[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 December 26, 1993
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 January 14, 1994 - 13,984,475
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GUILFORD MILLS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 26, 1993
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 thirteen weeks ended
December 26, 1993 and December 27, 1992
Consolidated Balance Sheets as of December 26, 1993 and
September 26, 1993
Consolidated Statements of Cash Flows for the thirteen weeks
ended December 26, 1993 and December 27, 1992
Condensed Notes to Consolidated Financial Statements
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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 December 26, 1993 and December 27, 1992
(In thousands except per share data)
(Unaudited)
<TABLE>
<S> <C> <C>
1993 1992
Net Sales $157,576 $157,488
Costs and Expenses:
Cost of goods sold 131,152 129,810
Selling and administrative 17,494 16,894
148,646 146,704
Operating Income 8,930 10,784
Interest Expense 2,902 2,108
Other Expense, net 79 570
Income Before Income Taxes 5,949 8,106
Income Tax Provision 2,100 2,900
Net Income $ 3,849 $ 5,206
Net Income Per Share:
Primary $.28 $.38
Fully Diluted .28 .36
Dividends Per Share $.15 $.15
See accompanying condensed notes to consolidated financial statements.
</TABLE>
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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
December 26, 1993 and September 26, 1993
(In thousands except share data)
(Unaudited)
<TABLE>
<S> <C> <C>
December 26, September 26,
1993 1993
Assets
Cash and cash equivalents $ 2,831 $ 4,912
Accounts receivable 104,768 113,819
Inventories (Note 3) 101,679 98,064
Prepaid income taxes 4,977 5,354
Other current assets 3,701 3,910
Total current assets 217,956 226,059
Property, net (Note 4) 219,780 219,964
Cash surrender value of life insurance,
net of policy loans 34,963 34,628
Other 20,543 19,655
Total assets $493,242 $500,306
Liabilities
Short-term borrowings $ 23,444 $ 26,598
Current maturities of long-term debt 2,778 2,778
Accounts payable 37,060 44,646
Accrued liabilities 28,106 26,302
Total current liabilities 91,388 100,324
Long-term debt 146,041 146,736
Deferred income taxes 8,138 7,738
Other deferred liabilities 24,496 24,585
Total liabilities 270,063 279,383
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, 13,984,475 shares
outstanding at December 26, 1993
and 13,845,854 shares outstanding
at September 26, 1993 393 393
Capital in excess of par 31,684 32,550
Retained earnings 245,758 244,006
Foreign currency translation loss (5,678) (5,536)
Unamortized stock compensation (4,669) (5,137)
Treasury stock, at cost (5,644,724
shares at December 26, 1993
and 5,783,345 shares at September
26, 1993) (44,309) (45,353)
Total stockholders' investment 223,179 220,923
Total liabilities and
stockholders' investment $493,242 $500,306
See accompanying condensed notes to consolidated financial statements.
</TABLE>
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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 Thirteen Weeks Ended December 26, 1993 and December 27, 1992
(In thousands)
(Unaudited)
<TABLE>
<S> <C> <C>
1993 1992
Cash Flows From Operating Activities:
Net income $ 3,849 $ 5,206
Non-cash items included in net income --
Depreciation and amortization 9,705 7,425
Gain on disposition of property (14) (37)
Deferred income taxes 788 605
Increase in cash surrender value of life
insurance (335) (860)
Compensation earned under restricted stock plan 412 150
Changes in assets and liabilities --
Receivables 9,010 19,177
Inventories (3,667) 881
Other current assets 195 (1,031)
Accounts payable (8,538) 522
Accrued liabilities 4,250 (2,100)
Other 11 180
Net cash provided by operating activities 15,666 30,118
Cash Flows From Investing Activities:
Additions to property (12,015) (24,001)
Proceeds from disposition of property 1,072 736
Increase in other assets (1,144) (1,480)
Net cash used by investing activities (12,087) (24,745)
Cash Flows From Financing Activities:
Repayments of short-term borrowings, net (3,117) (9,338)
Payments of long-term debt (695) (733)
Cash dividends (2,097) (2,076)
Common stock options exercised 234 193
Net cash used by financing activities (5,675) (11,954)
Effect of Exchange Rate Changes on Cash and
Cash Equivalents 15 (402)
Net Decrease In Cash and Cash Equivalents (2,081) (6,983)
Beginning Cash and Cash Equivalents 4,912 16,236
Ending Cash and Cash Equivalents $ 2,831 $ 9,253
See accompanying condensed notes to consolidated financial statements.
</TABLE>
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GUILFORD MILLS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 26, 1993
(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 thirteen week
periods ended December 26, 1993 and December 27, 1992 were
13,742,000 and 13,639,000, 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 thirteen weeks ended December 26, 1993 and December 27,
1992 were 16,021,000 and 15,934,000, 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 December 26, 1993 and September 26, 1993 consist
of the following:
<TABLE>
<S> <C> <C>
December 26, September 26,
1993 1993
Finished goods $ 49,218 $ 49,285
Raw materials and work in process 59,592 57,140
Manufacturing supplies 10,404 10,285
Total inventories valued at
first-in, first-out (FIFO) cost 119,214 116,710
Less -- Adjustments to reduce
FIFO cost to LIFO cost (17,535) (18,646)
Total inventories $101,679 $ 98,064
</TABLE>
4. Accumulated Depreciation -- Accumulated depreciation at
December 26, 1993 and September 26, 1993 was $229,128 and $220,899,
respectively.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
For the first quarter of fiscal 1994, consolidated sales of
$157.6 million were unchanged from last year's comparable quarter
sales of $157.5 million.
Sales in the automotive and upholstery business unit increased
11.1% overall with a 14.4% increase in sales of headliner and body
cloth fabrics and a 25.6% increase in sales of fabrics for
recreational vehicles and vans. Furniture fabric sales, however,
declined 23.5% as several selections at the last furniture market
did not move well at the retail level.
Sales in the apparel and home fashions business unit increased
1.4% over the comparable prior year quarter with warp knit sales
increasing 6.3% over last year's comparable quarter due to stronger
demand for intimate apparel fabrics and strong growth in lycra
containing fabrics. Offsetting the increase in warp knit sales
were sales declines of 5.6% in circular knits and 22.9% in swimwear
due to continuing weak markets.
European sales declined 19.8% from the comparable quarter of
the prior year reflecting continuing economic weakness in Europe.
On a currency exchange adjusted basis, sales declined 14.5%. The
sales mix in Europe continued to trend away from apparel fabrics
towards automotive fabrics with automotive representing
approximately 85% of the current quarter's sales.
Margins for the first quarter of fiscal 1994 declined to 16.8%
from last year's 17.6%. Primary factors contributing to this
decline include higher depreciation expense included in cost of
sales (associated with the increased capital spending in 1993),
continuing start-up costs related to the expansion of the Fuquay-
Varina fibers plant (the spinning capacity of fibers was increased
nearly 20%; however, full productivity has not yet been fully
realized) and severe pricing pressures in apparel prints and
European automotive markets.
Selling and administrative expenses increased 3.6% from $16.9
million in last year's comparable quarter to $17.5 million for the
first quarter of this year. This increase reflects the continuing
trend of increased research and development expenditures, increased
amortization under certain incentive compensation plans due to
accelerated vesting and increased expenses associated with the
"Total Quality and Excellence" program designed to improve
operating procedures throughout the Company.
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 an increase in interest expense of $.8 million to $2.9
million in the first quarter of fiscal 1994 compared to $2.1
million in the comparable quarter of the prior year.
The effective income tax rate was 35.3% in the first quarter of
fiscal 1994 compared to 35.8% in the comparable quarter of the
prior year.
Net income for the first quarter was $3.8 million, or $.28 per
primary share, compared to $5.2 million, or $.38 per primary share,
for the comparable quarter of the prior year. On a fully diluted
basis, net income for the first quarter was $.28 per share versus
$.36 per share for the comparable quarter of the prior year.
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Liquidity and Capital Requirements
At December 26, 1993, working capital was $126.6 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 strong 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 December 26, 1993, environmental accruals amounted to $8.5
million of which $7.5 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.
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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 - 3. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's 1993 Annual Meeting of Stockholders was held on
November 4, 1993. At such meeting, the stockholders elected (i)
each of Sherry R. Jacobs, Tomokazu Adachi, Paul R. McGarr and
Stig A. Kry to serve as directors for a three-year term expiring
after the Company's 1996 fiscal year and (ii) Paul G. Gillease to
serve as a director for a two-year term expiring after the
Company's 1995 fiscal year. In addition, the stockholders at such
meeting ratified the selection of Arthur Andersen & Co. as
independent auditors for the fiscal year ending October 2, 1994.
The number of votes cast for, against or withheld, as well as the
number of abstentions, as the case may be, with respect to each
matter voted upon at the 1993 Annual Stockholders' Meeting is set
forth below:
<TABLE>
<S> <C> <C>
(1) Election of Directors
Director Votes For Votes Withheld
Sherry R. Jacobs 11,769,800 19,727
Tomokazu Adachi 11,768,826 20,701
Paul R. McGarr 11,770,070 19,457
Stig A. Kry 11,767,368 22,159
(2) Ratification of Selection of Auditors
Votes For Votes Against Abstentions
11,763,599 15,302 10,626
</TABLE>
Items 5 - 6. Not Applicable.
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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: February 8, 1994 By: /s/ Terrence E. Geremski
Terrence E. Geremski
Vice President/Chief Financial
Officer and Treasurer
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