[TEXT]
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 March 27, 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 March 27, 1994 - 13,972,553
<PAGE>
GUILFORD MILLS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 27, 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 twenty-six weeks ended
March 27, 1994 and March 28, 1993
Consolidated Statements of Income for the thirteen weeks ended
March 27, 1994 and March 28, 1993
Consolidated Balance Sheets as of March 27, 1994 and September
26, 1993
Consolidated Statements of Cash Flows for the twenty-six weeks
ended March 27, 1994 and March 28, 1993
Condensed Notes to Consolidated Financial Statements
<PAGE>
G u i l f o r d M i l l s, I n c.
C o n s o l i d a t e d S t a t e m e n t s o f I n c o m e
For the Twenty-Six Weeks Ended March 27, 1994 and March 28, 1993
(In thousands except per share data)
(Unaudited)
<TABLE>
<S> <C> <C>
1994 1993
Net Sales $313,162 $310,738
Costs and Expenses:
Cost of goods sold 263,346 255,692
Selling and administrative 32,095 33,547
295,441 289,239
Operating Income 17,721 21,499
Interest Expense 5,808 3,979
Other Expense (Income), net (65) 171
Income Before Income Taxes 11,978 17,349
Income Tax Provision 4,200 6,000
Net Income $ 7,778 $ 11,349
Net Income Per Share:
Primary $.56 $.83
Fully Diluted .56 .78
Dividends Per Share $.30 $.30
See accompanying condensed notes to consolidated financial statements.
</TABLE>
<PAGE>
G u i l f o r d M i l l s, I n c.
C o n s o l i d a t e d S t a t e m e n t s o f I n c o m e
For the Thirteen Weeks Ended March 27, 1994 and March 28, 1993
(In thousands except per share data)
(Unaudited)
<TABLE>
<S> <C> <C>
1994 1993
Net Sales $155,586 153,250
Costs and Expenses:
Cost of goods sold 132,194 125,882
Selling and administrative 14,601 16,653
146,795 142,535
Operating Income 8,791 10,715
Interest Expense 2,906 1,871
Other Income, net (144) (399)
Income Before Income Taxes 6,029 9,243
Income Tax Provision 2,100 3,100
Net Income $ 3,929 $ 6,143
Net Income Per Share:
Primary $.28 $.45
Fully Diluted .28 .42
Dividends Per Share $.15 $.15
See accompanying condensed notes to consolidated financial statements.
</TABLE>
<PAGE>
G u i l f o r d M i l l s, I n c.
C o n s o l i d a t e d B a l a n c e S h e e t s
March 27, 1994 and September 26, 1993
(In thousands except share data)
(Unaudited)
<TABLE>
<S> <C> <C>
March 27, September 26,
1994 1993
Assets
Cash and cash equivalents $ 4,517 $ 4,912
Accounts receivable 121,742 113,819
Inventories (Note 3) 105,380 98,064
Prepaid income taxes 5,178 5,354
Other current assets 2,647 3,910
Total current assets 239,464 226,059
Property, net (Note 4) 221,752 219,964
Cash surrender value of life
insurance, net of policy loans 35,954 34,628
Other 20,449 19,655
Total assets $517,619 $500,306
Liabilities
Short-term borrowings $ 41,482 $ 26,598
Current maturities of long-term debt 2,778 2,778
Accounts payable 43,284 44,646
Accrued liabilities 25,976 26,302
Total current liabilities 113,520 100,324
Long-term debt 145,347 146,736
Deferred income taxes 9,309 7,738
Other deferred liabilities 24,169 24,585
Total liabilities 292,345 279,383
Stockholders' Investment
Preferred stock, $1 par; 1,000,000
shares authorized, none issued --- ---
Common stock, $.02 par; 40,000,000
shares authorized, 19,629,199 shares
issued, 13,972,553 shares outstanding
at March 27, 1994 and 13,845,854 shares
outstanding at September 26, 1993 393 393
Capital in excess of par 31,705 32,550
Retained earnings 247,564 244,006
Foreign currency translation loss (5,833) (5,536)
Unamortized stock compensation (4,069) (5,137)
Treasury stock, at cost (5,656,646
shares at March 27, 1994 and 5,783,345
shares at September 26, 1993) (44,486) (45,353)
Total stockholders' investment 225,274 220,923
Total liabilities and
stockholders' investment $517,619 $500,306
See accompanying condensed notes to consolidated financial statements.
</TABLE>
<PAGE>
G u i l f o r d M i l l s, I n c.
C o n s o l i d a t e d S t a t e m e n t s o f C a s h F l o w s
For the Twenty-Six Weeks Ended March 27, 1994 and March 28, 1993
(In thousands)
(Unaudited)
<TABLE>
<S> <C> <C>
1994 1993
Cash Flows From Operating Activities:
Net income $ 7,778 $11,349
Non-cash items included in net income --
Depreciation and amortization 19,228 15,607
Gain on disposition of property (68) (580)
Deferred income taxes 1,767 483
Increase in cash surrender value
of life insurance (1,326) (2,721)
Compensation earned under
restricted stock plan 713 345
Changes in assets and liabilities --
Receivables (7,989) 1,121
Inventories (7,409) (4,365)
Other current assets 1,235 (2,806)
Accounts payable (2,666) 10,300
Accrued liabilities 2,732 4,976
Other (216) (453)
Net cash provided by operating activities 13,779 33,256
Cash Flows From Investing Activities:
Additions to property (23,800) (50,407)
Proceeds from disposition of property 1,191 2,004
Increase in other assets (1,310) (1,377)
Net cash used by investing activities (23,919) (49,780)
Cash Flows From Financing Activities:
Short-term borrowings (repayments), net 14,961 (32,261)
Payments of long-term debt (1,389) (3,112)
Proceeds from issuance of long-term debt -- 75,000
Cash dividends (4,219) (4,154)
Common stock options exercised 376 279
Net cash provided by financing activities 9,729 35,752
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 16 (634)
Net Increase (Decrease) In Cash
and Cash Equivalents (395) 18,594
Beginning Cash and Cash Equivalents 4,912 16,236
Ending Cash and Cash Equivalents $ 4,517 $34,830
See accompanying condensed notes to consolidated financial statements.
</TABLE>
<PAGE>
GUILFORD MILLS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 27, 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 twenty-six weeks
ended March 27, 1994 and March 28, 1993 were 13,800,000 and
13,642,000, respectively. The average shares used in computing
primary net income per share for the thirteen week periods ended
March 27, 1994 and March 28, 1993 were 13,831,000 and 13,724,000,
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 twenty-six weeks ended March 27, 1994 and March 28, 1993
were 13,834,000 and 15,972,000, respectively. The average shares
used in computing fully diluted net income per share for the
thirteen weeks ended March 27, 1994 and March 28, 1993 were
13,836,000 and 15,981,000, 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 March 27, 1994 and September 26, 1993 consist
of the following:
<TABLE>
<S> <C> <C>
March 27, September 26,
1994 1993
Finished goods $ 48,288 $ 49,285
Raw materials and work in process 62,623 57,140
Manufacturing supplies 10,922 10,285
Total inventories valued at first-in,
first-out (FIFO) cost 121,833 116,710
Less -- Adjustments to reduce FIFO cost
to LIFO cost (16,453) (18,646)
Total inventories $105,380 $ 98,064
</TABLE>
4. Accumulated Depreciation -- Accumulated depreciation at March 27,
1994 and September 26, 1993 was $237,898 and $220,899, respectively.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Sales for the first six months of the current fiscal year
increased $2.4 million over the comparable period of the previous
year. Sales for the second quarter increased $2.3 million over the
comparable period of the previous year.
During the first six 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
12.7%. During the second quarter of the fiscal year, automotive
and upholstery business unit sales increased 14.2% from the
comparable period of the previous year. These increases are
composed of sales increases in headliner and bodycloth fabrics,
recreational vehicle and van fabrics, and decreases in furniture
fabrics.
For the six months ended March 27, 1994, sales in the apparel
and home fashions business unit decreased 1.0% from the comparable
period of the prior year with warp knit sales increasing due to
stronger demand for intimate apparel fabrics and sales growth in
lycra containing fabrics. Offsetting the increase in warp knit
sales for the six months were sales declines in swimwear due to
continuing weak markets. Sales in the apparel and home fashions
business unit decreased .7% during the second quarter from the
comparable period of the prior year. This was due to changing
market conditions resulting in shifting the mix of sales to
robewear, sleepwear, and circular knit fabrics from warp knit and
intimate apparel fabrics.
European sales for the first six months of the current fiscal
year declined $4.3 million, or 9.8%, compared with the same period
of the previous year due to continuing poor economic conditions in
Europe. European sales for the second quarter of the current
fiscal year were relatively stable with the comparable period of
the prior year increasing $.2 million, or 1.1%.
Margins for the first six months declined to 15.9% from last
year's 17.9% and declined to 15.0% for the second quarter from last
year's 18.1%. These declines are the result of shifting apparel
product mix during the second quarter to lower margin fabrics,
increases in depreciation expense due to significant capital
improvements in 1993 and increases in quality and efficiency costs
aggravated by adverse weather conditions.
Selling and administrative expenses declined 4.3% for the
first six months of the current fiscal year from the comparable
period of the prior year and 12.3% from $16.7 million in the
comparable quarter of the prior year to $14.6 million for the
second quarter of this year. The decrease in the second quarter
is due to downward adjustments to estimated incentive compensation
plan accruals, reductions in discretionary research and development
expenses and reductions in expenses being achieved through the
Company's business re-engineering programs.
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 $1.8 million and $1.0
million for the first six months of fiscal 1994 and the second
quarter of fiscal 1994, respectively, from the comparable periods
of the prior year.
Net income for the first six months was $7.8 million, or $.56
per primary share, compared with $11.3 million or $.83 per primary
share, for the comparable period of the prior year. Net income for
the second quarter was $3.9 million, or $.28 per primary share,
compared to $6.1 million, or $.45 per primary share, for the
comparable quarter of the prior year.
<PAGE>
Liquidity and Capital Requirements
At March 27, 1994, working capital was $125.9 million compared
to $125.7 million at 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 its 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 allow access to
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 March 27, 1994, environmental accruals amounted to $8.0
million of which $7.0 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.
<PAGE>
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: May 11, 1994 By: /s/ Terrence E. Geremski
Terrence E. Geremski
Vice President/Chief Financial
Officer and Treasurer
