FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 1994
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 1-6922
GUILFORD MILLS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-1995928
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4925 West Market Street, Greensboro, N.C. 27407
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code - (910) 316-4000
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 ( )
Number of shares of common stock outstanding
at June 26, 1994 - 13,988,129
<PAGE>
GUILFORD MILLS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 26, 1994
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The consolidated financial statements included herein have been
prepared by Guilford Mills, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the
information presented not misleading. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
latest annual report on Form 10-K for the year ended June 27, 1993
and transition report on Form 10-Q for the transition period from
June 28, 1993 to September 26, 1993.
The consolidated financial statements included herein reflect
all adjustments (none of which are other than normal recurring
accruals) which are, in the opinion of management, necessary for a
fair presentation of the information included. The following
consolidated financial statements are included:
Consolidated Statements of Income for the thirty-nine weeks
ended June 26, 1994 and June 27, 1993
Consolidated Statements of Income for the thirteen weeks ended
June 26, 1994 and June 27, 1993
Consolidated Balance Sheets as of June 26, 1994 and September
26, 1993
Consolidated Statements of Cash Flows for the thirty-nine weeks
ended June 26, 1994 and June 27, 1993
Condensed Notes to Consolidated Financial Statements
<PAGE>
Guilford Mills, Inc.
CONSOLIDATED STATMENTS OF INCOME
For the Thirty-nine Weeks Ended June 26, 1994 and June 27, 1993
(In thousands except share data)
(Unaudited)
<TABLE>
<S> <C> <C>
1994 1993
Net Sales $496,397 $502,713
Costs and Expenses:
Cost of goods sold 413,579 408,793
Selling and administrative 47,814 54,166
461,393 462,959
Operating Income 35,004 39,754
Interest Expense 9,014 6,327
Other Expense, net 178 93
Income Before Income Taxes 25,812 33,334
Income Tax Provision 9,100 11,300
Net Income $ 16,712 $ 22,034
Net Income Per Share:
Primary $1.21 $1.61
Fully Diluted 1.15 1.49
Dividends Per Share $ .45 $ .45
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
CONSOLIDATED STATMENTS OF INCOME
For the Thirteen Weeks Ended June 26, 1994 and June 27, 1993
(In thousands except share data)
(Unaudited)
<TABLE>
<S> <C> <C>
1994 1993
Net Sales $183,235 $191,975
Costs and Expenses:
Cost of goods sold 150,233 153,101
Selling and administrative 15,719 20,619
165,952 173,720
Operating Income 17,283 18,255
Interest Expense 3,205 2,348
Other Expense (Income), net 243 (78)
Income Before Income Taxes 13,835 15,985
Income Tax Provision 4,900 5,300
Net Income $ 8,935 $ 10,685
Net Income Per Share:
Primary $.65 $.78
Fully Diluted .59 .71
Dividends Per Share $.15 $.15
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
CONSOLIDATED BALANCE SHEETS
June 26, 1994 and September 26, 1993
(In thousands except share data)
(Unaudited)
<TABLE>
<S> <C> <C>
June 26, September 26,
1994 1993
Assets
Cash and cash equivalents $ 4,798 $ 4,912
Accounts receivable 129,043 113,819
Inventories (Note 3) 104,945 98,064
Prepaid income taxes 5,178 5,354
Other current assets 3,441 3,910
Total current assets 247,405 226,059
Property, net (Note 4) 224,286 219,964
Cash surrender value of life
insurance, net of policy loans 36,589 34,628
Other 19,743 19,655
Total assets $528,023 $500,306
Liabilities
Short-term borrowings $ 15,378 $ 26,598
Current maturities of long-term debt 2,778 2,778
Accounts Payable 45,757 44,646
Accrued liabilities 31,979 26,302
Total current liabilities 95,892 100,324
Long-term debt (Note 5) 164,652 146,736
Deferred income taxes 9,227 7,738
Other deferred liabilities 24,231 24,585
Total liabilities $294,002 $279,383
Stockholders' Investment
Preferred stock, $1 par; 1,000,000
shares authorized, not issued --- ---
Common stock, $.02 par; 40,000,000
shares authorized, 19,629,199 shares
issued, 13,988,129 shares outstanding
at June 26, 1994 and 13,845,854 shares
outstanding at September 26, 1993. 393 393
Capital in excess of par 31,719 32,550
Retained Earnings 254,400 244,006
Foreign currency translation loss (4,341) (5,536)
Unamortized stock compensation (3,006) (5,137)
Treasury stock at cost ( 5,641,070
shares at June 26, 1994 and 5,783,345
shares at September 26, 1993). (45,144) (45,353)
Total stockholders' investment 234,021 220,923
Total liabilities and
stockholders' investment $528,023 $500,306
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
CONSOLIDATED STATMENTS OF CASH FLOWS
For the Thirty-nine Weeks Ended June 26, 1994 and June 27, 1993
(In thousands)
(Unaudited)
<TABLE>
<S> <C> <C>
1994 1993
Cash Flows From Operating Activities:
Net income $ 16,712 $ 22,034
Non-cash items included in net income --
Depreciation and amortization 29,507 20,659
Gain on disposition of property (65) (1,324)
Deferred income taxes 1,614 (592)
Increase in cash surrender value
of life insurance (1,961) (1,501)
Compensation earned under restricted
stock plan 1,047 453
Shares to be issued under employee
stock ownership plan --- 2,489
Change in assets and liabilities --
Receivables (14,715) (15,440)
Inventories (6,510) (492)
Other current assets 530 (412)
Accounts payable (248) 21,224
Accrued Liabilities 8,357 7,261
Other (52) (1,549)
Net cash provided by operating activities 34,216 52,810
Cash Flows From Investing Activities:
Additions to property (35,672) (83,827)
Proceeds from disposition of property 1,348 2,761
Increase in other assets (1,018) (425)
Net cash used by investing activities (35,342) (81,491)
Cash Flows From Financing Activities:
Short-term borrowings (repayments), net (11,503) (32,003)
Payments of long-term debt (2,084) (6,075)
Proceeds from issuance of long-term debt 20,000 75,000
Cash dividends (6,319) (6,233)
Proceeds from exercise of common stock
options 461 447
Net cash provided by financing activities 555 31,136
Effect of exchange rate changes on cash
and cash equivalents 457 (810)
Net Increase (Decrease) In Cash
and Cash Equivalents (114) 1,645
Beginning Cash and Cash Equivalents 4,912 16,236
Ending Cash and Cash Equivalents $ 4,798 $ 17,881
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
GUILFORD MILLS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 26, 1994
(In thousands except share data)
1. Seasonal Fluctuations -- Results for any portion of a year are
not necessarily indicative of the results to be expected for a full
year, due to seasonal aspects of the textile industry.
2. Per Share Information -- Primary net income per share information
has been computed by dividing net income by the weighted average
number of shares of common stock, par value $.02 per share, of the
Company (the "Common Stock") and Common Stock equivalents outstanding during
the periods. The average shares used in computing primary net income per
share for the thirty-nine weeks ended June 26, 1994 and June 27, 1993 were
13,764,000 and 13,674,000, respectively. The average shares used in computing
primary net income per share for the thirteen week periods ended June 26,
1994 and June 27, 1993 were 13,845,000 and 13,729,000, respectively.
Fully diluted income per share information also considers as applicable
(i) the dilutive effect, if any, assuming that the Company's convertible
debentures were converted at the beginning of the current fiscal period, with
earnings being increased by the interest expense, net of income taxes, that
would not have been incurred had conversion taken place and (ii) any additional
dilutive effect for stock options and restricted stock grants. The average
shares used in computing fully diluted net income per share for the
thirty-nine weeks ended June 26, 1994 and June 27, 1993 were 16,031,000 and
15,933,000, respectively. The average shares used in computing fully diluted
net income per share for the thirteen weeks ended June 26, 1994 and June 27,
1993 were 16,095,000 and 15,977,000, respectively.
3. Inventories -- Inventories are carried at the lower of cost or market.
Cost is determined for substantially all inventories using the LIFO (last-in,
first-out) method.
Inventories at June 26, 1994 and September 26, 1993 consist of the
following:
<TABLE>
<S> <C> <C>
June 26, September 26,
1994 1993
Finished goods $ 48,243 $ 49,285
Raw materials and work in process 60,332 57,140
Manufacturing supplies 12,091 10,285
Total inventories valued at first-in,
first-out (FIFO) cost 120,666 116,710
Less -- Adjustments to reduce FIFO
cost to LIFO cost (15,721) (18,646)
Total inventories $104,945 $ 98,064
</TABLE>
4. Accumulated Depreciation -- Accumulated depreciation at June 26,
1994 and September 26, 1993 was $248,134 and $220,899, respectively.
5. Long-Term Debt -- On May 20, 1994, the Company issued an additional
$20,000 of senior, unsecured long-term notes to certain institutional
investors. The notes bear interest at a rate of 7.49% per annum and will
mature on May 20, 1999. The proceeds of the note offering will be used for
general corporate purposes.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Sales for the first nine months of the current fiscal year decreased
$6.3 million from the comparable period of the previous year. Sales for the
third quarter decreased $8.7 million from the comparable period of the
previous year.
During the first nine months of the fiscal year, sales in the automotive
and upholstery business unit continued to grow strongly and increased from
the comparable period of the prior year by 9.9%.
During the third quarter of the fiscal year, automotive and upholstery
business unit sales increased 4.8% from the comparable period of the previous
year. These net increases are composed of sales increases in headliner and
bodycloth fabrics, recreational vehicle and van fabrics, and decreases in
furniture fabrics.
For the nine months ended June 26, 1994, sales in the apparel, home
fashions and industrial fabrics business unit decreased 4.4% from the
comparable period of the prior year reflecting declines in most apparel
market end uses. Offsetting some of the decrease in apparel for such nine
months were sales increases in lingerie, solid color swimwear, Ready-To-Wear
prints, and industrial fabrics. Sales in the apparel, home fashions and
industrial fabrics business unit decreased 9.5% during the third quarter
from the comparable period of the prior year. This was due to changing
market conditions resulting in shifting the mix of sales to shapewear and
industrial fabrics and weaker sales of warp knit Ready-To-Wear fabrics,
linings, domestics and swimwear. Lingerie fabrics and circular knit
Ready-To-Wear sales during the third quarter remained even with the
comparable quarter of last year's sales.
Sales of the Company's U.K. subsidiary for the first nine months of the
current fiscal year declined $3.6 million, or 5.4%, compared with the same
period of the previous year due to continuing poor economic conditions in
Europe. European sales for the third quarter of the current fiscal year
increased $.7 million or 2.8% over the comparable period of the prior year
reflecting improvement in automotive production during the quarter.
Margins for the first nine months declined to 16.7% from 18.7% for the
comparable period of the prior year and declined to 18.0% for the third
quarter from last year's 20.2%. These declines are the result of shifting
apparel product mix and weaker pricing during the third quarter coupled with
significant operating variances related primarily to volume efficiencies, as
well as weaker operating performance in the fibers and apparel units.
Selling and administrative expenses declined 11.7% to $47.8 million for
the first nine months of the current fiscal year from $54.2 million for
the comparable period of the prior year and 23.8% to $15.7 million for the
third quarter of this year from $20.6 million in the comparable quarter of
the prior year. The decrease is due to reductions in discretionary research
and development expenses and other expenses being achieved through the
Company's business re-engineering programs. The third quarter of fiscal 1993
also included unusual reserve requirements for bad debts due to bankruptcies
($2.6 million).
Increased borrowings, necessitated by the high capital expenditures
during fiscal 1993 and primarily related to the issuance of $75 million of
senior, unsecured notes in January 1993 resulted in increases in interest
expense of $2.7 million and $.9 million for the first nine months of fiscal
1994 and the third quarter of fiscal 1994, respectively, from the comparable
periods of the prior year. Higher short-term rates and borrowings related to
higher inventories also contributed to higher interest expense for the
quarter. An additional $20 million of senior, unsecured notes was issued
in the third quarter of this year.
Net income for the first nine months was $16.7 million, or $1.21 per
primary share, compared with $22.0 million or $1.61 per primary share, for
the comparable period of the prior year. Net income for the third quarter
was $8.9 million, or $.65 per primary share, compared to $10.7 million, or
$.78 per primary share, for the comparable quarter of the prior year.
<PAGE>
Liquidity and Capital Requirements
At June 26, 1994, working capital was $151.5 million compared to $125.7
million at September 26, 1993. The increase in working capital is due
primarily to the reduction in short-term borrowings through use of the
long-term debt proceeds, as well as an increase in accounts receivable due
to a $40 million increase in sales in the third quarter of the current year
as compared to the transition quarter ended September 26, 1993. The Company
maintains flexibility with respect to its seasonal working capital needs
through a committed revolving credit facility of $25 million and its continued
access to other traditional sources of funds, including available uncommitted
lines of credit aggregating over $100 million, and the ability to receive
advances against its factored accounts receivable. Management believes that
the Company's financial position and operating performance would continue to
provide the Company with necessary capital from appropriate financial markets.
Contingencies and Future Operations
Since January 1992, the Company has been involved in discussions with
the United States Environmental Protection Agency ("EPA") regarding remedial
actions at its Gold Mills, Inc. ("Gold") facility in Pine Grove, Pennsylvania
which was acquired in October 1986. Between 1988 and 1990, the Company
implemented a number of corrective measures at the facility in conjunction
with the Pennsylvania Department of Environmental Resources and incurred
approximately $3.5 million in costs. Subsequently, through negotiations
with the EPA, Gold entered into a Final Administrative Consent Order with
the EPA, effective October 14, 1992. Pursuant to such order, Gold (i) is
performing (a) certain measures designed to prevent any potential threats to
the environment at the facility and (b) an investigation to fully determine
the nature of any release of hazardous substances at the facility and (ii)
will perform a study to evaluate alternatives for any corrective action
which may be necessary at the facility. The failure of Gold to comply with
the terms of the Consent Order may result in the imposition of monetary
penalties against Gold.
The Company has initiated litigation against the former shareholders
and other parties involved in the sale of Gold to the Company. While the
Company believes it has a strong argument to effect the recovery of a
portion of the past and future environmental remediation costs related to
the Pine Grove facilities, no amount for recovery has been recorded.
During the fourth quarter of 1992, the Company also received a Notice
of Violation from the North Carolina Division of Environmental Management
concerning ground water contamination on or near one of its North Carolina
facilities. The Company has voluntarily agreed to allow the installation of
monitoring wells at the site to determine the source of the contaminants,
but denies that such contaminants originated from the Company's operations or
property.
At June 26, 1994, environmental accruals amounted to $7.7 million of
which $6.7 million is non-current and is included in other deferred
liabilities in the accompanying balance sheet.
The Company also is involved in various litigation arising in the
ordinary course of business. Although the final outcome of these legal
and environmental matters cannot be determined, based on the facts
presently known, it is management's opinion that the final resolution of
these matters will not have a material adverse effect on the Company's
financial position or future results of operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Reference is made to Item 3 to the Company's
Annual Report on Form 10-K for the fiscal year ended June 27, 1993 which
item is incorporated herein by reference.
Items 2 - 6. Not Applicable
<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 thereunto duly authorized.
GUILFORD MILLS, INC.
(Registrant)
Date: August 10, 1994 By: /s/ Terrence E. Geremski
Terrence E. Geremski
Vice President/Chief Financial
Officer and Treasurer
