UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20459
FORM 10-Q
(Mark one)
[X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Quarterly Period Ended October 3, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file number 1-6150
ALBA-WALDENSIAN, INC.
(Exact name of registrant as specified in its Charter)
Delaware 56-0359780
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
P.O. Box 100, Valdese, N.C. 28690
(Address of principal executive offices)(Zip code)
(828) 879-6500
Registrant's telephone number, including area code
NONE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether 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
As of November 8, 1999, the number of common shares outstanding was 3,246,045.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
ALBA-WALDENSIAN, INC.
Consolidated Balance Sheets
($000's)
(Unaudited)
October 3, December 31,
1999 1998
---- ----
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $94 $15
Accounts receivable, net of allowance for
doubtful accounts of $342 and $260, respectively 10,496 6,426
Inventories:
Materials and supplies 4,506 3,076
Work-in-process 9,349 7,048
Finished goods 3,257 3,498
----- -----
Total Inventories 17,112 13,622
------ ------
Deferred income taxes 906 906
Prepaid expenses and other 842 602
--- ---
Total Current Assets 29,450 21,571
------ ------
PROPERTY AND EQUIPMENT 45,284 37,441
Less: accumulated depreciation (21,356) (19,559)
------- ------
Net Property and Equipment 23,928 17,882
------ ------
OTHER ASSETS:
Notes receivable 0 13
Trademarks and patents 379 427
Excess of cost over net assets acquired, net 6,444 6,886
----- -----
6,823 7,326
----- -----
TOTAL ASSETS $60,201 $46,779
====== ======
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALBA-WALDENSIAN, INC.
Consolidated Balance Sheets
($000's except share amounts)
October 3, December 31,
1999 1998
---- ----
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Current maturities of long-term debt $1,525 $852
Accounts payable 3,580 2,989
Accrued expenses 1,688 2,842
----- -----
Total Current Liabilities 6,793 6,683
LONG-TERM DEBT (Note 3) 19,079 8,383
DEFERRED COMPENSATION 210 200
DEFERRED INCOME TAX LIABILITY 1,864 1,864
----- -----
Total Liabilities 27,946 17,130
------ ------
STOCKHOLDERS' EQUITY:
Common stock - authorized 5,000,000 shares, $2.50 par value; issued: 3,773,000
and 2,829,834 shares in 1999 and 1998 respectively; outstanding:
3,246,045 and 2,361,231 in 1999 and 1998, respectively 9,433 7,075
Additional paid-in capital 4,466 6,823
Retained earnings 21,089 18,436
------ ------
34,988 32,334
Less treasury stock - at cost
(526,955 and 468,603 shares, respectively) (2,733) (2,685)
----- -----
Total Stockholders' Equity 32,255 29,649
------ ------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $60,201 $46,779
====== ======
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALBA-WALDENSIAN, INC.
Consolidated Statements of Operations
(Unaudited)
($000's except per share amounts)
Three Month Periods Ended Nine Month Periods Ended
Oct. 3, Sept. 27, Oct. 3, Sept. 27,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $19,292 $18,904 $59,739 $54,914
Cost of sales 14,138 13,239 43,152 40,261
------ ------ ------ ------
Gross margin 5,154 5,665 16,587 14,653
Selling, general and
administrative expense 3,578 3,368 10,431 9,633
----- ----- ------ -----
Operating income 1,576 2,297 6,156 5,020
----- ----- ----- -----
Interest expense 368 227 999 612
Other expenses 81 83 127 174
-- -- --- ---
Total other expenses 449 310 1,126 786
--- --- ----- ---
Income before income taxes 1,127 1,987 5,030 4,234
Provision for income taxes 377 755 1,746 1,609
--- --- ----- -----
Net income $750 $1,232 $3,284 $2,625
==== ====== ====== =====
Net income per common share
- Basic $.23 $.39 $1.04 $.76
- Diluted $.23 $.37 $.99 $.74
Weighted average number of shares
of common stock outstanding
- Basic 3,198 3,140 3,158 3,438
- Diluted 3,331 3,326 3,329 3,545
<FN>
See notes to consolidated financial statement
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALBA-WALDENSIAN, INC.
Consolidated Statements of Stockholders' Equity
(Unaudited)
($000's except share amounts)
Additional
Common Paid-In Retained Treasury Stock
Shares Amount Capital Earnings Shares Amount Total
------ ------ ------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998 1,886,580 $4,716 $9,182 $13,651 (19,177) $(137) $27,412
Purchase of Treasury Stock (310,500) (2,521) (2,521)
Exercise of Stock Options (8) 3,600 26 18
Dividends Paid (118) (118)
Net Income 2,625 2,625
----- -----
Balance at Sept. 27, 1999 1,886,580 $4,716 $9,182 $16,150 (326,077) $(2,632) $27,416
========= ===== ===== ====== ======= ===== ======
Balance at January 1, 1999 2,829,834 $7,075 $6,823 $18,436 (468,603) $(2,685) $29,649
Purchase of Treasury Stock (30,900) (604) (604)
Exercise of Stock Options (215) 130,536 556 341
Dividends Paid (416) (416)
Stock Split 943,166 2,358 (2,357) (157,988) 1
Net Income 3,284 3,284
----- -----
Balance at Oct. 3, 1999 3,773,000 $9,433 $4,466 $21,089 (526,955) $(2,733) $32,255
========= ===== ===== ====== ======= ===== ======
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALBA-WALDENSIAN, INC.
Consolidated Statements of Cash Flows
(Unaudited)
($000's)
Nine Month Periods Ended
Oct. 3, Sept. 27,
1999 1998
---- ----
OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 3,284 $ 2,624
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 2,287 1,847
Provision for bad debts 90 135
Loss on disposal of property 2 2
Provision for inventory obsolescence 1,178 1,161
Changes in operating assets and liabilities providing (using) cash:
Accounts receivable (4,165) (3,035)
Refundable Income Taxes (69) --
Inventories (4,669) (1,182)
Prepaid expenses and other (169) (251)
Accounts payable 590 (93)
Accrued expenses and other liabilities (696) 930
Income taxes payable (460) 496
Deferred compensation 10 1
-- -
Net cash (used in) provided by operating activities (2,787) 2,635
----- -----
INVESTING ACTIVITIES:
Capital expenditures (4,067) (2,383)
Proceeds from notes receivable 18 1
-- -
Net cash used in investing activities (4,049) (2,382)
----- ------
FINANCING ACTIVITIES:
Net borrowings under line
of credit agreement 7,861 6,245
Principal payments notes and Capital Leases (927) (9,951)
Payment of dividends (416) (118)
Proceeds from Issuance of Long Term Debt 660 3,664
Cash proceeds for issuance of stock options 343 18
Repurchase of capital stock (605) (2,521)
----- -------
Net cash provided by (used in) financing activities 6,916 (2,663)
----- -------
NET INCREASE (DECREASE) IN CASH 80 (2,410)
CASH AT BEGINNING OF PERIOD 15 2,416
-- -----
CASH AT END OF PERIOD $ 95 $ 6
== =
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALBA-WALDENSIAN, INC.
Consolidated Statements of Cash Flows
(Unaudited)
($000's)
Nine Month Periods Ended
Oct. 3, Sept. 27,
1999 1998
---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
<S> <C> <C>
Interest $899 $563
Income taxes $2,275 $1,128
<FN>
During the first nine months of 1999, the Company acquired production equipment
totaling $3,776,000 through capital lease financing as compared to $713,000 of
production equipment acquired through capital lease financing in 1988
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ALBA-WALDENSIAN, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. SUBSEQUENT EVENT
On November 8, 1999, the Company signed a definitive agreement (the
"Merger Agreement") under which Tefron U.S. Holding Corp. ("Tefron U.S."), a
wholly-owned subsidiary of Tefron, Ltd., will, subject to the conditions
therein, acquire the Company for $18.50 per share in cash. Tefron will pay
approximately $62 million for the Company's common shares. Including assumed
debt (see Note 3), the transaction has a total value of approximately $83
million.
Under the terms of the agreement, which was unanimously approved by the
boards of directors of both the Company and Tefron, Ltd., AWS Acquisition Corp.,
a wholly-owned subsidiary of Tefron U.S., has made a tender offer for 100% of
the Company's outstanding shares. Pursuant to the Merger Agreement, following
the consummation of the tender offer, AWS Acquisition Corp. will be merged (the
"Merger") into Alba-Waldensian and each share of Company common stock then
outstanding will be converted into the right to receive $18.50. In connection
with the execution of the Merger Agreement, each of Alba-Waldensian's two
largest shareholders have entered into a Support Agreement (the "Support
Agreement") pursuant to which, among other things, they have agreed to tender a
majority of the outstanding shares of the Company into the tender offer. The
tender offer is conditioned on the valid tender of a majority of the Company's
outstanding shares, expiration of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act, and other customary closing
conditions. It is anticipated that the transaction will be consummated before
year-end 1999.
2. UNAUDITED FINANCIAL INFORMATION
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position as of October 3, 1999, and the results of operations for the
three and nine month periods ended October 3, 1999 and September 27, 1998. These
unaudited financial statements should be read in conjunction with the Company's
most recent audited financial statements.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year.
All per share and weighted average share information for 1998 has been
restated to reflect the 3 for 2 stock split effected on November 16, 1998 and
the 4 for 3 stock split effected June 4, 1999.
3. FINANCING
On May 14, 1998, the Company entered into a three-year $21,000,000
financing facility with a major bank composed of up to a $15,000,000 revolving
loan, based upon levels of accounts receivable and inventories, a $3,000,000
term loan and a $3,000,000 credit line to fund future capital expenditures. The
new facility bears interest at Prime plus 0.5% (or at the option of the Company,
portions of the facility may be priced at LIBOR plus 2.25%) and is secured by
substantially all of the assets of the Company.
The loan agreement requires that the Company maintain certain levels of
tangible net worth and fixed charge coverage ratios as well as limiting the
level of capital expenditures ($16.2 million in 1999) and prohibiting other
financing (in excess of $10.5 million in 1999). At October 3, 1999, the Company
was in compliance with the covenants contained in the loan agreement.
During the first nine months of 1999, the Company secured $3,776,000 of
capital lease financing covering the acquisition of machinery during 1999. This
facility is secured by only the acquired machinery, bears interest at rates
varying from 7.56% to 8.34% and provides for level monthly payments over its
five-year term.
The Company's loan agreement with the bank includes covenants that the
Company shall not "enter into any merger or consolidation" or "enter into any
transaction outside the ordinary course of the [Company's] business," and also
provides that the occurrence of a "Change of Control" (which includes the
acquisition by any person of the right to vote a majority of the Company's
common stock) constitutes an event of default. Therefore, the purchase of a
majority of the outstanding shares of the Company pursuant to the tender offer,
as well the consummation of the Merger thereafter (See Note 1), will constitute
events of default under the credit agreement. The execution and delivery of the
Merger Agreement and the execution and delivery of the Support Agreement
(pursuant to which Tefron U.S. acquired the right to vote a majority of the
Company's outstanding shares, subject to the terms of pledge agreements covering
some of those shares) may also constitute events of default under those
provisions. The bank has waived any events of default resulting from the
execution and delivery of the Merger Agreement and the Support Agreement,
reserving its existing right to be paid off upon completion of the tender offer.
The Company anticipates that Tefron U.S. will cause the Company's existing
indebtedness to be refinanced in connection with the completion of the tender
offer or the consummation of the Merger; however, there is no financing
condition to the tender offer or the Merger.
Based upon the bank's consent to waive its rights to accelerate the
loan prior to the completion of the tender offer and the written financing
commitment obtained by Tefron, the Company has reflected its bank debt as
long-term in the accompanying financial statements.
4. DIVIDENDS
The Company declared a semi-annual cash dividend of $.075 ($0.05625
post-split) per share ($177,000) on its common stock payable on February 22,
1999 to shareholders of record on February 12, 1999. Additionally, the Company
increased its semi-annual cash dividend by 33% with the declaration of a $.075
per post-split share ($239,000) on its common stock payable on August 24, 1999
to shareholders of record on August 14, 1999. Under the Company's loan agreement
with a bank (see Note 3), dividends and repurchases of Company stock may not
exceed $4,000,000 during the three-year term of the loan. As of October 3, 1999,
dividends and repurchases of Company stock have totaled $3,917,000.
5. EARNINGS PER SHARE
<TABLE>
<CAPTION>
Nine Month Period Ended Sept. 27, 1998
Income Shares Per-Share
(Numerator) (Denominator) Amount
(000's, except per share amounts)
Basic EPS
<S> <C> <C> <C>
Net Income $2,625 3,438 $.76
Effect of Dilutive Securities
Stock Options -- 107
Diluted EPS
Net Income $2,625 3,545 $.74
Nine Month Period Ended Oct. 3, 1999
Income Shares Per-Share
(Numerator) (Denominator) Amount
(000's, except per share amounts)
Basic EPS
Net Income $3,284 3,158 $1.04
Effect of Dilutive Securities
Stock Options -- 171 --
Diluted EPS
Net Income $3,284 3,329 $.99
</TABLE>
<PAGE>
6. SEGMENT INFORMATION
The following table contains selected information with respect to the
Company's business segments:
<TABLE>
<CAPTION>
Nine Month Periods Ended
Oct. 4, Sept. 27,
1999 1998
($000's)
Consumer Products
<S> <C> <C>
Net sales $33,140 $30,921
Segment profit 4,476 4,623
% Net sales 13.5% 15.0%
Segment assets 36,008 N/A
Health Products
Net sales $26,599 $24,531
Segment profit 5,535 3,857
% Net sales 20.8% 15.7%
Segment assets 12,922 N/A
Segment profit -
Consumer Products $4,476 $4,623
Health Products 5,535 3,857
----- -----
Total segment profit 10,011 8,480
General and administrative expenses 3,855 3,460
Other expense, net 1,126 786
----- ---
Income before income taxes $5,030 $4,234
<FN>
N/A = Information Not Available
</FN>
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Merger Transaction
On November 8, 1999, the Company signed a definitive Agreement (the
"Merger Agreement") under which Tefron U.S. Holding Corp., a wholly-owned
subsidiary of Tefron, Ltd., will, subject to the conditions therein, acquire the
Company for $18.50 per share in cash. See Note 1 of Notes to Consolidated
Financial Statements, for further information regarding the Merger Agreement and
the transactions contemplated thereby.
Liquidity and Capital Resources
We currently have a three-year $21,000,000 financing facility with a
major bank (see Note 3 of Notes to Consolidated Financial Statements). This
financing facility provides a revolving loan of up to $15,000,000, depending
upon levels of accounts receivable and inventories, a term loan of $3,000,000
and a capital expenditure line of $3,000,000. In addition, the facility permits
the Company to secure other outside financing of capital expenditures of up to
$10,500,000 in 1999. We have secured a total commitment of $10,500,000 for lease
financing in 1999 with two major financial institutions and through the third
quarter have funded $3,776,000 of capital expenditures under such leases.
Working capital continues to be adequate to support the Company's
operations. On October 3, 1999, the Company had current working capital of
$22,657,000 with a current ratio of 4.3 to 1. This is comparable to $14,888,000
or 3.2 to 1 at December 31, 1998. Working capital increased during 1999
primarily due to a $4,070,000 increase in accounts receivable from an unusually
low level of $6,426,000 at December 31, 1998, which resulted from an unusually
large payment received a few days prior to year end, to a more normal level of
$10,496,000. Also, inventories have increased by $3,490,000 from $13,622,000 to
$17,112,000, partially due to the building of knitted inventories as finishing
capacity was being expanded (see Results of Operations below) coupled with
higher levels of inactive styles as a consequence of the shift of the Company's
business into more fashion oriented markets. Under the terms of our new
financing facility, all of our excess cash is used daily to reduce the
outstanding balance on our revolving credit line. This results in increasing the
amount available to borrow under the revolver while at the same time providing
for the maximum short-term investment return on the Company's available cash
balances. However, this results in our not reporting normal levels of cash
(current asset) which have been utilized to temporarily reduce our revolving
credit line (long-term liability). Availability under our revolving credit line
totaled $1,752,000 at October 3, 1999.
Liquidity needs are primarily affected by and related to capital
expenditures and changes in the Company's business volume. During the first nine
months of 1999, these needs were adequately met through our $21 million
financing facility and $3,776,000 of lease financing. Capital expenditures for
the first nine months of 1999 totaled $7,843,000, reflecting continued expansion
of our seamless knitting capacity to meet the increasing demand for our seamless
products. This level of capital expenditures compares to $3,096,000 for the
first nine months of 1998.
We intend to continue to aggressively expand our seamless knitting
capacity in response to increasing demand for our seamless women's apparel. In
addition to the 66% capacity increase in 1998, we have enough knitting machines
received or on order with scheduled delivery dates in 1999 to further increase
seamless knitting capacity 85% from beginning 1999 levels. Capital expenditures
in 1999 may approximate $16,000,000. This level of investment in the future of
our Company will allow us to capitalize on the expanding demand for seamless
apparel.
Cash utilized in operating activities was $2,787,000 in the first nine
months of 1999 as compared to $2,635,000 of cash generated in the comparable
period of 1998. This decrease in cash provided in 1999 was primarily due to a
net increase of $4,165,000 in accounts receivable from an unusually low level of
$6,426,000 at December 31, 1998, which resulted from an unusually large payment
received a few days prior to year end, to $10,496,000 at October 4, 1999 coupled
with an increase in inventories of $4,669,000.
Net cash used in investing activities during the first nine months of
1999 was $4,049,000 compared to $2,382,000 in 1998. The cash used in each of
these two periods was primarily for capital expenditures to expand capacities,
and to replace and update plant and equipment. In addition to the $4,067,000 of
cash expenditures to acquire productive equipment during the first nine months
of 1999, the Company also acquired $3,776,000 of equipment through capital lease
financing. Financing activities in 1999 included $7,861,000 of funding from the
Company's revolving line of credit, the repurchase of 30,900 split-adjusted
shares ($605,000) of the Company's common stock and the payment of $416,000 in
cash dividends.
The Company declared a semi-annual cash dividend of $.075 per share
($.05625 per post-split share) totaling $177,000 on its common stock payable on
February 22, 1999, to shareholders of record on February 12, 1999. Additionally,
the Company increased its semi-annual cash dividend by 33% with the declaration
of a $.075 per post-split share ($239,000) on its common stock payable on August
24, 1999 to shareholders of record on August 14, 1999. Under the Company's loan
agreement with a bank, dividends and repurchases of Company stock may not exceed
$4,000,000 during the three-year term of the loan. As of October 3, 1999,
dividends and repurchases of Company stock have totaled $3,917,000.
On June 4, 1999, we effected a 4 for 3 stock split in the form of a 33
1/3% stock dividend to shareholders of record as of May 25, 1999. All per share
amounts and weighted average share information has been restated to reflect this
stock split
<PAGE>
<TABLE>
<CAPTION>
Results of Operations
Items as a percentage of sales are reflected in the following table:
Three Month Periods Ended Nine Month Periods Ended
Oct. 3, Sept. 27, Oct. 3, Sept. 27,
1999 1998 1999 1998
---- ---- ---- ----
(%)
<S> <C> <C> <C> <C>
Net sales 100.0 100.0 100.0 100.0
Cost of sales 73.3 70.0 72.2 73.3
---- ---- ---- ----
Gross margin 26.7 30.0 27.8 26.7
Selling, general and
administrative expenses 18.5 17.8 17.5 17.6
---- ---- ---- ----
Operating income 8.2 12.2 10.3 9.1
Other expense, net 2.3 1.7 1.9 1.4
--- --- --- ---
Income before income taxes 5.9 10.5 8.4 7.7
Provision for income taxes 2.0 4.0 2.9 2.9
--- --- --- ---
Net income 3.9 6.5 5.5 4.8
</TABLE>
Three Month Periods Ended October 3, 1999 and September 27, 1998
1999 yielded record third quarter revenues for the Company. Third
quarter earnings of $750,000 decreased 39.1% as compared to $1,232,000 in the
third quarter of 1998. The quarterly earnings per share of 23 cents (23 cents
fully diluted) compared to 39 cents (37 cents fully diluted) per share in the
third quarter of 1998. Third quarter earnings included a one-time pre-tax charge
of $258,000 (5 cents per share after tax) relating to severance costs associated
with the departure of the Company's chief executive officer in July. Revenues
for the 1999-quarter increased 2.1% reaching a third quarter record level of
$19,292,000 as compared to $18,904,000 for the prior year.
Net sales by division for the third quarter of 1999 compared to the
third quarter of 1998 are set forth in the following table ($000's):
<TABLE>
<CAPTION>
Three Month Periods Ended
Oct. 3, Sept. 27, Increase/ % Increase/
1999 1998 (Decrease) (Decrease)
---- ---- ---------- ----------
<S> <C> <C> <C> <C>
Consumer Products $10,549 $10,746 ($197) (1.8%)
Health Products 8,743 8,158 585 7.2%
----- ----- ---
Total $19,292 $18,904 $388 2.1%
</TABLE>
Sales of Consumer Products decreased $197,000 during the third quarter,
or 1.8% over the comparable quarter of 1998. This decrease resulted primarily
from the division having reached finishing capacity limits for seamless women's
apparel. Unanticipated shifts in demand for seamless women's apparel has
required the division to introduce new styles requiring different types of
sewing for which the Company lacked adequate capacity and which resulted in the
Company not being able to meet increased demand for certain styles. In response,
we are substantially increasing sewing capacity and expanding dyeing equipment
by 25 percent as well as increasing the efficiency of our dyeing facility.
Sales of Health Products increased $585,000 or 7.2% lead by increased
sales of treads and stockinettes.
Gross margins decreased in 1999 to 26.7% of net sales (30.0% in 1998)
primarily as the result of product mix shifts. During the third quarter of 1998,
the Company was producing newly developed high volume, high margin styles of
seamless women's apparel requiring minimal sewing such as tube tops, bandeaus
and dresses. In 1999, demand has shifted toward more complex garments requiring
higher levels of specialized sewing and finishing techniques.
Selling, general and administrative expenses increased $210,000 or 6.2%
during the third quarter of 1999, reflective of $258,000 of severance costs
associated with the departure of the Company's Chief Executive Officer in July.
Interest expense increased as a result of higher borrowings under the
revolving line of credit agreement to fund increased capital expenditures
necessary to continue our aggressive expansion of productive capacity to keep
pace with the increasing demand for our products.
Nine Month Periods Ended October 3, 1999 and September 27, 1998
During the first nine months of 1999, the Company reached record levels
of revenues and earnings. Revenues for the 1999-year to date period increased
8.8% reaching a first nine months record level of $59,739,000 as compared to
$54,914,000 for the same nine months of the prior year. This year's record
nine-month earnings of $3,284,000 increased 25.1% as compared to $2,625,000 in
the same nine months of 1998. The 1999 earnings per share of $1.04 (99 cents
fully diluted) represented an increase of 33.8% (diluted) and was a record first
nine months for the Company as compared to 76 cents (74 cents fully diluted) per
share in the nine months of 1998.
Net sales by division for the first nine months of 1999 compared to the
first nine months of 1998 are set forth in the following table ($000's):
<TABLE>
<CAPTION>
Nine Month Periods Ended
Oct. 3, Sept. 27, Increase/ % Increase/
1999 1998 (Decrease) (Decrease)
---- ---- ---------- ----------
<S> <C> <C> <C> <C>
Consumer Products $33,140 $30,383 $2,757 9.1%
Health Products 26,599 24,531 2,068 8.4%
------ ------ -----
Total $59,739 $54,914 $4,825 8.8%
</TABLE>
Sales of Consumer Products increased $2,757,000 during the first nine
months, or 9.1% over the comparable nine months of 1998. This increase resulted
primarily from continuing acceptance of the Company's seamless women's apparel
as consumers continued to respond positively to the unsurpassed fit, comfort and
style of seamless intimates and combination innerwear/outerwear products.
Sales of Health Products increased $2,068,000 or 8.4% lead by increased
sales of treads and stockinettes.
Gross margins increased in 1999 to 27.8% of net sales (26.7% in 1998)
as the result of increased volume, higher margins on new styles of seamless
women's apparel developed after the third quarter of 1998 and tighter cost
controls.
Selling, general and administrative expenses increased 8.3% during the
nine months of 1999, reflective of the higher volumes but remained relatively
constant as a percentage of net sales from 17.6% in 1998 to 17.5% in 1999. In
order to support our significant increases in productive capacity and to further
improve our quick response research and development strategy, we have
approximately doubled our spending for research and development from $648,000 in
1998 to $1,292,000 in 1999. Also included in the 1999 expenses is $258,000 of
severance costs associated with the departure of the Company's Chief Executive
Officer in July.
Interest expense increased as a result of higher borrowings under the
revolving line of credit agreement to fund increased capital expenditures
necessary to continue our aggressive expansion of productive capacity to keep
pace with the increasing demand for our products.
FORWARD-LOOKING INFORMATION
We continue to expect the long-term growth of the seamless apparel
business to produce outstanding revenue and earnings for Alba, however, we must
further develop and expand our manufacturing processes and finishing capacities
to keep pace with the marketplace's demand for our seamless products and the
rapid expansion of our knitting capacity. Consumer Products' revenues in the
second and third quarters fell short of the 1st quarter as the Company
experienced delays in the completion of customer orders caused by production
capacity limitations and longer production cycles associated with certain new
technology yarns and new product designs. While we are implementing the steps
necessary to shorten these production processes and to expand finishing
capacity, the effect of certain of these efforts may not be felt until late
1999.
Our Health Products Division has performed well through the first nine
months of 1999 and we anticipate the Division to continue on its steady growth
pattern throughout the remainder of the year and into the year 2000.
YEAR 2000 COMPLIANCE
We have addressed the Year 2000 compliance issues in three parts; our
products, our internal systems and third-parties.
Our Products - Year 2000 compliance is not an issue for any of our
products. None of our products, women's hosiery, women's intimate apparel or
health products contains date-sensitive-electronic components or date-sensitive
software.
Our Internal Systems - All major systems within Alba will be Year 2000
compliant before year end. For operational reasons, in late 1996 we decided to
install a new integrated manufacturing and financial reporting management
information system. This new system involved acquiring new system hardware, new
PC-based local and wide-area networks and the standardization of PC software.
All of these hardware and software systems are Year 2000 compliant. The new
system hardware, the new PC-based local area network, wide-area network and the
new financial reporting system are now operational. The new manufacturing system
will be operational by the end of November 1999. Additionally, we have
substantially completed our review of all other date-sensitive systems
throughout Alba with no material non-compliance problems noted. This review also
included non-information technology systems and equipment such as the electronic
components of our knitting and other manufacturing equipment.
Third Parties - Like most all other companies, we are dependent upon
our material vendors, suppliers and customers to ensure that we remain a going
concern. We are unable to control the actions of others with respect to their
Year 2000 compliance. However, our material suppliers, service providers and
customers are mostly all very large companies within their own industries and
have much at stake in ensuring their own compliance. We are substantially
complete with our questioning these third parties as to their compliance plans
and to date have not been advised of any major non-compliance problems. We
expect to complete this process during the fourth quarter and will then develop
contingency plans in indicated problem areas, as feasible. The risks to Alba in
this area are obviously significant; for example, we could not operate without a
continuous source of electricity to our manufacturing plants and there are no
realistic contingency alternatives available. Similarly, there is very little
that we can do to continue sales to customers who themselves are unable to
operate due to their own failure to ensure Year 2000 compliance.
We have not incurred and do not anticipate that we will incur material
costs associated with the Year 2000 compliance issue. Our operational decision
in 1996 to replace our manufacturing and financial reporting systems had the
side benefit of eliminating most Year 2000 compliance issues for us.
THIS QUARTERLY REPORT ON FORM 1O-Q, INCLUDING ANY INFORMATION INCORPORTATED
THEREIN BY REFERENCE, MAY CONTAIN, IN ADDITION TO HISTORICAL INFORMATION,
CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE SIGNIFICANT RISKS AND
UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT'S BELIEF
AS WELL AS ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO,
MANAGEMENT PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS CAN GENERALLY BE
IDENTIFIED AS SUCH BECAUSE THE CONTEXT OF THE STATEMENT USUALLY WILL INCLUDE
WORDS SUCH AS "THE COMPANY BELIEVES"; OR "ANTICIPATES", OR "EXPECTS"; OR WORDS
OF SIMILAR IMPORT. SIMILARLY, STATEMENTS THAT DESCRIBE THE COMPANY'S FUTURE
PLANS, OBJECTIVES, ESTIMATES OR GOALS ARE ALSO FORWARD-LOOKING STATEMENTS. SUCH
STATEMENTS ADDRESS FUTURE EVENTS AND CONDITIONS CONCERNING CAPITAL EXPENDITURES,
EARNINGS, SALES, LIQUIDITY AND CAPITAL RESOURCES, AND ACCOUNTING MATTERS.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN, OR
IMPLIED BY, THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN. FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN ITEM 1 DESCRIPTION OF BUSINESS; AND ELSEWHERE IN THE COMPANY'S
ANNUAL REPORT ON FORM 1O-K FOR THE YEAR ENDED DECEMBER 31, 1998, OR IN
INFORMATION INCORPORATED THERIN BY REFERENCE, AS WELL AS FACTORS SUCH AS FUTURE
ECONOMIC CONDITIONS, ACCEPTANCE BY CUSTOMERS OF THE COMPANY'S PRODUCTS, CHANGES
IN CUSTOMER DEMAND, LEGISLATIVE, REGULATORY AND COMPETITIVE DEVELOPMENTS IN
MARKETS IN WHICH THE COMPANY OPERATES AND OTHER CIRCUMSTANCES AFFECTING
ANTICIPATED REVENUES AND COSTS. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE
PUBLICLY THE RESULT OF ANY REVISIONS TO THESE FORWARD LOOKING STATEMENTS THAT
MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF THIS REPORT OR
TO REFLECT THE OCCURRENCE OF OTHER ANTICIPATED EVENTS.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on FORM 8-K
a. Exhibits
3(i) Amended and Restated Certificate of Incorporation of Alba-Waldensian, Inc.
as of June 2, 1999
3(ii)Amended and Restated By-Laws of Alba-Waldensian, Inc. as of September 30,
1999
10 Memorandum of Understanding between Alba-Waldensian, Inc. and Lee Mortenson
27 Financial Data Schedule (filed in electronic format only)
b. Forms 8-K
None
* * * * *
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
ALBA-WALDENSIAN, INC.
Date: November 17, 1999 /s/ Glenn J. Kennedy
--------------------
Vice President and Treasurer
(Chief Financial Officer and
Principal Accounting Officer)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
ITEM 6(a)
FORM 10-Q
QUARTERLY REPORT
For the quarter ended Commission File Number
October 3, 1999 1-6150
ALBA-WALDENSIAN, INC.
EXHIBIT INDEX
Exhibit No. Exhibit Description
3(i) Amended and Restated Certificate of Incorporation of Alba-Waldensian, Inc.
as of June 2, 1999
3(ii)Amended and Restated By-Laws of Alba-Waldensian, Inc. as of September 30,
1999
10 Memorandum of Understanding between Alba-Waldensian, Inc. and Lee Mortenson
27 Financial Data Schedule (electronic version only)
EXHIBIT 3(i)
RESTATED CERTIFICATE OF INCORPORATION
of
ALBA-WALDENSIAN, INC.
ALBA-WALDENSIAN, INC., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
7. The name of the corporation is Alba-Waldensian, Inc. and the name
under which the corporation was originally incorporated on June 20, 1928, was
Pilot Full Fashion Mills, Inc.
8. This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or supplemented and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
9. The text of the Certificate of Incorporation as amended or
supplemented heretofore is hereby restated without further amendments or changes
to read as herein set forth in full.
CERTIFICATE OF INCORPORATION
of
ALBA-WALDENSIAN, INC.
- --------------------------------------------------------------------------------
1. The name of the corporation is ALBA-WALDENSIAN, INC.
2. The principal office and place of business of the corporation in the
State of Delaware is to be located at No. 100 West Tenth Street, in the City of
Wilmington, County of New Castle. The name of its resident agent is The
Corporation Trust Company, whose address is No. 100 West Tenth Street,
Wilmington, Delaware.
3. The nature of the business of the corporation and the objects and
purposes thereof proposed to be transacted, promoted and carried on by it are as
follows:
(a) To buy, manufacture, dye, weave, knit, sell, deal in and
distribute hosiery, stockings, yarn and any and all kinds of knit goods or
fabrics, whether wool, silk, cotton or any mixture or combination thereof or
otherwise, to cord and spin cotton, woolen or silk yarns or any other material,
textile or fabrics; to purchase, manufacture, sell or otherwise deal in any
other cotton, woolen or silk goods, whether partly manufactured or in a finished
state, and to dye, color, stamp print or otherwise treat or finish its own
products or the substances composing those products or the products of others,
and either directly or through agents or commission merchants to carry on any
other business (whether manufacturing or otherwise) which may seem to the
corporation capable of being conveniently carried on in connection with the
above or calculated directly or indirectly to enhance the value of the
corporation's rights or property, and to manufacture, purchase or otherwise
acquire, hold, own, mortgage, sell, assign and transfer, invest, trade, deal in
and deal with goods, wares and merchandise and property of every class and
description.
(b) To purchase, take on lease or in exchange, hire, or
otherwise acquire, hold, own, possess, equip, convey, assign, mortgage, pledge
or otherwise encumber any and all real property, contracts, securities and
personal property of every kind and description, and property partaking of the
nature of either real or personal property, and rights, estates, interests,
franchises, licenses and privileges in such property, real, personal or mixed,
wheresoever situated or located whether within any state, territory, district or
dependency of the United States, or in any foreign country; to build, erect or
cause to be erected, construct or cause to be constructed, make, improve,
operate, work, maintain, develop and carry on or aid or subscribe towards the
erection, construction, making, improvement, operation, or development, and the
maintenance of any and all mills, factories, warehouses, garages, stables,
laboratories, experiment stations, stores, houses, dwellings, buildings, rights,
machinery, and works of all kinds to the extent necessary, proper or convenient
to carry out the objects and purposes of this corporation; and to sell, lease,
exchange, hire, mortgage, pledge, convey, transfer, assign or otherwise dispose
of, the whole or any part of any and all such real or personal property, or
property partaking of the nature of either, as well as the rights, estates,
interests, franchises, licenses and privileges thereof and incidental thereto;
(c) To apply for, obtain, register, purchase, lease or
otherwise acquire for its objects and purposes, any and all patents, patents
pending, patent rights, processes, formulas, improvements, copyrights, licenses,
trademarks, trade-names, labels, brands, designs, and the like, or any
information as to any invention or process whether used in connection with or
secured under Letters Patent or otherwise, of the United States of America or of
any foreign government or country, and to hold, own, operate, introduce, use,
exercise, develop, grant licenses or territorial rights in respect of, sell,
assign, lease, traffic in, exchange and otherwise turn to account of dispose of
the same or any of them, or the product of the same or any of them;
(d) To acquire by purchase, lease or otherwise upon such terms
and conditions and in such manner as the Board of Directors of the Corporation
shall determine, all or any part of the property, real, personal, or mixed,
tangible or intangible, of any nature whatsoever, including the good-will,
business and rights of all kinds of any other corporation or of any person, firm
or association which may be useful or convenient in the business of the
Corporation, and to pay for the same in cash, stocks, bonds or in other
securities of this Corporation, or partly in cash and partly in such stocks,
bonds or other securities, or in such other manner as may be agreed, and to
hold, possess and improve such properties, and to conduct in any legal manner
the whole or any part of the business as acquired, and to pledge, mortgage, sell
or otherwise dispose of the same;
(e) To acquire by purchase, subscription or otherwise and to
invest in, hold for investment or otherwise, and to trade and deal in, and to
use, endorse, sell, pledge, or otherwise dispose of the stock, bonds, notes and
other securities or evidences of indebtedness issued or created by any other
corporation or corporations, domestic or foreign, and bonds, notes or other
evidences of indebtedness, and certificates of interest or participation or
other obligations of any individual, syndicate, firm, association, trustee,
government or subdivision thereof; to pay for the same by the issuance of its
stock, bonds, debentures or its other obligations or securities or by any other
means of payment whatsoever, and while owner of any such stocks, bonds,
certificates or other securities or evidences of indebtedness to exercise any
and all the rights, powers and privileges of ownership or interest, including
the right to vote thereon for any and all purposes and to consent and otherwise
act with respect thereto; to aid by loan, subsidy, guaranty or in any other
manner whatsoever, those issuing, creating or responsible for any such stock,
bonds, or other securities or evidences of indebtedness owned, held or
guaranteed by this Corporation or by any corporation in which this Corporation
may have an interest as stockholder or otherwise; to do any and all other acts
or things for the preservation, protection, improvement or enhancement in value
of any such stocks, bonds or other securities or evidences of indebtedness; and
to do all and any such acts or things designed to accomplish any such purpose;
(f) To purchase, hold, sell, transfer, reissue or cancel the
shares of its own capital stock and/or any securities or other obligations of
the Corporation in the manner and to the extent now or hereafter permitted by
the laws of the State of Delaware; provided that it shall not use its funds or
property for the purchase of its own shares of capital stock when such use will
cause any impairment of the capital of the Corporation, and provided further
that shares of its own capital stock belonging to the Corporation shall not be
voted upon directly or indirectly;
(g) To borrow money; to issue bonds, debentures, notes and
other obligations, secured or unsecured, of the corporation, from time to time,
for moneys borrowed, or in payment for property acquired, or for any of the
other objects or purposes of the Corporation or for any of the objects of its
business; to secure the same by mortgage or mortgages, or deed or deeds of trust
of, or by pledge or other lien upon any or all of the property, rights,
privileges or franchises of the Corporation, wheresoever situated, acquired or
to be acquired; to sell, pledge, or otherwise dispose of any or all debentures,
bonds, notes or other obligations in such manner and upon such terms as the
Board of Directors may deem judicious; to confer upon the holders of any bonds,
debentures or obligations of the Corporation, secured or unsecured, the right to
convert the principal thereof into stock of the Corporation upon such terms and
conditions as may be deemed advisable; to endorse or guarantee the payment of
any dividends upon stocks, or the principal and/or interest upon bonds, or the
contracts or other obligations of any corporation or individual, so far as the
same may be permitted by law;
(h) To carry out all or any part of the purposes herein
expressed, as principal, factor, agent, contractor, trustee, or otherwise,
either alone or in common with any person, partnership, association or
corporation and in any part of the world, or to carry out the same, in whole or
in part, through, by means of, with the aid of, or in the name of any other
person or persons, corporation or corporations; and in carrying on its business
for the purposes of attaining or furthering any or all of its objects, to make
and perform such contracts of any kind and description and to do such acts and
things and to exercise any and all such powers as a natural person could
lawfully make, perform, do or exercise;
(i) To do any and all of the acts and things herein set forth,
and in general to carry on any other business which is incidental or conducive
or convenient or proper to the attainment of the above objects or any of them,
not forbidden by law, and to exercise any and all powers which it may now or
hereafter be lawful for the Corporation to exercise under the laws of the State
of Delaware; to establish and maintain offices and agencies within and anywhere
outside of the State of Delaware; to exercise all or any of its corporate powers
and rights in the State of Delaware and in any or all other states, territories,
districts, colonies, possessions or dependencies of the United States of America
and in any foreign countries.
The foregoing clauses shall be construed as both purposes and powers
and the matters expressed in each clause shall, except as otherwise expressly
provided, be in no wise limited by reference to or inference from the terms of
any other clause but shall be regarded as independent purposes and powers and
the enumeration of specific purposes and powers shall not be construed to limit
or restrict in any manner the meaning of general terms or the general powers of
the Corporation, now or hereafter conferred, nor shall the expression of one
thing be deemed to exclude another, although it be of like nature, not
expressed.
4. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Five Million (5,000,000) shares of
common stock with a par value of Two and 50/100 Dollars ($2.50) per share.
The following is a statement of the powers, preferences and rights of
the Common Stock, and the qualifications, limitations or restrictions thereof:
(1) Each holder of Common Stock of the Corporation shall be entitled to one
vote for each share of Common Stock held by him.
(2) No holder of Common Stock shall be entitled as such, as a matter of
right, to subscribe for or purchase any part of any new or additional issue of
stock of any class whatsoever whether now or hereafter authorized, or of any
issue of securities convertible into stock.
(3) In the event of dissolution or any liquidation or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the remaining
assets and funds of the Corporation shall be distributed among the holders of
the Common Stock according to their respective shares.
5. The corporation is to have perpetual existence.
6. The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatsoever.
7. The number of directors of the corporation shall not be less than
five (5) nor more than fifteen (15), the exact number of authorized directors,
hereinafter referred to as the entire Board, to be determined from time to time
by resolution adopted by a majority of the entire Board, and such exact number
shall be eleven (11) until otherwise determined by resolution adopted by a
majority of the entire Board. In the event that the number of authorized
directors is increased by such resolution, the vacancy or vacancies so resulting
shall be filled by the stockholders of this corporation called for that purpose.
Any such vacancy or vacancies not filled by the stockholders at any annual or
special meeting of the corporation may be filled by a vote of a majority of the
directors then in office. A decrease in the number of authorized directors shall
not of itself remove any director prior to the expiration of his term of office.
The Board of Directors shall be divided into three classes, each class
to be as nearly equal in number as possible, to serve in the first instance
until the annual meeting of stockholders to be held in 1980, 1981, and 1982,
respectively, and until their successors shall be elected and shall qualify, and
thereafter the successors in each class of directors shall be elected to serve
for terms of three years and until their successors shall be elected and shall
qualify. In the event of any increase in the authorized number of directors, the
additional directors shall be so classified that all classes of directors shall
be increased equally, as nearly as possible, and, in the event of any decrease
in the authorized number of directors, all classes of directors shall be
decreased equally, as nearly as possible. In the event of the death,
resignation, retirement, removal or disqualification of a director during his
elected term of office, his successor shall be elected by a majority of the
directors then in office and shall serve only until the expiration of the term
of his predecessor. Directors need not be stockholders of the corporation.
Notwithstanding anything in Paragraphs 10 and 11 to the contrary, this
paragraph may not be amended, repealed, or annulled except by the affirmative
vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of
the issued and outstanding stock of the corporation having the power to vote.
8. In furtherance and not in limitation of the powers conferred
by law, the Board of Directors is expressly authorized: (a) To
make, alter, amend and repeal the By-Laws of the corporation,
subject to the powers of the holders of
the stock to alter, amend or repeal the By-Laws made by the Board of Directors;
(b) To designate by resolution passed by a majority of the
whole Board one or more committees, each committee to consist of two or more of
the directors of the corporation, who, to the extent provide in said resolution
or in the By-Laws of the Corporation, shall have and exercise the powers of the
Board of Directors in the management of the business and affairs of the
corporation, with power to authorize the seal of the corporation to be affixed
to all papers which may require it;
(c) To appoint from the directors or otherwise such other
committees as they may deem judicious, and to such extent as may be provided in
their resolutions or in the By-Laws to delegate to such committees all or any of
the powers of the Board of Directors which may be lawfully delegated;
(d) To fix from time to time, and to vary, the amount of the
profits to be reserved as working capital or for any other lawful purposes and
to increase, decrease or make any disposition of any fund so reserved;
(e) To determine whether any, and if any, what part, of the
surplus of the corporation or of the net profits arising from its business shall
be declared in dividends and paid to the stockholders, and to direct and
determine the use and disposition of any such surplus or net profits;
(f) To determine from time to time, subject to the By-Laws,
whether and to what extent and at what times and place and under what conditions
and regulations the accounts and books of the corporation, or any of them shall
be open to the inspection of the stockholders; and no stockholder shall have any
right to inspect any account or book or document of the corporation, except as
conferred by the laws of the State of Delaware, or the By-Laws of the
corporation, unless and until authorized so to do by resolution of the Board of
Directors or of the stockholders;
(g) To remove at any time any officer elected or appointed by
the Board of Directors, but only by the affirmative vote of the majority of the
members of the Board then in office, and to remove any other officer or employee
of the corporation or to confer such power on any committee or officer. Any such
removal may be for cause or without cause.
9. In addition to the powers and authorities herein before or by
statute expressly conferred upon them, the Board of Directors may exercise all
such powers and do all such acts and things as may be exercised or done by the
corporation, subject, nevertheless, to the express provisions of the laws of the
State of Delaware, of this Certificate of Incorporation and of the By-Laws of
the Corporation.
10. In the absence of fraud, no contract or other transaction between
the corporation and any other corporation or any individual or firm shall be in
any way affected or invalidated by the fact that any of the directors of the
corporation is interested in such other corporations or firm or personally
interested in such other contract or transaction; provided that such interest
shall be fully disclosed or otherwise known to the Board of Directors or
Executive Committee at the meeting at which such contract or transaction is
authorized or confirmed; and provided further that at such meeting there is
present a quorum of directors not so interested and that such contract or
transaction shall be approved by a majority of such quorum. Any director of the
corporation may vote upon any contract or other transaction between this
corporation and any subsidiary or affiliated corporation without regard to the
fact that he is also a director of such subsidiary or affiliated corporation.
11. Any contract, transaction or act of the corporation or of the
directors, which shall be ratified by a majority of a quorum of the stockholders
having voting power at any annual meeting, or at any special meeting called for
such purpose, shall, except as otherwise specifically provided by law or by this
Certificate of Incorporation, be as valid and as binding as though ratified by
every stockholder of the corporation; provided, however, that any failure of the
stockholders to approve or ratify such contract, transaction or act, when and if
submitted, shall not of itself be deemed in any way to render the same invalid,
nor deprive the directors of their right to proceed with such contract,
transaction or act.
The corporation reserves the right to amend, alter, change or repeal
any provisions contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by statute, except as herein otherwise expressly
provided, and all rights conferred upon the stockholder herein are granted
subject to this reservation.
12. A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this provision to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a Director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation existing at the time of such repeal
or modification.
13. (1) Notwithstanding any other provisions of this certificate of
incorporation to the contrary, except as otherwise provided in this paragraph,
the affirmative vote of the holders of at least eighty percent (80%) of the
issued and outstanding stock of the corporation having the power to vote shall
be required to authorize, adopt, or approve any of the following:
(i) any plan of merger or consolidation of the corporation with or into any
Substantial Stockholder (as defined herein);
(ii) any sale, lease, exchange, transfer, or other disposition
of all or substantially all of the assets or business of the
corporation to or with any Substantial Stockholder;
(iii) any issuance or delivery of stock or other securities of
the corporation in exchange or payment for any properties or assets of
a Substantial Stockholder or in exchange for any other consideration of
a Substantial Stockholder or its stockholders;
(iv) the dissolution of the corporation; provided, however, that the
foregoing shall not apply if:
(i) a majority of the entire Board of Directors of the corporation shall by
resolution have approved a memorandum of understanding with respect to or
substantially consistent with such transaction prior to the time that a
Substantial Stockholder becomes holder of more than five percent (5%) of the
issued and outstanding stock of the corporation having the power to vote; or
(ii) the entire Board of Directors of the corporation approves the
transaction.
(2) As used herein the following terms are defined as follows:
(a) Substantial Stockholder shall mean any person, firm, trust,
corporation, or other entity, or any Affiliate (as defined herein) of the
foregoing, which owns of record, or owns beneficially, directly or indirectly,
or which has the right to acquire pursuant to any agreement, arrangement, or
understanding, more then five percent (5%) of the issued and outstanding stock
of the corporation having the power to vote;
(b) Affiliate shall mean any person, firm, trust, corporation, or other
entity that directly or indirectly through one or more intermediaries, controls,
or is controlled by, or is under common control with any other person, firm,
trust, corporation or other entity.
Notwithstanding anything in paragraphs 10 and 11 to the
contrary, this paragraph may not be amended, repealed, or annulled except by the
affirmative vote of the holders of at least eighty percent (80%) of the issued
and outstanding stock of the corporation having the power to vote.
14. The stockholders may hold their meetings, annual or special, within
or without the State of Delaware as may be provided in the By-Laws and the Board
of Directors or any Committee thereof may hold all or any of their meetings
within or without the State of Delaware at such places as the By-Laws or the
Board of Directors may designate. The Corporation may have one or more offices
and keep any of the books of the corporation subject to the provisions of the
laws of the State of Delaware within or without the State of Delaware at such
places as may from time to time be designated by the Board of Directors.
The foregoing Restated Certificate of Incorporation was first
approved and adopted February 23, 1971 and was amended by Certificates of
Amendment duly approved by the Corporation's Board of Directors and stockholders
and filed February 12, 1980, June 2, 1980 and June 2, 1999.
EXHIBIT 3(ii)
ALBA-WALDENSIAN, INC.
BY-LAWS
As Amended to September 30, 1999
----------------------------
ARTICLE XV
STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of the corporation
shall be held at its office in Valdese, North Carolina, on the third Wednesday
in April of each year (or if said day be a legal holiday, then on the next
succeeding day not a holiday), at eleven o'clock in the forenoon, Eastern
Standard Time, for the purpose of electing directors and for the transaction of
such other business as may properly be brought before the meeting.
SECTION 2. Special meetings of the stockholders may be held upon call
of the Board of Directors or of the Chairman of the Board or the President (and
shall be called by the President at the request in writing of stockholders
owning a majority of the outstanding shares of the corporation entitled to vote
at the meeting) at such time and at such place within or without the State of
Delaware, as may be fixed by the Board of Directors or the Chairman of the Board
or the President by the stockholders owning a majority of the outstanding stock
of the corporation entitled to vote, as the case may be, and as may be stated in
the notice setting forth such call.
SECTION 3. Notice of the time and place of every meeting of
stockholders shall be delivered personally or mailed at least ten days previous
thereto to each stockholder of record entitled to vote at the meeting, who shall
have furnished a written address to the Secretary of the corporation for the
purpose. Such further notice shall be given as may be required by law. Meetings
may be held without notice if all stockholders entitled to vote at the meeting
are present, or if notice is waived by those not present.
SECTION 4. The holders of record of a majority of the issued and
outstanding shares of the corporation which are entitled to vote at the meeting,
present in person or by proxy, shall, except as otherwise provided by law,
constitute a quorum at all meetings of the stockholders. If there be no such
quorum, the holders of a majority of such shares so present or represented may
adjourn the meeting from time to time.
SECTION 5. Meetings of the stockholders shall be presided over by the
Chairman of the Board or the President or, if neither is present, by a Vice
President or, if no such officer is present, by a chairman to be chosen at the
meeting. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of the meeting, if present.
SECTION 6. Each stockholder entitled to vote at any meeting shall have
one vote in person or by proxy for each share of stock held by him which has
voting power over the matter in question at the time; but no proxy shall be
voted on after three years from its date, unless such proxy provides for a
longer period.
SECTION 7. At all elections of directors the voting shall be by ballot,
and a majority of the votes cast thereat shall elect. The Chairman of each
meeting at which directors are to be elected shall appoint two inspectors of
election, unless such appointment shall be unanimously waived by those
stockholders present or represented by proxy at the meeting and entitled to vote
at the election of directors. No director or candidate for the office of
director shall be appointed as such Inspector. The Inspectors shall first take
and subscribe an oath or affirmation faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
their ability, and shall take charge of the polls and after the balloting shall
make a certificate of the result of the vote taken. Except where the transfer
books of the corporation shall have been closed or a date shall have been fixed
as a record date for the determination of stockholders entitled to vote, as
hereinafter provided, no stock shall be voted on at any election of directors
which shall have been transferred upon the books of the corporation within
twenty days next preceding such election.
SECTION 8. In order that the Corporation may determine stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any right, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall be not more than 60 nor less than 10 days before the date of such
meeting, nor more than 60 days prior to any other action. In no case shall the
stock transfer books be closed for purposes of such determination. If no record
date is fixed: (1) the record date for determining stockholders entitled to
notice or to vote at a meeting of stockholders shall be the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held; and (2) the record date for determining stockholders or any
other purpose shall be held at the close of business on the day on which the
board of directors adopts the resolution relating thereto. The determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may exercise a new record date for the adjourned
meeting.
ARTICLE XVI
BOARD OF DIRECTORS
SECTION 1. The property and business of the corporation shall be
managed by its board of directors, none of the members of which need be a
stockholder of the corporation.
The number of directors of the corporation shall not be less than five
(5) nor more than fifteen (15), the exact number of authorized directors,
hereinafter referred to as the entire board, to be determined from time to time
by resolution adopted by a majority of the entire board, and such exact number
shall be eleven (11) until otherwise determined by resolution adopted by a
majority of the entire board. In the event that the number of authorized
directors is increased by such resolution, the vacancy or vacancies so resulting
shall be filled by the stockholders of this corporation called for that purpose.
Any such vacancy or vacancies not filled by the stockholders at any annual or
special meeting of the corporation may be filled by a vote of a majority of the
directors then in office. A decrease in the number of authorized directors shall
not of itself remove any director prior to the expiration of his term of office.
The board of directors shall be divided into three classes, each class
to be as nearly equal in number as possible, to serve in the first instance
until the annual meeting of stockholders to be held in 1980, 1981, and 1982,
respectively, and until their successors shall be elected and shall qualify, and
thereafter the successors in each class of directors shall be elected to serve
for terms of three years and until their successors shall be elected and shall
qualify. In the event of any increase in the authorized number of directors, the
additional directors shall be so classified that all classes of directors shall
be increased equally, as nearly as possible, and, in the event of any decrease
in the authorized number of directors, all classes of directors shall be
decreased equally, as nearly as possible.
A majority of the board of directors shall constitute a quorum for the
transaction of all business except for those particular items contained in
Paragraph 13(iv)(i)(ii) of the Certificate of Incorporation in which event, the
majority required thereunder shall prevail.
SECTION 2. In the event of the death, resignation, retirement, removal
or disqualification of a director during his elected term of office, his
successor shall be elected by a majority of the directors then in office and
shall serve only until the expiration of the term of his predecessor.
The stockholders at any meeting may, by a majority vote of all issued
and outstanding stock entitled to vote, remove any director and fill the vacancy
in the board of directors thus caused.
SECTION 3. Meetings of the board of directors shall be held at such
place within or without the State of Delaware as may from time to time be fixed
by resolution of the board or as may be specified in the call of any meeting.
Regular meetings of the board of directors shall be held at such times as may
from time to time be fixed by resolution of the board; and special meetings may
be held at any time upon the call of the Chairman of the Board or the President,
by oral, telegraphic or written notice, duly served on or sent or mailed to each
Director not less than two days before the meeting. A meeting of the board may
be held without notice immediately after the annual meeting of the stockholders
at the same place at which such meeting is held. Notice need not be given of
regular meetings of the board held at times fixed by resolution of the board.
Meetings may be held at anytime without notice if all the directors are present
or if those not present waive notice of the meeting, in writing.
SECTION 4. Any person who at any time serves or has served as a
director of the Corporation shall have a right to be indemnified by the
Corporation to the fullest extent permitted by law against (a) expenses,
including reasonable attorneys' fees, actually and necessarily incurred by him
or her in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, whether
formal or informal, and whether or not brought by or on behalf of the
Corporation, arising out of his or her status as such director, or as an
officer, employee or agent of the Corporation, or his or her service, at the
request of the Corporation, as a director, officer, partner, trustee, employee
or agent of any other corporation, partnership, joint venture, trust or other
enterprise or as a trustee or administrator under an employee benefit plan, or
his or her activities in any of the foregoing capacities, and (b) any liability
incurred by him or her, including without limitation, satisfaction of any
judgment, money decree, fine (including any excise tax assessed with respect to
an employee benefit plan), penalty or settlement, for which he or she may have
become liable in connection with any such action, suit or proceeding.
The Board of Directors of the Corporation shall take all such action as
may be necessary and appropriate to authorize the Corporation to pay the
indemnification required by this Bylaw, including without limitation, to the
extent necessary, (a) making a good faith evaluation of the manner in which the
claimant for indemnity acted and of the reasonable amount of indemnity due him
or her and (b) giving notice to and obtaining approval by the shareholders of
the Corporation.
Expenses incurred by a director in defending an action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director to pay such amount unless it shall ultimately be determined that
he or she is entitled to be indemnified by the Corporation against such
expenses.
Any person who at any time after the adoption of this Bylaw serves or
has served as a director of the Corporation shall be deemed to be doing or to
have done so in reliance upon, and as consideration for, the right of
indemnification provided herein, and any modification or repeal of these
provisions for indemnification shall be prospective only and shall not affect
any rights or obligations existing at the time of such modification or repeal.
Such right shall inure to the benefit of the legal representatives of any such
person, shall not be exclusive of any other rights to which such person may be
entitled apart from the provisions of this Bylaw, and shall not be limited by
the provisions for indemnification in Section 145 of the Delaware General
Corporation Law or any successor statutory provisions or by reason of the
existence at any time of any other Bylaw of the Corporation.
Any person who is entitled to indemnification by the Corporation
hereunder shall also be entitled to reimbursement of reasonable costs, expenses
and attorneys' fees incurred in obtaining such indemnification.
In addition, the Corporation may by action of the Board of Directors in
a particular case agree to indemnify up to the fullest extent permitted by law
any officer, employee or agent who is a not a director of the Corporation to the
same extent and in the same manner as the Corporation is bound to indemnify
directors of the Corporation pursuant to this Bylaw
ARTICLE XVII
OFFICERS
SECTION 1. The board of directors as soon as may be after their
election held in each year, or at any time during their term of office, shall
choose a President of the corporation, one or more Vice Presidents, a Secretary
and a Treasurer and, from time to time, may appoint an Executive Vice President,
Assistant Secretaries, Assistant Treasurers and such other officers, agents and
employees as it may deem proper. The office of Secretary and Treasurer may be
held by the same person, and a Vice President of the corporation may also be
either the Secretary or the Treasurer. The President shall be chosen from among
the Directors. The Board in its discretion may, also, choose a Chairman of the
Board and a Vice Chairman of the Board from among the directors.
SECTION 2. The term of office of all officers shall be one year, or
until their respective successors are chosen; but any officer may be removed
from office at any time by the affirmative vote of a majority of the members of
the board.
SECTION 3. Subject to such limitations as the board of directors may
from time to time prescribe, the officers of the corporation shall each have
such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as from time to time may be conferred by the Board of
Directors. The Secretary shall be sworn to the faithful discharge of his duties.
The Treasurer and the Assistant Treasurers may be required to give bond for the
faithful discharge of their duties, in such sum and with such surety or sureties
as the Board of Directors may from time to time prescribe.
ARTICLE XVIII
CERTIFICATES OF STOCK
SECTION 1. The interest of each stockholder of the corporation shall be
evidenced by a certificate or certificates for shares of stock in such form as
the board of directors may from time to time prescribe. The shares in the stock
of the corporation shall be transferable on the books of the corporation by the
holder thereof in person or by his attorney, upon surrender for cancellation of
a certificate or certificates for the same number of shares, with an assignment
and power of transfer endorsed thereupon or attached thereto, duly executed, and
with such proof of the authenticity of the signature as the corporation or its
agents may reasonably require.
SECTION 2. The certificates of stock shall be signed by the President
or a Vice President and by the Secretary or the Treasurer or an Assistant
Secretary or an Assistant Treasurer, shall be sealed with the seal of the
corporation (or shall bear a facsimile of such seal), and shall be countersigned
and registered in such manner, if any, as the board of directors may by
resolution prescribe. If such certificate is countersigned by a transfer agent
(other than the corporation or its employees) or by a registrar (other than the
corporation or its employees) any other signature on the certificates may be
facsimile.
SECTION 3. No certificate for shares of stock in the corporation may be
issued in place of any certificate alleged to have been lost, stolen or
destroyed, except upon production of such evidence of such loss, theft or
destruction and upon delivery to the Corporation of a bond of indemnity in such
amount, upon such terms and secured by such surety, as the Board of Directors in
its discretion may require.
ARTICLE XIX
CORPORATE BOOKS
The books of the corporation, except the original or duplicate stock
ledger, may be kept outside of the State of Delaware, at the office of the
corporation in Valdese, North Carolina, or at such other place or places as the
board of directors may from time to time determine.
ARTICLE XX
CHECKS, NOTES, ETC.
All checks and drafts on the corporation's bank accounts and all bills
of exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer of
officers or agent or agents as shall be thereunto authorized from time to time
by the board of directors.
ARTICLE XXI
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of January
in each year and shall end on the 31st day of December following.
ARTICLE XXII
CORPORATE SEAL
The corporate seal shall have inscribed the name thereon the name of
the corporation and the words "Incorporated Delaware 1928." In lieu of the
corporate seal, when so authorized by the board of directors or a duly empowered
committee thereof, a facsimile thereof may be impressed or affixed or
reproduced.
ARTICLE XXIII
OFFICES
The corporation and the stockholders and the directors may have offices
outside the State of Delaware at such places as shall be determined from time to
time by the board of directors.
ARTICLE XXIV
AMENDMENTS
Except as provided for in Paragraph 7 and 13 of the Certificate of
Incorporation, all other paragraphs of the By-Laws of the corporation may be
added to, altered, amended or repealed by the affirmative vote of the holders of
the stock of the corporation issued and outstanding and entitled to vote
thereon, at any regular or special meeting of the stockholders, if notice of the
proposed change be contained in the notice of the meeting, or, subject to the
power of the stockholders to alter, amend or repeal By-Laws made by the board of
directors, by the affirmative vote of a majority of the Board of Directors at
any regular or special meeting thereof, if in the call or notice of said meeting
the proposed change shall be set forth as one of the objects of the meeting;
provided that no change in the time or place for the election of directors shall
be made except in accordance with the laws of the State of Delaware.
EXHIBIT 10
MEMORANDUM OF UNDERSTANDING
TO Clyde Engle
Chairman of the Board of Directors
Alba-Waldensian, Inc.
FROM Lee Mortenson
1 have agreed to resign as an Officer and Director of Alba-Waldensian Inc. as of
this date based on certain conditions agreed to by Alba-Waldensian, Inc. by and
through Clyde Engle, its Chairman of the Board of Directors, which are as
follows
1. Alba agrees to continue payment to Mortenson of up to twelve (12) months of
his current base salary (until such time as other employment is obtained from a
non-Telco party) in the amount of $230,000 per year (including participation in
Alba's 401K Plan).
2. Alba agrees to provide for up to twelve (12) months of all current benefits
to Mortenson. Including, but not limited to, his current salary of $230,000,
Country Club monthly dues and use of Ford Explorer (includes all insurance and
auto expenses). Mortenson will have the option of purchasing the Explorer at the
end of twelve (12) months (or sooner) at the fair market value at the time of
purchase for such a vehicle in good condition as determined by its so-called
"blue book" value
3 Continue the bridge-loan heretofore made to Mortenson by Alba until its due
date in December, 1999 or until Mortenson's Hickory residence is sold (whichever
occurs first) If this loan is riot paid in full by December 31, 1999, ratable
deductions may be made by Alba from net amounts payable under paragraph 1
hereof.
4 All unvested options Mortenson currently holds in Alba stock shall become
immediately vested.
5 If Mortenson decides to relocate to the Chicago area. Alba will reimburse
Mortenson for transporting those "furnishings" previously moved from Chicago to
Hickory within the meaning of paragraph 5B of the June 19, 1997 Memorandum.
6 Alba also agrees to pay all closing costs (including Real Estate Commission)
on the sale of the Mortenson's Chicago condominium when the sale of that
property finally closes, unless Mortenson relocates back to that condominium.
7 Mortenson will be allowed to keep the 2-year old computer and laptop, which he
has been using in his "home office".
Based upon Alba-Waldensian, Inc agreeing to the foregoing conditions, Mortenson
hereby resigns as an Officer and Director of Alba-Waldensian, Inc. this 27th day
of July, 1999.
THIS, the 27th day of July, 1999
AGREED TO AGREED TO
/s/ Lee Mortenson /s/ Clyde Engle
President and Chief Executive Officer Chairman of the Board of Directors
Alba-Waldensian, Inc. Alba-Waldensian, Inc.
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