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, 1996
{TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For transition period from.................... to .........................
Commission file number 001-06150
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 (ss..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 $4,915,588 AS OF MARCH 15, 1997.
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 MARCH 15, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Annual Report for the fiscal year ended December 31,
1996 are incorporated by reference into Parts I, II and IV.
Portions of the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders are incorporated by reference into Parts I and III.
Page 1 of 25 pages
(including exhibits) The
Exhibit Index is located
on page 23.
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Alba-Waldensian, Inc., (the "Company") manufactures a variety of knitted
apparel and health care products at 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 Healthcare 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 and received a patent for the process in 1996.
This same process is used to manufacture tank tops and body suits which were
introduced in 1995.
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, at 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 at some point in the future.
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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 1996 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 on 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. Such equipment produces apparel that management believes is better
fitting and therefore more comfortable.
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The Company did not renew the license after 1994 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 is
searching for new brand licenses that will position the Company in various types
of trade. The Company has also placed 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; 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 and South
American sources. Sourcing for Byford sweaters comes 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 9.7% of sales in 1996 and 10.0% of sales in
1995. (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 is located at the Rockwood,
Tennessee plant. The Rockwood plant is a 246,000 square foot building, with
space and available labor market for growth. All products are knitted 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 is located at three plants in
Valdese, North Carolina. Products are knitted on circular knitting equipment.
Most of the circular knitting equipment is the latest equipment available.
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.
The Company continues to replace older equipment and automate where possible.
The Company expects capital expenditures for 1997 to be approximately
$2,100,000. The capital expenditures in 1997 will be for purchasing equipment,
upgrading remaining older equipment and computer systems, 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:
1996 1995 1994
---- ----- ----
Women's Intimate Apparel 28.6% 28.3% 40.2%
Men's Wear 1.8 2.6 4.3
Women's Hosiery Products 13.8 15.5 17.4
Men's Hosiery 6.2 6.2 7.9
Health Products 49.6 47.4 30.2
---- ---- ----
100.0% 100.0% 100.0%
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o Women's intimate apparel consists of regular size bras, briefs and
bodywear as well as maternity and plus size briefs.
o Mens wear consists of Byford Sweaters.
o Women's hosiery products consist of regular, maternity and plus-size
panty hose, as well as trouser socks and thigh high hose.
o Men's hosiery consist of Byford socks and Consumer Product's
Toesies(R).
o Health products consist of stockinettes, treads, arm sleeves, mesh
panties, anti-embolism stockings, PAS(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 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.)
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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. Also, the Company acquired a exclusive License Agreement for a patented
process which makes it possible to knit briefs. The agreement is for the life of
the patent, which expires in 2012. 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), PAS(R), Baby Bogan(R), Balfour(R),
Care-Steps(R) and Castmate(R). The 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.
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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 1996 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
1996 or 1995. 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.
SIGNIFICANT CUSTOMERS
Allegiance Healthcare Corporation (formerly Baxter Healthcare Corporation)
is the only customer that represents ten percent or greater of the Company's
sales volume for the years ended in 1996, 1995 and 1994.
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1996 1995 1994
---- ---- ----
Allegiance Healthcare Corporation $15,932,382 $16,601,252 $12,902,722
(formerly Baxter Healthcare Corporation)
Percentage of sales 24.2% 26.1% 22.8%
While the loss of Allegiance Healthcare Corporation would have a material
adverse effect on the business of the Company, management believes that, because
of the number of departments within Allegiance 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, 1996 and 1995 was
$2,867,901 and $3,651,398 respectively. A majority of the Company's orders are
for delivery within 5 to 60 days; therefore, backlogs 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 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
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pertaining to such factors. (See also "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Company's 1996 Annual
Report to Shareholders.)
RESEARCH AND DEVELOPMENT
The Company estimates that in 1996 it spent $474,330 on 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 $490,824 in 1995 and $376,008 in 1994.
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.
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
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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 663 employees as of December 31, 1996. None of the
Company's employees are covered by a collective bargaining agreement. The
Company considers its employee relations to be excellent.
ITEM 2. PROPERTIES.
The Company's principal physical properties are listed below:
Approximate
Square
Name Location Footage Use
- ---- -------- ----------- ---
Alba Valdese, NC 157,000 Yarn
Processing
(Consumer Products)
Alba Valdese, NC 18,000 Not in Use
Annex
John Louis Valdese, NC 178,300 Finishing (Consumer
Products)
Pineburr Valdese, NC 81,000 Knitting (Consumer
Products)
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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 (Not in Use)
$32,560 Annually
Expires March 1999
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 and leases approximately 11%.
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 and 5 of Notes to Consolidated
Financial Statements in the Company's 1996 Annual Report to Shareholders, which
information is incorporated herein by reference.
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.
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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 1996 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.
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 1996 Annual Report to
Shareholders , which information is incorporated herein by reference.
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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 1996 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 1996
Annual Report to Shareholders, which information is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The 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 1997 Annual Meeting of Shareholders, which
information is incorporated herein by reference. Such Proxy Statement
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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
- ---- -------------------------
Lee N. Mortenson 61 President and Chief Executive
Officer
Donald R. Denne, Sr. 60 Senior Vice President and President
of the Health Products Division
Thomas I. Nail 49 Treasurer, Secretary and Chief
Financial Officer
Dixon R. Johnston 55 Vice President and President of
the Consumer Products Division
James Douglas Dickson 40 Assistant Secretary
Warren R. Nesbit 44 Vice President
The following paragraphs set forth information concerning each executive
officer's business experience:
Mr. Lee N. Mortenson has been a director of Alba-Waldensian since 1984
and was elected President and Chief Executive Officer of the Company in
February 1997. He currently serves as President, Chief Operating Officer and
Director of Sunstates Corporation (formerly Acton Corporation). He has been
President, Chief Operating Officer and Director of Telco Capital Corporation
since 1984. Mr. Mortenson previously served as Group Vice President of Gould,
Inc. from 1980 to 1982. Prior to this, he was a Group Vice President with Becton
Dickinson, Inc. Mr. Mortenson holds a BS Degree and Masters Degree in
Engineering from UCLA.
Mr. Donald R. Denne, Sr. 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. Denne has a B.A. degree from Duke University.
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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, Berkeley.
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.
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 1997 Annual
Meeting of Shareholders, which information is incorporated by reference.
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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 1997 Annual Meeting of Shareholders, which information is incorporated
herein by reference.
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 1997 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
1996 Annual Report to shareholders are incorporated
herein by reference to the Annual Report as indicated
Consolidated Balance Sheets--December 31, 1996 and 1995.
Consolidated Statements of Operations--Years
ended December 31, 1996, 1995, and 1994.
Consolidated Statements of Stockholders'
Equity--Years ended December 31, 1996, 1995, and 1994.
Consolidated Statements of Cash Flows--Years ended
December 31, 1996, 1995, and 1994.
Summary of Significant Accounting Policies
Notes to Consolidated Financial Statements.
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(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.
(3) Exhibits filed:
3.1 Certificate 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.
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*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 8-K
report dated March 20, 1995.
13 1996 Annual Report to Shareholders
. 21 List of Subsidiaries of the Company
23.2 Consent of Independent Certified Public
Accountants, BDO Seidman 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, 1996.
21
<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, 1997 By /s/
Lee N. Mortenson
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
/s/ . /s/
Paul H. Albritton, Jr., Director William M. Cousins, Jr., Director
March 28, 1997 March 28, 1997
/s/ /s/
C. Alan Forbes, Director Clyde Wm. Engle, Chairman of the
March 28, 1997 Board of Directors
March 28, 1997
/s/ /s/
James M. Fawcett, Jr. , Director Glenn J. Kennedy, Director
March 28, 1997 March 28, 1997
/s/ /s/
Joseph C. Minio, Director Lee N. Mortenson , Director and
March 28, 1997 Chief Executive Officer
(Principal Executive Officer)
March 28, 1997
/s/
Thomas I. Nail
Treasurer and Secretary (Chief
Financial and Accounting Officer)
March 28, 1997
22
<PAGE>
ALBA-WALDENSIAN, INC.
INDEX TO EXHIBITS
Annual Report on Form 10-K for the Fiscal Year Commission File No. 1-6150
ended December 31, 1996.
Exhibit Number Exhibit
- -------------- -------
13 Annual Report to Shareholders
21 Subsidiaries of the Company as of
December 31, 1996
23.2 Consent of Independent Certified
Public Accountants, BDO Seidman LLP
27 Financial Data schedule (filed in
electronic format only)
23
<PAGE>
Schedule II
Alba-Waldensian, Inc.
and Subsidiaries
Valdese, North Carolina
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to Reduction Balance
Description/ Beginning of Cost and of at End
Fiscal Year Ended Period Expenses Allowance of Period
<S> <C> <C> <C> <C>
Year Ended December 31, 1996
Accounts Receivable - Allowance 250,000 109,868 84,868 275,000
for uncollectible accounts
Notes Receivable - Allowance for 0
uncollectible accounts
Inventory - Reserve for markdowns 610,504 754,106 641,969 722,641
Year Ended December 1, 1995
Accounts Receivable - Allowance 180,000 145,199 75,199 250,000
for uncollectible accounts
Notes Receivable - Allowance for 0
uncollectible accounts
Inventory - Reserve for markdowns 385,200 1,619,013 1,393,709 610,504
Year Ended December 31, 1994
Accounts Receivable - Allowance 194,000 74,933 88,933 180,000
for uncollectible accounts
Notes Receivable - Allowance for 0
uncollectible accounts
Inventory - Reserve for markdowns 149,000 579,997 343,797 385,200
</TABLE>
<PAGE>
(Bar graph appears here with the following plot points, along with a
background logo for Alba-Waldensian)
91 92 93 94 95 96
39.7 40.6 50.9 56.5 63.7 65.8
Net Sales
ALBA-WALDENSIAN
1996 ANNUAL REPORT
<PAGE>
ALBA-WALDENSIAN HISTORY
Headquartered in Valdese, North Carolina, Alba-Waldensian, Inc. was
founded in 1901 by Waldensians who had immigrated from Italy in the late 1800's
to start new lives in the foothills of the Blue Ridge Mountains. From this
modest beginning Alba-Waldensian, Inc. has grown over the last 96 years into a
multi-facility company manufacturing a variety of very innovative products for
domestic as well as international markets.
The current Company's ancestor, Waldensian Hosiery Mills, first began
operations in a 40 x 80 foot building using timber from local farms. The Company
was a long-time producer of full fashioned women's knit hosiery until the 1950's
when they brought their innovative spirit into play and learned to knit women's
stretch panties on their original knitting equipment. Today, the Company uses
the most modern, state-of-the-art computerized knitting technology, to produce a
wide variety of stretch panties, bras, body suits, panty hose and medical
specialty products.
In 1961 Waldensian Hosiery Mills merged with Alba Hosiery Mills to form
the current Alba-Waldensian, Inc. The Company then went public in 1969 with its
stock listed on the American Stock Exchange (AWS).
The Company introduced its first low-tech, consumable medical specialty
products in 1974 utilizing its considerable knitting expertise. The health
products business has grown steadily and today the Alba Health Division is a
leading manufacturing and marketer of products used in hospitals, nursing homes,
physician offices and extended care facilities throughout the world.
Alba-Waldensian continued to diversify in 1992 with its acquisition of
Byford Apparel, a leading marketer of high-quality English men's socks and
sweaters. In 1996 Byford acquired the license to market Greg Norman socks, a
major department store and golf shop men's brand.
The Health Products Division continued to grow in 1994 by acquiring the
Pulsatile Anti-Embolism System (PAS(R)) thereby doubling its vascular care
business. In early 1995 the Company acquired the Balfour Healthcare Division
thereby doubling the size of its healthcare business. During 1995 and 1996 the
Company consolidated all health products manufacturing into the Rockwood,
Tennessee facility that was part of the Balfour acquisition. At the same time,
the Valdese facilities were dedicated to consumer products manufacturing.
The highly innovative spirit that has been the trade-mark of
Alba-Waldensian for close to a century continues today to be our "secret weapon"
that enables us to continue to develop and market highly unique products and be
extremely competitive throughout the world. It is with a keen sense of heritage
that Alba-Waldensian commits itself to the future.
<PAGE>
To Our Shareholders
- -------------------------------------------------------------------------------
I was named President and Chief Executive Officer of Alba-Waldensian on
February 20, 1997, replacing Tom Schuster, who served as Chief Executive Officer
from May 1992 to February 1997, and who resigned to pursue other business
interests. Although I am new to the job, I am certainly no stranger to Alba,
having spent twelve years as a member of the Board of Directors. Over these
years I've served on several committees of the Board of Directors including the
MIS Committee, the Stock Option and Executive Compensation Committee and the
Strategic Planning Committee, giving me a good insight into the Company's
operations. Some of my other business experiences include serving as President
and Chief Operating Officer of Sunstates Corporation and Group Vice President
with Gould Inc. and Becton Dickinson and Company.
Alba-Waldensian realized significant growth during 1995 as a result of
the Balfour acquisition, but 1995 earnings suffered due to the assimilation of
the Balfour acquisition and a 14.6% decline in Consumer Products sales. This led
to our loss of $1.66 million for 1995.
I'm happy to report the Company made great strides during 1996 in
resolving many of these issues. While 1996 results were certainly an improvement
over 1995, they were still a disappointment to us.
Sales for 1996 increased 3.3% to $65,815,000, a record high for the
Company. At the same time, our profits went from a loss of $1,656,000 last year
to a profit this year of $320,000. While this level of profitability is far from
acceptable, it does represent a turn-around in the bottom line of nearly
$2,000,000 and is an indication that the many changes made are having a positive
effect.
Productivity, as measured by sales per employee, grew by 12.3% to a new
record of $80,066.
Looking at the Company on a divisional basis, the Health Products
Division had another good year with sales up 8% and operating income up 47%. The
division is now 50% of total Company sales vs 28% in 1994 prior to our
acquisitions of the Balfour and Baxter PAS(R) businesses.
The Health Products management team continues to face a very rapidly
changing market place as consolidation continues at all levels -- among
hospitals, distributors and suppliers. In an attempt to stay ahead of the rate
of change in their industry, they are taking steps that will lead to faster and
more innovative research and development efforts, better grouping and
cross-selling of their products and an overall emphasis on being more
competitive to increase their market share.
Helping these efforts, in late December, the FDA gave the Health Products
Division approval for a significant new product for their PAS(R) business.
In February 1996, Dixon Johnston joined Alba as the new president of the
Consumer Products Division. He has over 29 years of experience in consumer
marketing. While sales for the year for the Consumer Products Division were
basically flat, their operating loss was significantly reduced. Dixon has
brought much better focus to the division and they are now concentrating on two
product categories -- seamless intimate apparel and queensize hosiery. The
division has placed increased emphasis on inventory control and it's having very
positive results. Their average inventories are down 20% and their turns are up
30%.
The Alba Direct Division has stabilized sales while reducing their
overhead expense level. During the year, several independent sales
representatives were engaged to assist in selling product. In addition, the
division participated in a Department of Commerce study on the Japanese
marketplace to aid them in rebuilding sales in that very key marketplace.
The Byford Division exited the fashion sweater business during the year.
While this resulted in a loss of sweater sales volume, it also eliminated
significant losses associated with product close-outs. Overall, the Division had
nearly flat sales, as increases in their sock volume replaced most of the lost
sweater sales. At mid-year, the Division acquired the license for Greg Norman
socks and initial results for this new line have been very promising.
Toward year end, the Company executed a reorganization of manufacturing
operations in Valdese. We hope that this will significantly reduce manufacturing
overhead and serve us well as we go forward. After an extensive search by the
Company, Mr. Ron Harrison joined Alba-Waldensian in March 1997 as Vice President
of Operations. He brings over 25 years of experience in apparel manufacturing to
the Company.
While 1996 returned Alba to a state of profitability, the results were by
no means satisfactory. The plan we have put together for 1997 shows modest sales
growth but improved growth in the corporation's profitability and we're all
looking forward to executing this plan properly and in a timely manner.
I want to thank everyone at Alba for a lot of hard work. We're looking
forward as a team to improvements in our operating results and shareholder value
in 1997.
Sincerely,
/s/ Lee N. Mortenson
Lee N. Mortenson
President and Chief Executive Officer
Net Sales
$ in millions
(Bar graph appears here with the following plot points)
92 93 94 95 96
40.6 50.9 56.5 63.7 65.8
Sales Per
Employee
Thousands
(Bar graph appears here with the following plot points)
92 93 94 95 96
51 58 67 71 80
<PAGE>
Health Products Division
- --------------------------------------------------------------------------------
The key to success in today's ever-changing healthcare market is
delivering great products with great value. albahealth(TM) is constantly
listening to its customers to manufacture and deliver products that not only
meet their needs, but exceed their expectations.
Despite continued emphasis on reducing costs in the healthcare industry,
albahealth(TM) experienced the largest sales year in its 22 year history. With
over 500 customers, a broad based product line and manufacturing efficiencies,
albahealth(TM) is well positioned to compete long term in the cost-conscious
healthcare marketplace.
albahealth(TM) is now the market leader in three different product
groups. Our diverse offering of slip-resistant footwear continues to be the
mainstay of the product line, with a market share in excess of 50%.
albahealth(TM) continues to be the market leader in stockinette with
sales increasing over 14% in 1996. Our extensive line of products, including
non-sterile, sterile, and "pre-treated" stockinette for custom pack put-ups in a
large variety of sizes allows us to meet any and all customer needs.
It is estimated albahealth(TM) now manufactures over 80% of the cuffs
used for disposable surgeons gowns. Cuff sales increased over 26% in 1996, the
largest sales increase of any of our product groups.
In December 1996, albahealth(TM) was granted FDA approval for its new
PulStar(TM) system. PulStar(TM) combines the clinically proven efficiencies of
the PAS(R) System with an easier to apply wrap feature. The addition to
PulStar(TM) with PAS(R), C.A.R.E.(R), and Life-Span(R) anti-embolism stockings
provides a complete vascular product system.
The 1995 acquisition of Balfour and subsequent consolidation of all
health products manufacturing in Rockwood, Tennessee has created a more
efficient and lower cost operating environment. With the manufacturing and
customer service team now in place, albahealth's(TM) future is the brightest its
ever been.
albahealth's(TM) ultimate strength is our people. Empowered to do what's
best for our customers, they responded with breakthroughs in product design,
cost reduction, quality improvement, manufacturing efficiency and overall
productivity.
We enter 1997 with high expectations for continued profitable growth.
Consumer Products
- --------------------------------------------------------------------------------
Consumer Products in 1996 experienced a slight gain in dollar sales and a
significant gain in margins (9.7% to 14.0%) as the division spent much of the
year refocusing and solidifying the business; many of these efforts will further
pay in 1997. The focus of the division has been sharpened against full-figure
and maternity hosiery and
(Two photos appear on this page)
2
<PAGE>
intimates plus regular sized seamless intimate apparel. All of these are large
and growing markets.
Full-figure apparel, which we define as size 16 and over, is worn by over
one-third of all women now....projected to be forty-two percent by 2002
according to the National Center for Health Statistics. Seamless intimates, a
recent technical development pioneered and patented by Alba, are experiencing
double digit growth. As women discover the fit, comfort, and fashion attributes
of seamless intimates we expect this growth to continue, supporting the wisdom
of our investment in this equipment over the past few years (we believe Alba had
more seamless equipment that any other manufacturer at the end of '96).
In 1996 we placed new queen size hosiery knitting machines in operation.
These provide a better fit and improved comfort for the full-figured customer.
In fact, over one-third of all women cannot comfortably wear pantyhose made on
"regular" knitting machines; they can be comfortably fit with Alba's new wider
cylinder machines!
The maternity market, which is benefiting from the mini baby boom, is
very important to Alba. Management believes we have the leading share of market
in maternity pantyhose and panties. Our circular knit products, with their 360
degree stretch, are particularly well suited for the always changing physical
needs of the expectant mother.
The Company continues to invest in and build its brands, All Day Long(R)
and BBW(R) in department and specialty stores and While You Wait(R) maternity
products. We have recently put renewed emphasis on obtaining licenses. We are
close to being able to announce a couple of licensed properties which should
generate increased margins and open additional distribution opportunities to our
products. In addition, we are the exclusive resource for Calvin Klein seamless
panties and bras which will begin shipping in early 1997.
The sales and marketing functions of the Company have been strengthened
by the creation of dedicated teams specializing in our key accounts, organized
by areas of the country. These teams contain experts from within the Company in
various disciplines who work directly with the sales managers in the field and
are in constant contact with our customers. Thus, we have taken the concept of
"brand management" a step further to working partnerships with major retailers
and catalogue houses.
R&D efforts have been significant. In addition to obtaining additional
patents on our seamless brassieres, we have developed a line of shapewear, and
new hosiery styles incorporating the latest yarns and patterns in pantyhose,
trouser socks, and tights. We have also developed additional applications of our
wider cylinder hosiery machinery for full-figure and maternity customers.
Significantly, we have incorporated a new fiber, Tencel(R) (a natural
fiber, the first new fiber in thirty years), into a line of intimate apparel
that has received very positive early marketplace reception.
(Two photos appear on this page)
3
<PAGE>
Alba will be the first intimate apparel company to market with this new
natural fiber.
In manufacturing we have placed the above referenced emphasis on our new
hosiery equipment, getting the new machines on line and producing superior
hosiery for the full-figured consumer. We have developed new applications of our
seamless technology resulting in improved brassieres, panties and shapewear.
Further, we have continued the automation of hosiery sewing and packaging that
was begun last year. All of these efforts have coincided with a conscious effort
to reduce our inventory (which is now down by 15% resulting in a 30% increase in
turns). Further efficiencies are expected as a result of our success in reducing
SKU's, down one-third in 1996, and another third in 1997.
We are pleased with the turnaround accomplished in '96 and are extremely
excited about the potential for 1997.
Byford
- -------------------------------------------------------------------------------
In 1996 Byford signed exciting license agreements with the Smithsonian
Institution and with Greg Norman. This has resulted in opening new accounts and
significant new channels of distribution such as golf shops, catalogue houses,
and department stores. These licensed brands will compliment and enhance the
Byford brand.
We have begun an aggressive cost reduction program by seeking out
domestic and other resources that will enable us to reduce our reliance on high
cost production in the UK. Byford is being integrated into the Consumer Products
Division to give the Byford brands increased marketing focus, participation in
the sales-marketing-customer partnership team approach, and to fully utilize a
new designer for the Byford team.
Alba-Direct
- --------------------------------------------------------------------------------
The Alba-Direct telemarketing people give us efficient access to the many
small independent specialty stores in this country. This domestic telemarketing
effort has been augmented by the addition of commissioned reps in key markets
plus new marketing programs offering close-out and irregulars to these accounts.
Alba-Direct is also our main export sales arm. We have narrowed our export focus
to a select few distributors in Japan, based on guidance from a recent
Department of Commerce Study, and three other Far Eastern markets: Australia,
Taiwan, and Korea.
4
<PAGE>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................................ $ 294,447 $ 56,009
Accounts receivable (net of allowance for uncollectible accounts of $275,000 in 1996 and $250,000 in
1995 (Notes 4 and 5)............................................................................... 9,712,667 9,412,841
Refundable income taxes.............................................................................. -- 437,453
Inventories (Notes 2 and 5).......................................................................... 12,342,658 15,157,970
Deferred income tax asset (Note 8)................................................................... 452,091 400,850
Prepaid expenses and other........................................................................... 303,142 379,373
Total current assets................................................................................. 23,105,005 25,844,496
PROPERTY AND EQUIPMENT (Notes 3, 4, and 5):
Land................................................................................................. 259,744 259,744
Buildings............................................................................................ 8,366,494 8,257,176
Machinery and equipment.............................................................................. 22,733,414 21,462,652
Total property and equipment......................................................................... 31,359,652 29,979,572
Less accumulated depreciation and amortization....................................................... (17,821,356) (16,204,174)
Net property and equipment........................................................................... 13,538,296 13,775,398
OTHER ASSETS:
Notes receivable..................................................................................... 47,920 60,421
Trademarks and patents............................................................................... 445,510 281,082
Excess of cost over net assets acquired (Note 1)..................................................... 8,062,580 8,957,001
Cash surrender value of life insurance (net of loans against policies of $107,842 in 1995)........... -- 331,617
Total other assets................................................................................... 8,556,010 9,630,121
Total assets......................................................................................... $ 45,199,311 $ 49,250,015
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and lines of credit (Note 4)................................................... $ -- $ 1,267,600
Current maturities of long-term debt (Note 5)........................................................ 2,350,000 2,350,000
Current maturities of capital lease obligations (Note 3)............................................. -- 58,069
Accounts payable..................................................................................... 1,900,024 2,773,542
Accrued Expenses:
Payroll and profit-sharing......................................................................... 605,372 517,286
Property and payroll taxes......................................................................... 169,554 247,453
Group health claims................................................................................ 241,872 188,143
Income taxes payable............................................................................... 169,324 --
Other.............................................................................................. 356,080 481,801
Total current liabilities............................................................................ 5,792,226 7,883,894
LONG-TERM DEBT (Note 5).............................................................................. 9,912,500 12,262,500
DEFERRED COMPENSATION................................................................................ 232,160 330,086
DEFERRED INCOME TAX LIABILITY (Note 8)............................................................... 1,474,014 1,305,019
Total liabilities.................................................................................... 17,410,900 21,781,499
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 1996 and
1995; outstanding; 1,867,403 shares in 1996 and 1995............................................... 4,716,450 4,716,450
Additional paid-in capital........................................................................... 9,182,158 9,182,158
Retained earnings.................................................................................... 14,026,439 13,706,544
Total................................................................................................ 27,925,047 27,605,152
Less treasury stock -- at cost (19,177 shares)....................................................... (136,636) (136,636)
Total stockholders' equity........................................................................... 27,788,411 27,468,516
Total liabilities and stockholders' equity........................................................... $ 45,199,311 $ 49,250,015
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
NET SALES (Note 7)...................................................................... $65,814,594 $63,717,716 $56,506,566
COST OF SALES........................................................................... 50,623,565 51,675,498 42,252,186
GROSS MARGIN............................................................................ 15,191,029 12,042,218 14,254,380
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES............................................ 13,392,356 13,139,788 11,007,734
OPERATING INCOME (LOSS)................................................................. 1,798,673 (1,097,570) 3,246,646
OTHER INCOME (EXPENSE):
Interest expense........................................................................ (1,286,110) (1,246,540) (274,739)
Interest income......................................................................... 21,164 25,423 57,863
Gain (loss) on sale of property and equipment........................................... (8,921) (109,809) 27,992
Other................................................................................... (20,792) (41,019) 91,781
Total other income (expense), net....................................................... (1,294,659) (1,371,945) (97,103)
INCOME (LOSS) BEFORE INCOME TAXES....................................................... 504,014 (2,469,515) 3,149,543
PROVISION (BENEFIT) FOR INCOME TAXES (Note 8)........................................... 184,119 (813,671) 1,203,667
NET INCOME (LOSS)....................................................................... $ 319,895 $(1,655,844) $ 1,945,876
NET INCOME (LOSS) PER COMMON SHARE...................................................... $ .17 $ (.89) $ 1.05
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<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, 1994...................... 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)
Net income...................................... -- -- -- 319,895 -- --
BALANCE AT DECEMBER 31, 1996.................... 1,886,580 $4,716,450 $9,182,158 $14,026,439 (19,177) $(136,636)
<CAPTION>
TOTAL
<S> <C>
BALANCE AT JANUARY 1, 1994...................... $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
Net income...................................... 319,895
BALANCE AT DECEMBER 31, 1996.................... $27,788,411
</TABLE>
*DENOTES SHARES ISSUED.
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................................................ $ 319,895 $(1,655,844)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization.......................................................... 2,352,258 2,303,874
Provision for bad debts................................................................ 109,868 145,199
Loss (gain) on sale of property and equipment.......................................... 8,921 109,809
Increase (decrease) in deferred income taxes........................................... 117,754 (496,190)
Provision for inventory obsolescence................................................... 754,106 1,619,013
Changes in operating assets and liabilities providing (using) cash:
Accounts receivable................................................................. (407,776) (153,403)
Refundable income taxes............................................................. 437,453 (310,059)
Inventories......................................................................... 2,061,206 2,010,308
Prepaid expenses and other.......................................................... (142,082) (239,429)
Accounts payable.................................................................... (873,518) 185,667
Accrued expenses and other liabilities.............................................. 441,782 (38,227)
Deferred compensation............................................................... (97,926) (14,305)
Net cash provided by operating activities................................................ 5,081,941 3,466,413
INVESTING ACTIVITIES:
Proceeds from surrender of life insurance policies....................................... 327,855 --
Capital expenditures..................................................................... (1,524,893) (1,609,840)
Proceeds from sale of property and equipment............................................. 7,500 271,830
Proceeds from notes receivable........................................................... 21,704 25,950
Purchase of Balfour Healthcare........................................................... -- (15,321,714)
Net cash used in investing activities.................................................... (1,167,834) (16,633,774)
FINANCING ACTIVITIES:
Proceeds from borrowings under line of credit agreement, net............................. (1,267,600) 89,538
Proceeds from issuance of long-term debt................................................. -- 15,000,000
Principal payments on long-term debt and leases.......................................... (2,408,069) (2,001,026)
Cash proceeds from exercise of stock options............................................. -- 30,906
Net cash provided by (used in) financing activities...................................... (3,675,669) 13,119,418
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... 238,438 (47,943)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................................... 56,009 103,952
CASH AND CASH EQUIVALENTS AT END OF YEAR................................................. $ 294,447 $ 56,009
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during
the year for:
Interest............................................................................... $ 1,280,976 $ 1,204,386
Income taxes, net of refunds received.................................................. $ 528 $ 25,934
<CAPTION>
1994
<S> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................................................ $ 1,945,876
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization.......................................................... 1,736,576
Provision for bad debts................................................................ 74,933
Loss (gain) on sale of property and equipment.......................................... (27,992)
Increase (decrease) in deferred income taxes........................................... 455,000
Provision for inventory obsolescence................................................... 579,997
Changes in operating assets and liabilities providing (using) cash:
Accounts receivable................................................................. (303,611)
Refundable income taxes............................................................. (51,260)
Inventories......................................................................... (3,695,551)
Prepaid expenses and other.......................................................... (14,967)
Accounts payable.................................................................... (175,772)
Accrued expenses and other liabilities.............................................. (21,088)
Deferred compensation............................................................... (105,974)
Net cash provided by operating activities................................................ 396,167
INVESTING ACTIVITIES:
Proceeds from surrender of life insurance policies....................................... --
Capital expenditures..................................................................... (1,918,638)
Proceeds from sale of property and equipment............................................. 4,250
Proceeds from notes receivable........................................................... 31,530
Purchase of Balfour Healthcare........................................................... --
Net cash used in investing activities.................................................... (1,882,858)
FINANCING ACTIVITIES:
Proceeds from borrowings under line of credit agreement, net............................. 1,178,062
Proceeds from issuance of long-term debt................................................. --
Principal payments on long-term debt and leases.......................................... (715,000)
Cash proceeds from exercise of stock options............................................. 167,065
Net cash provided by (used in) financing activities...................................... 630,127
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... (856,564)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................................... 960,516
CASH AND CASH EQUIVALENTS AT END OF YEAR................................................. $ 103,952
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION -- Cash paid during
the year for:
Interest............................................................................... $ 259,222
Income taxes, net of refunds received.................................................. $ 801,917
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE>
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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 1997.
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. Depreciation expense amounted to approximately $1,700,000,
$1,789,000, and $1,693,000 in 1996, 1995 and 1994, respectively.
The Company follows the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of " (SFAS 121), in assessing the carrying
value of property and equipment. The provisions of this statement were adopted
in 1996 and there was no effect on the financial statements.
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 was $608,497 in 1996
and $471,421 in 1995. 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 its
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 $408,000, $384,000, and $522,000 for advertising
in 1996, 1995 and 1994, 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
8
<PAGE>
Company spent approximately $474,000, $490,000, and $376,000 for research and
development in 1996, 1995 and 1994, 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 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 (1,867,403 in
1996, 1,864,618 in 1995, and 1,848,671 in 1994). When dilutive, outstanding
options to purchase common stock are considered. The effects on earnings per
share of dilutive stock options were not material for 1994 and 1996. 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 in the year it is earned. The liability represents
the present value of future payments earned as of December 31, 1996 and 1995.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- Financial instruments of the Company
include long-term debt and line of credit agreements. Based upon the current
borrowing rates available to the Company, estimated fair values of these
financial instruments approximate their recorded carrying amounts. At December
31, 1996, the fair value of the Company's swap agreements were not material.
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).
RECLASSIFICATION -- Certain 1994 and 1995 amounts have been reclassified to
conform with 1996 classifications.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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 $9.142 million is amortized on a straight line basis over
15 years.
2. INVENTORIES
Inventories at December 31, 1996 and 1995 include:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Materials and supplies............. $ 2,877,822 $ 3,171,091
Work-in-process.................... 4,168,965 4,749,829
Finished goods..................... 5,295,871 7,237,050
Total.............................. $12,342,658 $15,157,970
</TABLE>
3. LEASES
The Company leased certain computer equipment under capital leases. Such
equipment is included in property and equipment as of December 31, 1996 and 1995
and is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Machinery and equipment.................... $447,080 $447,080
Less accumulated amortization.............. 447,080 426,389
Net equipment under capital leases......... $ -- $ 20,691
</TABLE>
The future minimum lease payments under equipment operating leases having
initial or remaining noncancellable lease terms in excess of one year are
summarized as follows:
<TABLE>
<CAPTION>
YEAR
<S> <C>
1997................................................ $ 450,000
1998................................................ 221,000
1999................................................ 130,000
2000................................................ 119,000
2001................................................ 94,000
Thereafter.......................................... 49,000
Total minimum lease payments........................ $1,063,000
</TABLE>
Total rental expense for all operating leases was $543,000 in 1996, $398,000 in
1995, and $241,000 in 1994.
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, all of which was unused at December 31, 1996, with
interest at the LIBOR rate plus 1.75% (7.41% at December 31, 1996) 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, tangible net worth (not less than
$18,160,000 at December 31, 1996), dividends, capital expenditures and cash
flow. At December 31, 1996, after giving effect to a waiver granted by the bank
relating to cash flow, the Company is in compliance with the provisions of the
agreement.
The following relates to aggregate short-term borrowings in 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Amount outstanding at December
31........................... $ -- $1,267,600 $1,178,062
Maximum amount outstanding at
any month end................ $2,555,000 $1,466,000 $1,178,062
Average amount outstanding
(based on weighted daily
average balances)............ $1,065,784 $ 672,478 $ 59,326
Weighted average interest rate
during the year.............. 7.40% 7.51% 6.98%
Weighted average interest rate
at December 31............... 7.41% 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.
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
5. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1995 is comprised of the following:
<TABLE>
<CAPTION>
1996 1995
<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%
(7.7% at December 31, 1996) or as
low as 1.5% if certain net worth
targets are met...................... $11,762,500 $13,612,500
Equipment Term Loan, due $125,000
quarterly through December 31, 1997
plus interest at 6.30%............... 500,000 1,000,000
Total................................. 12,262,500 14,612,500
Less current maturities............... 2,350,000 2,350,000
Long-term debt........................ $ 9,912,500 $12,262,500
</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, tangible net worth (not less than $18,160,000 at December 31,
1996), dividends, capital expenditures and cash flow. At December 31, 1996,
after giving effect to a waiver granted by the bank relating to cash flow, the
Company is in compliance with the provisions of the agreement.
At December 31, 1996 and 1995, the Company had outstanding interest rate swap
agreements under which the Company receives a variable rate based on LIBOR and
pays a fixed rate ranging from 7.95% to 8.03% on a notional amount of $3,342,806
and $3,868,561, respectively, as determined in one month intervals through
November 30, 1998. These transactions effectively change 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
parties to the interest rate swap agreement. However, the Company does not
anticipate nonperformance by the counterparties.
All of the Company's property and equipment, inventories and accounts receivable
are pledged as collateral for the long-term debt.
Maturities of long-term debt over the next four years are as follows:
<TABLE>
<CAPTION>
YEAR
<S> <C>
1997............................................... $ 2,350,000
1998............................................... 2,350,000
1999............................................... 2,350,000
2000............................................... 5,212,500
Total.............................................. $12,262,500
</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 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 Company adopted the 1992 Nonqualified Stock Option Plan for Nonemployee
Directors (the 1992 Plan). Under the 1992 Plan, each nonemployee director was
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.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Transactions involving the Plans are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTION SHARES SHARES EXERCISE PRICE
<S> <C> <C>
Outstanding at
January 1, 1994...................... 138,250 $ 7.75
Granted............................... 50,000 10.81
Exercised............................. (24,625) 6.87
Expired and/or cancelled.............. (19,125) 7.47
Outstanding at
December 31, 1994.................... 144,500 8.99
Granted............................... 7,250 8.13
Exercised............................. (4,250) 7.27
Expired and/or cancelled.............. (500) 7.75
Outstanding at
December 31, 1995.................... 147,000 9.01
Granted............................... 9,250 6.92
Expired and/or cancelled.............. (28,000) 9.27
Outstanding at
December 31, 1996.................... 128,250 $8.79
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
WEIGHTED WEIGHTED
NUMBER OUTSTANDING AVERAGE REMAINING AVERAGE
AT DECEMBER 31, 1996 CONTRACT LIFE EXERCISE PRICE
<S> <C> <C>
39,000......................... .5 $ 7.68
34,750......................... 2.0 8.50
38,000......................... 2.9 10.79
16,500......................... 4.2 7.46
128,250........................ 2.1 $ 8.79
</TABLE>
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
NUMBER EXERCISABLE WEIGHTED-AVERAGE
AT DECEMBER 31, 1996 EXERCISE PRICE
<S> <C>
39,000........................................ $ 7.69
30,063........................................ 8.46
19,000........................................ 10.79
1,813......................................... 8.13
89,876........................................ $ 8.61
</TABLE>
The Company has adopted Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation," effective January 1, 1996. In
accordance with the provisions of SFAS No. 123, the Company continues to apply
APB Opinion 25 and related interpretations in accounting for its stock option
plans and, accordingly, has not recognized compensation cost. If the Company had
elected to recognize compensation cost based on fair value of the options
granted at the grant date as prescribed by SFAS No. 123, net income (loss) and
earnings (loss) per share would have been reduced to the pro forma amounts
indicated in the table below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net income (loss) -- as reported.............. $319.9 $ (1655.8)
Net income (loss) -- pro forma................ 308.0 (1667.3)
Earnings per share -- as reported............. .17 (.89)
Earnings per share -- pro forma............... .16 (.89)
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Expected dividend yield........................ 0.00% 0.00%
Expected stock price volatility................ 18.26% 18.59%
Risk-free interest rate........................ 5.67% 5.40%
Expected life of options....................... 5 years 5 years
</TABLE>
The weighted average fair value of options granted during 1996 and 1995 was
$2.03 and $2.36, respectively.
7. MAJOR CUSTOMERS
The Company's single line of business is considered to be the manufacture,
processing and sale of knitted products. The Company has only one customer
representing 10% or more of net sales. Sales to Allegiance Healthcare
Corporation (formerly known as Baxter Healthcare Corporation) totaled
$15,932,382, $16,601,252 and $12,902,722, in 1996, 1995 and 1994, respectively.
While the loss of Allegiance Healthcare Corporation would have a material
adverse effect on the business of the Company, management believes that, because
of the number of departments within Allegiance to which the Company sells, the
likelihood of a material amount of sales loss is reduced.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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
1996 and 1994, the Company utilized approximately $27,000 and $117,000,
respectively, 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 carryback of the NOL, approximately $392,000 of alternative
minimum tax credit carryovers became available to offset future federal income
taxes.
The Company also has approximately $1,800,000 of state net operating loss
carryforwards available for reduction of future state taxable income. These
carryovers begin to expire in 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 1996, 1995 and 1994
included:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current:
Federal........................ $ 66,365 $(317,481) $ 632,667
State.......................... -- -- 116,000
Total current................... 66,365 (317,481) 748,667
Deferred:
Federal........................ 101,897 (411,810) 438,000
State.......................... 15,857 (84,380) 17,000
Total deferred.................. 117,754 (496,190) 455,000
Total provision (benefit) for
income taxes................... $ 184,119 $(813,671) $1,203,667
</TABLE>
The approximate tax effect of temporary differences and carryforwards that gave
rise to the Company's deferred income tax assets and liabilities for 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
1996 ASSETS LIABILITIES TOTAL
<S> <C> <C> <C>
Current:
Receivables.............. $ 100,741 $ -- $ 100,741
Inventories.............. 351,350 -- 351,350
Total current............. 452,091 -- 452,091
Noncurrent:
Property................. -- (2,124,927) (2,124,927)
Deferred compensation.... 127,079 -- 127,079
Insurance reserve........ 88,606 -- 88,606
Deferred revenue......... -- (2,529) (2,529)
Benefit of state net
operating loss
carryforward............ 72,370 -- 72,370
Alternative minimum tax
credit carryforward..... 365,387 -- 365,387
Total noncurrent.......... 653,442 (2,127,456) (1,474,014)
Total current and
noncurrent............... $1,105,533 $(2,127,456) $(1,021,923)
</TABLE>
<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
Total current............. 400,850 400,850
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)
Benefit of state net
operating loss
carryforward............ 80,000 -- 80,000
Alternative minimum tax
credit carryforward..... 400,000 -- 400,000
Total noncurrent.......... 689,670 (1,994,689) (1,305,019)
Total current and
noncurrent............... $1,090,520 $(1,994,689) $ (904,169)
</TABLE>
13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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>
1996 1995 1994
<S> <C> <C> <C>
Federal income tax at
statutory rate (benefit)...... $ 171,020 $(839,635) $1,070,845
State income taxes, net of
federal benefit (cost)........ 10,466 (55,691) 87,780
Change, net of premiums paid
and proceeds, in officers'
life insurance values......... (1,396) (4,196) (6,323)
Expenses which are not
deductible for income
tax purposes.................. 21,491 32,684 22,923
All other...................... (17,462) 53,167 28,442
Total provision (benefit) for
income taxes.................. $ 184,119 $(813,671) $1,203,667
</TABLE>
9. EMPLOYEE BENEFITS
The Company has an employee salary deferral plan covering substantially all
employees which allows participants to defer from 2% to 20% of their salaries,
or the maximum allowable under the Internal Revenue Code, 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, 1996, 1995 and
1994 were $149,000, $164,000, and $171,000, respectively.
14
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of Alba-Waldensian, Inc. is responsible for the accuracy and
consistency of all the information contained in the annual report, including all
accompanying consolidated financial statements. The statements have been
prepared to conform with generally accepted accounting principles and include
amounts based on management's estimates and judgments.
Alba-Waldensian, Inc. maintains a system of internal accounting controls
designed to provide reasonable assurance that financial records are accurate,
Company assets are safeguarded, and financial statements present fairly the
consolidated financial position of the Company.
The Audit Committee of the Board of Directors, composed solely of outside
directors, reviews the scope of audits and the findings of the independent
certified public accountants. The auditors meet regularly with the Audit
Committee to discuss audit and financial issues.
BDO Seidman, LLP, the Company's independent certified public accountants,
has audited the financial statements prepared by management. Their opinion on
the financial statements is presented as follows.
<TABLE>
<S> <C>
LEE N. MORTENSON THOMAS I. NAIL
President and Chief Executive Officer Chief Financial Officer
</TABLE>
15
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Alba-Waldensian, Inc.
Valdese, North Carolina
We have audited the accompanying consolidated balance sheets of
Alba-Waldensian, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Alba-Waldensian, Inc. and subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
BDO SEIDMAN, LLP
Greensboro, North Carolina
February 6, 1997
16
<PAGE>
STOCK PRICES AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
SALES PRICE OF COMMON SHARES SALES PRICE OF COMMON SHARES
HIGH 1996 LOW HIGH 1995 LOW
<S> <C> <C> <C> <C>
First Quarter......................... 7 7/8 6 5/8 11 1/8 9 7/8
Second Quarter........................ 8 1/4 6 5/8 10 1/4 8 3/8
Third Quarter......................... 8 6 1/4 9 1/8 8 3/4
Fourth Quarter........................ 6 5/8 5 3/8 9 1/8 7 1/2
<CAPTION>
DIVIDENDS PER SHARE
1996 1995
<S> <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>
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%
1996 13.8% 28.6% 6.2% 1.8% 49.6%
</TABLE>
NOTE: AMOUNTS REPRESENT PERCENTAGES OF ANNUAL NET SALES.
FIVE-YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS
1996 1995 1994 1993
<S> <C> <C> <C> <C>
SELECTED FINANCIAL DATA:
Net sales...................................................................... $65,815 $63,718 $56,507 $50,855
Gross margin................................................................... 15,191 12,042 14,254 13,479
Income (loss) before income taxes and cumulative effect of a change in
accounting principle......................................................... 504 (2,470) 3,150 1,435
Provision (benefit) for income taxes........................................... 184 (814) 1,204 451
Income (loss) before cumulative effect of a change in accounting principle..... 320 (1,656) 1,946 984
Cumulative effect on prior years of a change in accounting for
income taxes................................................................. -- -- -- --
Net income (loss).............................................................. 320 (1,656) 1,946 984
Income (loss) per common share:
Income (loss) before cumulative effect of a change in accounting principle... .17 (.89) 1.05 .54
Cumulative effect on prior years of a change in accounting for
income taxes.............................................................. -- -- -- --
Net income (loss) per common share........................................... .17 (.89) 1.05 .54
Weighted average number of shares of common stock outstanding................ 1,867 1,865 1,849 1,826
At Year End:
Total assets................................................................. $45,199 $49,250 $37,730 $35,224
Long-term debt and capital lease obligations................................. 9,913 12,263 1,058 1,777
SELECTED SUPPLEMENTARY FINANCIAL DATA
Property and equipment:
Net investment............................................................... $13,538 $13,775 $11,605 $11,474
Current additions............................................................ 1,525 1,610 1,919 1,719
Depreciation................................................................. 1,700 1,789 1,693 1,688
Other:
Working capital.............................................................. $17,313 $17,960 $19,866 $18,293
Stockholders' equity......................................................... 27,788 27,469 29,093 26,981
Stockholders' equity per common share........................................ 14.88 14.71 15.62 14.68
<CAPTION>
<S> <C>
SELECTED FINANCIAL DATA:
Net sales...................................................................... $40,567
Gross margin................................................................... 10,187
Income (loss) before income taxes and cumulative effect of a change in
accounting principle......................................................... 2,068
Provision (benefit) for income taxes........................................... 727
Income (loss) before cumulative effect of a change in accounting principle..... 1,341
Cumulative effect on prior years of a change in accounting for
income taxes................................................................. 226
Net income (loss).............................................................. 1,567
Income (loss) per common share:
Income (loss) before cumulative effect of a change in accounting principle... .74
Cumulative effect on prior years of a change in accounting for
income taxes.............................................................. .12
Net income (loss) per common share........................................... .86
Weighted average number of shares of common stock outstanding................ 1,819
At Year End:
Total assets................................................................. $30,586
Long-term debt and capital lease obligations................................. 505
SELECTED SUPPLEMENTARY FINANCIAL DATA
Property and equipment:
Net investment............................................................... $11,475
Current additions............................................................ 1,326
Depreciation................................................................. 1,614
Other:
Working capital.............................................................. $15,922
Stockholders' equity......................................................... 25,887
Stockholders' equity per common share........................................ 14.20
</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.
17
<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
Operations as a percentage of sales for 1996, 1995 and 1994.
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
YEAR ENDED DECEMBER 31,
1996 1995 1994
<S> <C> <C> <C>
Net Sales............................. 100.0% 100.0% 100.0%
Cost of Sales......................... 76.9 81.1 74.8
Gross Margin.......................... 23.1 18.9 25.2
Selling, General and Administrative... 20.4 20.6 19.5
Operating Income/(Loss)............... 2.7 (1.7 ) 5.7
Other Income (Expense), Net........... (1.9) (2.2 ) (.2)
Income (Loss) Before Income Taxes..... .8 (3.9 ) 5.5
Provision (Benefit) for Income
Taxes............................... .3 (1.3 ) 2.1
Net Income (Loss)..................... .5% (2.6%) 3.4 %
</TABLE>
DISCUSSION OF 1996 COMPARED TO 1995
Net Sales by Division for 1996 as compared to 1995 are set forth in the
following table:
<TABLE>
<CAPTION>
IN THOUSANDS OF DOLLARS
DEC. 31 DEC. 31 INCREASE/ % INCREASE/
1996 1995 (DECREASE) (DECREASE)
<S> <C> <C> <C> <C>
Consumer
Products........ $26,120 $25,853 $ 267 1.0%
Health Products... 32,640 30,203 2,437 8.1%
Alba Direct....... 1,749 2,034 (285) (14.0%)
Byford............ 5,291 5,548 (257) (4.6%)
AWI Retail........ 15 80 (65) (81.3%)
Total............. $65,815 $63,718 $ 2,097 3.3%
</TABLE>
Net sales, as shown in the table above, increased by $2,096,878 or 3.3%.
Consumer Products sales increased as a result of sales to a new customer. Health
Products sales increased as a result of the Balfour acquisition in March 1995
(See Note 1 to Consolidated Financial Statements).
The Health Products Division's sales represent a full twelve months of Balfour
sales in 1996, as compared to approximately ten months in 1995. Alba Direct
declined as a result of weaker sales to its domestic and Japanese customers.
Byford sales decreased as a result of weaker basic sweater sales and the
Company's decision to discontinue the fashion sweater line. Byford's sock sales
increased as a result of shipments made in the fourth quarter under the newly
acquired GREG NORMAN license.
Gross profits increased in 1996 to 23.1% of net sales, as compared to 18.9% in
1995. There were four major factors that contributed to the increase in gross
margin. First, the increase in sales in the Health Products Division carries
higher gross margins. Second, manufacturing costs were lower, due to cost
improvement programs initiated during the year. Third, an additional inventory
markdown of $1,200,000 was taken in 1995 (during third quarter). Such additional
markdowns above normal markdowns, did not occur in 1996. Fourth, the Company
completed the consolidation of its Health Products Division to Rockwood, TN in
1996 and did not incur the amount of moving and training costs incurred in 1995.
Selling, General and Administrative Expenses decreased slightly as a percentage
of sales to 20.4% from 20.6% in 1995. Although SG&A expenses decreased as a
percentage of sales due to higher sales volume, actual costs increased by
$252,568. This increase was primarily due to an increase in commissions,
contract programming cost, a full year of goodwill amortization for the Balfour
purchase and an increase in distribution cost caused by shipments of smaller
orders, partially offset by savings in other areas.
Interest expense was $1,286,110 in 1996 as compared to $1,246,540 in 1995.
Average borrowings under the Short Term revolver were $1,066,000 with an average
interest rate of 7.40% compared to average borrowings of $672,000 with an
average interest rate of 7.51% in 1995. Additionally, the long-term debt issued
to finance the Balfour acquisition was outstanding for all of 1996, adding to
overall interest incurred in 1996 (See Note 5 to Consolidated Financial
Statements).
Other Income (Expense), (exclusive of Interest Income and Expense) for 1996
reflected net other expense of $29,713 compared to net other expense in 1995 of
$150,828. Net Other Expense in 1995 included a loss of $90,000 on the sale of
the Main Street Plant and a return to a licensee of $60,000 for the overpayment
of royalties from previous years.
DISCUSSION OF 1995 COMPARED TO 1994
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) (14.6%)
Health Products... 30,203 15,895 14,308 90.0%
Alba Direct....... 2,034 4,002 (1,968) (49.2%)
Byford............ 5,548 6,353 (805) (12.7%)
AWI Retail........ 80 3 77 2,566.7%
Total............. $63,718 $56,507 $ 7,211 12.8%
</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 was 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 was 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's sales decline was primarily
18
<PAGE>
MANAGEMENT'S DISCUSSION CONTINUED
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.
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 $1,200,000 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.
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 in proportion 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 costs 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
marked 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 costs and selling
expenses related to the Balfour business.
Interest expense was $1,246,540 in 1995, as compared to $274,739 in 1994. Short
term interest rates averaged 7.51% for 1995, as compared to 6.98% in 1994.
Average borrowings under the short term revolver were $672,000 in 1995, as
compared to $59,000 in 1994. Borrowing 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
PAS(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
to 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 income of $119,773
in 1994. 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 over-payment of royalties
from previous years.
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, renovations and expansion. These needs are
being met by cash on hand, cash flow and a short term line of credit of
$5,000,000 (See Note 4 to Consolidated Financial Statements). Working capital
decreased by $647,823 from 1995. The decrease from 1995 was primarily due to
payments on long-term debt and payments for capital expenditures in excess of
current year net income and depreciation.
Cash provided by operating activities was $5,081,941 in 1996, compared to
$3,466,413 in 1995 and $396,167 in 1994. The cash provided in 1996 was mainly
the result of an increase in net income and a reduction in inventories.
Net cash used in investing activities was $1,167,834 compared to $16,633,774 in
1995 and $1,882,858 in 1994. The cash used in 1996 and 1994 was primarily for
capital expenditures to expand capacities, and to replace and update plant and
equipment. Cash used in 1995 reflects the purchase of Balfour Health Products.
Net cash used by financing activities was $3,675,669 in 1996 compared to net
cash provided of $13,119,418 in 1995 and $630,127 in 1994. Net cash used in 1996
was primarily for principal payments on long-term debt and payments to reduce
the borrowings under the line of credit. Net cash provided in 1995 was primarily
due to proceeds from 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 PAS~ 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. The convenants permit the Company to finance capital expenditure at
an adequate level to support current and future operations.
Anticipated capital expenditures for 1997 will be approximately $2,100,000 for
existing business. Capital expenditures will be made to renovate existing plant
and equipment and to purchase new, more effficient 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.
DERIVATIVES
At December 31, 1996, the Company had outstanding interest rate swap agreements
under which the Company receives a variable rate based on LIBOR and pays a fixed
rate of 7.95% and 8.03% on notional amounts of $3,342,806 and $3,342,806
respectively, as determined under one month intervals through November 30, 1998.
The transactions effectively change a portion of the Company's interest rate
exposure from a variable rate to a fixed rate. The Company is exposed to a
credit loss in the event of nonperformance by the other party to the interest
rate swap agreements. However, the Company does not anticipate nonperformance by
the counterparties.
19
<PAGE>
QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED (EXPRESSED IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1996 1995
DECEMBER 31 SEPTEMBER 29 JUNE 30 MARCH 31 DECEMBER 31 OCTOBER 1 JULY 2 APRIL 2
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales......................... $15,861 $ 16,279 $16,296 $17,379 $16,319 $16,769 $16,252 $14,378
Gross Margin...................... 3,582 3,694 3,792 4,123 2,718 2,343 3,866 3,115
Net Income (Loss)................. 191 23 5 101 (1,018) (728) 64 26
Income (Loss) Per Share........... .10 .01 .01 .05 (0.54) (0.39) 0.03 0.01
Weighted Average Number of Shares
of Common Stock Outstanding..... 1,867 1,867 1,867 1,867 1,865 1,864 1,864 1,863
</TABLE>
1995
NOTE: SIGNIFICANT THIRD QUARTER ADJUSTMENTS IN 1995 INCLUDED $1,200 IN INVENTORY
WRITE-OFF ($744 NET OF INCOME TAXES).
20
<PAGE>
Corporate Management
Lee N. Mortenson
CEO and President
Clyde Wm. Engle
Chariman 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
Corporate Directors
Term Expiring May 1997
William M. Cousins, Jr.
Management Consultant
Jupiter, Florida
Glenn J. Kennedy
Executive Vice President
Sunstates Corporation
Raleigh, North Carolina
Paul H. Albritton, Jr.
Vice President and
Chief Financial Officer
C-Phone Corporation
Wilmington, 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
Term Expiring May 1999
C. Alan Forbes
Management Consultant
Charlotte, North Carolina
James M. Fawcett, Jr.
Registered Representative and Agent
Equitable Financial Companies
Chicago, Illinois
Lee N. Mortenson
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 13,
1997 was approximately 342.
Annual Meeting
May 14, 1997
Corporate Headquarters
Alba-Waldensian, Inc.
Box 100
201 St. Germain Ave., 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 1996, 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
<PAGE>
(Background of Alba-Waldensian, Inc.'s logo)
Alba-Waldensian, Inc.
PO Box 100, 201 St. Germain Avenue, S.W.
Valdese, NC 28690
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
As of December 31, 1996
Percentage of
Name Jurisdiction Stock Owned
- ---- ------------ -------------
AWI Retail, Inc. North Carolina 100%
Pilot Research Corp. North Carolina 100%
Alba Export Corp. North Carolina 100%
24
<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 6, 1997,
relating to the consolidated financial statements and schedules of
Alba-Waldensian, Inc. incorporated by reference in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.
Greensboro, North Carolina BDO Seidman, LLP
March 28, 1997
25
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 294,447
<SECURITIES> 0
<RECEIVABLES> 9,987,667
<ALLOWANCES> 275,000
<INVENTORY> 12,342,658
<CURRENT-ASSETS> 23,105,005
<PP&E> 31,359,652
<DEPRECIATION> 17,821,356
<TOTAL-ASSETS> 45,199,311
<CURRENT-LIABILITIES> 5,792,226
<BONDS> 0
0
0
<COMMON> 4,716,450
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 45,119,311
<SALES> 65,814,594
<TOTAL-REVENUES> 65,835,758
<CGS> 50,623,565
<TOTAL-COSTS> 64,015,921
<OTHER-EXPENSES> 29,713
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,286,110
<INCOME-PRETAX> 504,014
<INCOME-TAX> 184,119
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319,895
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
