASSETS 135,936 130,712
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 9,421 8,673
Buildings and improvements 72,683 65,960
Machinery and equipment 291,345 263,940
373,449 338,573
Less accumulated amortization and depreciation (199,027) (182,797)
NET PROPERTY, PLANT AND EQUIPMENT 174,422 155,776
INTANGIBLE ASSETS (less accumulated amortization of
$8,359 in 1997 and $6,928 in 1996) 63,555 31,611
OTHER ASSETS 12,701 10,036
TOTAL ASSETS $386,614 $328,135
<FN>
See notes to consolidated financial statements.
<CAPTION>
December 27, December 28,
1997 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 35,768 $ 31,473
Accrued expenses 26,974 24,338
Current portion of long-term debt 5,143 2,641
TOTAL CURRENT LIABILITIES 67,885 58,452
LONG-TERM DEBT
Senior indebtedness 68,528 34,036
Subordinated notes 50,000 50,000
Convertible subordinated debentures 42,282 44,782
TOTAL LONG-TERM DEBT 160,810 128,818
OTHER LIABILITIES 9,560 9,555
DEFERRED INCOME TAXES 27,115 22,760
STOCKHOLDERS' EQUITY
Common Stock ($3 par value per share): Authorized
80,000,000 shares, issued - 14,038,318 shares in
1997 and 13,876,826 shares in 1996 42,115 41,630
Class B Common Stock ($3 par value per share):
Authorized 16,000,000 shares, issued - 735,228
shares 2,206 2,206
Common Stock subscribed - 512,477 shares in 1997
and 449,300 shares in 1996 1,537 1,348
Additional paid-in capital 134,151 132,475
Stock subscriptions receivable (3,132) (2,190)
Unearned stock compensation (894) ---
Retained earnings (deficit) 2,853 (8,766)
Minimum pension liability adjustment (1,839) (2,668)
176,997 164,035
Less Common Stock in treasury at cost - 3,439,999
shares in 1997 and 3,409,872 shares in 1996 (55,753) (55,485)
TOTAL STOCKHOLDERS' EQUITY 121,244 108,550
Commitments - Note O
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $386,614 $328,135
<FN>
See notes to consolidated financial statements.
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
<CAPTION>
Years Ended
December 27, December 28, December 30,
1997 1996 1995
<S> <C> <C> <C>
NET SALES $661,843 $615,081 $670,842
Cost of sales 551,851 515,205 572,762
GROSS PROFIT 109,992 99,876 98,080
Selling and administrative expenses 75,837 74,061 82,624
Asset valuation losses --- 18,995 63,425
Other expense - net 2,770 9,363 1,112
INCOME (LOSS) BEFORE INTEREST AND TAXES 31,385 (2,543) (49,081)
Interest expense 12,583 13,000 15,591
INCOME (LOSS) BEFORE INCOME TAXES 18,802 (15,543) (64,672)
Income tax provision (benefit) 7,183 (4,330) (12,493)
NET INCOME (LOSS) $ 11,619 $(11,213) $(52,179)
NET EARNINGS (LOSS) PER SHARE
Basic $ 1.03 $ (1.00) $ (4.44)
Diluted $ .99 $ (1.00) $ (4.44)
<FN>
See notes to consolidated financial statements.
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
Years Ended
December 27, December 28, December 30,
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ 11,619 $(11,213) $(52,179)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 24,495 28,195 35,980
Provision (benefit) for deferred
income taxes 3,993 (5,395) (11,416)
(Gain) loss on property, plant
and equipment disposals and
asset valuation adjustments (211) 18,706 65,037
Changes in operating assets and
liabilities, net of effects of
business combinations:
Accounts receivable (14,821) 2,740 11,549
Inventories 26,361 10,028 3,517
Other current assets (1,370) (721) (585)
Other assets (2,600) (3) (552)
Accounts payable and accrued expenses 36 12,222 (21,143)
Other liabilities 1,444 443 279
NET CASH PROVIDED BY OPERATING ACTIVITIES 48,946 55,002 30,487
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sales of property,
plant and equipment 4,556 24,057 7,773
Purchase of property, plant and equipment (26,519) (17,634) (30,266)
Cash payments in connection with business
combinations (61,744) --- ---
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (83,707) 6,423 (22,493)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in credit line
borrowings 37,135 (60,080) 2,529
Borrowings (payments) under term loan
facility (2,500) (2,500) 10,000
Purchase of Company Common Stock (268) (32) (18,457)
Other 254 (238) (557)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 34,621 (62,850) (6,485)
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (140) (1,425) 1,509
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 1,988 3,413 1,904
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,848 $ 1,988 $ 3,413
<FN>
See notes to consolidated financial statements.
<CAPTION>
THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except per share data)
Class B Common Additional Retained Pension Common
Common Common Stock Paid-In Earnings Liability Stock In
Stock Stock Subscribed Capital Other (Deficit) Adjustment Treasury
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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)
Common Stock acquired for treasury-
5,749 shares (32)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 14,027 shares 42 15
Common Stock subscribed -
449,300 shares 1,348 842 (2,190)
Net loss for the year (11,213)
Minimum pension liability adjustment 1,448
BALANCE AT DECEMBER 28, 1996 41,630 2,206 1,348 132,475 (2,190) (8,766) (2,668) (55,485)
Common Stock acquired for treasury-
30,127 shares (268)
Common Stock sold under stock
option and Employees' Stock
Purchase Plan - 60,925 shares 183 250
Common Stock subscribed -
124,677 shares 374 868 (1,242)
Stock subscriptions settled 77 (185) (192) 300
Restricted stock grants -
75,000 shares 225 750 (975)
Amortization of restricted
stock grants 81
Net income for the year 11,619
Minimum pension liability adjustment 829
BALANCE AT DECEMBER 27, 1997 $42,115 $2,206 $1,537 $134,151 $(4,026) $ 2,853 $(1,839) $(55,753)
<FN>
See notes to consolidated financial statements.
</TABLE>
THE DIXIE GROUP, 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 The Dixie Group, 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 floorcovering and
textile/apparel 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 D). 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 the lower of
cost, determined by the last-in, first-out (LIFO) method, or market. The
reduction of certain inventory quantities resulted in liquidations of LIFO
inventory quantities carried at lower costs prevailing in prior years. The
effect of these reductions was to increase net income in 1997 by $1,065
($.09 per share), to decrease the net loss in 1996 by $4,909 ($.44 per
share), and to decrease the net loss in 1995 by $750 ($.06 per share).
These effects include $690 ($.06 per share) in 1997 and $3,195 ($.29 per
share) in 1996 relating to inventory reductions resulting from the sale of
the Company's thread business (see Note C).
Inventories are summarized as follows:
1997 1996
At current cost:
Raw materials $19,080 $ 20,276
Work-in-process 20,954 26,294
Finished goods 47,819 54,109
Supplies, repair parts and other 3,183 4,000
91,036 104,679
Excess of current cost over LIFO value (8,375) (11,453)
Total inventories $82,661 $ 93,226
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 for
financial reporting purposes using the straight-line method over the
estimated useful lives of the related assets, ranging from 10 to 40 years
for buildings and improvements, and 3 to 10 years for machinery and
equipment. Applicable statutory recovery methods are used for tax
purposes. Depreciation and amortization of property, plant and equipment
for financial reporting purposes totaled $22,780 in 1997, $26,893 in 1996,
and $33,545 in 1995.
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 estimated 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: During 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation". As permitted under Statement No. 123, the Company continues
to account for stock based compensation in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees".
Earnings per Share: In 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share". Statement No. 128
replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Basic earnings per share is
computed using the weighted average common shares outstanding including the
assumed conversion of Class B Common Stock. Diluted earnings per share
considers the effects of all potentially dilutive securities. Earnings per
share amounts for all periods have been presented, and where appropriate,
restated to conform to the provisions of Statement No. 128.
Revenue Recognition: The Company recognizes revenue for goods sold at the
time title passes to the customer.
Reclassifications: Certain amounts for 1996 and 1995 have been
reclassified to conform with the 1997 presentation.
NOTE B - BUSINESS COMBINATIONS
In early fiscal 1997, the Company acquired for $20,854, the business and
operating assets of Danube Carpet Mills, Inc. ("Danube"), a manufacturer of
carpet for the manufactured housing, recreational vehicle, and van
conversion industries. The Danube manufacturing and distribution
facilities were closed and their operations merged into existing facilities
of the Company's Carriage Carpet and Candlewick Yarns operations. On
October 2, 1997, the Company acquired the needlebond and artificial turf
assets and business of General Felt Industries based in Dalton, Georgia
("GFI Dalton") for $40,890. The acquired assets and business were merged
with the Company's Bretlin operation. The acquisitions were accounted for
as purchase business combinations, and accordingly, the results of
operations of Danube subsequent to December 31, 1996 and GFI Dalton
subsequent to October 2, 1997 are included in the Company's consolidated
financial statements. The purchase price of each acquisition was allocated
to the net tangible assets acquired based on their estimated fair market
values. The excess amounts of the purchase price over the estimated fair
market value of the net tangible assets were recorded as intangible assets
and are being amortized using the straight-line method over forty years.
A summary of net assets acquired is as follows:
GFI
Danube Dalton
Current assets $ 8,363 $ 9,015
Property, plant, and equipment 4,359 13,550
Current liabilities (4,703) (2,356)
Deferred taxes 141 ---
Intangible asset 12,694 20,681
Net assets acquired $20,854 $40,890
The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions of Danube and GFI Dalton had occurred
at the beginning of the periods presented after giving effect to certain
adjustments, including the closure of Danube facilities and consolidation
into existing operations, 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 future results or of
the results that would have occurred had the acquisitions taken place at
the beginning of the periods presented.
1997 1996
Net sales $694,199 $692,604
Net income (loss) 12,397 (9,923)
Net income (loss) per share:
Basic 1.10 (.89)
Diluted 1.05 (.89)
NOTE C - SALE OF THE COMPANY'S THREAD BUSINESS
On June 3, 1996, the Company sold substantially all of the property, plant
and equipment, raw material and in-process inventories, and certain other
assets related to its thread business to American & Efird, Inc. for $27,157
cash (including $1,500 held in escrow). Under the terms of the asset
purchase agreement: (i) greige and finished thread inventories were
retained by the Company and held for purchase by American & Efird to
service the acquired business; (ii) the Company's branded thread product
lines were to be continued until the earlier of six months or all such
inventories were purchased from the Company; and (iii) the Company is
prohibited from competing in the thread business for a period of five
years. Accounts receivable associated with the Company's thread business
were retained. From June 3, 1996 through the end of fiscal 1997, net
proceeds related to the disposition of the Company's thread business were
approximately $55,533. The proceeds include the collection of
substantially all of the accounts receivables and the sale of substantially
all inventories retained by the Company.
Sales related to thread inventories retained by the Company were $3,025 in
1997 and the Company's results included charges of $558 primarily related
to adjustments to the inventory carrying values. During 1996, operations
of the thread business generated sales of $53,034, including $12,483 after
June 3, 1996 related to inventories retained by the Company. The Company's
1996 results included thread business operating losses of $369 and the
Company recorded $5,154 of costs to exit the thread business. Included in
the exit costs were $3,867 relating to 63 selling and administrative
associates receiving termination benefits and approximately 700 wage
associates receiving excess benefits under a pre-existing pension plan.
Also included were other exit costs of $1,287 consisting primarily of
contractual support expenses under the sales agreement and non-fixed asset
valuation losses. These costs were classified in "Other expense-net" in
the Company's consolidated statements of operations.
NOTE D--SALE OF ACCOUNTS RECEIVABLE
On October 15, 1993, the Company entered into a seven year agreement and
sold a $45,000 undivided interest in a revolving pool of its trade accounts
receivable. No further interest has been sold under this agreement
subsequent to the original sale. At December 27, 1997 and December 28,
1996, the $45,000 interest sold is reflected as a reduction of accounts
receivable in the Company's 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 $2,985 for 1997, $2,948 for 1996, and $2,998 for 1995
are included in other expense - net. In addition, the Company is generally
at risk for credit losses associated with sold receivables and provides for
such in the Company's financial statements.
NOTE E--ACCRUED EXPENSES
Accrued expenses include the following:
1997 1996
Compensation and benefits $ 12,172 $ 10,263
NOTE F--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
1997 1996
Senior indebtedness:
Credit line borrowings $ 65,449 $ 28,314
Term loan 5,000 7,500
Other 722 863
Total senior indebtedness 71,171 36,677
Subordinated notes 50,000 50,000
Convertible subordinated debentures 44,782 44,782
Total long-term debt 165,953 131,459
Less current portion (5,143) (2,641)
Total long-term debt (less current
portion) $160,810 $128,818
The Company's unsecured revolving credit and term-loan agreement provides
revolving credit of up to $125,000 (before reduction for certain
significant asset sales) through March of 2000 and a $10,000 term-loan
payable in quarterly installments of $625 which began in March 1996. The
terms of the agreement provide for a 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 27, 1997
was $25,524. 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 .5%. The effective annual interest
rate on the revolving credit and term-loan agreement was 6.79% in 1997,
6.85% in 1996, and 7.21% in 1995. The interest rate on debt outstanding
under this agreement was 6.83% at December 27, 1997. 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 27, 1997, unused borrowing capacity under the
Company's credit agreements (including amounts available under a $5,000
short-term credit line) was approximately $39,027 (see Note Q).
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.
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 an amendment to the Company's subordinated note agreement effective
December 31, 1997, retained earnings available for the payment of dividends
is $1,000 plus 50% of future net income subject to certain adjustments.
Approximate maturities of long-term debt for each of the five years
succeeding December 27, 1997 are $5,143 in 1998, $5,113 in 1999, $72,732 in
2000, $7,285 in 2001, and $7,287 in 2002 (see Note Q).
Interest payments were $12,424 in 1997, $13,550 in 1996, and $14,852 in
1995.
NOTE G--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:
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
Financial assets
Cash and cash
equivalents $ 1,848 $ 1,848 $ 1,988 $ 1,988
Notes receivable
(including current
portion) 2,178 2,178 2,158 2,158
Escrow funds 1,270 1,270 1,751 1,751
Financial liabilities
Long-term debt
(including current
portion) $165,953 $163,758 $131,460 $123,295
The fair values of the Company's financial assets approximate their
carrying amounts due to their short-term nature and for notes receivable,
adjustable interest rate provisions. The fair values of the Company's
long-term debt were estimated using discounted cash flow analyses based on
incremental borrowing rates for similar types of borrowing arrangements and
quoted market rates for the Company's convertible debentures.
NOTE H--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. At
December 27, 1997, the Company's defined benefit plans included 130,226
shares of the Company's Common Stock with a fair value of $1,481, or 11.4%
of the fair value of the plans' assets. All accrued benefits under the
Company's largest defined benefit plan became fully vested and were frozen
at December 24, 1993, and participants became eligible to participate in a
401(k) defined contribution plan. A portion of these accrued benefits have
been settled through lump sum payments. Losses from settlements (excluding
losses related to the sale of the Company's thread business, see Note C)
were $284 in 1997, $772 in 1996, and $1,209 in 1995.
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 of all plans included the following
components:
1997 1996 1995
Defined benefit plans:
Service cost $ 47 $ 42 $ 30
Interest cost 1,026 1,464 1,434
Actual return on plan assets (2,166) (1,788) (3,305)
Other components 1,793 1,748 3,382
700 1,466 1,541
Defined contribution plans 4,685 2,009 1,715
Net periodic pension cost $ 5,385 $ 3,475 $3,256
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:
1997 1996
Actuarial present value of benefit obligations:
Vested benefits $ 14,503 $ 14,727
Nonvested benefits 30 27
Accumulated benefit obligations $ 14,533 $ 14,754
Plan assets at fair value $ 12,966 $ 10,941
Projected benefit obligation (14,533) (14,754)
Projected benefit obligation in
excess of plan assets (1,567) (3,813)
Unrecognized net loss 2,972 4,373
Adjustment to recognize minimum liability (3,014) (4,373)
Pension related liability included in the
consolidated balance sheets $ (1,609) $ (3,813)
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 $1,839 at December 27,
1997 and $2,668 at December 28, 1996.
The weighted average discount rate used in determining the projected
benefit obligation was 7.0% for each year presented. There has been no
increase in future compensation levels assumed due to the freezing of
benefits in 1993. The assumed long-term rate of return on plan assets was
8.5% for each year presented.
NOTE I--INCOME TAXES
The provision (benefit) for income taxes on income (loss) from continuing
operations consists of the following:
1997 1996 1995
Current Deferred Current Deferred Current Deferred
Federal $4,190 $2,220 $ (158) $(3,603) $(1,825) $ (9,586)
State 676 97 1,223 (1,792) 748 (1,830)
Total $4,866 $2,317 $1,065 $(5,395) $(1,077) $(11,416)
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: 1997 1996
Property, plant and equipment $28,749 $28,042
Inventories 1,097 3,404
Intangible assets 1,185 972
Other 3,241 3,016
Total deferred tax liabilities 34,272 35,434
Deferred Tax Assets:
Post-retirement benefits 3,007 3,150
Other employee benefits 2,046 2,276
Alternative minimum tax 2,674 5,739
Allowances for bad debts,
claims and discounts 1,891 2,749
Other 1,700 1,366
Valuation reserve --- ---
Total deferred tax assets 11,318 15,280
Net deferred tax liabilities $22,954 $20,154
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:
1997 1996 1995
Statutory rate applied to income
(loss) from continuing operations $ 6,393 $(5,285) $(21,988)
Plus state income taxes net of
Federal tax effect 948 (375) (714)
Total statutory provision (benefit) 7,341 (5,660) (22,702)
Increase(decrease) attributable to:
Nondeductible amortization of and
impairment adjustments to
intangible assets 305 1,020 9,816
Nondeductible portion of
travel and entertainment 228 193 267
Net operating loss carryback
benefit (781) --- ---
Other items 90 117 126
Total tax provision (benefit) $ 7,183 $(4,330) $(12,493)
Income tax payments, net of income tax refunds received, were $3,162 in
1997 and $1,677 in 1996. Income tax refunds received, net of income tax
payments, were $1,072 in 1995.
NOTE J--COMMON STOCK AND EARNINGS PER SHARE
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.
In August 1996, the Company's Board of Directors adopted a stock ownership
plan applicable to the senior management of the Company for the purpose of
encouraging each participant to make a significant investment in the
Company's Common Stock. Pursuant to the plan, at December 27, 1997,
512,477 shares were subscribed at an average price of $6.11 per share and
at December 28, 1996, 449,300 shares were subscribed at a price of $4.875
per share.
The following table sets forth the computation of basic and diluted
earnings (loss) per share:
1997 1996 1995
Net income (loss) $11,619 $(11,213) $(52,179)
(No adjustments needed for diluted
calculation)
Denominator for calculation of
basic earnings per share -
weighted average shares (1) 11,229 11,200 11,744
Effect of dilutive securities:
Stock options 332 --- ---
Stock subscriptions 204 --- ---
Denominator for calculation of
diluted earnings per share -
weighted average shares
adjusted for potential
dilution (2) 11,765 11,200 11,744
Earnings (loss) per share:
Basic $ 1.03 $ (1.00) $ (4.44)
Diluted 0.99 (1.00) (4.44)
(1) Includes Common and Class B Common shares in thousands
(2) Because their effects are anti-dilutive, excludes shares issuable under
stock option, stock subscription, and restricted stock plans whose grant
price was greater than the average market price of common shares
outstanding and the assumed conversion of subordinated debentures into
shares of Common Stock as follows: 1,737 shares in 1997, 3,100 shares in
1996, and 2,161 shares in 1995.
NOTE K--STOCK PLANS
The Company's 1990 Incentive Stock Plan reserves 2,270,000 shares of Common
Stock (including 500,000 shares approved by the Board of Directors and
recommended to the shareholders for approval at the annual meeting) for
sale or award to key associates or to the outside directors of the Company
under stock options, stock appreciation rights, restricted stock
performance grants, or other awards. Outstanding options are generally
exercisable at a cumulative rate of 25% per year after the second year from
the date the options are granted and generally expire after ten years from
the date of grant. 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 28, 1996 no options remain outstanding under the 1983 plan.
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 the amendment, the options become exercisable at a
cumulative rate of 25% per year beginning on May 4, 1997.
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
Industries, Inc.
A summary of the option activity for 1995 is as follows:
Number of Exercise Price
Shares Per Share
Outstanding at December 31, 1994 618,316 $ 3.19 - $19.50
Granted 716,000 6.50 - 8.00
Exercised (3,057) 3.43 - 5.03
Canceled (561,500) 8.00 - 17.00
Outstanding at December 30, 1995 769,759 $ 3.19 - $19.50
A summary of the 1996 and 1997 option activity is as follows:
Weighted-
Weighted- Average
Number Average Fair Value of
of Exercise Options Granted
Shares Price During the Year
Outstanding at December 30, 1995 769,759 $ 7.74
Granted at market price 532,500 5.49 $2.61
Granted above market price 85,000 6.33 2.57
Exercised (12,227) 3.96
Forfeited (111,190) 7.55
Expired (4,000) 19.50
Outstanding at December 28, 1996 1,259,842 6.71
Granted at market price 499,500 9.74 4.45
Granted above market price 12,000 14.30 5.54
Exercised (22,825) 6.46
Forfeited (80,250) 7.28
Outstanding at December 27, 1997 1,668,267 $ 7.65
Options exercisable at
December 28, 1996 45,342 $ 4.85
December 27, 1997 240,392 6.85
The following table summarizes information about stock options at
December 27, 1997:
Options Outstanding
Weighted-Average
Range of Number of Remaining Weighted-Average
Exercise Prices Shares Contractual Life Exercise Price
$3.43 - $ 5.27 176,267 7.4 years $ 4.82
5.75 - 8.00 1,216,000 7.9 6.99
9.25 - 14.30 276,000 9.5 12.37
$3.43 - $14.30 1,668,267 8.1 $ 7.65
Options Exercisable
Range of Number of Weighted-Average
Exercise Prices Shares Exercise Price
$3.43 - $5.27 41,267 $4.86
5.75 - 8.00 199,125 7.26
$3.43 - $8.00 240,392 $6.85
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-
average assumptions:
1997 Grants 1996 Grants 1995 Grants
Expected life 5 years 5 years 5 years
Expected volatility 41.6% 44.3% 42.6%
Risk-free interest rate 6.25% 6.38% 6.75%
Dividend yield 0% 0% 0%
The following pro forma summary presents the Company's net income (loss)
and earnings (loss) per share which would have been reported had the
Company determined stock compensation cost using the alternative fair value
method of accounting set forth under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation". The pro
forma impact on net income (loss) shown below may not be representative of
future pro forma effects.
1997 1996 1995
Pro forma
Net income (loss) $11,073 $(11,495) $(52,282)
Earnings (loss)
per share:
Basic .99 (1.03) (4.45)
Diluted .94 (1.03) (4.45)
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 27, 1997, 29,740 shares
remained available for issue. Shares sold under this plan are held in
escrow until paid for and are subject to repurchase agreements which give
the Company the right of first refusal at the prevailing market price.
Numbers of shares sold under the plan were 38,500 in 1997, 1,800 in 1996,
and 2,100 in 1995.
NOTE L--ASSET VALUATION LOSSES
The Company incurred asset valuation losses of $18,995 ($13,074, after
taxes) in 1996 and $63,425 ($51,058, after taxes) in 1995.
The losses recorded in 1996 consisted of $14,297 related to a write-down of
the Company's Tarboro textile spinning operation to its estimated net
recoverable value following the Company's decision to exit this business
and hold the facility for sale. Losses relating to Tarboro operations of
$4,304, excluding the write-down described above, were included in the
Company's textile segment results for 1996. Additional losses of $4,698
consisted primarily of write-downs of fixed assets and related intangibles
where expected future cash flows are less than the assets' carrying value.
Included in the 1996 asset valuation losses are $3,395 related to
intangibles.
At December 27, 1997, the Tarboro facility continued to operate while being
held for sale. The Company anticipates completion of a transaction during
fiscal 1998. Operating results of the Company's textile and apparel
business included an operating profit of $864 associated with the Tarboro
operation. In accordance with Statement of Financial Accounting Standards
No. 121, no depreciation expense was recorded for the Tarboro physical
assets, which are held for sale. Depreciation expense for the Tarboro
assets was $3,585 in 1996 prior to the Company's decision to hold the
facility for sale.
Asset valuation losses recorded in 1995 included a $41,480 loss to adjust
the assets of the Company's thread business to their estimated fair market
value following an agreement in principle to sell the assets. Additional
1995 asset valuation losses of $17,988 in the Company's textile business
related to a plant sold in 1995, equipment write-downs and the
consolidation of certain facilities. The floorcovering segment included
losses of $3,957 primarily related to the write-down of equipment utilized
for a product line to be discontinued.
NOTE M--RESTRUCTURING AND EXIT COSTS
At December 28, 1996, the financial statements included $1,311 of accrued
costs associated with the exit of two product lines in the Company's
floorcovering business and consolidations of facilities in both the
floorcovering and textile/apparel businesses.
Included in the accrual were $600 associated with involuntary termination
benefits related to 40 production associates and 29 sales, administrative
or distribution associates. These costs were classified in "Selling and
administrative expenses" in the Company's financial statements. At
December 27, 1997, $60 remains accrued related to involuntary termination
benefits.
Additional costs that were incremental and directly attributable to the
exit and consolidations totaling $711 were recorded in 1996. These costs
primarily relate to inventory devaluations and impairment of current assets
associated with discontinued product lines and clean up costs related to a
facility idled in a consolidation. Of these costs, $326 were classified in
"Cost of sales" and $385 were classified in "Other expense - net" in the
Company's financial statements. At December 27, 1997, $92 remains accrued
related to impairment of current assets associated with discontinued
product lines and facility clean up costs.
NOTE N--CASUALTY DAMAGE
The Company recognized insurance benefits of $5,148 in 1995 related to
manufacturing facilities that were damaged or destroyed in 1993 and 1994.
These benefits were included in other income in the financial statements.
NOTE O--COMMITMENTS
The Company had commitments for purchases of machinery and equipment,
building construction, and information system of approximately $10,362 at
December 27, 1997.
NOTE P--INDUSTRY SEGMENT INFORMATION
The Company operates in two industry segments: Floorcovering and
Textile/Apparel. Floorcovering includes carpet for manufactured housing,
recreational vehicles, high-end residential and commercial markets, rugs
and yarns. Textile/Apparel includes yarns, knit fabrics and apparel.
Net Sales Operating Profit(Loss)(1)
1997 1996 1995 1997 1996 1995
Business Segments:
Floorcovering $433,248 $366,431 $361,520 $30,724 $ 23,584 $ 20,213
Textile/Apparel 229,757 251,968 313,697 8,852 (20,166) (63,958)
Intersegment
elimination (1,162) (3,318) (4,375) 7 18 (3)
Segment total $661,843 $615,081 $670,842 39,583 3,436 (43,748)
Interest expense 12,583 13,000 15,591
Corporate expenses 9,315 6,156 5,444
Other (income) expense - net (1,117) (177) (111)
Consolidated income (loss)
before income taxes $18,802 $(15,543) $(64,672)
Identifiable Capital
Assets at Year End Expenditures
1997 1996 1995 1997 1996 1995
Business Segments:
Floorcovering $231,714 $185,071 $189,208 $18,961 $11,016 $19,591
Textile/Apparel 138,853 129,692 192,134 7,336 5,539 10,222
Corporate 16,047 13,372 15,655 222 1,079 453
Total $386,614 $328,135 $396,997 $26,519 $17,634 $30,266
Depreciation
and Amortization
1997 1996 1995
Business Segments:
Floorcovering $15,181 $13,847 $13,988
Textile/Apparel 8,686 13,802 21,444
Corporate 628 546 548
Total $24,495 $28,195 $35,980
(1) 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:
1997 1996 1995
Floorcovering $ --- $ 1,136 $ (91)
Textile/Apparel --- 17,609 58,468
NOTE Q--SUBSEQUENT EVENT
In February 1998, the Company received a commitment letter from its
principal senior lenders agreeing to replace its unsecured revolving credit
and term-loan facility with a new unsecured credit facility that would
provide for revolving credit of up to $100.0 million through a five year
commitment period and a $60.0 million, seven year term-loan. The new
credit facility is expected to have financial covenants and interest rates
similar to those of the Company's existing revolving credit and term-loan
facility. The transaction, which is subject to certain contingencies,
including the execution of a mutually acceptable credit agreement, is
expected to be completed in early April 1998. Assuming the transaction is
completed as structured in the commitment letter, the Company's committed
borrowing capacity would be increased by approximately $50.0 million.
Under the revised agreement, the Company's maturities of long-term debt for
the five years succeeding December 27, 1997 would be as follows: $7,268 in
1998, $9,947 in 1999, $15,950 in 2000, $16,285 in 2001, and $16,287 in 2002
(see Note F).
<TABLE>
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE DIXIE GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
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 27, 1997:
Reserves deducted from asset
accounts:
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $ 3,614 $ 386 $ -0- $ 793 (2) $ 3,207
Provision to reduce
inventories to net
realizable value 7,346 -0- 2,447 (1) 2,129 (3) 7,664
Provision to reduce
assets held for sale
to estimated fair
market value 18,564 -0- -0- 2,364 (4) 16,200
Year ended December 28, 1996:
Reserves deducted from asset
accounts:
Allowance for doubtful
accounts $ 3,156 $ 1,538 $ -0- $ 1,080 (2) $ 3,614
Provision to reduce
inventories to net
realizable value 9,668 -0- -0- 2,322 (3) 7,346
Provision to reduce assets
held for sale to estimated
fair market value 23,005 13,425 -0- 17,866 (4) 18,564
<CAPTION>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE DIXIE GROUP, INC. AND SUBSIDIARIES
(dollars in thousands)
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 30, 1995:
Reserves deducted from asset
accounts:
Allowance for doubtful
<S> <C> <C> <C> <C> <C>
accounts $ 3,617 $ 1,259 $-0- $ 1,720 (2) $ 3,156
Provision to reduce
inventories to net
realizable value 10,052 -0- -0- 384 (3) 9,668
Provision to reduce assets
held for sale to estimated
fair market value 1,999 21,006 -0- -0- 23,005
<FN>
(1) Increase in reserves in connection with business combinations.
(2) Uncollectible accounts written off, net of recoveries.
(3) Provision for current items net of reductions for previous items.
(4) Reserve reductions for assets sold.
</TABLE>
ANNUAL REPORT ON FORM 10-K
ITEM 14 (c)
EXHIBITS
YEAR ENDED DECEMBER 27, 1997
THE DIXIE GROUP, INC.
CHATTANOOGA, TENNESSEE
Exhibit Index
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(3a) Restated Charter of The Incorporated by reference to
Dixie Group, Inc. Exhibit (3) to Dixie's Quarterly
Report on Form 10-Q for the
quarter ended March 29, 1997.*
(3b) Amended and Restated By- Incorporated by reference to
Laws of Dixie Yarns, Inc. Exhibits (3b) and (3c) to Dixie's
Annual Report on Form 10-K for
the year ended December 29,
1990.*
(4a) Second Amended and Restated Incorporated by reference to
Revolving Credit and Term Exhibit (4a) to Dixie's Annual
Loan Agreement, dated Report on Form 10-K for the
January 31, 1992, by and year ended December 28, 1991.*
among Dixie Yarns, Inc. and
Trust Company Bank, NationsBank
of North Carolina, N.A. and
Chemical Bank.
(4b) Loan Agreement, dated Incorporated by reference to
February 6, 1990 between Exhibit (4d) to Dixie's Annual
Dixie Yarns, Inc. and New Report on Form 10-K for the
York Life Insurance Company year ended December 30, 1989.*
and New York Life Annuity
Corporation.
(4c) Form of Indenture, dated Incorporated by reference to
May 15, 1987 between Dixie Exhibit 4.2 to Amendment No. 1
Yarns, Inc. and Morgan of Dixie's Registration
Guaranty Trust Company of Statement No. 33-140 78 on Form
New York as Trustee. S-3, dated May 19, 1987.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(4d) Revolving Credit Loan Incorporated by reference to
Agreement dated as of Exhibit (4d) to Dixie's Annual
September 16, 1991 by Report on Form 10-K for the
and among Ti-Caro, Inc. and year ended December 28, 1991.*
Trust Company Bank,
individually and as agent,
NCNB National Bank, and
Chemical Bank.
(4e) First Amendment to Revolving Incorporated by reference to
Credit Loan Agreement dated Exhibit (4e) to Dixie's Annual
as of August 19, 1992 by and Report on Form 10-K for the
among Ti-Caro, Inc., T-C year ended December 26, 1992.*
Threads, Inc. and Trust
Company Bank, individually
and as agent, NCNB National
Bank, and Chemical Bank.
(4f) First Amendment, dated Incorporated by reference to
August 25, 1993 to Second Exhibit (4f) to Dixie's Annual
Amended and Restated Report on Form 10-K for the year
Revolving Credit and Term ended December 25, 1993.*
Loan Agreement dated
January 31, 1992, by and among
Dixie Yarns, Inc. and Trust
Company Bank, NationsBank of
North Carolina, N.A. and
Chemical Bank.
(4g) Third Amended and Restated Incorporated by reference to
Credit Agreement dated Exhibit (4) to Dixie's Quarterly
March 31, 1995. Report on Form 10-Q for the
quarter ended April 1, 1995.*
(4h) Waiver and First Amendment Incorporated by reference to
to Credit Agreement dated Exhibit (4h) to Dixie's Annual
February 27, 1996. Report on Form 10-K for the year
ended December 30, 1995.*
(4i) Waiver and Modification Incorporated by reference to
Agreement dated Exhibit (4i) to Dixie's Annual
November 1, 1996. Report on Form 10-K for the year
ended December 28, 1996.*
(4j) Waiver Letter dated Incorporated by reference to
December 13, 1996. Exhibit (4j) to Dixie's Annual
Report on Form 10-K for the year
ended December 28, 1996.*
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(4k) Second Amendment dated Incorporated by reference to
September 7, 1997 to the Exhibit (4) to Dixie's Quarterly
Third Amended and Restated Report on Form 10-Q for the
Credit Agreement dated quarter ended September 27, 1997.*
March 31, 1995.
(4l) Amendment to 9.96% Senior Filed herewith.
Subordinated Notes due
February 1, 2010.
(4m) Letter agreement dated Filed herewith.
February 17, 1998 re:
Amendment to 9.96% Senior
Subordinated Notes due
February 1, 2010.
(10a) 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.*
(10b) 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.*
(10c) 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.*
(10d) 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).
(10e) 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).
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10f) 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).
(10g) 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.
(10h) 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.
(10i) 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.
(10j) 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.
(10k) Asset Purchase Agreement Incorporated by reference to
dated May 23, 1996, by and Exhibit (2a) to Dixie's Current
among T-C Threads, Inc. Report on Form 8-K dated
d/b/a Threads USA, Threads June 3, 1996.*
of Puerto Rico, Inc.,
Productos para la Industria
de la Maquila, S. A., PRIMA,
Hilos y Accessorios, S. A.
de C. V., and Dixie Yarns,
Inc. and American & Efird,
Inc.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10l) Amendment, dated May 31, Incorporated by reference to
1996, to Asset Purchase Exhibit (2b) to Dixie's Current
Agreement dated May 23, Report on Form 8-K dated
1996, by and among T-C June 3, 1996.*
Threads, Inc. d/b/a Threads
USA, Threads of Puerto Rico,
Inc., Productos para la
Industria de la Maquila,
S. A., PRIMA, Hilos y
Accessorios, S. A. de C. V.,
and Dixie Yarns, Inc. and
American & Efird, Inc.
(10m) Second Amendment, dated Incorporated by reference to
June 3, 1996, to Asset Exhibit (2c) to Dixie's Current
Purchase Agreement dated Report on Form 8-K dated
May 23, 1996, by and among June 3, 1996.*
T-C Threads, Inc., d/b/a
Threads USA, Threads of
Puerto Rico, Inc., Productos
para la Industria de la
Maquila, S. A., PRIMA, Hilos
y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(10n) Yarn and Finished Goods Incorporated by reference to
Agreement dated as of Exhibit (2d) to Dixie's Current
June 3, 1996, by and among Report on Form 8-K dated
T-C Threads, Inc. d/b/a June 3, 1996.*
Threads USA, Threads of
Puerto Rico, Inc., Productos
para la Industria de la
Maquila, S. A., PRIMA, Hilos
y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
(10o) Accounts Receivable Incorporated by reference to
Agreement dated as of Exhibit (2e) to Dixie's Current
June 3, 1996, by and among Report on Form 8-K dated
T-C Threads, Inc. d/b/a June 3, 1996.*
Threads USA, Threads of
Puerto Rico, Inc., Productos
para la Industria de la
Maquila, S. A., PRIMA, Hilos
y Accessorios, S. A. de
C. V., and Dixie Yarns, Inc.
and American & Efird, Inc.
* Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10p) Noncompetition Agreement Incorporated by reference to
dated as of June 3, 1996, by Exhibit (2f) to Dixie's Current
and among T-C Threads, Inc. Report on Form 8-K dated
d/b/a Threads USA, Threads June 3, 1996.*
of Puerto Rico, Inc.,
Productos para la Industria
de la Maquila, S. A., PRIMA,
Hilos y Accessorios, S. A.
de C. V., and Dixie Yarns,
Inc. and American & Efird,
Inc.
(10q) Asset Purchase Agreement Incorporated by reference to
dated as of August 29, 1997 Exhibit (2) to Dixie's Current
among The Dixie Group, Inc., Report on Form 8-K dated
Bretlin, Inc., Foamex L.P. August 29, 1997.
and General Felt Industries,
Inc.
(10r) Dixie Yarns, Inc. Incentive Incorporated by reference to
Stock Plan as amended. ANNEX A to Dixie's Proxy Statement
dated March 27, 1998 for its 1998
Annual Meeting of Shareholders.
(10s) Form of Nonqualified Stock Incorporated by reference to
Option Agreement Under the Exhibit (10a) to Dixie's Quarterly
Dixie Yarns, Inc. Incentive Report on Form 10-Q for the
Stock Plan. quarter ended July 1, 1995.*
(10t) Form of Amendment to Incorporated by reference to
Nonqualified Stock Option Exhibit (10b) to Dixie's Quarterly
Agreement Under the Dixie Report on Form 10-Q for the
Yarns, Inc. Incentive Stock quarter ended July 1, 1995.*
Plan.
(10u) Form of Stock Option Incorporated by reference to
Agreement Under the Dixie Exhibit (10b) to Dixie's Annual
Yarns, Inc. Incentive Report on Form 10-K for the
Stock Plan as amended. Year ended December 28, 1996.*
(10v) Form of Stock Rights and Filed herewith.
Restrictions Agreement
for Restricted Stock Award
Under Incentive Stock Plan
as Amended.
(10w) The Dixie Group, Inc. Stock Filed herewith.
Ownership Plan as
amended.
*Commission File No. 0-2585
Exhibit Index - Continued
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(10x) Form of Stock Subscription Filed herewith.
Agreement Under Stock
Ownership Plan of The
Dixie Group, Inc.
(10y) The Dixie Group, Inc. Filed herewith.
Directors Stock Plan
(21) Subsidiaries of the Filed herewith.
Registrant.
(23) Consent of Ernst & Young LLP. Filed herewith.
*Commission File No. 0-2585
EXHIBIT (4l)
AMENDMENT TO 9.96% SENIOR SUBORDINATED
NOTES DUE FEBRUARY 1, 2010
This shall constitute an amendment to the 9.96% Senior Subordinated
Notes due February 1, 2010, by and between New York Life Insurance Company,
or registered assigns, and Dixie Yarns, Inc. dated February 6, 1990, in the
aggregate principal amount of $50,000,000 and the related Loan Agreement
dated February 6, 1990, by and between the same parties, which is
incorporated therein by reference (together the "NYL Notes"). All defined
terms herein shall have the same meaning as in the NYL Notes unless a
different meaning is clearly set forth herein.
Whereas, Dixie Yarns, Inc. (the "Company"), whose name has been
changed to The Dixie Group, Inc., and New York Life Insurance Company or
registered assigns (the "holders") have agreed to certain amendments to
the terms of the NYL Notes as set forth herein; and
Whereas, the parties hereto desire to amend the NYL Notes to reflect
the amendments agreed upon by them.
Now, Therefore, for and in consideration of the mutual promises
contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be bound hereby, agree as follows:
1. Section 9, paragraph (F) of the NYL Notes is hereby deleted in its
entirety and the following is substituted therefor:
(F) DIVIDENDS. The Company will not declare or pay, or set apart any
funds for the payment of, any dividends (other than dividends paid or
payable in capital stock of the Company) on any shares of capital stock of
the Company, by reduction of the Company's capital surplus or otherwise, or
make any other distribution in respect of any shares of capital stock of
the Company ("Dividend Action"), if immediately after giving effect to
such Dividend Action (i) the sum of the amounts declared and paid or
payable as, or set apart for, dividends (other than dividends paid or
payable in capital stock of the Company) on, or distribution (taken at cost
to the Company or fair value at time of distribution, whichever is higher)
in respect of, all shares of capital stock of the Company subsequent to
December 31, 1997, would be in excess of $1,000,000 plus 50% of aggregate
cumulative Consolidated net income as defined in the NYL Notes for all
periods subsequent thereto, determined as of the first day of the fiscal
quarter in which a Dividend Action is declared by the Board of Directors of
the Company; or (ii) if the Company's Interest Coverage Ratio for the
fiscal period consisting of the four fiscal quarters immediately preceding
such Dividend Action is less than the ratio set forth below:
Four Quarter Fiscal Period Ending In Ratio
Fiscal year 1998 1.25 to 1
Fiscal year 1999 and thereafter 1.50 to 1
For the purpose of determining the Company's compliance with this
obligation, Interest Coverage Ratio shall mean, with respect to the
applicable period, the ratio of (i) Consolidated net income as defined in
the NYL Notes plus, to the extent deducted in determining such Consolidated
net income, interest expense of the Company and its subsidiaries for the
applicable period and any provision for taxes for such period (whether paid
or deferred), exclusive of any non-cash gains or losses associated with
restructuring or consolidations and gains or non-cash losses from sales of
assets other than inventory sold in the ordinary course of business, to
(ii) interest expense, of the Company and its subsidiaries, for the
applicable period.
2. Section 9, paragraph (G) of the NYL Notes is hereby deleted in its
entirety and the following is substituted therefor:
(G) MINIMUM NET WORTH. The Company will not permit its
consolidated Net Worth, measured at the end of each fiscal quarter,
(exclusive of any amount previously written down for the property,
machinery and related assets of the Tarboro manufacturing facility located
in Tarboro, North Carolina, adjusted for any subsequent gain or non-cash
losses on the sale of such property) to be at any time less than
$115,000,000 plus fifty percent (50%) of the aggregate cumulative
Consolidated net income (excluding losses) as defined in the NYL Notes, for
any fiscal quarter from and after the beginning of the 1998 fiscal year;
provided however, that net losses for any quarter during a fiscal year may
be offset to the extent of net income during another quarter in the same
fiscal year, but net losses for any fiscal year shall not be offset against
net income for any other fiscal year and shall not reduce the amount of the
minimum net worth requirements at the beginning of such fiscal year.
3. Section 9, paragraph (A) of the NYL Notes is hereby deleted in its
entirety and the following is substituted therefor:
(A) FUNDED INDEBTEDNESS OF THE COMPANY. The Company will not
borrow or incur additional Funded Indebtedness if, immediately after giving
effect thereto, the aggregate principal amount of Funded Indebtedness would
exceed the percentage ratio set forth in the table below of the
Capitalization of the Company; except that nothing in this paragraph (A)
shall prohibit the renewal or refinancing of any Funded Indebtedness
heretofore or hereafter incurred or assumed in compliance with this
paragraph (A), provided such renewal or refinancing shall not result in an
increase in the outstanding principal amount of such Funded Indebtedness.
Period Ratio
Fiscal year 1998 72.5%
Fiscal year 1999 70.0%
Fiscal year 2000 and thereafter 67.5%
For the purpose of this paragraph only, Funded Indebtedness shall mean as
of any date of determination the sum of all indebtedness, whether senior or
subordinated indebtedness, (including the 7% Convertible Subordinated
Debentures due 2012), which would in accordance with generally accepted
accounting principles constitute long term or short term debt, any amount
of off-balance sheet financing that is not shown on the balance sheet as
debt,(including the 6.08% Trade Receivable-Backed Certificates, Series
1993-1), all reimbursement obligations under any letters of credit or
acceptances (excluding letters of credit incurred in the ordinary course by
another person other than with respect to Indebtedness of such person for
money borrowed, including, without limitation, letters of credit issued for
workers compensation and other insurance liabilities and trade letters of
credit), all guarantees of obligations of another person, whether direct or
indirect, contingent or otherwise, including but not limited to an
obligation of such other person to purchase or otherwise acquire, or
otherwise insure any creditor against loss in respect of, Indebtedness of
any other person for borrowed money, and any amount representing mandatory
dividend rights on capital stock or other equity of the Company.
Capitalization shall mean as of any date of determination the sum of Funded
Indebtedness plus Stockholders Equity (Net Worth) as reflected on the
consolidated balance sheet of the Company plus an amount not to exceed
$31,400,000 relating to the write-down of assets of T-C Threads, Inc. and
its Subsidiaries.
4. As consideration for the amendments herein provided for, the
Company agrees to pay to the holders, to be divided ratably between them,
an additional fee in the amount of $250,000.
5. Notwithstanding the provisions of Section 9(B) and (D) of the NYL
Notes, all wholly owned subsidiaries of the Company that have assets of
$1,000,000 or more, except for Dixie Funding, Inc., shall guarantee the
NYL Notes and shall be permitted to guarantee the Senior Indebtedness of
the Company. All such guarantees of such Subsidiaries of the Company of
the NYL Notes shall be subordinated to the obligations of the subsidiaries
under the guarantee of the Senior Indebtedness in the same manner and to
the same extent as the NYL Notes are subordinated to the Senior
Indebtedness, and such subordination provisions shall be expressly set
forth in any such guarantees of the NYL Notes.
6. The Company shall provide calculations of and a certificate of
compliance with the Dividends, Minimum Net Worth and Funded Indebtedness
requirements set forth herein as soon as reasonably possible, and in any
event within 60 days after the close of each of the first three fiscal
quarters of the Company in each fiscal year and within 90 days after the
close of each fiscal year of the Company.
In all other respects except as specifically amended herein, the NYL
Notes shall remain in effect as on the date hereof unchanged. This
amendment has been approved in accordance with the provisions of Section 10
of NYL Notes and has been approved by 66-2/3% of the NYL Note holders as
evidenced by their signatures hereto.
The Dixie Group, Inc., formerly
Dixie Yarns, Inc.
By: Gary A. Harmon
Its: Treasurer
New York Life Insurance New York Life Insurance
Company and Annuity Corporation
By: New York Life Insurance
Company
By: Steven M. Benevento By: Steven M. Benevento
Its: Investment Manager Its: Investment Manager
Exhibit (4m)
SunTrust Bank, Atlanta
Post Office Box 4418
Atlanta, GA 30302-4418
February 17, 1998
The Dixie Group, Inc.
1100 Watkins Street
Chattanooga, Tennessee 37404
Attention: Mr. Gary Harmon
Re: Third Amended and Restated Credit Agreement, dated as of
March 31, 1995, by and among The Dixie Group, Inc. (formerly
known as Dixie Yarns, Inc.), SunTrust Bank Atlanta (formerly
known as Trust Company Bank), individually and as Agent,
NationsBank, N.A. (formerly known as NationsBank, N.A.
(Carolinas)), individually and as Lead Manager, and Chemical
Bank, as amended
Ladies and Gentlemen:
Reference is hereby made to that certain Third Amended and Restated
Credit Agreement, dated as of March 31, 1995, by and among The Dixie Group,
Inc. (formerly known as Dixie yarns, Inc.) (the "Borrower"), SunTrust Bank,
Atlanta (formerly known as Trust Company Bank), individually and as Agent,
NationsBank, N.A. (formerly known as NationsBank, N.A. (Carolinas)),
individually and as Lead Manager and Chemical Bank, as amended through the
date hereof (the "Credit Agreement"). All terms used herein without
definition shall have the meaning set forth in the Credit Agreement.
Pursuant to Section 9.12 of the Credit Agreement, the Borrower is
restricted from modifying or amending Subordinated Debt and documents
relating to Subordinated Debt to add or make more onerous any provision
thereof.
The Borrower has requested that the Agent and the Lenders, by their
signatures below, consent to the execution and delivery by the Borrower of
that certain amendment of the Senior Subordinated Note Agreement in the
form attached hereto as Exhibit A.
Except as expressly set forth herein, this letter agreement shall not
be deemed to be a waiver of any provisions of the Credit Agreement or any
other Credit Document and shall not preclude the future exercise of any
right, power or privilege available to the Agent, the Lead manager or the
Lenders whether under the Credit Agreement or otherwise.
The Dixie Group, Inc.
February 17, 1998
Page 2
This letter agreement constitutes the entire understanding of the
parties with respect to the subject matter hereof, and any other prior or
contemporaneous agreements, whether written or oral, with respect thereto
are expressly superseded hereby. This letter agreement shall be governed
by and construed in accordance with the laws of the State of Georgia. This
letter agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto. This letter agreement may be
executed by telecopy and such facsimile signature shall be binding upon all
parties hereto.
Please indicate your consent to the terms and conditions of this
letter agreement by signature of your authorized officers in the space
indicated below. This letter agreement shall be effective upon receipt by
the Agent of an executed counterpart hereof from the Required Lenders.
SUNTRUST BANK, ATLANTA,
Individually and as Agent
By: Bradley J. Staples
Title: Assistant Vice President
NATIONSBANK, N.A.,
Individually and as Lead Manager
By: David H. Dinkins
Title: Vice President
CHASE MANHATTAN BANK,
Accepted and Agreed as the Date First
Set Forth Above
By: Karen M. Sharf
Title: Vice President
ACCEPTED AND AGREED
AS OF THE DATE FIRST ABOVE
WRITTEN
THE DIXIE GROUP, INC.
By: Gary A. Harmon
Title: Treasurer
Exhibit (10v)
THE DIXIE GROUP, INC.
Amended and Restated
Stock Rights and Restrictions Agreement
for
Restricted Stock Award
Under
1990 Incentive Stock Plan
Stock Rights and Restrictions Agreement made as of this
______ day of _______________, 199____, by and between The Dixie
Group, Inc., a Tennessee corporation (hereinafter referred to as
the "COMPANY"), and ______________________________________, an
employee of the Company (hereinafter referred to as the
"PARTICIPANT");
W I T N E S S E T H:
WHEREAS, the shareholders of the Company have approved the
1990 Incentive Stock Plan, as amended (hereinafter referred to
as the "PLAN"), for the purpose of providing financial
incentives to directors of the Company and to selected key
associates of the Company and its Affiliates who contribute
significantly to the strategic and long-term performance
objectives and growth of the Company and its Affiliates; and
WHEREAS, the Company desires to grant to the Participant an
Award of restricted shares of the Company's common stock under
the Plan as a financial incentive and in consideration for the
Participant's agreement to abide by the terms and conditions of
the covenant not to compete contained in Section 10 hereof, and
upon the additional terms and subject to the conditions
described herein; and
WHEREAS, the Participant desires to accept such grant and
to enter into the covenant not to compete contained in Section
10 hereof in consideration for such grant; and
WHEREAS, this Amended and Restated Agreement is intended to
replace and supersede any prior Stock Rights and Restricted
Agreement for Restricted Stock awarded to Participant.
NOW, THEREFORE, in consideration of the mutual covenants
herein set forth, for other good and valuable consideration, and
subject to the terms and conditions of the Plan (a copy of which
is or has been furnished to Participant) which are hereby
incorporated herein by reference, the parties hereto hereby
agree as follows:
1. ADMINISTRATION. Under the Plan the Compensation
Committee of the Board of Directors of the Company ("COMMITTEE")
administers the Plan, may grant shares of restricted stock and
other Awards under the Plan, construe and interpret the Plan,
establish rules and regulations and perform all other acts as it
believes reasonable and proper under the Plan. Any Award may be
canceled if a Participant violates the terms of either this
Stock Rights and Restrictions Agreement or the Plan or acts in a
manner which the Committee determines to be inimical to the best
interest of the Company. Any decision made, or action taken, by
the Committee shall be final, conclusive and binding on both
parties to this Agreement.
2. AWARD OF RESTRICTED SHARES. Effective _______________,
(the date the Committee approved this grant) the Committee
hereby irrevocably grants to the Participant ____________ shares
of the Company's Common Stock, par value $3.00 per share, as an
Award of shares of restricted stock (the "RESTRICTED SHARES")
pursuant to the Plan and as incentive compensation, subject to
the terms and conditions hereinafter set forth. The number of
Restricted Shares which are the subject of this Award shall be
subject to antidilution and other adjustments in accordance with
PARAGRAPH 15 of the Plan, provided that any additional shares
issued as a result of such an adjustment shall be Restricted
Shares as if such shares were originally issued subject hereto.
By signing his name to the acceptance at the end of this
Agreement, the Participant hereby irrevocably agrees to accept
such Award subject to the terms and conditions hereinafter set
forth.
3. LENGTH OF THE RESTRICTED PERIOD. This Award of
Restricted Shares is conditioned upon Participant's continued
employment by the Company for a minimum period of _______ (____)
years. Accordingly, and subject to the other provisions of this
Agreement, the restrictions set forth herein with respect to the
Restricted Shares shall remain in full force and effect until
5:00 p.m., Eastern Time, on the ______ (___th) anniversary of
the effective date of the Award set forth in Section 2 hereof.
The period of time from such effective date until the expiration
of restrictions in accordance with the preceding sentence is
referred to herein as the "RESTRICTED PERIOD". The Committee,
in its sole discretion, may elect to accelerate (but not delay)
the expiration of the Restricted Period with respect to all or
any portion of the Restricted Shares.
4. RESTRICTIONS ON TRANSFER DURING THE RESTRICTED PERIOD.
During the Restricted Period, the Restricted Shares shall not
be transferable by the Participant. More particularly, such
shares may not be sold, assigned or transferred (whether by
sale, gift or otherwise), pledged, hypothecated or encumbered in
whole or in part either directly or by operation of law or
otherwise including, but not by way of limitation, by execution,
levy, garnishment, attachment, pledge, bankruptcy or in any
other manner. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of any of the Restricted
Shares in violation of the foregoing provisions shall be null
and void and without effect and shall cause the Participant to
immediately forfeit all rights to the Restricted Shares, which
shall immediately revert to the Company.
5. ANTI-ASSIGNMENT PROVISION. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and
the successors and assigns of the Company and its subsidiaries.
However, except as may be approved by the Committee, where such
approval will not adversely affect compliance of the Plan with
Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), neither the Restricted Shares nor this
Agreement shall be transferable or assignable by the
Participant.
6. TERMINATION OF EMPLOYMENT. Since this Award of
Restricted Shares is being made (subject to the terms and
conditions hereof) as additional incentive compensation and
Participant is not being required to make any payment for the
Restricted Shares, the provisions of PARAGRAPH 7 of the Plan
which deal with the Company's repurchase option are inapplicable
to the Restricted Shares. Instead, upon any termination of the
Participant's employment (as defined in Section 9 hereof) prior
to the expiration of the Restricted Period with respect to any
of the Restricted Shares for any reason other than Participant's
death or disability, regardless of whether such termination is
initiated by Participant or by the Company and regardless of
whether it is for cause or without cause, voluntary or
involuntary, all of the Restricted Shares shall immediately
revert to the Company and the Participant shall cease to have
any right or interest in such shares.
In the event of Participant's death or disability, the
Participant shall be entitled to receive a portion of the
Restricted Shares granted hereunder equal to that fraction of
the Restricted Shares with respect to which the Company has
recognized compensation expense under generally accepted
accounting principles (as such principles are in effect on the
date this Award is effective) as of the date of death or
disability. Disability shall be determined for this purpose in
accordance with Paragraph 12 of the Plan.
7. CERTIFICATES ISSUED WITH RESPECT TO RESTRICTED SHARES.
All certificates evidencing Restricted Shares issued to the
Participant under this Agreement shall be registered in the name
of the Participant, shall be deposited by him, together with a
stock power endorsed in blank, with the Company, and shall bear
a restrictive legend in substantially the following form:
THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO THE
DIXIE GROUP, INC. INCENTIVE STOCK PLAN (THE "PLAN")
AND ARE SUBJECT TO THE TERMS, CONDITIONS AND
LIMITATIONS CONTAINED IN SUCH PLAN AND IN A STOCK
RIGHTS AND RESTRICTIONS AGREEMENT DATED
__________________, 1997. THESE SECURITIES MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF OR ENCUMBERED EXCEPT
IN COMPLIANCE WITH THE PROVISIONS OF THE PLAN AND OF
SUCH AGREEMENT.
Upon the expiration of the Restricted Period with respect to any
of the Restricted Shares represented by any such certificate,
the Company shall: (i) cancel any earlier certificate
evidencing such shares which was issued as described above; and
(ii) issue and deliver to the Participant a certificate of like
tenor representing the number of shares of Common Stock for
which the Restricted Period shall have expired, registered in
the Participant's name but not bearing the restrictive legend
described above.
8. RIGHTS OF PARTICIPANT WITH RESPECT TO RESTRICTED
SHARES. Except as otherwise provided in the Plan or in this
Stock Rights and Restrictions Agreement, Participants who
receive Restricted Shares in accordance with this Agreement
shall have all of the rights of any holder of the Company's
common stock with respect to such shares, including without
limitation the right to vote such shares and to receive any
dividends declared and paid with respect to such shares during
the Restricted Period.
9. EMPLOYMENT. As used herein, the term "employment"
shall mean the employment or performance of services by an
individual for the Company (or any Affiliate of the Company, as
defined in the Plan) in Participant's current officer capacity,
or in any future capacity which constitutes a promotion or
increase in Participant's responsibilities as compared to
Participant's present position as __________________.
"Employment" shall also include any period of "Related
Employment" as set forth in PARAGRAPH 14 of the Plan. Except as
otherwise explicitly provided herein, any other change in
Participant's employment status with the Company shall be deemed
a termination of employment for purposes of this Stock Rights
and Restrictions Agreement.
10. COVENANT NOT TO COMPETE. Participant agrees that for
a period of one (1) year following any termination of
Participant's employment with the Company, Participant will not
own, manage, operate, control, be employed by, engage in or
participate in the ownership, management, operation, control
of, or be connected in any manner with or have any other direct
or indirect financial interest in any business, firm, person,
partnership, corporation, enterprise or concern which is
engaged in any business of the type and character competitive
with the operations of the Company with respect to which
Participant was associated, including any of its subsidiaries
or Affiliates, at the time of Participant's termination of
employment. The above notwithstanding, the Participant may own
stock in any publicly traded corporation that competes with the
Company, provided that such stock constitutes less than one-
percent (1%) of the issued and outstanding stock of such
company.
11. NO RIGHT TO CONTINUED EMPLOYMENT. It is understood
that this Agreement is not intended and shall not be construed
as an agreement or commitment by the Company or any subsidiary
or Affiliate to employ the Participant during the term of the
Restricted Period with respect to the Restricted Shares which
are the subject hereof, or for any fixed period of time.
12. WITHHOLDING. The Company shall not deliver or
otherwise make Restricted Shares, or shares of common stock with
respect to which the Restricted Period has expired, available to
the Participant until the Company has received from Participant,
in cash or any other form acceptable to the Committee, the
amount necessary to enable the Company to remit to the
appropriate government entity on behalf of the Participant any
amounts required to be withheld for taxes, in accordance with
Paragraph 17(f) of the Plan. If the applicable party fails to
cooperate with the Company in fulfilling the requirements of
this Section 13, then the Company shall have the right to
retain, or to sell without notice, a sufficient number of shares
of such stock to cover the amount required to be withheld.
13. PAYMENT OF EXPENSES. The Company shall pay all fees
and expenses necessarily incurred by it in connection with the
issue of shares pursuant hereto and will use its best efforts to
comply with all laws and regulations which, in the opinion of
counsel for the Company, shall be applicable.
14. ENTIRE AGREEMENT. This Stock Rights and Restrictions
Agreement and the Plan represent the entire agreement between
the parties with respect to the subject matter hereof, and
supersedes all negotiations, representations or agreements,
either written or oral, with respect hereto. This agreement may
not be amended, modified or altered, except in writing, duly
accepted and executed by both parties.
15. GOVERNING LAW. This Stock Rights and Restrictions
Agreement has been entered into pursuant to and shall be
governed by the laws of the State of Tennessee.
16. GENDER AND NUMBER. Any use of the masculine includes
the feminine and the neuter; and any use of the singular
includes the plural, whenever such meanings are appropriate.
17. HEADINGS AND DEFINITIONS. The headings appearing at
the beginning of each Section in this Agreement are intended
only as an index and are not to be construed to vary the meaning
of the provision to which they refer. Any capitalized terms
used but not defined herein shall have the meanings assigned to
such terms in the Plan.
IN WITNESS WHEREOF, this Agreement has been duly executed
by the Participant and the Company has caused this Agreement to
be duly executed by its officers thereunto duly authorized on
the date and year above written.
ATTEST: THE DIXIE GROUP, INC.
_______________________ By:_______________________
Name: Title:
Title:
ACCEPTED BY:
__________________________
PARTICIPANT
Name:_____________________
Social Security No.:_________
Exhibit (10w)
THE DIXIE GROUP, INC.
STOCK OWNERSHIP PLAN
PURPOSE: The Board of Directors believes that it is desirable
and in the best interest of the Company to encourage ownership
of Common Stock of the Company by the principal officers of the
Company. It is believed that a substantial investment in the
Company by such officers will encourage and enhance their
incentive to manage the Company for the long term benefit of
its shareholders. Accordingly, the Board of Directors adopts
this Plan in order to carry out such goals.
GOAL: Every participant is encouraged to own that number of
shares of Common Stock of the Company that represents in fair
market value on the date of such subscription two (2) times
such participant's base salary commencing on the first business
day three (3) years following the Initial Subscription Offering
Date (as defined herein) with respect to such participant. For
such purpose, fair market value shall be determined by the
closing price of the Company's Common Stock as reported by NASD
on the date of such determination, or if the Common Stock is
not traded on such day, then the earliest day prior thereto
when such stock trades (the "NASD Price".)
PARTICIPANTS: This Plan shall apply to the Chief Executive
Officer, President, Chief Financial Officer, and all Corporate
vice-presidents, and, such other persons as may be identified
periodically from time to time hereafter by the Compensation
Committee.
PURCHASE FROM COMPANY: In order to facilitate the acquisition
of Common Stock of the Company, the Company will on the date of
adoption of the Plan by the Board of Directors, or as soon
thereafter as may be practical, or on the next anniversary date
of the adoption of the Plan (an "Anniversary Date") that occurs
following the selection of a new corporate officer eligible to
participate in the Plan (or on such earlier date as the
Compensation Committee may designate in the case of a new
corporate officer) (such date, as applicable, the "Initial
Subscription Offering Date"), allow each participant to
subscribe for shares of Common Stock up to but not to exceed
that number of shares having a fair market value based upon the
NASD Price on the Initial Subscription Offering Date equal to
two (2) times the participant's base salary. The subscription
price for such shares shall be the NASD Price on the Initial
Subscription Offering Date.
Thereafter on the two (2) successive Anniversary Dates
following the Initial Subscription Offering Date, a participant
shall be allowed to subscribe for the purchase of additional
shares of Common Stock having a fair market value equal to two
(2) times the participant's base salary on such Anniversary
Date less the subscription price applicable to any previous
subscriptions. The subscription price of such shares shall be
the NASD Price of the Common Stock on the applicable
Anniversary Date for such offering.
Each participant's subscription shall be automatically called
for payment on the third anniversary date of the Initial
Subscription Offering Date with respect to that participant.
At that time, the participant may pay the subscription price in
cash and/or the surrender to the Company of shares of Common
Stock of equal value either (i) owned by the participant or
(ii) subject to acquisition under the subscription.
DEATH OR DISABILITY: In the event of the death of a
participant or the disability of a participant such that the
participant shall no longer continue to be employed by the
Company, all subscriptions outstanding shall become due and
payable, if not earlier pursuant to their terms, six (6) months
from the date of such participant's death or disability, as
applicable.
TERMINATION OF EMPLOYMENT: In the event of the termination of
employment of a participant for any reason other than death or
disability, whether for or without cause, voluntary or
involuntary, all subscriptions outstanding shall become due and
payable, if not earlier pursuant to their terms, ten (10) days
from the participant's termination date.
ACQUISITION: In the event that the Company is acquired by
another person, corporation or legal entity, whether by merger,
consolidation, sale of assets, tender offer or other means, the
Company shall have the right to immediately call all
outstanding subscriptions for payment, at its sole option.
RESTRICTED STOCK: All shares of Common Stock purchased by a
participant from the Company shall be restricted stock and
shall be subject to the resale restrictions imposed by all
applicable federal and state securities laws.
RULE 16B-3 REQUIREMENTS: The Board of Directors reserves the
right to modify the Plan retroactively. The Board of Directors
may submit the Plan to the Company's shareholders for approval
should it determine that it is desirable to do so either to
meet the requirements of Rule 16b-3 of the Securities Exchange
Act of 1934 or for any other reason.
AUTHORITY TO MODIFY THE PLAN: The Company reserves the right
to modify or terminate the Plan at all times, provided that the
Company will not change the number of shares of Common Stock or
the maturity date of any subscription agreement outstanding
without such participant's consent.
COMPENSATION COMMITTEE AUTHORITY: The Board of Directors
grants to the Compensation Committee the authority to
administer the Plan and to make any changes in the Plan
necessary or desirable in order to carry out the purposes of
the Plan. Furthermore, the Compensation Committee shall have
exclusive authority to interpret the Plan provisions and to
waive or modify any requirement of the Plan or any terms of a
subscription agreement issued to a participant in the Plan.
Exhibit (10x)
STOCK SUBSCRIPTION AGREEMENT
UNDER STOCK OWNERSHIP PLAN OF
THE DIXIE GROUP, INC.
The undersigned participant in the Stock Ownership Plan (the
"Plan") adopted by the Board of Directors of The Dixie Group,
Inc., f/k/a Dixie Yarns, Inc. ("Dixie") on August 22, 1996,
hereby subscribes for ________ shares of Common Stock of Dixie,
par value of $3 per share, at a price of $________ per share
(the "Shares"), a total purchase price of $________ (the
"Purchase Price").
The undersigned participant in the Plan hereby agrees that the
Purchase Price for the Shares shall be due and payable on
____________, 2001 (the third anniversary of the undersigned
participant's Initial Subscription Offering Date), if not
sooner, in accordance with the Plan. The undersigned hereby
acknowledges receipt of a copy of the Plan and confirms that
the undersigned has read the Plan.
This subscription is subject to the terms and conditions of the
Plan, including specifically the provisions of the Plan that
provide for automatic call for payment of the Purchase Price
and the optional call for payment of the Purchase Price before
____________, 2001.
All shares of Common Stock issued pursuant to this subscription
may be restricted shares and subject to limitations and
conditions of sale, including the holding of such shares for a
minimum period of time.
Executed as of this ______ day of ____________, 1998.
_________________ _____________
Participant Witness
This subscription is accepted by The Dixie Group, Inc. pursuant
to the terms of the Stock Ownership Plan adopted by the Board
of Directors on August 22, 1996.
The Dixie Group, Inc.
By: _________________
Chairman and CEO
Exhibit (10y)
THE DIXIE GROUP, INC.
DIRECTORS STOCK PLAN
1. PURPOSE. The purpose of the Dixie Group, Inc. Directors
Stock Plan (the "Plan") is to create an environment conducive
to the long-term benefit of the Company. The Board of
Directors believes that if a substantial portion of the annual
director's fee to be paid to non-employee directors of the
Company is deferred and subsequently paid in Common Stock of
the Company following the retirement from service of a
director, there will be greater director interest in and focus
upon the Company and its affairs.
2. ADMINISTRATION. The Plan and all decisions with respect
thereto shall be administered by the Compensation Committee of
the Board of Directors. The Compensation Committee shall
periodically report to the Board of Directors upon the status
of the Plan.
3. PARTICIPATION. All non-employee directors of the Company
who are paid an annual fee for serving as a director (the
"Participants") shall participate in the Plan.
4. DEFERRAL OF PAYMENT OF A PORTION OF THE ANNUAL FEE AND
SUBSEQUENT PAYMENT THEREOF IN COMMON STOCK. Effective on the
date of election of a director beginning with the annual
meeting of stockholders held on May 1, 1997, one-half of the
annual fee to be paid to Participants for serving as a director
shall be deferred as to payment and converted into Performance
Units which will be subsequently paid to each Participant in
Common Stock of the Company in accordance with the terms and
conditions of this Plan. The purchase price of the Performance
Units for the purpose of determining the number of Performance
Units to be recorded for each Participant shall be the closing
price of the Common Stock as reported by NASDAQ on the day
prior to the annual meeting date. The number of Performance
Units to be recorded for each Participant shall be determined
by dividing one-half the annual fee for serving as a director
by the closing price.
5. PERFORMANCE UNIT ACCOUNT. An account (an "Account") shall
be maintained by the Company for each Participant, and the
number of Performance Units awarded to each Participant shall
be recorded in the account. The number of Performance Units
shall be adjusted for any stock splits, dividends or other
capital transactions to the same extent as is effective for any
stockholder of the Company. An amount equal to any cash
dividends paid on the Common Stock of the Company shall be paid
to each Participant for each Performance Unit held in the
Participant's Account. No certificates shall be issued for
shares of Common Stock and a Participant shall have no right or
power to sell or transfer any Performance Units or shares of
Common Stock to be issued subsequently with respect thereto nor
to exercise any rights of a shareholder of Common Stock with
respect to such Performance Units while the Participant
continues to serve as a director of the Company.
6. DELIVERY OF CERTIFICATES FOR THE SHARES. At any time on or
before the beginning of the final year of service of a
Participant as a director of the Company, the Participant may
elect in writing to have all shares of Common Stock to be
issued to the Participant under the Plan delivered (a) upon the
Participant ceasing to serve as a director or (b) in five (5)
equal share distributions commencing upon the date the
Participant ceases to serve as a director, and thereafter, on
the four (4) successive anniversary dates thereof. If the
Participant does not make an election, the shares will be
issued upon the Participant ceasing to serve as a director. At
such time or times, the Company will issue a certificate to the
Participant for one share of Common Stock of the Company for
each Performance Unit in the Participant's Account being
distributed. The shares of Common Stock will then be available
to be sold by the former director; subject, however, to the
former director complying with all federal and state laws
applicable to the sale of such securities. Participants shall
have no rights of a shareholder with respect to Common Stock of
the Company to be issued under the Plan until certificates for
shares have been issued.
7. PREMATURE DEATH OF A PARTICIPANT. In the event of the
death of a Participant, the Company will issue a certificate to
the executor or administrator of the Participant's estate for
one share of Common Stock of the Company for each Performance
Unit in the Participant's Account. Such shares may then be
sold, subject to the executor or administrator complying with
all federal and state laws applicable to the sale of such
securities.
8. LEGENDING OF SHARES. The Company shall have the right in
its sole discretion to place a legend upon all certificates for
shares of Common Stock issued under the Plan reflecting any
legal restrictions upon or requirements necessary in order to
sell the shares.
9. TERMINATION OF OR AMENDMENT OF THE PLAN. The Company
retains the right to terminate the Plan at any time and for any
purpose, and the Company shall have the right to amend the Plan
in any manner at any time for any purpose.
10. GOVERNING LAW. The laws of the State of Tennessee shall
govern all matters relating to the Plan and the rights of all
Participants under the Plan.
11. LEGAL COMPLIANCE. No certificates for Common Stock shall
be issued hereunder unless counsel for the Company is satisfied
that such issuance will be in compliance with all applicable
federal and state laws and regulations.
12. WITHHOLDING. The Company shall have the right to deduct
from any payment made under the Plan any federal, state, or
local income or other taxes required by law to be withheld with
respect to such payment. It shall be a condition to the
obligation of the Company to issue Common Stock that the
participant pay the to Company such amount as may be required
for the purpose of satisfying any liability to withhold
federal, state or local income or other taxes.
13. DEFERRED COMPENSATION. It is the intent of the Company
that the portion of the annual director fees retained under the
Plan shall qualify for deferred compensation treatment under
the Internal Revenue Code. Accordingly, no provision of the
Plan shall be effective to the extent that it would cause the
portion of director fees retained by the Company and the award
of Performance Units under the Plan to become immediately taxed
as income under the Internal Revenue Code. The Plan shall be
unfunded, and the Company shall not be required to establish
any special or separate fund or to make any other segregation
of assets to assure the payment of any fee or right hereunder,
it being intended that the rights to payment shall be no
greater than those of the Company's general creditors
hereunder.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
THE DIXIE GROUP, INC. SUBSIDIARIES
STATE/COUNTRY
OF
SUBSIDIARY INCORPORATION
Dixie Export, Inc. USVI
Carriage Industries, Inc. Georgia
Masland Carpets, Inc. Alabama
Patrick Carpet Mills, Inc. California
Candlewick - Ringgold, Inc. Tennessee
Candlewick - Lemoore, Inc. Tennessee
Candlewick - Roanoke/Tennessee, Inc. Tennessee
Dixie Funding, Inc. Tennessee
DEL, Inc. Tennessee
RMK, Inc. North Carolina
Caro Knit Incorporated South Carolina
C-Knit Apparel, Inc. Tennessee
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
The Dixie Group, Inc., the Registration Statement (Form S-8 No. 33-59564)
pertaining to options to acquire Common Stock of The Dixie Group, 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 The Dixie Group, 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 The Dixie Group, Inc. of our report dated February 19, 1998,
with respect to the consolidated financial statements and schedule of The
Dixie Group, Inc. included in the Annual Report (Form 10-K) for the year
ended December 27, 1997.
ERNST & YOUNG LLP
Chattanooga, Tennessee
March 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE DIXIE GROUP, INC. AT
AND FOR THE TWELVE MONTHS ENDED DECEMBER 27, 1997 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-27-1997
<PERIOD-END> DEC-27-1997
<CASH> 1,848
<SECURITIES> 0
<RECEIVABLES> 32,657
<ALLOWANCES> 3,207
<INVENTORY> 82,661
<CURRENT-ASSETS> 135,936
<PP&E> 373,449
<DEPRECIATION> 199,027
<TOTAL-ASSETS> 386,614
<CURRENT-LIABILITIES> 67,885
<BONDS> 160,810
<COMMON> 44,321
0
0
<OTHER-SE> 76,923
<TOTAL-LIABILITY-AND-EQUITY> 386,614
<SALES> 661,843
<TOTAL-REVENUES> 661,843
<CGS> 551,851
<TOTAL-COSTS> 551,851
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,583
<INCOME-PRETAX> 18,802
<INCOME-TAX> 7,183
<INCOME-CONTINUING> 11,619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,619
<EPS-PRIMARY> 1.03
<EPS-DILUTED> .99
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE DIXIE GROUP, INC. AT
AND FOR THE THREE MONTHS ENDED MARCH 29, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. ***EPS RESTATED***
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 1,882
<SECURITIES> 0
<RECEIVABLES> 32,868
<ALLOWANCES> 3,205
<INVENTORY> 104,738
<CURRENT-ASSETS> 155,729
<PP&E> 345,417
<DEPRECIATION> 188,560
<TOTAL-ASSETS> 368,964
<CURRENT-LIABILITIES> 65,459
<BONDS> 158,969
<COMMON> 43,836
0
0
<OTHER-SE> 67,695
<TOTAL-LIABILITY-AND-EQUITY> 368,964
<SALES> 162,360
<TOTAL-REVENUES> 162,360
<CGS> 135,147
<TOTAL-COSTS> 135,147
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,337
<INCOME-PRETAX> 4,964
<INCOME-TAX> 1,983
<INCOME-CONTINUING> 2,981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,981
<EPS-PRIMARY> .27
<EPS-DILUTED> .26
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE DIXIE GROUP, INC. AT
AND FOR THE SIX MONTHS ENDED JUNE 28, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. ***EPS RESTATED***
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 2,052
<SECURITIES> 0
<RECEIVABLES> 34,754
<ALLOWANCES> 3,415
<INVENTORY> 100,102
<CURRENT-ASSETS> 151,618
<PP&E> 346,960
<DEPRECIATION> 190,270
<TOTAL-ASSETS> 363,775
<CURRENT-LIABILITIES> 68,985
<BONDS> 147,170
<COMMON> 43,917
0
0
<OTHER-SE> 70,703
<TOTAL-LIABILITY-AND-EQUITY> 363,775
<SALES> 331,523
<TOTAL-REVENUES> 331,523
<CGS> 274,479
<TOTAL-COSTS> 274,479
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,619
<INCOME-PRETAX> 10,539
<INCOME-TAX> 4,258
<INCOME-CONTINUING> 6,281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,281
<EPS-PRIMARY> .56
<EPS-DILUTED> .55
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF THE DIXIE GROUP, INC. AT
AND FOR THE NINE MONTHS ENDED SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. ***EPS RESTATED***
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> SEP-27-1997
<CASH> 2,096
<SECURITIES> 0
<RECEIVABLES> 33,635
<ALLOWANCES> 3,209
<INVENTORY> 94,873
<CURRENT-ASSETS> 145,196
<PP&E> 352,668
<DEPRECIATION> 195,533
<TOTAL-ASSETS> 357,065
<CURRENT-LIABILITIES> 72,841
<BONDS> 134,186
<COMMON> 44,087
0
0
<OTHER-SE> 73,879
<TOTAL-LIABILITY-AND-EQUITY> 357,065
<SALES> 491,463
<TOTAL-REVENUES> 491,463
<CGS> 408,283
<TOTAL-COSTS> 408,283
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,417
<INCOME-PRETAX> 15,132
<INCOME-TAX> 5,839
<INCOME-CONTINUING> 9,293
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,293
<EPS-PRIMARY> .83
<EPS-DILUTED> .80
</TABLE>
