SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
____________________________
FORM 10-K
{x} ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
{TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For transition period from..................... to .....................
Commission file number 1-6150
ALBA - WALDENSIAN, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-0359780
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 St. Germain Avenue, S.W.
P.O. Box 100 Valdese, North Carolina 28690
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 704-874-2191
Securities registered pursuant to Section 12 (b) of the Act:
COMMON STOCK ($2.50 PAR VALUE) AMERICAN STOCK EXCHANGE
(Title of class) (Name of exchange on which registered)
Securities registered pursuant to Section to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((section mark).229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this form 10-K. { }
State the aggregate market value of the voting stock held by the
non-affiliates of the registrant: Approximately $6,670,785 as of
February 29, 1996.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date: 1,867,403 shares of
Common Stock ($2.50 par value) as of February 29, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Annual Report for the fiscal year ended December 31,
1995 are incorporated by reference into Parts I and II.
Portions of the Company's Proxy Statement for the 1996 Annual Meeting of
Stockholders are incorporated by reference into Parts I and III.
Page 1 of pages (including exhibits)
The Exhibit Index is located on page .
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PART I
Item 1. Business.
General Development of Business
Alba-Waldensian, Inc., (the "Company") manufactures a variety of
knitted apparel and health care products in three plants in Valdese,
North Carolina and one plant in Rockwood, TN and markets the products
through four divisions, the Consumer Products Division, the Health
Products Division, the Alba Direct Division and the Byford Apparel
Division.
On March 6, 1995 the Company purchased Balfour Health Products, a
manufacturer of various knit products for the Heathcare industry, from
Kayser-Roth Corporation. The purchase consisted primarily of a
manufacturing facility, in Rockwood, TN., machinery, inventory and
certain brand names.
In 1993, the Company developed a process to knit a seamless bra
which was introduced to the market in 1994. This same process is used
to manufacture tank tops and body suits which were introduced in 1995.
The Company also plans to introduce a control version of these garments
in 1996.
In 1995 the Company underwent a major restructuring. The purchase
of Balfour Health Products early in 1995 gave the company a
manufacturing facility in Rockwood, Tennessee. The Company consolidated
its Health Products manufacturing and distribution, which was located
in three plants in Valdese, North Carolina to the Rockwood, Tennessee
facility.
As a result of the Health Products consolidation, the Company was
able to restructure its manufacturing of consumer products in Valdese,
North Carolina, thereby closing two production facilities. One of the
facilities (the Main Street plant) was sold in September 1995 and the
Company plans to sell or lease the other facility.
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Financial Information About Industry Segments
The Company is in a single line of business: the manufacturing,
processing, importing and selling of knitted products, which consists of
several classes. Accordingly, no segment information is presented.
Principal Products
The principal products of the Company's four Divisions
are described below. For additional discussion of the current
status of each Division and its products, please see the
Company's 1995 Annual Report to Shareholders, which contains
information expressly incorporated herein by reference.
Consumer Products Division
Products manufactured and sold by this Division include
women's intimate apparel and women's hosiery products. Intimate
apparel includes stretch bikinis, briefs and bodywear, as well
as specially designed briefs for maternity wear. Women's
hosiery products include sheer stockings, pantyhose, and trouser
socks, primarily for large-size women and the maternity market.
The Company has developed a process which makes it
possible to knit bras, tank tops and body suits in seamless
knitting equipment. This design technology, which is patented
for the knit Bra, has allowed the Company to significantly
broaden its product offerings. The seamless knit bra was
introduced in 1994 and the tank tops and body suits were
introduced in 1995.
The Company uses state of the art computer-controlled
circular-knitting technology. In addition, a significant
portion of the Company's consumer products, including its
women's intimate apparel, are
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produced on fine gauge full-fashion knitting equipment. Such equipment
produces apparel that management believes is better fitting and
therefore more comfortable.
The Company did not renew for 1995 the license acquired
from Kayser-Roth Corporation in 1990 for No-Nonsense(R) or the
license acquired from Leslie Fay Company in 1992 for the Leslie
Fay(R) name, both used in connection with women's hosiery
products. Management's decision to terminate both license
agreements was based on the fact that the licenses no longer
provided value for the Company and that both agreements had a
high minimum royalty payment. Instead, the Company plans to
put renewed emphasis on placing its All Day Long(R) brand in
department stores.
Health Products Division
Products manufactured and sold by this division are
designed to assist in healthcare. They include anti-embolism
stockings and pulsitate anti-embolism systems, an intermittent
pneumatic compression device, both of which are designed to
improve circulation and reduce the incidence of deep vein
thrombosis; sterile wound dressings such as pre-saturated gauze,
petrolatum and xeroform gauze, non-adhering dressings and gauze
strips and XX-Span(R) dressing retainers, an extensible net
tubing designed to hold dressings in place without the use of
adhesive tape. All dressing products are used in wound care
therapy, particularly for the treatment of burns.
In addition, this division manufactures a knitted
stockinette in a variety of sizes which is used under fracture
casts or is sterile packaged for use as a supplemental drape in
surgical procedures. Heel and elbow pads are XX-Span(R) sleeves
with an inner soft foam pad used to reduce pressure and the
incidence of decubitus ulcers.
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Other products include slip-resistant patient treads, which
are knitted, soft patient footwear with slip resistant soles to
help prevent patient falls while keeping feet warm even while in
bed; knitted arm sleeves, which provide protection to the skin
of patients with poor circulation; blood filter sleeves which
are a component used in blood filtering systems manufactured by
others; mesh panties, inexpensive stretch pants used to hold
maternity pads or incontinent pads in place; oversize socks for
diabetic patients; baby caps to retain body temperature; and
knitted cuffs for use on surgical gowns.
Byford Apparel Division
The Byford division imports and markets a broad range of
quality men's hosiery and sweaters. For the most part,
Byford's socks are imported from the Byford mill in Leicester,
England and supplemented with domestic sources. Sourcing for
Byford sweaters is more broadly based, with products coming from
Coats Viyella mills in the United Kingdom, mills in the Far
East, and domestic sweater producers. The men's hosiery
incorporates fully reciprocated and reinforced heels and toes.
Alba Direct Division
Alba Direct distributes products from the Consumer Products
Division, Byford Apparel Division, and Health Products Division
to the independent specialty retail class of trade via
telemarketing. Alba Direct has developed export customers in
Japan and Turkey and is the primary group responsible for
developing the Company's Consumer export business.
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Methods of Distribution
The Company's products are sold throughout the United
States through salaried and commissioned salesmen. The Consumer
Products Division markets its products directly to chain store
organizations, which sell them under their own labels, and to
several companies that market nationally advertised brands.
Byford products are marketed primarily through men's specialty
stores, both chains and independents. Products of the Health
Products Division for use in hospitals are marketed to major
distributors by the Company's sales representatives. These
products are sold both under private label and under the
Company's own Life Span(R) Label. Alba Direct distributes
branded Consumer Products and Health Products to the
independent retail trade through telemarketing. Sales offices
are located in Valdese, North Carolina and in New York City.
Total expenses for marketing and selling of all products from
the Company's continuing operations was 10.0% of sales in both
1995 and 1994. (See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" in the
Company's Annual Report to Shareholders, which is incorporated
herein by reference.)
Manufacturing
All Health Products manufacturing and distribution are located
in the Rockwood, Tennessee plant. A modern 246,000 square foot
building, with space and available labor market for growth. All
products are knit on circular knitting equipment. Most of this
equipment has been purchased in the past ten years. Automated
seaming, printing and packaging are used in the finishing
process.
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Consumer Products manufacturing and distribution are located in
three plants in Valdese, North Carolina. Products are knitted
on fine gauge full fashion machines or circular knitting
equipment. Most of the circular knitting equipment is the
latest equipment available. The full fashion machines are old
(50 years) but the Company's technicians are able to continue
efficient operation of these machines. Greige seaming and
finishing are manual or automated, depending on product and size
of product. A major improvement during 1995 was the purchase of
new automatic hosiery packaging equipment, which will reduce
labor costs and improve quality.
In 1995 the Company started contract sewing in El Salvador.
Panties are knitted in Valdese, North Carolina and sent to El
Salvador for sewing and returned to Valdese, North Carolina for
dying and packaging.
The Company continues to replace older equipment and automate
where possible. The Company plans capital expenditures for 1996
to be approximately $2,100,000. Most of the capital
expenditures for 1996 will be in the Health Products Division -
upgrading remaining older equipment, automating and renovating
and improving plant facilities.
Financial Information About Classes of Similar Products
The Company is in a single line of business:
manufacturing, processing and selling knitted products,
consisting of several classes. The table below illustrates
sales as a percentage of net dollar volume from continuing
operations for each product class for each of the Company's
last three years:
7
1995 1994 1993
Women's Intimate Apparel 28.3% 40.2% 37.4%
Men's Wear 2.6 4.3 5.5
Women's Hosiery Products 15.5 17.4 19.2
Men's Hosiery 6.2 7.9 7.3
Health Products 47.4 30.2 30.6
100.0% 100.0% 100.0%
Women's intimate apparel consists of regular size bras, briefs
and bodywear as well as maternity and plus size briefs.
Mens wear consists of Byford Sweaters.
Women's hosiery products consist of regular, maternity and
plus-size panty hose, as well as trouser socks and thigh high hose.
Men's hosiery consist of Byford socks and consumer products
Toesies(R).
Health products consist of stockinettes, treads, arm sleeves,
mesh panties, anti-embolism stockings, P.A.S.(R), sterile wound
dressings, heel pads, elbow pads, oversize socks, baby caps,
and knitted cuffs.
Discontinued products are eliminated for the purpose of
this table. The remaining sales percentages of each class were restated
after this elimination to represent sales of each class as a percentage
of net dollar volume from continuing product lines.
New Products
The Company maintains an active research and development
department that continually evaluates new products and process.
Management also evaluates new products, business opportunities,
and acquisitions on an on-going basis and could encounter an
opportunity which would require substantial
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investment in the future. Such investments occurred in 1994 with the
acquisition of the pulsitate anti-embolism business from Baxter
Healthcare Corporation and in 1995 with the acquisition of the Balfour
Health Products Division from Kayser-Roth Corporation. (See "Management
's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's Annual Report to Shareholders).
Sources and Availability of Raw Materials
The principal raw materials used by the Company in its
manufacturing processes include various types of yarn, chemicals
for dyeing and finishing and for impregnating medical products
and packaging materials for all products. The Company acquires
these materials from a number of sources and is not dependent
on any one source for a significant amount of its raw materials.
The Company anticipates no material change in either the
availability or the cost of its raw materials.
Patents and Trademarks
The only material patents held by the Company are (1) for
a device used to warm wet dressings, which expires in 2002; (2)
for a process covering the manufacture of dressings, which
expires in 2002, and (3) for a process which makes it possible
to knit bras on seamless knitting equipment, which expires in
2014. The material trademarks held by the Company are: Alba(R),
All Day Long(R), ComfortKnit(R), SomeBody(R), While You Wait(R), Comfort
Zone(R), Lady Alba(R), Occasionals(R), Ultimates(R), XX-Span(R),
Speed-Roll(R), Life Span(R), Coplex(R), P.A.S.(R), Baby Bogan(R),
Balfour(R), Care-Steps(R), Castmate(R). The
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Company or its subsidiary, Pilot Research Corporation, holds numerous
other patents and trademarks that, because of obsolescence or other
reasons, are not material to the Company's current operations.
Seasonality
Sales tend to be fairly even throughout the year. For a
tabular presentation of unaudited summary financial information
on a quarterly basis, see the Company's 1995 Annual Report to
Shareholders, which information is incorporated herein by
reference.
Working Capital
Differences resulting from seasonal fluctuations have not
materially affected the Company's working capital requirements. The
Company sells merchandise on consignment only on a limited basis.
Although returns are permitted when the quality of merchandise sold is
below acceptable standards or when an error in completing an order
occurs, the number and amounts of returns did not have a material
effect on working capital of the Company during fiscal 1995 or 1994. Due
to the various approaches to manufacturing and distribution used by the
industry, the Company is not aware of any industry-wide norms relating
to sale and delivery requirements. In 1995 the Company's working
capital was adversely affected as current maturities of long-term debt
increased, due to the financing of the Balfour Health Products
acquisition.
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Significant Customers
Baxter Healthcare Corporation is the only customer that
represents ten percent or greater of the Company's sales
volume for the years ended in 1995, 1994 and 1993.
1995 1994 1993
Baxter Healthcare Corporation $16,601,252 $12,902,722 $13,610,937
Percentage of sales 26.1% 22.8% 26.8%
While the loss of Baxter Healthcare Corporation would
have a material adverse effect on the business of the Company,
management believes that, because of the number of departments
within Baxter to which the Company sells, the likelihood of a
material amount of sales loss is reduced.
Backlog
The Company's backlog of firm orders at December 31, 1995
and 1994 was $3,651,398 and $2,173,893 respectively. A
majority of the Company's orders are for delivery within 30 to
60 days. The backlog figures, therefore, are not normally
indicative of orders for the remainder of the year.
Competition
The Company encounters substantial competition in the sale
of its products from numerous competitors, a few of which are
known to have larger sales and capital resources than the
Company. Management is unable to estimate the number of the
Company's competitors or its relative position
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among them. Management believes that the principal methods of
competition in the markets in which the Company competes include
price, delivery, performance, service and the ability to bring to the
market innovative products. Management believes that the Company is
competitive with respect to these factors but is unable to identify
specific positive and negative aspects of the Company's business
pertaining to such factors. (See also" Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the
Company's 1995 Annual Report to Shareholders).
Research and Development
The Company estimates that in 1995 it spent $490,824 in
Company-sponsored research and development projects through the
Company's Research and Development Department and its wholly
owned subsidiary, Pilot Research Corporation. This compares to
$376,008 in 1994 and $340,663 in 1993.
Environmental Regulations
In the opinion of management, the Company and its
subsidiaries are in substantial compliance with present federal,
state and local regulations regarding the discharge of materials
into the environment. Capital expenditures required to be made
in order to achieve such compliance have had no material effect
upon the earnings or competitive position of the Company or
its subsidiaries. Management believes that continued compliance
will require no material expenditures.
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Government Regulation
The Company is subject to various regulations relating to
the maintenance of safe working conditions and manufacturing
practices. In addition, certain of the products manufactured by
the Health Products Division are subject to the requirements of
the Food and Drug Administration with respect to environmentally
controlled facilities. Management believes that it is
currently in compliance with all such regulations.
Employees
The Company had 893 employees as of December 31, 1995.
Item 2. Properties.
The Company's principal physical properties are listed
below:
<TABLE>
<CAPTION>
Approximate
Square
Name Location Footage Use
<S> <C> <C> <C> <C>
Alba Valdese, NC 157,000 Yarn
Processing
Alba Valdese, NC 18,000 Knitting (intimate
Annex apparel)
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John Louis Valdese, NC 178,300 Finishing (Consumer
Products)
Pineburr Valdese, NC 81,000 Knitting (Consumer
Products)
Rockwood Rockwood, TN 245,940 Knitting, Yarn
Processing &
Finishing Health
Products
Office Valdese, NC 52,000 Corporate
headquarters
Offices New York City 2,488 Leased Sales Offices
$80,000 Annually
Expires May 1997
AWI Retail Branson, MO 1,760 Leased Retail Store
$26,400 Annually
Expires March 1999
</TABLE>
During 1995 the Company restructured its Valdese, North
Carolina manufacturing operations. As a result the Company only
utilizes approximately 8% of its Alba Plant for a yarn covering
operation. The Company plans to sell or lease the Alba Plant
and will move its yarn covering operation when a suitable
purchaser or tenant is found.
All plants are of brick and steel construction, and most
areas have been air conditioned. All have been maintained in
working condition. The Company leases its New York City office
and its Branson, Missouri retail store. The rest of the
Company's physical properties are held in fee simple, subject
to encumbrances that are described in Note 4 of Notes to
Consolidated Financial Statements in the Company's 1995 Annual
Report to Shareholders, which information is incorporated herein
by reference.
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Item 3. Legal Proceedings.
Litigation
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which
the Company or any of its subsidiaries or which any of its
properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The information called for by this item appears beneath the
heading "Stock Prices and Dividend Information" in the
Company's 1995 Annual Report to Shareholders, which information
is incorporated herein by reference. The Company's $2.50 par
value Common Stock is registered and traded on the American
Stock Exchange under the symbol "AWS". The Board of Directors
has no formal policy with respect to the payment of dividends
and no such dividends have been declared or paid during the past
three fiscal years.
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Item 6. Selected Financial Data.
The information called for by this item appears beneath the
heading "Five-Year Selected Financial Data" in the Company's
1995 Annual Report to Shareholders , which information is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Operations
The information called for by this item appears beneath the
heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1995
Annual Report to Shareholders, which information is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data.
The information called for by this item appears in the
Company's 1995 Annual Report to Shareholders, which
information is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant.
The information regarding Directors called for by this item
appears beneath the heading "Information about Directors and
Nominees for Director" in the Company's Proxy Statement for
the 1996 Annual Meeting of Shareholders, which information is
incorporated herein by reference. Such Proxy Statement will be
filed with the Securities and Exchange Commission not later than
120 days after the Company's fiscal year end.
Executive Officers
The following table sets forth certain information about
the Company's executive officers:
Name Position with "the Company"
Thomas F. Schuster 53 President and Chief Executive
Officer
Donald R. Denne 58 Senior Vice President and
President of the Health Products
Division
Thomas I. Nail 48 Treasurer, Secretary and Chief
Financial Officer
Dixon R. Johnston 54 Vice President and President of
the Consumer Products Division
James Douglas Dickson 39 Assistant Secretary
Warren R. Nesbit 43 Vice President
Charles D. Poteat 52 Vice President
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The following paragraphs set forth information concerning
each executive officer's business experience:
Mr. Thomas F. Schuster has been President and Chief
Executive Officer of the Company since August, 1992 and served
as Executive Vice President and Chief Operating Officer from
February, 1992 to August 1992. Prior to joining the Company,
he was an Independent Consultant from 1989 until 1992, President
of US Operations for a division of Coats Viyella (British
Corporation) from 1987 through 1989, and President and CEO of
The Great American Knitting Mills Division of Cluett Peabody,
1983 - 1986. Prior to this Mr. Schuster held an equity
position with Hartmann Luggage Company, and progressively more
responsible marketing positions with various large
organizations. Mr. Schuster holds a B. A. degree from Tufts
University and an M.B.A. from Harvard Business School.
Mr. Donald R. Denne joined the Company in 1987 as a
Corporate Vice President and President of the Health Products
Division. Prior to joining the Company, Mr. Denne served as
Vice President of Marketing for General Medical Corporation,
Vice President of Health Products for Work Wear Corporation, and
Vice President for Business Planning for American Hospital
Supply.
Mr. Thomas I. Nail joined the Company as Chief Financial
Officer in March of 1994. He was elected as Secretary and
Treasurer of the Corporation in May of 1994. Prior to joining
the Company, Mr. Nail served as Vice President of Finance and as
a member of the Board of Directors of Burke Mills, Inc. for
approximately six years. Mr. Nail served as Controller of
Intercomp Wire and Cable, a subsidiary of Insilco, Inc. from
1985 to 1987. Mr. Nail has a degree in Business from Auburn
University.
Mr. Dixon R. Johnston was elected Vice President of the
Company and President of the Consumer Products Division on
February 22, 1996. Prior to joining the Company, Mr. Johnston
served as Executive Vice President of Gem-Dandy, Inc. from 1995
- - 1996. Mr. Johnston served as Director of Motorsports & New
Ventures for Sky Box International from 1993 to 1995. He served
as Executive Vice President of Trone Advertising from 1989 -
1993. Mr. Johnston was president and part owner of Milpak
Graphics from 1986 to 1989. From 1982 to 1986 he was President
of No-nonsense Fashions, Inc., a division of Kayser-Roth
Hosiery. Mr. Johnston has a degree in economics from
Northwestern University and an MBA from the University of
California, Berkely.
Mr. James Douglas Dickson joined the Company in 1994 as
Corporate Controller. He was elected Assistant Secretary on
December 15, 1994. Prior to joining the Company, Mr. Dickson
served as Controller of Hickorycraft, Inc., a division of Masco
Corporation from 1987 to 1994 and as Division Controller of
Sealed Air Corporation from 1982 to 1987. Mr. Dickson holds a
B.B.A. from the University of Georgia and is a Certified
Management Accountant.
Mr. Warren Nesbit joined the Company in December, 1985 as
Director of Human Resources. He was named Vice President of
Human Resources in 1990 and elected to serve as a Corporate
Vice President in 1993. Mr. Nesbit served as Vice President of
Industrial Relations with Marion Manufacturing, in Marion, North
Carolina prior to joining the Company. He held various
Manufacturing and human resource responsibilities with
Burlington Industries from 1978 to 1984. Mr. Nesbit is a
graduate of the University of North Carolina.
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Mr. Charles D. Poteat joined the Company in June, 1993 as
Vice President of Operations. He was elected to the additional
position of Corporate Vice President in December, 1993. From
February, 1992 until June 1993, Mr. Poteat was Senior Vice
President, Manufacturing , of Cooper, Inc. and from 1977 to
1989, Vice President, Manufacturing, of Kayser-Roth Hosiery,
Inc. Mr. Poteat is a graduate of the University of North
Carolina.
The Company's officers are elected for a one year term at
the annual meeting of the Board of Directors.
Item 11. Executive Compensation.
The information called for by this item appears under the
heading "Executive Compensation" in the Proxy Statement for the
Company's 1996 Annual Meeting of Shareholders, which
information is incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information called for by this item appears under the
heading "Voting Securities and Principal Security Holders" in
the Company's Proxy Statement for the 1996 Annual Meeting of
Shareholders, which information is incorporated herein by
reference.
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Item 13. Certain Relationships and Transactions.
The information called for by this item appears under
the heading "Information About Directors and Nominees for
Directors" in the Proxy Statement for the Company's 1996
Annual Meeting of Shareholders; which information is
incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a) The following are filed as a part of this report:
(1) Financial statements filed:
(i) The following consolidated financial statements
of the Company and its subsidiaries
included in the Company's 1995 Annual
Report are incorporated herein by reference
to the Annual Report as indicated
Consolidated Balance Sheets - December 31, 1995
and 1994.
Consolidated Statements of Operations - Years ended
December 31, 1995, 1994, and 1993.
Consolidated Statements of Stockholders'
Equity- Years ended December 31, 1995, 1994,
and 1993.
Consolidated Statements of Cash Flows - Years
ended December 31, 1995, 1994, and 1993.
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements.
(2) Financial Statement Schedules filed:
Report of Independent Certified Public Accountants on
Financial Statement Schedule (page S-1 of this report)
Schedule II (Valuation and Qualifying Accounts)
(page S-2 of this report)
All other schedules are omitted as the required
information is inapplicable or is present in the
financial statements or related notes thereto.
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(3) Exhibits filed:
3.1 Certificates of Incorporation, as amended,
which is incorporated herein by
reference to Exhibit 3.1 of the
Company's 1986 Annual Report on Form
10-K.
3.1.1 Amendment to Certificate of Incorporation
adopted by shareholders which is
incorporated herein by reference to
Exhibit 3.1 of the Company's 1987 Annual
Report on Form 10-K.
3.2 Bylaws, which are incorporated herein by
reference to Exhibit 3.2 of the
Company's 1986 Annual Report on form
10-K.
4.1 Specimen certificate of common stock,
which is incorporated herein by
reference to Exhibit 4 of the Company's
Registration Statement on Form
S-2 (No. 2-83186).
4.3 Undertaking of the Company to file exhibits
pursuant to Item 601 (b) (4) (iii) (A)
of Regulation S-K, which is incorporated
herein by reference to Exhibit 28 of
the Company's 1986 Annual Report on Form
10-K.
10.5 Office Lease dated March 16, 1982
between the Company and Empire State
Building Company, which is incorporated
by reference to Exhibit 10.25 of the
Company's Registration Statement on Form
S-2 (No. 2-83186)
* 10.6 Deferred Compensation Agreement between
the Company and William D.
Schubert dated April 1, 1976, which is
incorporated by reference to Exhibit
10.30 of the Company's Registration
Statement on Form S-2 (No. 2-83186).
*10.7 Deferred Compensation Agreement between
the Company and William D.
Schubert dated December 18, 1984, which
is incorporated by reference to
Exhibit 10.2 of the Company's Annual
Report on Form 10-K for the year ended
December 31, 1984.
*10.8 1983 Key Employee Incentive Stock
Option Plan which is incorporated
herein by reference to Exhibit 10 of the
Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1983.
*10.9 Management Incentive Plan, which is
incorporated herein by reference to
Exhibit 10.1 of the Company's Annual
Report on Form 10-K for the year ended
December 31, 1984.
*10.10 1989 Non-Qualified Deferred Compensation
Plan, which is incorporated herein by
reference to Exhibit 10.10 of the
Company's Annual Report on Form
10-K for the year ended December 31,
1988.
*10.11 1989 Management Incentive Plan which is
incorporated herein by reference to
Exhibit 10.10 of the Company's Annual
Report on Form 10-K for the year
ended December 31, 1988.
*10.12 1992 Non-Qualified Stock Option Plan for
Non-Employee Directors, which is
incorporated herein by reference to
Exhibit 10.12 of the Company's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1993.
*10.13 1993 Long Term Performance Plan, which is
incorporated herein by reference to
Exhibit 10.13 of the Company's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1993.
10.14 Asset Purchase Agreement dated as of
March 6, 1995 between the Registrant and
Kayser-Roth Corporation, which is
incorporated herein by reference to
Exhibit 2 of the Company's 8K report
dated March 20, 1995.
13 1995 Annual Report to Shareholders
. 21 List of Subsidiaries of the Company
21
<PAGE>
23.1 Consent of Independent Auditors, Deloitte &
Touche LLP
23.2 Consent of Independent Certified Public
Accountants, BDO Seidman LLP
23.3 Independent Auditors' Report,
Deloitte & Touche LLP
27 Financial Data Schedule (filed in
electronic format only). This schedule
is furnished for the information of the
Commission and is not deemed to
be "filed".
* Identifies compensation plans.
b. Reports on Form 8-K: No reports on Form 8-K were filed
during the last quarter of the year ended December 31, 1995.
22
<PAGE>
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.
ALBA-WALDENSIAN, INC.
Date : March 28, 1996 By /s/ Thomas F. Schuster
Thomas F. Schuster
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
<TABLE>
<CAPTION>
<S> <C>
/s/ Paul H. Albritton, Jr. /s/William M. Cousins, Jr.
Paul H. Albritton, Director William M. Cousins, Jr. Director
March 28, 1996 March 28, 1996
/s/ James M. Fawcett, Jr.
James M. Fawcett, Jr., Director
March 28, 1996
/s/C. Alan Forbes /s/Glenn J. Kennedy
C. Alan Forbes, Director Glenn J. Kennedy, Director
March 28, 1996 March 28, 1996
/s/Joseph C. Minio
Joseph C. Minio, Director
March 28, 1996
/s/Thomas I. Nail
Treasurer and Secretary (Chief
Financial
and Accounting Officer)
March 28, 1996
</TABLE>
23
<PAGE>
ALBA-WALDENSIAN, INC.
INDEX TO EXHIBITS
Annual Report on Form 10-K for the Fiscal Year ended Commission
File No. 1-6150
December 31, 1995.
Exhibit Number Exhibit
13 Annual Report to Shareholders
21 Subsidiaries of the Company as of December
31, 1995
23.1 Consent of Independent Certified Public
Accountants, Deloitte & Touche LLP
23.2 Consent of Independent Certified Public
Accountants, BDO Seidman LLP
23.3 Independent Auditors' Report
Deloitte & Touche LLP
27 Financial Data schedule (filed in electronic
format only)
24
(Photo of a man working on a piece of machinery appears in the background of
page)
(Alba-Waldensian logo appears here)
Alba-Waldensian
1995 Annual Report
<PAGE>
(Photo of a person working on a piece of machinery)
(Photo of a man working)
(Photo of a man working on a computer)
(Photo of a woman working)
THROUGH
THESE
PORTALS
PASS
THE
MOST
WONDERFUL
PEOPLE
IN THE
WORLD...
ALBA (ALBA LOGO)
PEOPLE
<PAGE>
To Our Shareholders
1995 proved to be a complex, difficult and disappointing year for
Alba-Waldensian. On the bright side, sales continued to grow, up 12.7% over the
prior year to $63.7 million and productivity, as measured by sales per employee,
rose to a record $71,273, a 6.4% increase. However, the Company went from a net
income last year to a net loss this year of $1.66 million.
The primary reason for the Company's loss was the incurring of negative
manufacturing variances caused by a variety of factors that I will outline in
the course of this letter.
In early March, we acquired the Balfour Division of the Kayser-Roth
Corporation for our Alba Health Products Division. Balfour's business is very
similar to that of the Alba Health Division--the knitting of low-cost, low-tech,
consumable medical products. This includes stockinette and footwear similar to
what Alba has traditionally produced, as well as cuffs for gowns worn by
operating room personnel. In addition, Balfour's customer list is broader than
Alba's, thereby spreading the combined business over a broader base as well as
offering significant opportunities for cross-selling by their salespeople.
NET SALES
$ in millions
(Net Sales chart appears here. Plot points are as followed)
39.7 40.6 50.9 56.5 63.7
91 92 93 94 95
SALES PER
EMPLOYEE
$ in thousands
(Sales Per Employee chart appears here. Plot points are as followed)
46 51 58 67 71
91 92 93 94 95
The immediate result of this acquisition was a 84% increase in the
Division's sales. With the acquisition came Balfour's manufacturing facility in
Rockwood, Tennessee, which enabled us to move Alba's Valdese healthcare
operations to Tennessee to consolidate manufacturing in one facility and
take advantage of Rockwood's better manufacturing efficiencies. This further
allowed us to close and sell the division's Main Street facility in Valdese. The
consolidation necessitated the creation of new jobs in Tennessee and the
training of workers for these new jobs proved to be time-consuming and somewhat
complex. In addition, we experienced several problems in setting up the
Tennessee operation on Alba's MIS system. The net effect was the creation of
negative manufacturing variances, which impacted the Division's operating
income. As the year ended, however, the Division's inventory turn had increased
from 2.42 to 4.21. Additionally, Alba brings highly automated manufacturing
efficiencies to the Balfour operation, which lowers their manufacturing cost and
improves margins for the Balfour product lines. Therefore, this move leads us to
look forward to continuing improvements in 1996 in both sales and operating
income for the Division.
The Consumer Products Division had a disappointing year as sales volume
fell 14.6% and they went from an operating income last year to an operating loss
this year.
The reasons for the sales decline include a generally terrible year for
women's apparel products at retail, increased competition, and some product
development difficulties which led to the delaying of the launch of a line of
new products into 1996.
The Division's decline in volume resulted in the creation of negative
manufacturing variances which ran approximately 50% higher than last year.
Additionally, during the third quarter, we took significant mark-downs to clear
out a variety of excess, obsolete and irregular inventory. Spending was well
controlled through the year and inventory turns increased; however, this was not
enough to offset the previously mentioned manufacturing variances and the result
was a bottom line loss.
1
<PAGE>
On the plus side, the Division has acquired the harve benard license for
intimate apparel and continues to place emphasis on its successful new product
development work.
As a Company, we've taken a "worst case" approach to the Division's
volume problems and restructured the Valdese operations to provide for the
profitable operation of the Division at current volume levels. As part of this,
we've closed our Alba Plant (the oldest and least efficient of our facilities),
reduced employment, and set up a contract sewing operation for panties in El
Salvador. We believe that the combination of these moves as well as a
strengthening of top management planned for early 1996 will ensure that the
Division returns to a profitable basis.
Our Alba Direct Division suffered a sales decline of nearly 51% as its
export business--primarily in Japan--experienced a severe contraction. To
correct this situation, the Division had one of its Japanese distributors in
Valdese for a series of meetings and our management traveled to Japan to meet
with a variety of distributors and retailers. It would appear that these steps
are correcting our volume problems in the Japanese market.
In addition, the Division moved from separate facilities into the
Consumer Products Division distribution center while its administrative and
selling staff moved into Alba's main office building, to reduce overhead
expenses. Further, the outlet store experiment in Branson, Missouri, did not
work out and plans to shut it down were put in place. As a result, the Division
is looking forward to increased sales and profits in 1996.
The Byford Division also experienced a tough year due to problems with
its sweater business. The winter of 1994 was extremely warm, which resulted in
many of Byford's small accounts ending that year with excessive sweater
inventories. Rather than closing them out, they held them over for the 1995
season and, as a result, it was difficult to sell-in the 1995 sweater line. This
decline in sweater volume resulted in continued losses for the Division.
(Photo of a man standing beside machinary)
1996 is expected to be a much better year for the Division as accounts
have finally cleared out their excess sweater inventories, the weather has
turned cold, and accounts are starting to buy sweaters again. At the same time,
the Division took steps to streamline its operation and implement new
forecasting procedures designed to eliminate close-outs.
Net net, our 1995 results were unacceptable and we've taken many steps to
improve results. Our Valdese operations have been significantly restructured,
our sewing operations in El Salvador are starting to pay off, and our Rockwood
operation is showing improved profitability. 1995 was a rough year for everyone
and I'd like to thank the Alba team, as well as our customers and shareholders,
for their continued support. We're looking forward to improvements in operating
results and shareholder value in 1996.
Thomas F. Schuster
President and Chief Executive Officer
2
<PAGE>
Health Products Division
1995 was the most significant year for the Health Products Division since
its inception 21 years ago. Our acquisition of the Balfour Health Care Division
from Kayser-Roth nearly doubled the size of Alba's health business.
Sales in 1995 increased over 90% over 1994. New products, as a result of
the acquisition, include cuffs for disposable surgeons gowns (it is estimated
Alba now has an 80% market share); Care-Steps(R), footwear which increased our
footwear volume by a third and gives Alba over 50% share of this market;
impervious stockinette; baby caps; Care SocksTM for diabetic patients; and
several other specialty products.
Our customer base increased by over 500 accounts, including significant
volume with Johnson & Johnson Medical; Avent (Division of Kimberly-Clark), Owens
& Minor, 3M Company, and Medline. While our overall sales to Baxter Healthcare
increased over 30%, their purchases as a percent of our total business dropped
significantly.
(Photos of socks appears along the bottom of page)
After the close of the acquisition in March, albahealthTM began to
relocate its Valdese health manufacturing operations to the 250,000-square-foot
Rockwood, Tennessee plant, acquired in the Balfour deal. We now have all of our
health products being produced and inventoried under one roof in Rockwood,
creating a more efficient, lower cost operating environment; one that puts Alba
in an excellent position to compete long range in the cost-conscious healthcare
marketplace.
(Photo appears here)
In addition to the new products acquired, Alba continues to produce
anti-embolism stockings for sale in North America, Germany, Sweden, England, and
Australia. The P.A.S.(R) business, acquired in December, 1994, provides a total
vascular care
3
<PAGE>
(Photo of a person working on a machine appears here)
system in conjunction with stockings. Sales and profits from the P.A.S.(R)
product line met our goals in 1995.
Market share of our slip-resistant footwear increased over 50% in 1995.
Our diverse offering of Terry-Treads(R), Fashion-TreadsTM, Safe-T-Treads(R), and
Day-Treads(R) was augmented by the Care-StepsTM line of Balfour. Our range of
products cover every customer need from long term usage to the short term with
our economical Day-Treads(R).
(Photo of some one modeling hospital products appears here)
Likewise, the Balfour acquisition greatly expanded our already extensive
line of stockinette products. Non-sterile, sterile, and "pre-treated" for custom
pack put-ups in a large variety of sizes allow us to meet any and all customer
needs; of particular note is the availability of many impervious stockinette
styles. All stockinette products are available in both 100% cotton and 100%
polyester materials. To maintain service and growth, while lowering
manufacturing costs, Alba has invested in high-speed knitting equipment for its
stockinette production.
Another significant investment was the construction of a new controlled
environment "clean" room in Rockwood for the manufacture of our
4
<PAGE>
sterile dressing products. The new room will allow for the increased capacity
necessary to provide products to our expanded customer base.
The acquisition and subsequent manufacturing consolidation brought a
large number of new employees to our Rockwood operation, many of whom needed to
be trained for new jobs and new systems. It was a significant challenge
requiring long hours for both manufacturing and management employees. The
integration process has now been achieved because of the dedication of all the
albahealthTM employees, both old and new.
We enter 1996 with high expectations for continued profitable growth.
Consumer Products
The Consumer Products Division of Alba-Waldensian, Inc. manufactures and
markets a wide variety of knitted apparel products, primarily using
state-of-the-art computer controlled circular knitting machines. Product lines
include intimate apparel and sheer hosiery in regular size, queen size and
maternity size, marketed on a branded and private label basis.
1995 was a challenging and difficult year for the Consumer Products
Division at Alba. Industrywide weakness in the apparel market at retail clearly
impacted most manufacturers, resulting in falling sales and earnings, domestic
plant closings and growing inventories. Alba was not immune to this weakness,
finishing 1995 with sales down 14.6% vs. prior year. Counter to the industry,
however, Alba's hosiery business increased 8.6% during 1995, the result of
continuing niche marketing efforts in special size categories. Intimate apparel
sales, however, declined 29.9% vs. 1994. This decline in intimate apparel was
caused in large part by retail softness combined with competitive measures among
some of the Division's major customers.
(Photo of hosiery package appears here)
Late in the second quarter, when it became apparent that the weakness at
retail was not a short-term trend, the Company took major steps to shrink its
overhead to bring it in line with a lower volume base. One plant
5
<PAGE>
was closed, the division's work force was downsized and 30% of sewing was moved
to El Salvador, in an attempt to drive costs down. While these steps will have a
positive impact on the business long term, it was not enough to prevent losses
in 1995. Throughout the year, marketing and selling expenses were tightly
controlled and decreased 8.9% vs. 1994.
New Brands
Late in 1995, the Division entered into a licensing agreement with harve
benard to manufacture and market a collection of intimate apparel under the
harve benard brand name. Launched in November to a receptive retail audience,
the brand is expected to gain distribution in the Department/Specialty Store
classes of trade, as well as among off-price branded retailers.
(Photo of a woman appears here)
Private Label
The private label portion of our business continues to be aggressively
pursued. Private label hosiery programs have grown in the specialty store class
of trade. Additionally, the Division broadened distribution of bra and panty
programs in accounts such as Nordstrom and Victoria's Secret catalog. The
continued development of private label remains an important part of our on-going
strategy.
New Products
The Division's commitment to providing quality products at value prices
is the cornerstone of our product development plan. 1995 saw the introduction of
several key new product groups. Fashion basics were important in intimate
apparel with such new products as cotton "naturals" and heather patterns,
introduced early in the second half of the year. In November a super-size
stretch lace bra was added to our bra collection, expanding the size range and
the potential wearer base. Late in the year we completed development work on a
revolutionary stretch seamless bra that provides underbust support and lift
(without underwires) to improve the comfort and appearance of the wearer. The
product is so unique that we have applied for patent protection. Additionally,
we are nearing completion on a collection of seamless control panties slated for
introduction in early 1996. In hosiery, queen size tights and trouser socks were
introduced in the
6
<PAGE>
third quarter with improved gross margins.
Other
During the year, the Division's inventories were carefully analyzed and
substantial amounts of obsolete, close-out, excess and irregular inventory were
identified and sold off. While this adversely impacted profits, particularly in
the third quarter, it allowed us to "clean house" and go into 1996 with cleaner
inventories.
(Photo of a woman appears here)
The Division's Electronic Data Interchange (EDI) capabilities provide us
with a direct link to our customers for efficiently and quickly processing
orders. Major retailers order on a daily basis rather than monthly, which
smoothes order and merchandise flow through our Distribution Center.
Inter-company communications have also been improved by the addition of e-mail
and on-line access to the World-wide Web.
Byford
Byford Apparel has now completed its third year as a division of
Alba-Waldensian and continues to share sales, marketing and knitting
technologies with the core Alba business. The Byford brand of men's socks and
sweaters is recognized throughout the world and was first introduced into the
United States by founder Donald Byford in 1923.
Byford designs and markets better men's socks and sweaters and focuses on
three separate classes of trade-department stores, better specialty stores, and
the fast-emerging golf trade. Alternative markets such as college bookstores,
corporate premium sales, and catalogs are also being developed.
Byford socks have traditionally been sourced primarily from the D. Byford
Hosiery Mill in Leicester, England, although worldwide sourcing is now being
initiated to bring new products at more popular price points to the market.
Byford sweater sourcing is more broadly based, with product knit in the
United Kingdom, the Far East and the United States. Byford, along with the rest
of the apparel industry, experienced difficult conditions throughout 1995.
Hosiery sales were flat
versus the prior year as new account openings barely offset losses experienced
from old account closings.
Byford's sweater business was down versus 1994 as stores carried over
their sweater inventories from the prior warm winter. The expansion of fleece as
a fashion item also had a negative impact on the sweater business.
Although negatively impacting profits, Byford
7
<PAGE>
(Photo of socks appears here)
took the very necessary step of marking down and closing out old merchandise,
primarily sweaters, that were the result of past years' design errors.
(Photo a women talking appears here)
On a brighter note, during 1995, the division continued to make progress
toward its longer range goal of developing the department store class of trade
as a viable channel of distribution, while maintaining its rich and long
heritage of specialty store-based British tradition. Byford relaunched its
Byford International line of men's socks in mid-year. This line primarily
targets department stores and the re-introduction was quite successful.
Considerable expansion of this segment of our business, which enjoys operating
under the quality umbrella provided by the English-made line, is expected
throughout 1996.
Looking ahead, Byford has taken some major steps to increase market share
in the future. Divi-
8
<PAGE>
sion sock collections, both high-end and moderately priced, continue to gain
momentum and are expected to show volume gains during 1996. The sweater
collections are considerably stronger than they have been in the past, due to
the new design expertise being applied to them, along with new yarns that are
being introduced and new sourcing that's being developed.
Particularly exciting is the exclusive that Byford has for men's sweaters
at the 1996 U.S. Open Golf Tournament, to be held at Oakland Hills Country Club.
This bodes well for a strong 1996 that will see a turnaround for Byford's volume
and profitability.
Alba Direct
Alba Direct began in 1990 as the telemarketing arm of Alba-Waldensian,
selling both medical specialty products and consumer products to approximately
2400 independent retailers throughout the country. It has since evolved into an
organization which handles the company's non-traditional sales channels.
(Photo of a person working on a computer appears here)
The division had a very difficult year, in both the domestic area and in
the recently developed export sales area. The domestic business finished down
vs. year ago, due primarily to the closings of many small, independent stores.
The export part of the business finished down 51% due to a restructuring of
their distributor network in Japan. Distributors who had been heavily
discounting Alba's products during 1994 were eliminated to protect the long-term
viability of the business. The remaining distributors struggled to straighten
out the business in the midst of Japan's on-going recession, which adversely
affected Alba's business throughout the year.
Alba Direct's venture into the outlet store arena in Branson, Missouri,
proved to be unsuccessful and the store is slated to be closed in early 1996.
Alba Direct has consolidated it's distribution center with that of
Consumer Products to reduce its overhead and the Telemarketing staff was reduced
as sales declined. Additionally, the entire staff has moved into Alba's Main
Office building, thus allowing it to cease operating out of separate quarters,
thereby further reducing overhead expenses. These steps streamline the operation
while improving order response time.
In spite of Alba Direct's very difficult retail environment, the Division
operated profitably during 1995 and is looking forward to improved results in
1996.
9
<PAGE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................................ $ 56,009 $ 103,952
Accounts receivable (net of allowance for uncollectible accounts of $250,000 in 1995 and $180,000 in
1994 (Notes 4 and 5)............................................................................... 9,391,137 7,426,654
Refundable income taxes.............................................................................. 437,453 127,394
Notes receivable..................................................................................... 21,704 30,080
Inventories (Note 2)................................................................................. 15,157,970 17,264,180
Deferred income tax asset (Note 8)................................................................... 480,850 298,010
Prepaid expenses and other........................................................................... 379,373 151,236
Total current assets................................................................................. 25,924,496 25,401,506
PROPERTY AND EQUIPMENT (Notes 3, 4, and 5):
Land................................................................................................. 259,744 139,744
Buildings............................................................................................ 8,257,176 7,154,717
Machinery and equipment.............................................................................. 21,462,652 19,807,849
Total property and equipment......................................................................... 29,979,572 27,102,310
Less accumulated depreciation and amortization....................................................... (16,204,174) (15,497,062)
Net property and equipment........................................................................... 13,775,398 11,605,248
OTHER ASSETS:
Notes receivable..................................................................................... 60,421 77,995
Trademarks and patents............................................................................... 281,082 324,654
Excess of cost over net assets acquired (Note 1)..................................................... 8,957,001 --
Cash surrender value of life insurance (net of loans against policies of $107,842 in 1995 and
$101,591 in 1994).................................................................................. 331,617 320,325
Total other assets................................................................................... 9,630,121 722,974
Total assets......................................................................................... $ 49,330,015 $ 37,729,728
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and lines of credit (Note 4)................................................... $ 1,267,600 $ 1,178,062
Current maturities of long-term debt (Note 5)........................................................ 2,350,000 500,000
Current maturities of capital lease obligations (Note 3)............................................. 58,069 113,526
Accounts payable..................................................................................... 2,773,542 2,587,875
Accrued Expenses:
Payroll and profit-sharing......................................................................... 517,286 689,983
Property and payroll taxes......................................................................... 247,453 102,939
Group health claims................................................................................ 188,143 150,000
Other.............................................................................................. 481,801 213,060
Total current liabilities............................................................................ 7,883,894 5,535,445
LONG-TERM DEBT (Note 5).............................................................................. 12,262,500 1,000,000
CAPITAL LEASE OBLIGATIONS (Note 3)................................................................... -- 58,069
DEFERRED COMPENSATION................................................................................ 330,086 344,391
DEFERRED INCOME TAX LIABILITY (Note 8)............................................................... 1,385,019 1,698,369
Total liabilities.................................................................................... 21,861,499 8,636,274
Commitments (Notes 3 and 9)
STOCKHOLDERS' EQUITY (Notes 4, 5 and 6):
Common stock -- authorized 3,000,000 shares, $2.50 par value; issued: 1,886,580 shares in 1995 and
1994; outstanding; 1,867,403 and 1,863,153 shares in 1995 and 1994, respectively................... 4,716,450 4,716,450
Additional paid-in capital........................................................................... 9,182,158 9,182,158
Retained earnings.................................................................................... 13,706,544 15,361,763
Total................................................................................................ 27,605,152 29,260,371
Less treasury stock -- at cost (19,177 and 23,427 shares in 1995 and 1994, respectively)............. (136,636) (166,917)
Total stockholders' equity........................................................................... 27,468,516 29,093,454
Total liabilities and stockholders' equity........................................................... $ 49,330,015 $ 37,729,728
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
10
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET SALES (Note 7)...................................................................... $63,717,716 $56,506,566 $50,855,377
COST OF SALES........................................................................... 51,675,498 42,252,186 37,376,874
GROSS MARGIN............................................................................ 12,042,218 14,254,380 13,478,503
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................................ 13,139,788 11,007,734 11,594,258
OPERATING INCOME (LOSS)................................................................. (1,097,570) 3,246,646 1,884,245
OTHER INCOME (EXPENSE):
Interest expense........................................................................ (1,246,540) (274,739) (247,821)
Interest income......................................................................... 25,423 57,863 65,380
Gain (loss) on sale of property and equipment........................................... (109,809) 27,992 83,598
Cost associated with unconsummated acquisition.......................................... -- -- (428,652)
Other................................................................................... (41,019) 91,781 78,353
Total other income (expense), net....................................................... (1,371,945) (97,103) (449,142)
INCOME (LOSS) BEFORE INCOME TAXES....................................................... (2,469,515) 3,149,543 1,435,103
PROVISION (BENEFIT) FOR INCOME TAXES (Note 8)........................................... (813,671) 1,203,667 450,625
NET INCOME (LOSS)....................................................................... $(1,655,844) $ 1,945,876 $ 984,478
NET INCOME (LOSS) PER COMMON SHARE...................................................... $ (.89) $ 1.05 $ .54
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY STOCK
SHARES* AMOUNT CAPITAL EARNINGS SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993...................... 1,886,580 $4,716,450 $9,182,158 $12,528,045 (63,302) $(540,025)
Net income...................................... -- -- -- 984,478 -- --
Exercise of stock options....................... -- -- -- (86,251) 15,250 195,658
BALANCE AT DECEMBER 31, 1993.................... 1,886,580 4,716,450 9,182,158 13,426,272 (48,052) (344,367)
Net income...................................... -- -- -- 1,945,876 -- --
Exercise of stock options....................... -- -- -- (10,385) 24,625 177,450
BALANCE AT DECEMBER 31, 1994.................... 1,886,580 4,716,450 9,182,158 15,361,763 (23,427) (166,917)
Net Loss........................................ -- -- -- (1,655,844) -- --
Exercise of stock options....................... -- -- -- 625 4,250 30,281
BALANCE AT DECEMBER 31, 1995.................... 1,886,580 $4,716,450 $9,182,158 $13,706,544 (19,177) $(136,636)
<CAPTION>
TOTAL
<S> <C>
BALANCE AT JANUARY 1, 1993...................... $25,886,628
Net income...................................... 984,478
Exercise of stock options....................... 109,407
BALANCE AT DECEMBER 31, 1993.................... 26,980,513
Net income...................................... 1,945,876
Exercise of stock options....................... 167,065
BALANCE AT DECEMBER 31, 1994.................... 29,093,454
Net Loss........................................ (1,655,844)
Exercise of stock options....................... 30,906
BALANCE AT DECEMBER 31, 1995.................... $27,468,516
</TABLE>
*DENOTES SHARES ISSUED.
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
11
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................................................ $(1,655,844) $ 1,945,876
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization.......................................................... 2,303,874 1,736,576
Provision for bad debts................................................................ 145,199 74,933
Loss (Gain) on sale of property and equipment.......................................... 109,809 (27,992)
Increase (decrease) in deferred income taxes........................................... (496,190) 455,000
Provision for inventory obsolescence................................................... 1,619,013 579,997
Changes in operating assets and liabilities providing (using) cash:
Accounts receivable................................................................. (153,403) (303,611)
Refundable income taxes............................................................. (310,059) (51,260)
Inventories......................................................................... 2,010,308 (3,695,551)
Prepaid expenses and other.......................................................... (239,429) (14,967)
Accounts payable.................................................................... 185,667 (175,772)
Accrued expenses and other liabilities.............................................. (38,227) (21,088)
Deferred compensation............................................................... (14,305) (105,974)
Net cash provided by (used in) operating activities...................................... 3,466,413 396,167
INVESTING ACTIVITIES:
Capital expenditures..................................................................... (1,609,840) (1,918,638)
Proceeds from sale of property and equipment............................................. 271,830 4,250
Proceeds from notes receivable........................................................... 25,950 31,530
Purchase of Balfour Healthcare........................................................... (15,321,714) --
Net cash used in investing activities.................................................... (16,633,774) (1,882,858)
FINANCING ACTIVITIES:
Proceeds from borrowings under line of credit agreement, net............................. 89,538 1,178,062
Proceeds from issuance of long-term debt................................................. 15,000,000 --
Principal payments on long-term debt and leases.......................................... (2,001,026) (715,000)
Cash proceeds from exercise of stock options............................................. 30,906 167,065
Net cash provided by financing activities................................................ 13,119,418 630,127
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... (47,943) (856,564)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................................... 103,952 960,516
CASH AND CASH EQUIVALENTS AT END OF YEAR................................................. $ 56,009 $ 103,952
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during
the year for:
Interest............................................................................... $ 1,204,386 $ 259,222
Income taxes........................................................................... $ 25,934 $ 801,917
<CAPTION>
1993
<S> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................................................ $ 984,478
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization.......................................................... 1,731,808
Provision for bad debts................................................................ 654,205
Loss (Gain) on sale of property and equipment.......................................... (83,598)
Increase (decrease) in deferred income taxes........................................... 221,762
Provision for inventory obsolescence................................................... 434,000
Changes in operating assets and liabilities providing (using) cash:
Accounts receivable................................................................. (3,084,953)
Refundable income taxes............................................................. 45,118
Inventories......................................................................... (3,819,867)
Prepaid expenses and other.......................................................... 146,003
Accounts payable.................................................................... 1,752,881
Accrued expenses and other liabilities.............................................. 255,816
Deferred compensation............................................................... (106,768)
Net cash provided by (used in) operating activities...................................... (869,115)
INVESTING ACTIVITIES:
Capital expenditures..................................................................... (1,719,170)
Proceeds from sale of property and equipment............................................. 24,505
Proceeds from notes receivable........................................................... 232,276
Purchase of Balfour Healthcare........................................................... --
Net cash used in investing activities.................................................... (1,462,389)
FINANCING ACTIVITIES:
Proceeds from borrowings under line of credit agreement, net............................. --
Proceeds from issuance of long-term debt................................................. 4,000,000
Principal payments on long-term debt and leases.......................................... (2,366,683)
Cash proceeds from exercise of stock options............................................. 75,000
Net cash provided by financing activities................................................ 1,708,317
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... (623,187)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................................... 1,583,703
CASH AND CASH EQUIVALENTS AT END OF YEAR................................................. $ 960,516
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during
the year for:
Interest............................................................................... $ 249,499
Income taxes........................................................................... $ 327,139
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
12
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
OPERATIONS -- Alba-Waldensian, Inc. (the Company) manufactures and sells an
extensive line of knitted apparel products as well as a variety of surgical
products for the health care industry. The Company's principal market for both
apparel and surgical products is the United States.
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries, Pilot Research Corp.,
Alba-Waldensian Export Corp., and AWI Retail, Inc. All significant intercompany
accounts and transactions have been eliminated.
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Company writes down close-out and irregular inventory on an ongoing basis
based on market conditions. Inventories reflect valuation allowances necessary
to reduce inventories to their net realizable value. It is reasonably possible
that these estimates could change in 1996.
CASH AND CASH EQUIVALENTS -- The Company considers short-term investments with
original maturities of less than three months to be equivalent to cash.
INVENTORIES -- Inventories are stated at the lower of cost (first-in, first-out
"FIFO" basis) or market.
PROPERTY, EQUIPMENT, DEPRECIATION AND AMORTIZATION -- Property and equipment are
stated at cost. Betterments are capitalized. Maintenance and repairs are
expensed as incurred.
The provision for depreciation is primarily based on the straight-line method
calculated to extinguish the costs of the respective assets over their estimated
useful lives which range from seven to forty years for buildings and
improvements and three to twenty years for furniture, fixtures, machinery and
equipment.
Assets under capital leases are amortized in accordance with the Company's
normal depreciation policy for owned assets or over the lease term if shorter.
INTANGIBLE ASSETS -- The costs of acquired trademarks and patents are amortized
using the straight-line method over their estimated useful lives of
approximately seventeen years.
Excess of cost of a company acquired over the fair value of its net assets at
dates of acquisition (goodwill) is being amortized on the straight-line method
over 15 years. Amortization expense charged to operations for 1995 was $471,421.
The Company periodically reviews the value of its goodwill to determine if an
impairment has occurred. The Company measures the potential impairment of
recorded goodwill by the undiscounted value of expected future operating cash
flows in relation to its net capital investment. Based on the review, the
Company does not believe that an impairment of its goodwill has occurred.
REVENUE RECOGNITION -- The Company recognizes revenue when goods are shipped.
ADVERTISING COSTS -- Advertising costs are charged to operations when incurred.
The Company spent approximately $384,000, $522,000, and $725,000 for advertising
in 1995, 1994 and 1993, respectively.
RESEARCH AND DEVELOPMENT -- The Company sponsors research and development
projects through its research and development department and its wholly owned
subsidiary, Pilot Research Corporation. Expenditures for research and
development are expensed as incurred. The Company spent approximately $490,000,
$376,000 and $341,000 for research and development in 1995, 1994 and 1993,
respectively.
INCOME TAXES -- The Company calculates income taxes using the asset and
liability method specified by Statement of Financial Accounting Standards No.
109.
CONCENTRATION OF CREDIT RISK -- Financial instruments which potentially subject
the Company to concentrations of credit risk consist of trade receivables. Any
such risk is limited due to the Company's large number of customers
13
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
and their geographic dispersion, except as discussed in Note 7.
NET INCOME PER COMMON SHARE -- Net income per common share is calculated on the
weighted average number of shares of common stock outstanding (1,864,618 in
1995, 1,848,671 in 1994 and 1,826,190 in 1993). When dilutive, outstanding
options to purchase common stock are considered. The effect on earnings per
share of dilutive stock options was not material for 1994 and 1993. For 1995,
such options were antidilutive.
DEFERRED COMPENSATION -- The Company has agreements with several of its officers
providing for the deferral of a portion of their annual compensation until their
retirement from the Company. The agreements allow for payment of the deferred
amounts over a ten-year period beginning on the retirement date. Compensation
expense is being recognized over the period of active employment. The liability
represents the present value of future payments earned as of December 31, 1995
and 1994.
INTEREST RATE SWAPS -- Interest rate swap agreements are entered into primarily
as a hedge against interest exposure of variable-rate debt. The difference to be
paid or received on swap agreements is included in interest expense as payments
are made or received.
GROUP HEALTH INSURANCE -- The Company is self-insured as to group health
insurance for its employees. The Company accrues an amount for estimated claims
incurred but not reported.
PROFIT-SHARING PLAN -- The Company sponsors a profit-sharing plan which covers
substantially all employees. Contributions to the plan are funded annually (see
Note 9).
RECENT ACCOUNTING PRONOUNCEMENTS -- Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", issued by the Financial Accounting Standards Board
(FASB), is effective for financial statements for fiscal years beginning after
December 15, 1995. The new standard establishes new guidelines regarding when
impairment losses on long-lived assets, which include plant and equipment and
certain identifiable intangible assets and goodwill, should be recognized and
how impairment losses should be measured. The Company does not expect adoption
to have a material effect on its financial position or results of operations.
Statements of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123), issued by the Financial Accounting
Standards Board (FASB), is effective for specific transactions entered into
after December 15, 1995, while the disclosure requirements of SFAS No. 123, are
effective for financial statements for fiscal years beginning no later than
December 15, 1995. The new standard encourages a fair value method of accounting
for stock-based compensation plans. This statement provides a choice to either
adopt the fair value based method of accounting or continue to apply APB Opinion
No. 25, which would require only disclosure of the pro forma net income and
earnings per share, determined as if the fair value based method has been
applied. The Company plans to continue to apply APB Opinion No. 25 when adopting
this statement, and accordingly, this statement is not expected to have a
material impact on the Company.
RECLASSIFICATION -- Certain 1994 and 1993 amounts have been reclassified to
conform with 1995 classifications.
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1. ACQUISITION
On March 6, 1995, the Company purchased the Balfour Health Care Division and
manufacturing facility in Rockwood, Tennessee ("Balfour"), a manufacturer of
knitted medical products, from Kayser-Roth Corporation for approximately $15.3
million. The Company financed 100% of the acquisition price with a revolving
loan agreement provided by a bank (See Note 5).
The acquisition has been accounted for using the purchase method of accounting.
The excess of the purchase price over the estimated fair value of the net assets
acquired (goodwill) of $9.428 million is amortized on a straight line basis over
15 years.
The accompanying consolidated statements of income reflect the operating results
of Balfour since the effective date of the acquisition. Pro forma unaudited
consolidated operating results of the Company and Balfour for the years ended
December 31, 1995 and 1994, assuming the acquisition had been made as of January
1, 1995 and 1994, are summarized below:
[CAPTION]
<TABLE>
<CAPTION>
1995 1994
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net sales............................ 66,193 71,629
Net income (loss).................... (1,598) 2,470
Earnings (loss) per share............ (.86) 1.34
</TABLE>
2. INVENTORIES
Inventories at December 31, 1995 and 1994 include:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Materials and supplies............. $ 3,171,091 $ 3,377,562
Work-in-process.................... 4,749,829 5,945,246
Finished goods..................... 7,237,050 7,941,372
Total.............................. $15,157,970 $17,264,180
</TABLE>
3. LEASES
The Company leases certain computer equipment under capital leases. Such
equipment is included in property and equipment as of December 31, 1995 and 1994
and is summarized as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Machinery and equipment.................... $447,080 $549,039
Less accumulated amortization.............. 426,389 375,912
Net equipment under capital leases......... $ 20,691 $173,127
</TABLE>
The future minimum lease payments under capital and other equipment operating
leases having initial or remaining noncancellable lease terms in excess of one
year are summarized as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR LEASES LEASES
<S> <C> <C>
1996....................................... $434,000 $ 60,414
1997....................................... 307,000 --
1998....................................... 105,000 --
1999....................................... 44,000 --
2000....................................... 16,000 --
Thereafter................................. 17,000
Total minimum lease payments............... $923,000 60,414
Less amount representing interest.......... 2,345
Present value of net minimum lease
payments.................................. $ 58,069
</TABLE>
Total rental expense for all operating leases was $398,000 in 1995, $241,000 in
1994 and $232,000 in 1993.
4. SHORT-TERM BORROWINGS AND LINES OF CREDIT
The Company has an agreement with a bank which provides a seasonal line of
credit of up to $5,000,000 (previously $3,000,000 in 1994) of which $3,732,400
was unused at December 31, 1995, with interest at the LIBOR rate plus 1.75%
(7.75% at December 31, 1995) or as low as 1.25% if certain net worth targets are
met. The line of credit commitment will be automatically reduced by $1,000,000
on both May 31, 1998 and March 31, 1999. Indebtedness under this agreement is
collateralized by equipment and accounts receivable. The loan agreement contains
covenants including, but not limited to, restrictions related to indebtedness,
net worth (not less than $18,753,000 at December 31, 1995), dividends, capital
expenditures and cash flow. At December 31, 1995, after giving effect to a
waiver granted by the bank relating to net worth and cash flow, the Company is
in compliance with the provisions of the agreement.
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The following relates to aggregate short-term borrowings in 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Amount outstanding at December
31........................... $1,267,600 $1,178,062 --
Maximum amount outstanding at
any month end................ $1,466,000 $1,178,062 $2,150,000
Average amount outstanding
(based on weighted daily
average balances)............ $ 672,478 $ 59,326 $ 733,836
Weighted average interest rate
during the year.............. 7.51% 6.98% 6.08%
Weighted average interest rate
at December 31............... 7.44% 7.00% --
</TABLE>
The weighted average interest rate during the year was computed by dividing
total short-term interest expense for the year by the weighted average amount
outstanding during the year.
5. LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 is comprised of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Variable Rate Term Loan, due $462,500
quarterly through December 31, 1997
and $587,500 quarterly from March 1,
1998 through December 31, 1999, with
$5,212,500 due March 31, 2000 plus
interest at LIBOR rate plus 2.0% (8.0%
at December 31, 1995) or as low as
1.5% if certain net worth targets are
met................................... $13,612,500 $ --
Equipment Term Loan, due $125,000
quarterly through December 31, 1997
plus interest at 6.30%................ 1,000,000 1,500,000
Total.................................. 14,612,500 1,500,000
Less current maturities................ 2,350,000 500,000
Long-term debt......................... $12,262,500 $1,000,000
</TABLE>
In March 1995, in connection with the acquisition of Balfour, the Company
entered into an agreement with a bank to provide a $15,000,000 variable rate
term loan. The loan agreement contains covenants including, but not limited to,
indebtedness, net worth (not less than $18,753,000 at December 31, 1995),
dividends, capital expenditures and cash flow. At December 31, 1995, after
giving effect to a waiver granted by the bank relating to net worth and cash
flow, the Company is in compliance with the provisions of the agreement.
At December 31, 1995, the Company had an outstanding interest rate swap
agreement under which the Company receives a variable rate based on LIBOR and
pays a fixed rate of 7.95% on a notional amount of $3,868,561, as determined in
one month intervals through November 30, 1998. The transaction effectively
changes a portion of the Company's interest rate exposure from a variable rate
to a fixed rate. The Company is exposed to credit loss in the event of
nonperformance by the other party to the interest rate swap agreement. However,
the Company does not anticipate nonperformance by the counterparty.
A substantial portion of the Company's property and equipment, and accounts
receivable are pledged as collateral for the long-term debt.
Maturities of long-term debt, exclusive of capital lease obligations, over the
next five years are as follows:
<TABLE>
<S> <C>
YEAR
1996............................................... $ 2,350,000
1997............................................... 2,350,000
1998............................................... 2,350,000
1999............................................... 2,350,000
2000............................................... 5,212,500
Total.............................................. $14,612,500
</TABLE>
6. COMMON STOCK AND EMPLOYEE INCENTIVE PLANS
In June, 1993, the Company adopted the 1993 Long Term Performance Plan (the 1993
Plan), which includes both qualified and nonqualified option provisions and
stock appreciation rights and restricted, performance and other stock-based
awards. Under the 1993 Plan, the Compensation Committee of the Board of
Directors is authorized to grant stock awards to purchase up to 250,000 shares
of the Company's common stock at prices equal to the fair value of the stock on
the dates of grant. The 1993 Plan replaced the 1983 Employee Stock Option Plan
(the 1983 Plan), which provided for the granting of 100,000 shares of the
Company's stock.
The 1993 Plan options are exercisable over a period determined by the
Compensation Committee at the date of grant, beginning five months after the
date of grant. The 1983 Plan qualified and nonqualified options are exercisable
at the rate of 25% per year, beginning one year from the date of grant. At
December 31, 1995, options to purchase 61,125 shares were exercisable.
The Company adopted the 1992 Nonqualified Stock Option Plan for Nonemployee
Directors (the 1992 Plan). Under the 1992 Plan, each nonemployee director was
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
granted options to purchase 2,000 shares of the Company's common stock at prices
equal to the fair value of the stock on the dates of grant. Options to purchase
an aggregate of 16,000 shares were granted December 14, 1993 and are exercisable
any time after the grant date and before the expiration date (December 14,
1998).
Transactions involving the Plans are summarized as follows:
<TABLE>
<CAPTION>
OPTION SHARES QUALIFIED NONQUALIFIED
<S> <C> <C>
Outstanding at
January 1, 1993................... 75,000 25,000
Granted............................ 37,500 16,000
Exercised.......................... (15,250) --
Outstanding at
December 31, 1993................. 97,250 41,000
Granted............................ 50,000 --
Exercised.......................... (20,250) (4,375)
Expired and/or cancelled........... (18,500) (625)
Outstanding at
December 31, 1994................. 108,500 36,000
Granted............................ 7,250 --
Exercised.......................... (1,750) (2,500)
Expired and/or cancelled........... (500) --
Outstanding at
December 31, 1995................. 113,500 33,500
OPTION PRICES PER SHARE:
1993
Granted............................ $ 8.625-$10.00 $7.94
Exercised.......................... $ 6.125-$7.625 --
1994
Granted............................ $10.625-$11.250 --
Exercised.......................... $ 6.125-$7.625 $6.50-$7.62
Expired and/or cancelled........... $ 6.125-$8.625 --
1995
Granted............................ $ 8.125 --
Exercised.......................... $ 7.75-$8.625 $6.50
Expired and/or cancelled........... $ 7.75 --
Outstanding at
December 31....................... $ 6.125-$11.25 $6.125-$7.94
</TABLE>
7. MAJOR CUSTOMERS
The Company's single line of business is considered to be the manufacture,
processing and sale of knitted products. Sales to Baxter Healthcare Corporation
(representing the only customer with 10% or more of net sales) totaled
$16,601,252, $12,902,722, $13,610,937 in 1995, 1994 and 1993, respectively.
While the loss of Baxter Healthcare Corporation would have a material adverse
effect on the business of the Company, management believes that, because of the
number of departments within Baxter to which the Company sells, the likelihood
of a material amount of sales loss is reduced.
8. INCOME TAXES
In prior years, the Company was subject to alternative minimum tax. These
amounts are allowed as credits against regular income tax in future years when
the regular tax liability exceeds the alternative minimum tax liability. During
1994, the Company utilized approximately $117,000 of these alternative minimum
tax credits to reduce income taxes. In addition, general business tax credits
totaling approximately $182,000 were also used to reduce 1994 federal income
taxes.
In 1995 the net operating loss (NOL) for federal income tax purposes of
$2,005,000 was carried back pursuant to federal statutes and fully utilized. As
a result of the NOL carryback, approximately $255,000 of alternative minimum tax
credit carryovers and $145,000 of business tax credit carryovers became
available in 1995 to offset future federal income taxes.
The Company also has approximately $2,100,000 of state net operating loss
carryforwards available for reduction of future state taxable income. These
carryovers begin to expire in the year 2001.
The Company has not provided valuation allowances for the deferred tax assets as
no conditions exist that require such allowances.
Components of the income tax provision (benefit) for 1995, 1994 and 1993
included:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal......................... $(317,481) $ 632,667 $210,968
State........................... -- 116,000 17,895
Total current.................... (317,481) 748,667 228,863
Deferred:
Federal......................... (411,810) 438,000 196,513
State........................... (84,380) 17,000 25,249
Total deferred................... (496,190) 455,000 221,762
Total provision (benefit) for
income taxes.................... $(813,671) $1,203,667 $450,625
</TABLE>
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The approximate tax effect of temporary differences and carryforwards that gave
rise to the Company's deferred income tax assets and liabilities for 1995 and
1994 are as follows:
<TABLE>
<CAPTION>
1995 ASSETS LIABILITIES TOTAL
<S> <C> <C> <C>
Current:
Receivables.............. $ 75,455 $ -- $ 75,455
Inventories.............. 322,970 -- 322,970
Other.................... 2,425 -- 2,425
Benefit of Net Operating
Loss carryforward....... 80,000 -- 80,000
Total current............. 480,850 480,850
Noncurrent:
Property................. -- (1,981,011) (1,981,011)
Deferred compensation.... 154,720 -- 154,720
Insurance reserve........ 54,950 -- 54,950
Deferred revenue......... -- (13,678) (13,678)
General business tax
credit carryforward..... 145,000 -- 145,000
Alternative minimum tax
credit carryforward..... 255,000 -- 255,000
Total noncurrent.......... 609,670 (1,994,689) (1,385,019)
Total current and
noncurrent............... $1,090,520 $(1,994,689) $ (904,169)
</TABLE>
<TABLE>
<CAPTION>
1994 ASSETS LIABILITIES TOTAL
<S> <C> <C> <C>
Current:
Receivables................ $ 49,766 $ -- $ 49,766
Inventories................ 249,563 -- 249,563
Prepaid expenses........... -- (1,459) (1,459)
Vacation pay............... 140 -- 140
Total current............... 299,469 (1,459) 298,010
Noncurrent:
Property................... -- (1,922,664) (1,922,664)
Deferred compensation...... 164,833 -- 164,833
Insurance reserve.......... 54,900 -- 54,900
Deferred revenue........... -- (19,352) (19,352)
Alternative minimum tax
credit carryforward....... 23,914 -- 23,914
Total noncurrent............ 243,647 (1,942,016) (1,698,369)
Total current and
noncurrent................. $543,116 $(1,943,475) $(1,400,359)
</TABLE>
The income tax provision differs from the amount computed by applying the
federal statutory income tax rate of 34% to pre-tax income. The computed amount
is reconciled to total income tax expense as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal income tax at
statutory rate (benefit)...... $ (839,635) $1,070,845 $487,935
State income taxes, net of
federal benefit (cost)........ (55,691) 87,780 28,475
Restoration of general business
credits due to IRS
settlement.................... -- (51,751)
Change, net of premiums paid
and proceeds, in officers'
life insurance values......... (4,196) (6,323) (4,149)
Expenses which are not
deductible for income
tax purposes.................. 32,684 22,923 13,323
All other...................... 53,167 28,442 (23,208)
Total provision (benefit) for
income taxes.................. $ (813,671) $1,203,667 $450,625
</TABLE>
9. EMPLOYEE BENEFITS
The Company has an employee salary deferral plan covering substantially all
employees which allows participants to defer from 2% to 10% of their salaries
with the Company contributing 40% of the participant's contribution up to 4%.
Contribution expenses related to this plan for the years ended December 31,
1995, 1994 and 1993 were $164,000, $171,000, and $156,000, respectively.
10. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the short-term borrowings and lines of credit and debt
issued pursuant to the Company's bank credit agreement approximate fair value
because the interest rates on these instruments change with market rates. At
December 31, 1995, the fair value of the Company's swap agreement was not
material.
18
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Alba-Waldensian, Inc.
Valdese, North Carolina
We have audited the accompanying balance sheets of Alba-Waldensian, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
two years in the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. The financial
statements of Alba-Waldensian, Inc. and subsidiaries as of December 31, 1993
were audited by other auditors whose report dated February 11, 1994 expressed an
unqualified opinion on those statements.
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 1995 and 1994 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Alba-Waldensian, Inc. and subsidiaries at December 31, 1995 and
1994, and the results of their operations and their cash flows for each of the
two years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
BDO SEIDMAN, LLP
Greensboro, North Carolina
February 8, 1996
19
<PAGE>
STOCK PRICES AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
SALES PRICE OF COMMON SHARES SALES PRICE OF COMMON SHARES
HIGH 1995 LOW HIGH 1994 LOW
<S> <C> <C> <C> <C>
First Quarter......................... 11 1/8 9 7/8 11 3/4 9 7/8
Second Quarter........................ 10 1/4 8 3/8 12 1/8 9 3/4
Third Quarter......................... 9 1/8 8 3/4 12 1/8 10 5/8
Fourth Quarter........................ 9 1/8 7 1/2 11 3/8 10 1/2
<CAPTION>
DIVIDENDS PER SHARE
<S> <C> <C> <C>
First Quarter......................... $ -- $ --
Second Quarter........................ $ -- $ --
Third Quarter......................... $ -- $ --
Fourth Quarter........................ $ -- $ --
</TABLE>
SEE NOTES 4 AND 5 TO THE CONSOLIDATED FINANCIAL STATEMENTS CONCERNING
RESTRICTIONS ON THE PAYMENT OF DIVIDENDS.
CLASSES OF PRODUCTS
<TABLE>
<CAPTION>
YEARS WOMEN'S WOMEN'S MEN'S
ENDED HOSIERY INTIMATE HOSIERY HEALTH
DECEMBER 31, PRODUCTS PRODUCTS PRODUCTS MEN'S WEAR PRODUCTS
<S> <C> <C> <C> <C> <C>
1991 15.7% 48.6% 1.2% -- 34.5%
1992 19.1% 43.8% 1.0% -- 36.1%
1993 19.2% 37.4% 7.3% 5.5% 30.6%
1994 17.4% 40.2% 7.9% 4.3% 30.2%
1995 15.5% 28.3% 6.2% 2.6% 47.4%
</TABLE>
NOTE: AMOUNTS REPRESENT PERCENTAGES OF ANNUAL NET SALES.
FIVE-YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
IN THOUSANDS EXCEPT FOR PER SHARE
AMOUNTS
1995 1994 1993 1992
<S> <C> <C> <C> <C>
SELECTED FINANCIAL DATA:
Net sales...................................................................... $63,718 $56,507 $50,855 $40,567
Gross margin................................................................... 12,042 14,254 13,479 10,187
Income (loss) before income taxes and cumulative effect of a change in
accounting principle......................................................... (2,470) 3,150 1,435 2,068
Provision (benefit) for income taxes........................................... (814) 1,204 451 727
Income (loss) before cumulative effect of a change in accounting principle..... (1,656) 1,946 984 1,341
Cumulative effect on prior years of a change in accounting for
income taxes................................................................. -- -- -- 226
Net income (loss).............................................................. (1,656) 1,946 984 1,567
Income (loss) per common share:
Income (loss) before cumulative effect of a change in accounting principle... (.89) 1.05 .54 .74
Cumulative effect on prior years of a change in accounting for
income taxes.............................................................. -- -- -- .12
Net income (loss) per common share........................................... (.89) 1.05 .54 .86
Weighted average number of shares of common stock outstanding................ 1,865 1,849 1,826 1,819
At Year End:
Total assets................................................................. $49,330 $37,730 $35,224 $30,586
Long-term debt and capital lease obligations................................. 12,263 1,058 1,777 505
SELECTED SUPPLEMENTARY FINANCIAL DATA
Property and equipment:
Net investment............................................................... $13,775 $11,605 $11,474 $11,475
Current additions............................................................ 1,610 1,919 1,719 1,326
Depreciation................................................................. 1,789 1,693 1,688 1,614
Other:
Working capital.............................................................. $18,040 $19,866 $18,293 $15,922
Stockholders' equity......................................................... 27,469 29,093 26,981 25,887
Stockholders' equity per common share........................................ 14.71 15.62 14.68 14.20
<CAPTION>
<S> <C>
SELECTED FINANCIAL DATA:
Net sales...................................................................... $39,728
Gross margin................................................................... 9,072
Income (loss) before income taxes and cumulative effect of a change in
accounting principle......................................................... 2,074
Provision (benefit) for income taxes........................................... 665
Income (loss) before cumulative effect of a change in accounting principle..... 1,409
Cumulative effect on prior years of a change in accounting for
income taxes................................................................. --
Net income (loss).............................................................. 1,409
Income (loss) per common share:
Income (loss) before cumulative effect of a change in accounting principle... .77
Cumulative effect on prior years of a change in accounting for
income taxes.............................................................. --
Net income (loss) per common share........................................... .77
Weighted average number of shares of common stock outstanding................ 1,818
At Year End:
Total assets................................................................. $29,767
Long-term debt and capital lease obligations................................. 872
SELECTED SUPPLEMENTARY FINANCIAL DATA
Property and equipment:
Net investment............................................................... $11,982
Current additions............................................................ 1,844
Depreciation................................................................. 1,483
Other:
Working capital.............................................................. $13,529
Stockholders' equity......................................................... 24,289
Stockholders' equity per common share........................................ 13.36
</TABLE>
SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" IN THIS REPORT FOR A DISCUSSION OF CERTAIN FACTORS WHICH AFFECT THE
COMPARABILITY OF THE INFORMATION REFLECTED ABOVE.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table details the items in the Consolidated Statements of Income
as a percentage of sales for 1995, 1994, and 1993.
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
YEAR ENDED DECEMBER 31,
1995 1994 1993
<S> <C> <C> <C>
Net Sales............................. 100.0% 100.0% 100.0%
Cost of Sales......................... 81.1 74.8 73.5
Gross Margin.......................... 18.9 25.2 26.5
Selling, General and Administrative... 20.6 19.5 22.7
Operating Income/(Loss)............... (1.7) 5.7 3.8
Other Income (Expense), Net........... (2.2) (.2) (1.0)
Income/(Loss) Before Income Taxes..... (3.9) 5.5 2.8
Provision (Benefit) for Income
Taxes............................... (1.3) 2.1 .9
Net Income (Loss)..................... (2.6%) 3.4 % 1.9 %
</TABLE>
NET SALES BY DIVISION FOR 1995, AS COMPARED TO 1994 ARE SET FORTH IN THE
FOLLOWING TABLE:
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
DEC. 31 DEC. 31 INCREASE/ % INCREASE/
1995 1994 (DECREASE) (DECREASE)
<S> <C> <C> <C> <C>
Consumer
Products........ $25,853 $30,254 $(4,401) (14.55%)
Health Products... 30,203 15,895 14,308 90.01%
Alba Direct....... 2,034 4,002 (1,968) (49.17%)
Byford............ 5,548 6,353 (805) (12.67%)
AWI Retail........ 80 3 77 2566.67%
Total............. $63,718 $56,507 $ 7,211 12.77%
</TABLE>
NET SALES BY DIVISION FOR 1994, AS COMPARED TO 1993 ARE SET FORTH IN THE
FOLLOWING TABLE:
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
DEC. 31 DEC. 31 INCREASE/ % INCREASE/
1994 1993 (DECREASE) (DECREASE)
<S> <C> <C> <C> <C>
Consumer
Products........ $30,254 $26,013 $ 4,241 16.30%
Health Products... 15,895 15,552 343 2.21%
Alba Direct....... 4,002 2,914 1,088 37.33%
Byford............ 6,353 6,376 (23) (0.36%)
AWI Rental........ 3 0 3 N/A
Total............. $56,507 $50,855 $ 5,652 11.11%
</TABLE>
Net sales for 1995 increased $7,211,150 or 12.8% as compared to 1994. The net
sales increase as shown in the table above was attributed to the increase in
sales of the Health Products Division, which includes the newly acquired Balfour
Health Products Division. (See Note 1 to consolidated financial statements).
During the year, the Company began to consolidate customers and products that
were common to both Balfour and Alba-Waldensian. It is estimated that 84% of the
90% sales increase in the Health Products Division was due to the Balfour
acquisition and the remainder is due to an increase in other business. The
decrease in Consumer Products sales was the result of the prevailing weakness in
the nation's retail sector and increased competition for the retailers' limited
dollars. The decline in Alba Direct sales is attributed to the company's
termination of two of its seven Japanese dealers, weakness in the Japanese
markets, and a weakness in the domestic consumer retail sector. The Byford
Division sales decline is primarily due to the softness in the sweater market,
resulting from a warmer winter in 1994, causing retailers to carryover inventory
to 1995, and the growing popularity of fleece and polartec as a substitute for
sweaters.
Net sales for the 1994 increased $5,651,189 or 11.1% as compared to an increase
of $10,287,952 or 25.4% in 1993. Net sales increased over 1993 primarily as a
result of increased sales to existing customers and a shifting of customers to
higher value added products. The Company experienced increases in sales of its
intimate apparel, ladies hosiery, surgical footwear, stockinette, Byford socks
and in its telemarketing operations. Alba's Factory Outlet store, which opened
in late November and was not fully operational in 1994, had no significant
impact on net sales.
Gross profits declined in 1995 to 18.9% of net sales, as compared to 25.2% in
1994. During 1995 the Company recorded an additional $1.2 million write-down of
inventory. The Company writes down close-out and irregular inventory on a
on-going basis, but due to the fact that Consumer Products sales volume had been
soft for the last year and prices were being depressed by other manufacturers
closing out excess inventory throughout the market place, the Company believed
additional write-downs were necessary. Management believes that the additional
write-downs taken in 1995 were sufficient to provide for close-out inventories
and is not aware of any further write-downs necessary in 1996, other than those
incurred under normal circumstances, that will materially affect future
operating results.
The decline in sales in the Consumer Products and Alba Direct Divisions caused
an increase in manufacturing cost per dozen, as manufacturing overhead cost
could not be reduced proportionate to the decrease in sales. In March of 1995
the Company purchased Balfour Health Products, including a manufacturing
facility in Rockwood, TN. The Company consolidated substantially all of its
health products manufacturing, which was located in Valdese, NC, into the
Rockwood facility. This consolidation caused the Company to incur duplicate
expenses, as it phased the manufacturing out of Valdese, NC and into Rockwood,
TN. In addition the Company experienced additional training cost in Valdese, NC
and Rockwood, TN as senior employees in Valdese, NC moved to new jobs and as new
employees were hired in Rockwood, TN.
The Byford Division's gross margins declined to 21.9% of net sales, as compared
to 23.5% in 1994. Byford continued to sell excess sweater inventory which was
down to market value in 1994.
Selling, General and Administrative expenses increased as a percentage of net
sales to 20.6% from 19.5% in 1994. In 1995 Goodwill amortization of $471,421 was
experienced as a result of the Balfour Health Products acquisition. Also
contributing to the increase were additional distribution cost and selling
expenses related to the Balfour business.
Interest expense was $1,246,540 in 1995, $274,739 in 1994 and $247,281 in 1993.
Short term interest rates averaged 7.51% for 1995, as compared to average rates
of 6.98% in 1994 and 6.08% in 1993. Average borrowings under the short term
revolver were $672,000 in
21
<PAGE>
MANAGEMENT'S DISCUSSION CONTINUED
1995 as compared to $59,000 in 1994 and $734,000 in 1993. Borrowings under the
short term revolver did not occur in 1994 until November 30, at which time the
Company used its line of credit to finance the $2,040,000 purchase of the Baxter
Healthcare Systems P.A.S.(Register mark) inventory. In March 1995 the Company
incurred $15.0 million in long-term debt to finance the Balfour Health Products
acquisition (see Note 5 consolidated financial statements).
Other Income (Expense), (exclusive of interest income and expense) for 1995
reflected net other expense of $150,828 as compared to a net other income of
$119,773 in 1994 and net other expense of $266,701 in 1993. Net other expense in
1995 included $90,000 loss on sale of the Main Street plant and a return to a
Licensee of $60,000 for the over payment of royalties from previous years. Other
expenses in 1993 included a write-off of $429,000 for costs related to an
unconsummated acquisition.
The Company continues to be faced with an unsettled retail environment. This
trend, coupled with the fact that the Company is still primarily in the private
label business with limited channels of distribution and is susceptible to
replacement by branded products, increases the level of uncertainty about the
level of sales in the future. However, management continues to search for
alternate products and channels of distribution as well as aggressively pursuing
branded products to combat this uncertainty in the market place.
The Company is putting renewed emphasis on placing its All Day
Long(Register mark) and HARVE BENARD licensed goods in department stores. The
Company's Health Products Division has completed its consolidation of
manufacturing into the newly acquired Balfour Healthcare Rockwood, Tennessee
plant and is now placing renewed emphasis on cross selling between the Alba and
Balfour customers.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs are primarily related to working capital required
to support necessary increases in inventories, receivables and capital
expenditures for plant and equipment, renovation and expansions. These needs are
being met by cash on hand, cash flow and a short term credit of $5,000,000 (see
Note 4 to consolidated financial statements). Working capital decreased by
$1,825,459 from 1994. The decrease from 1994 was primarily due to an increase in
current maturities of long-term debt, which relates to the financing of the
Balfour Health Products acquisition.
Cash provided by operating activities was $3,466,413 in 1995 compared to cash
provided of $396,167 in 1994 and cash used of $869,115 in 1993. The cash
provided in 1995 was mainly the result of a reduction in inventories due to
lower consumer sales and management's efforts to reduce investments in
inventory.
Net cash used in investing activities was $16,633,774 in 1995, compared to
$1,882,858 in 1994 and $1,462,389 in 1993. The increase in cash used in 1995
reflects the purchase of Balfour Health Products. The cash used in 1994 and 1993
was primarily invested in capital expenditures to expand capacities, and to
replace and update existing plant and equipment.
Net cash provided by financing activities was $13,119,418 in 1995 compared to
$630,127 in 1994 and $1,708,317. Net cash provided in 1995 was primarily due to
proceeds from the issuance of long-term debt for the acquisition of Balfour
Health Products (see Note 5 to consolidated financial statements). Cash was
provided in 1994 by short term debt and was used to finance the
P.A.S.(Register mark) inventory purchased from Baxter Healthcare Corporation.
The short term line of credit and long-term debt required the Company to comply
with certain restrictive convenants. These convenants permit the Company to
finance capital expenditures at an adequate level to support current and future
operations.
Anticipated capital expenditures for 1996 will be approximately $2,100,000 for
existing business. Capital expenditures will be made to renovate existing plant
and equipment and to purchases new, more efficient knitting equipment. It is
expected that cash required for capital expenditures, will be provided by
operations, supplemented by the Company's short-term line of credit.
OTHER
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No.121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ",
issued by the Financial Accounting Standards Board (FASB), is effective for
financial statements for fiscal years beginning after December 15, 1995. The new
standard establishes new guidelines regarding when impairment losses on
long-lived assets, which include plant and equipment and certain identifiable
intangible assets and goodwill, should be recognized and how impairment losses
should be measured. The Company does not expect adoption to have a material
effect on its financial position or results of operations.
Statements of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS-No.-123), issued by the Financial Accounting
Standards Board (FASB) is effective for specific transactions entered into after
December 15, 1995, while the disclosure requirements of SAFS No. 123 are
effective for financial statements for fiscal years beginning no later than
December 15, 1995. The new standard encourages a fair value method of accounting
for stock-based compensation plans. This statement provides a choice to either
adopt the fair value based method of accounting or continue to apply APB Opinion
No. 25, which could require only disclosure of the pro forma net income and
earnings per share, determined as if the fair value based method has been
applied. The Company plans to continue to apply APB Opinion No. 25, when
adopting this statement, and accordingly, this statement is not expected to have
a material effect on the Company.
DERIVATIVES
At December 31, 1995, the Company had an outstanding interest rate swap
agreement under which the Company receives a variable rate based on LIBOR and
pays a fixed rate of 7.95% on a notional amount of $3,868,561, as determined in
one month intervals through November 30, 1998. The transaction effectively
changes a potion of the Company's interest rate exposure from a variable rate to
a fixed rate. The Company is exposed to credit loss in the event of
nonperformance by the other party to the interest rate swap agreement. However,
the Company does not anticipate nonperformance by the counterparty.
22
<PAGE>
NET SALES
$ in millions
(Net Sales chart appears here. Plot points are below)
39.7 40.6 50.9 56.5 63.7
91 92 93 94 95
EARNINGS
$ in millions
(Earnings chart appears here. Plot points are below)
1.4 1.6 1.0 1.9 -1.7
91 92 93 94 95
EARNINGS PER SHARE
$ dollars
(Earnings Per Share chart appears here. Plot points are below)
.77 .86 .54 1.05 .89
91 92 93 94 95
GROSS MARGIN
Percent
(Gross Margin chart appears here. Plot points are below)
22.8 25.1 26.5 25.2 18.9
91 92 93 94 95
(1) 1993 Proforma/actual shows actual net income and estimated net income
before the two special charges to income in 1993.
(2) 1993 Proforma/actual shows actual earnings per share and estimated
earnings per share before the two special charges to earnings in 1993.
QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED (EXPRESSED IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1995 1994
DECEMBER 31 SEPTEMBER 30 JULY 2 MARCH 31 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales................... $16,319 $ 16,769 $16,252 $14,378 $13,667 $ 14,700 $14,744 $13,395
Gross Margin................ 2,718 2,343 3,866 3,115 3,175 4,063 3,782 3,234
Net Income (loss)........... (1,018) (728) 64 26 264 792 549 341
Income (loss) Per Share..... (0.54) (0.39) 0.03 0.01 0.14 0.42 0.30 0.19
Weighted Average Number of
Shares of Common Stock
Outstanding............... 1,865 1,864 1,864 1,863 1,854 1,852 1,849 1,839
</TABLE>
1995
NOTE: SIGNIFICANT THIRD QUARTER ADJUSTMENTS IN 1995 INCLUDED $1,200 IN INVENTORY
WRITE-OFF ($744 NET OF INCOME TAXES).
1994
NOTE: SIGNIFICANT FOURTH QUARTER ADJUSTMENTS IN 1994 INCLUDED $202 INCREASE IN
ALLOWANCE FOR INVENTORY OBSOLESCENCE ($125 NET OF INCOME TAXES).
23
<PAGE>
Corporate Management
Thomas F. Schuster
CEO and President
Clyde Wm. Engle
Chairman of the Board
Donald R. Denne
Senior Vice President
Dixon R. Johnson
Vice President
James Douglas Dickson, Jr.
Assistant Secretary
Corporate Controller
Thomas I. Nail
Secretary-Treasurer and CFO
Warren R. Nesbit
Vice President
Charles D. Poteat
Vice President
Corporate Directors
Term Expiring May 1996
C. Alan Forbes
Management Consultant
Charlotte, North Carolina
Lee N. Mortenson
President and Chief Operating
Officer and Director of
Telco Capital Corporation
Chicago, Illinois
James M. Fawcett, Jr.
Registered Representative and Agent
Equitable Financial Companies
Chicago, Illinois
Term Expiring May 1997
Paul H. Albritton, Jr.
Chief Financial Officer
Target Technologies, Inc.
Wilmington, North Carolina
William M. Cousins, Jr.
Management Consultant
Jupiter, Florida
Glenn J. Kennedy
Executive Vice President
Sunstates Corporation
Raleigh, North Carolina
Term Expiring May 1998
Clyde Wm. Engle
Chairman of the Board
and Chief Executive Officer of
Telco Capital Corporation
Chicago, Illinois
Joseph C. Minio
President
Belle Haven Management Ltd.
Greenwich, Connecticut
Thomas F. Schuster
President and
Chief Executive Officer
Corporate Information
Principal Market
The Company's Common Stock is
listed on the American Stock
Exchange
Transfer Agent - Registrar
First Union National Bank of
North Carolina
Charlotte, North Carolina
Number of Shareholders
The Number of holders of record
of Alba's Common Stock on March 8,
1996 was approximately 356.
Annual Meeting
May 8, 1996
Corporate Headquarters
Alba-Waldensian, Inc.
Box 100
201 St. Germain, S.W.
Valdese, North Carolina 28690
Auditor
BDO Seidman, LLP
Greensboro, North Carolina
Offer to Furnish Form 10-K
Upon written request of a shareholder, the Company will provide, without charge,
a copy of its Annual Report on Form 10-K for the fiscal year 1995, including
financial statements and schedules thereto required to be filed with the
Securities and Exchange Commission. Requests should be directed to James Douglas
Dickson, Jr., Alba-Waldensian, Inc., Post Office Box 100, Valdese, North
Carolina, 28690
24
<PAGE>
(Alba-Waldensian, Inc. logo appears in the background of page)
History of Alba-Waldensian, Inc.
Alba-Waldensian, Inc., a diversified knitwear producer with headquarters
in Valdese, North Carolina, is the oldest manufacturing company in Burke County.
The Company began during the early days of the developing Valdese community as
the Waldenses immigrated from Italy in the late 1800s and started new lives in
the foothills of the Blue Ridge Mountains.
Waldensian Hosiery Mills began operations in 1901, in a 40 x 80 foot
building constructed of timber cut from the local farmlands. Twenty employees
reported to work at this new company on May 8th that year.
Over the last 94 years, Alba-Waldensian has grown into a multi-facility
national company manufacturing a variety of innovative products for both
domestic and international markets. Although the company began as a producer of
women's knit hosiery products in the mid-1950s, the Company learned to knit
women's stretch panties on it's original full-fashioned knitting equipment.
Today, as things have progressed, the Company uses state-of-the-art technology
in the form of high speed, computerized machinery to knit stretch panties, bras,
bodysuits, pantyhose, and medical specialty products.
In 1961, Waldensian Hosiery Mills merged with Alba Hosiery Mills to form
the current Alba-Waldensian and in 1969 the corporation went public, listing its
stock on the American Stock Exchange.
In 1974, the Company introduced a group of low-tech, consumable health
products utilizing Alba's knitting expertise. This business has since grown
considerably and today Alba is a leading manufacturer and marketer of products
used in hospitals and nursing homes, with distribution throughout the United
States, Canada, England, Europe and the Middle East.
In 1989, the Company formed Alba Direct, a telemarketing Division to sell
the Company's many products a small retail and export accounts. The Company
continued to diversify in 1992 with it's acquisition of Byford Apparel, a
leading marketer of high-quality English men's socks and sweaters.
The Health Products Division acquired the Pulsatile Anti-Embolism System
(PAS(R)) in 1994, thereby doubling its business in vascular care products. On
March 6, 1995, the Company purchased the Balfour Healthcare Division from
Kayser-Roth Corporation. The acquisition included Balfour's 258,000-square-foot
facility in Rockwood, Tennessee. During 1995, the Company consolidated all
health products manufacturing previously located in Valdese to the Rockwood
facility.
The Company recognizes the influence of its Waldensian forefathers, who
emigrated to Valdese, North Carolina from the Cottian Alps of Italy in 1893.
With this keen sense of heritage and commitment to the future, Alba-Waldensian
continues to build on its reputation for outstanding quality and service to its
customers.
<PAGE>
(Alba-Waldensian logo appears here)
Alba-Waldensian, Inc.
PO Box 100, 201 St. Germain, S.W.
Valdese, N.C. 28690
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
As of December 31, 1995
<TABLE>
<CAPTION>
Percentage of
Name Jurisdiction Stock Owned
<S> <C> <C>
AWI Retail, Inc. North Carolina 100%
Pilot Research Corp. North Carolina 100%
Alba Export Corp. North Carolina 100%
</TABLE>
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
Alba-Waldensian, Inc. and Subsidiaries:
We consent to the incorporation by reference in Registration Statement
No. 33-15833 on Form S-8 of our reports dated February 11, 1994 appearing
in or incorporated by reference in the Annual Report on Form 10-K of
Alba-Waldensian, Inc. and subsidiaries for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Hickory, North Carolina
March 29, 1996
<PAGE>
Exhibit 23.2
Consent of Independent Certified Public Accountants
Alba-Waldensian, Inc.
Valdese, NC North Carolina
We hereby consent to the incorporation by reference in the Registration
Statement No. 33-15833 on Form S-8 of our reports dated February 8,
1996, relating to the consolidated financial statements and schedules of
Alba-Waldensian, Inc. incorporated by reference and included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1995.
Greensboro, North Carolina BDO Seidman, LLP
March 27, 1996
INDEPENDENT AUDITORS' REPORT
Board of Directors
Alba-Waldensian, Inc.
Valdese, North Carolina
We have audited the accompanying consolidated balance sheet of
Alba-Waldensian, Inc. and subsidiaries as of December 31, 1993, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the two years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Alba-Waldensian, Inc. and
subsidiaries as of December 31 1993, and the results of their operations and
their cash flows for each of the two years in the period ended December 31,
1993 in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 8 to the consolidated financial statements, in
1992 the Company changed its method of accounting for income taxes effective
January 1, 1992 to conform with Statement of Financial Accounting Standards No.
109.
Deloitte & Touche LLP
Hickory, NC
February 11, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 56,009
<SECURITIES> 0
<RECEIVABLES> 9,391,137
<ALLOWANCES> 0
<INVENTORY> 15,157,970
<CURRENT-ASSETS> 25,924,496
<PP&E> 29,979,572
<DEPRECIATION> 16,204,174
<TOTAL-ASSETS> 49,330,015
<CURRENT-LIABILITIES> 7,883,894
<BONDS> 0
0
0
<COMMON> 4,716,450
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<INCOME-PRETAX> (2,469,515)
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<EPS-PRIMARY> (.89)
<EPS-DILUTED> (.89)
</TABLE>
