UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO [ ] TRANSITION REPORT PURSUANT
SECTION13 OR 15(d) OF THE TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT SECURITIES EXCHANGE ACT OF
OF 1934 1934
(Fee Required) (No Fee Required)
For the fiscal year ended For the transition period
October 2, 1994 from ______ to _______
Commission File No. 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 No.)
4925 West Market Street
Greensboro, North Carolina 27407
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (910) 316-4000
_________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which
Registered
Common Stock, $.02 par value New York Stock Exchange
6% Convertible Subordinated New York Stock Exchange
Debentures due 2012
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve (12)
months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.[ ]
Aggregate market value of the voting stock (which consists solely
of shares of common stock) held by non-affiliates of the Registrant
at December 19, 1994 (a total of 11,409,794 shares of common
stock), computed by reference to the last reported sale price
($20.75) of the Registrant's common stock on the New York Stock
Exchange on such date: $236,753,226.
Number of shares of the Registrant's common stock outstanding as of
December 19, 1994: 14,011,412
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Annual Report to Stockholders for the
fiscal year ended October 2, 1994 are incorporated by reference
into Parts I and II of this report.
Certain portions of the Registrant's definitive proxy statement
pursuant to Regulation 14A of the Securities Exchange Act of 1934,
as amended, which will be filed with the Commission subsequent to
the date hereof, are incorporated by reference into Part III of
this report.
<PAGE>
GUILFORD MILLS, INC.
PART I
Item 1. Business
General
Guilford Mills, Inc. (the "Company") is engaged primarily in
the business of producing, processing and selling warp knit
fabrics. The Company knits synthetic yarn, primarily nylon,
acetate and polyester, on warp knitting machinery into warp knit
fabrics, which it then dyes and finishes. The Company sells its
finished fabrics for use in a broad range of apparel, automotive
and home furnishings products. The Company also designs, knits,
dyes, prints and finishes elastomeric and circular knit fabrics for
sale principally to swimwear, dress and sportswear manufacturers.
Additionally, the Company has introduced woven velour fabric
capabilities in its expanding automotive business.
On August 18, 1994, the Company purchased 55% of the
outstanding capital stock of Grupo Ambar, S.A. de C.V. and
subsidiaries ("Grupo Ambar"). The acquisition increased the
Company's ownership in Grupo Ambar to 75%. Grupo Ambar is a
leading manufacturer of knit textile fabrics in Mexico.
In 1993, the Company changed its fiscal year for financial
reporting purposes from a fiscal year ending on the Sunday nearest
to June 30 to the Sunday nearest to September 30. Accordingly,
presentation of a transition quarter beginning June 28, 1993 and
ending September 26, 1993 is made.
The Company was incorporated under the laws of Delaware in
August 1971, and is the successor by merger to businesses
previously conducted since 1946. Guilford Mills, Inc. and its
predecessors and subsidiaries are referred to as the "Company",
unless the context indicates otherwise.
Product Development
Working closely with the Company's customers, the Company's
research and development departments, consisting of 83 full-time
U.S. employees, six employees of Guilford Europe Limited, a United
Kingdom corporation and an indirect wholly-owned subsidiary of the
Company ("Guilford Europe"), and one employee of Grupo Ambar, are
primarily responsible for the creation of new fabrics and styles.
Sample warping and knitting machines are used to develop new
fabrics which can be placed into production after customer
acceptance. Total expenditures for research and development for
fiscal year 1994, the transition quarter ended September 26, 1993,
and the fiscal years 1993 and 1992 were approximately $14.7
million, $3.1 million $15.8 million, and $14.1 million,
respectively.
The Company has numerous trademarks, trade names and certain
licensing agreements which it uses in connection with the
advertising and promotion of its products. Management believes
that the loss or expiration of such trademarks, trade names and
licensing agreements would not have a material adverse effect on
the Company's operations.
Working Capital Practices
The Company primarily produces inventory based on customer
orders and significant amounts of inventory are not required to
meet rapid delivery or to assure a continuous allotment of goods
from suppliers. Customers are allowed to return goods for valid
reasons and customer accommodations are not significant.
Approximately 37% of domestic accounts receivable are factored
in order to avoid the credit risk on such accounts and to obtain
larger credit lines for many customers. The Company has the
ability to borrow against such receivables, although it has
traditionally not done so as the related borrowing terms are less
favorable than other available sources of financing. The Company
generally takes advantage of discounts offered by vendors.
Marketing
The Company sells its warp knit and circular knit fabrics for
use in a broad range of apparel, automotive and home furnishings
products. For the fiscal years ended October 2, 1994, June 27,
1993 and June 28, 1992, the approximate percentage of the Company's
worldwide sales attributable to each category was as follows:
<TABLE>
<S> <C> <C> <C>
Oct. 2, June 27, June 28,
1994 1993 1992
Apparel 51% 54% 58%
Automotive 38 33 28
Home Furnishings 8 10 12
Other 3 3 2
Total 100% 100% 100%
</TABLE>
<PAGE>
The Company experiences seasonal fluctuations in its sales of
apparel fabrics, with the highest sales historically occurring in
the period from January to June; however, recent trends indicating
the natural movement of the sales, based upon the needs of the
Company's customers, to the period from April to September. Sales
of fabrics for use in automotive and home furnishings products
experience insignificant seasonal fluctuations.
Reference is made to Note 11 of the Consolidated Financial
Statements in the Company's Annual Report to Stockholders for the
fiscal year ended October 2, 1994 (the "Annual Report"), which note
is incorporated herein by reference, for financial information
relating to sales, income and assets of Guilford Europe and Grupo
Ambar for the last three fiscal years and the transition quarter.
The backlog of orders believed to be firm as of the end of the
current and preceding fiscal years is not deemed to be material for
an understanding of the Company's business as most orders are
deliverable within a few months.
The Company promotes its fabrics primarily by advertising in
trade publications, in conjunction with yarn producers, and to a
lesser extent by participating in trade shows.
In the United States, the Company has sales offices in New York
City, Los Angeles, Greensboro, Detroit and Chicago. Guilford
Europe services the United Kingdom market with its own marketing
group from its Alfreton administrative offices. Export markets are
serviced by in-house personnel based in the United Kingdom, Belgium
and Germany and by commission agents in most continental European
Economic Community countries. Grupo Ambar services its Mexican
market from its administrative office.
The Company has a large number of customers. No customer
accounted for 10% or more of total net sales during fiscal 1994,
the transition quarter, or fiscal 1992. One customer, Ford Motor
Company, accounted for 13% of the total net sales of the Company
for fiscal 1993.
Export Sales
U.S. export sales, as a percentage of total worldwide sales of
the Company, constituted approximately 4% of total sales in fiscal
1994, the transition quarter, and fiscal 1993 and 5% in fiscal
1992.
Raw Materials
In the United States, the Company's warp knit fabrics are
constructed primarily of synthetic yarns: acetate, nylon,
polyester and spandex. In fiscal 1994, the Company purchased
approximately 75% of such yarns and internally produced the balance
of nylon and polyester monofilament yarns. The Company purchases
substantially all of its nylon yarn from three domestic fiber
producers and purchases substantially all of its polyester yarn
from three domestic fiber producers and one domestic texturizer.
One domestic fiber producer supplied substantially all of the
acetate yarn. The Company also uses cotton as well as synthetic
yarns in its circular knit operations. In fiscal 1994, all such
yarns were readily available and were purchased from numerous
sources.
Fabrics manufactured by Guilford Europe are made from nylon,
acetate and polyester synthetic yarns and cotton. The majority of
its polyester yarn is purchased from ten European suppliers, the
majority of its nylon and acetate yarn is purchased from five
European suppliers and its cotton yarn is purchased from one
European supplier.
Fabrics manufactured by Grupo Ambar in Mexico are made from
nylon, lycra and polyester synthetic yarn. The majority of its
polyester yarn is purchased from one Mexican, two Japanese and one
American supplier. The majority of nylon and lycra yarn is
purchased from two Mexican suppliers.
Except for certain specialty yarns, management believes that an
adequate supply of yarns is available to meet the Company's
requirements. The chemicals and dyes used in the dyeing and
finishing processes are available in large quantities from various
suppliers.
Environmental Matters
The production processes, particularly dyeing and finishing
operations, involve the use and discharge of certain chemicals and
dyes into the air and sewage disposal systems. The Company
installs pollution control devices as necessary to meet existing
and anticipated Federal, state and local pollution control
regulations. The Company, including Guilford Europe and Grupo
Ambar, does not anticipate that compliance with Federal, state,
local and other provisions which have been enacted or adopted
regulating the discharge of materials into the environment, or
otherwise relating to the protection of the environment, will have
a material adverse effect upon its capital expenditures, earnings
or competitive position.
Reference is made to Note 10 of the Consolidated Financial
Statements in the Annual Report, which note is incorporated herein
by reference, for information regarding certain other environmental
matters.
Competition
Historically, the textile industry has been both highly
competitive and cyclical in nature. The textile industry has also
been characterized by periods of
<PAGE>
strong demand, resulting in over-expansion of production facilities, followed
by periods of over-supply. For a number of years, the domestic textile
industry has been adversely affected by imports of garments comprised of
fabrics manufactured abroad. The principal methods of competition in the
textile industry are pricing, styling and design, customer service and
quality. The weight of each competitive factor varies with the product line
involved.
In the United States, the Company's apparel business unit has
three major warp knit competitors and as many as 12 other smaller
competitors. The Company also competes with some apparel
manufacturers that have warp knit equipment to manufacture their
own fabrics. Some of these companies are divisions of large,
well-capitalized companies while others are small manufacturers.
In circular knits, the Company has three major competitors and
numerous smaller competitors. The automotive business unit has
four major competitors and several smaller competitors. Guilford
Europe competes with two warp knitters in the United Kingdom and
several in France and Italy. It also competes with many producers
of circular knit and woven fabrics. Grupo Ambar competes with four
warp knitters in Mexico.
Employees
As of December 19, 1994, the Company employed 5,410 full-time
employees worldwide. Approximately 1,425 employees (including 580
in Guilford Europe and 450 in Mexico) are represented by a
collective bargaining agreement.
Item 2. Properties
The Company currently maintains a total of twelve manufacturing
and warehousing facilities in North Carolina (four of which are
leased, including one with an option to purchase, and one of which
is subleased to an unrelated entity), one manufacturing facility in
Georgia, two manufacturing facilities in Pennsylvania and one
warehousing facility in Virginia (leased). The Company's foreign
operations based in England include two manufacturing and
warehousing facilities, one in Alfreton in Derbyshire and one in
Sudbury in Suffolk, each owned by the Company, and those based in
Mexico include one manufacturing facility and one warehouse
(leased) in Xalostoc, and four stores (leased) in the Federal
District. Management believes the facilities and manufacturing
equipment are in good condition, well maintained, suitable and
adequate for present production. Utilization of the facilities
fluctuates from time to time due to the seasonal nature of
operations and market conditions.
Item 3. Legal Proceedings
Reference is made to Note 10 of the Consolidated Financial
Statements in the Annual Report, which note is incorporated herein
by reference, for information regarding certain environmental
matters.
On or about August 10, 1993, Skylon Corporation commenced an
action in the United States District Court for the Southern
District of New York against the Company and George Greenberg, the
former president and a current director of the Company. Plaintiff
alleged that it was fraudulently induced into entering into various
agreements with the Company. Plaintiff sought an aggregate of
$31.75 million in compensatory and punitive damages. In the fourth
quarter of the 1994 fiscal year, the District Court in this action
granted the Company's summary judgment motion dismissing all of the
plaintiff's claims against the Company. The court denied such
motion with respect to Mr. Greenberg, but Mr. Greenberg has moved
to reargue such motion which the court has under consideration. As
a matter of law, in appropriate circumstances, the Company has an
obligation to indemnify Mr. Greenberg as to any liability he may
have in this matter.
Except as indicated above, the Company is not a party to any
material pending legal proceedings, other than ordinary routine
litigation incidental to its business. Although the final outcome
of these legal 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.
Item 4A. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during
the Company's fourth quarter.
<PAGE>
Item 4B. Executive Officers of the Registrant (as of December 19,
1994)
Name Age Office or Business Experience
Charles A. Hayes 60 Chairman of the Board and Chief
Executive Officer (since 1976);
President and Chief Operating
Officer (since 1991); formerly
President (from 1968 to 1976) and
Executive Vice President (from
1961 to 1968).
Alfred A. Greenblatt 45 Senior Vice President (since 1989)
and President/Apparel and Home
Fashions Business Unit (since
1991); formerly President/Fashion
Apparel Fabrics Business Unit (from
1989 to 1991) and holder of various
executive positions (from 1984 to
1989).
John A. Emrich 50 Senior Vice President and President/
Automotive Business Unit (since
1993); formerly Vice President/
Planning and Vice President/
Operations for the Apparel and Home
Fashions Business Unit (from 1991 to
1993); Director of Operations with
Fab Industries, Inc. (from 1990 to
1991) and holder of various executive
positions with the Company (from 1985
to 1990).
Richard S. Roberts 65 Senior Vice President and President/
Fibers Business Unit (since 1989);
formerly Vice President/Manufacturing
(from 1987 to 1989) and Director of
Industrial Fabrics (from 1986 to
1987).
Terrence E. Geremski 47 Member of the Board of Directors
(since 1993); Vice President, Chief
Financial Officer and Treasurer
(since 1992); formerly Vice President
and Controller with Varity
Corporation (from 1989 to 1991) and
Vice President, Chief Financial
Officer, Treasurer and holder of
other executive positions with Dayton
Walther Corp. (from 1979 to 1989).
John N. Goldsworthy 46 Vice President (since 1991) and Chief
Executive Officer of Guilford Europe
(since 1990); formerly Financial
Director of Guilford Europe (from
1981 to 1990).
Phillip D. McCartney 52 Vice President/Technical Operations
(since 1989); formerly holder of
various executive positions with FAB
Industries, Inc. (from 1984 to 1989).
William R. Houser 51 Vice President/Human Resources (since
1994); formerly Vice President/Human
Resources of Baxter Diagnostics (from
1991 to 1994) and holder of other
executive positions with Baxter
Healthcare, Inc. (from 1977 to 1991).
No family relationships exist between any executive officers of the
Company.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Reference is made to the information set forth on page 21 in
the section entitled "Common Stock Market Prices and Dividends" in
the Annual Report, filed as Exhibit 13 to this report, which page
is incorporated herein by reference.
Item 6. Selected Financial Data
Reference is made to the information set forth on page 13 in
the section entitled "Selected Financial Data" in the Annual
Report, which page is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Reference is made to the information set forth on pages 14
through 20 in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the
Annual Report, which pages are incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Reference is made to information set forth on pages 22 through
34 of the Annual Report, which pages are incorporated herein by
reference.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information to be included under the captions "Directors
and Nominees" and "Additional Information" contained in the section
entitled "ELECTION OF DIRECTORS" in the Company's definitive proxy
statement, which will be filed with the Commission subsequent to
the date hereof pursuant to Regulation 14A under the Securities
Exchange Act of 1934 (the "Proxy Statement"), is incorporated
herein by reference.
Item 11. Executive Compensation
The information to be included in the section "EXECUTIVE
COMPENSATION" in the Proxy Statement is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information to be included in the section "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the Proxy
Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information to be included in the section "CERTAIN
TRANSACTIONS" in the Proxy Statement is incorporated herein by
reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) Documents filed as a part of this report:
1. Financial Statements (reference is made to pages 22 through
34 of the Annual Report, which pages are incorporated herein
by reference):
Consolidated Balance Sheets as of October 2, 1994, September
26, 1993 and June 27, 1993
Consolidated Statements of Income for the Year Ended October
2, 1994, the Transition Quarter from June 28, 1993 to
September 26, 1993, and the Years Ended June 27, 1993 and
June 28, 1992
Consolidated Statements of Stockholders' Investment for the
Year Ended October 2, 1994, the Transition Quarter from June
28, 1993 to September 26, 1993, and the Years Ended June 27,
1993 and June 28, 1992
Consolidated Statements of Cash Flows for the Year Ended
October 2, 1994, the Transition Quarter from June 28, 1993
to September 26, 1993, and the Years Ended June 27, 1993 and
June 28, 1992
Notes to Consolidated Financial Statements
Statement of Management Responsibility
Report of Independent Public Accountants
2. Financial Statement Schedules:
Schedule II - Amounts Receivable From Related Parties and
Underwriters, Promoters and Employees Other Than Related
Parties for the Year Ended October 2, 1994, the Transition
Quarter from June 28, 1993 to September 26, 1993, and the
Years Ended June 27, 1993 and June 28, 1992
Schedule V - Analysis of Property, Plant and Equipment for
the Year Ended October 2, 1994, the Transition Quarter from
June 28, 1993 to September 26, 1993, and the Years Ended
June 27, 1993 and June 28, 1992
Schedule VI - Analysis of Accumulated Depreciation for the
Year Ended October 2, 1994, the Transition Quarter from June
28, 1993 to September 26, 1993, and the Years Ended June 27,
1993 and June 28, 1992
Schedule VIII - Analysis of Valuation and Qualifying
Accounts for the Year Ended October 2, 1994, the Transition
Quarter from June 28, 1993 to September 26, 1993, and the
Years Ended June 27, 1993 and June 28, 1992
Schedule X - Supplementary Income Statement Information for
the Year Ended October 2, 1994, the Transition Quarter from
June 28, 1993 to September 26, 1993, and the Years Ended
June 27, 1993 and June 28, 1992
3. Exhibits:
Exhibit No. Description of Exhibit
(3) (a) Restated Certificate of Incorporation of the
Company, as amended through January 14, 1988
(incorporated by reference to Exhibit 3 (a) (1) to
the Company's Annual Report on Form 10-K for the
fiscal year ended July 3, 1988 (the "1988 Annual
Report")).
<PAGE>
(3) (b) By-Laws of the Company, as amended through August
19, 1993 (incorporated by reference to Exhibit (3)
(b) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 27, 1993 (the "1993
Annual Report")).
(4) (a) Promissory Note, dated September 4, 1986, issued by
the Company to The Chase Manhattan Bank (National
Association) (incorporated by reference to Exhibit
4(i) to the Company's Annual Report on Form 10-K
for the fiscal year ended June 29, 1986 (the "1986
Annual Report").
(4) (b) Indenture, dated as of March 15, 1987, between the
Company and First Union National Bank of North
Carolina, as Trustee (incorporated by reference to
Exhibit 4(a) to the Company's Registration
Statement on Form S-3 (Registration No. 33-12612)
filed with the SEC on March 13, 1987).
(4) (c) The Note Agreement, dated January 29, 1993, by and
among the Company and the purchasers named in the
purchasers' schedule attached thereto (incorporated
by reference to Exhibit 4 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended
December 27, 1992).
(4) (d) Rights Agreement dated as of August 23, 1990 between
the Company and The First National Bank of Boston,
as Rights Agent (incorporated by reference to
Exhibit 1 to the Company's Current Report on Form
8-K filed with the SEC on September 7, 1990).
(4) (e) The Company has an additional long-term debt
instrument which, pursuant to Item 601 (b)(4)(iii)
of Regulation S-K, will be furnished to the
Securities and Exchange Commission upon request.
(10) (a)* Guilford Mills, Inc. Non-Qualified Profit Sharing
Plan for Certain of its Executive Officers and Key
Employees, effective July 1, 1989 (incorporated by
reference to Exhibit 10 (a) (7) to the Company's
Annual Report on Form 10-K for the fiscal year
ended July 1, 1990 (the "1990 Annual Report")).
(10) (b)* Amended and Restated Incentive Stock Option
Plan-1981 (incorporated by reference to Exhibit (10)
(d) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 28, 1987 (the "1987
Annual Report")).
(10) (c)* Guilford Mills, Inc. 1991 Stock Option Plan
(incorporated by reference to Exhibit 28 (a) to the
Company's Registration statement on Form S-8
(Registration No. 33-47109) filed with the SEC on
April 10, 1992 (the "Form S-8")).
(10) (d)* Form of Stock Option Contract for key employees in
the 1991 Stock Option Plan (relating to incentive
stock options) (incorporated by reference to Exhibit
28 (b) to the Form S-8).
(10) (e)* Form of Stock Option Contract for Director
participants in the 1991 Stock Option Plan
(incorporated by reference to Exhibit 28 (d) to the
Form S-8).
(10) (f)* Guilford Mills, Inc. 1989 Restricted Stock Plan
(incorporated by reference to Exhibit 10 (b) (2) to
the 1990 Annual Report).
(10) (g)* Amendment to 1989 Restricted Stock Plan.
(10) (h)* Form of Restricted Stock Agreement between the
Company and certain of its officers and key
employees pursuant to the 1989 Restricted Stock Plan
(incorporated by reference to Exhibit 10 (j) to the
Company's Annual Report on Form 10-K for the fiscal
year ended June 28, 1992 (the "1992 Annual
Report")).
(10) (i)* Form of Amendment to Restricted Stock Agreement
between the Company and certain of its officers and
key employees pursuant to the 1989 Restricted Stock
Plan (incorporated by reference to Exhibit (10) (k)
to the 1992 Annual Report).
<PAGE>
(10) (j)* Form of Second Amendment to Restricted Stock
Agreement between the Company and certain of its
officers and key employees pursuant to the 1989
Restricted Stock Plan.
(10) (k)* Form of Third Amendment to Restricted Stock
Agreement between the Company and certain of its
officers and key employees pursuant to the 1989
Restricted Stock Plan.
(10) (l)* Form of Fourth Amendment to Restricted Stock
Agreement between the Company and certain of its
officers and key employees pursuant to the 1989
Restricted Stock Plan.
(10) (m)* Amended and Restated Phantom Stock Agreement between
the Company and Charles A. Hayes dated September 21,
1994.
(10) (n)* Retirement Agreement between the Company and Richard
S. Roberts, dated April 2, 1992 (incorporated by
reference to Exhibit (10) (n) to the 1992 Annual
Report).
(10) (o)* Form of Executive Retirement and Death Benefit
Agreements between the Company and certain of its
executive officers and key employees (incorporated
by reference to Exhibit 10 (d) (1) to the 1990
Annual Report).
(10) (p)* Form of Pension and Death Benefit Agreement between
the Company and certain of its executive officers
and key employees (incorporated by reference to
Exhibit 10 (d) (2) to the 1990 Annual Report).
(10) (q)* Form of Deferred Compensation Agreement between the
Company and certain of its officers and key
employees (incorporated by reference to Exhibit 10
(d) (3) to the 1990 Annual Report).
(10) (r)* Guilford Mills, Inc. Senior Managers' Life Insurance
Plan and related Plan Agreement (incorporated by
reference to Exhibit (10) (r) to the 1992 Annual
Report).
(10) (s)* Guilford Mills, Inc. Senior Managers' Pre-Retirement
Life Insurance Agreement (incorporated by reference
to Exhibit (10) (s) to the 1992 Annual Report).
(10) (t)* Guilford Mills, Inc. Senior Managers' Supplemental
Retirement Plan and related Plan Agreement
(incorporated by reference to Exhibit (10) (t) to
the 1992 Annual Report).
(10) (u)* Form of Severance Agreement between the Company and
certain of its officers and employees (incorporated
by reference to Exhibit (10) (u) to the 1992 Annual
Report).
(10) (v)* Form of Amendment to Severance Agreement between the
Company and certain of its officers and employees.
(10) (w)* Form of Second Amendment to Severance Agreement
between the Company and certain of its officers and
employees.
(10) (x) Stockholders' Agreement, dated as of April 30, 1991
by and among the Company, Maurice Fishman and
Charles A. Hayes (incorporated by reference to
Exhibit (10) (e) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1991).
(10) (y) Amendment, dated June 29, 1994, to Stockholders'
Agreement, dated as of April 30, 1991, by and among
the Company, Maurice Fishman and Charles A. Hayes.
(10) (z) Stockholders' Agreement, dated as of June 22, 1990,
by and among the Company, Charles A. Hayes, George
Greenberg and Maurice Fishman (incorporated by
reference to Exhibit 10 (f) to the 1990 Annual
Report).
(10) (a) (a)* Short Term Incentive Compensation Plan for Key
Managers (incorporated by reference to Exhibit (10)
(x) to the 1992 Annual Report).
<PAGE>
(10) (b) (b)* Management Compensation Trust Agreement between
the Company and North Carolina Trust Company dated
July 1, 1991 (incorporated by reference to Exhibit
(10) (y) to the 1992 Annual Report).
(10) (c) (c)* Amendment to the Management Compensation Trust
Agreement between the Company and North Carolina
Trust Company dated April 1, 1992 (incorporated by
reference to Exhibit (10) (z) to the 1992 Annual
Report).
(10) (d) (d)* Second Amendment to the Management Compensation
Trust Agreement between the Company and North
Carolina Trust Company dated July 1, 1992
(incorporated by reference to Exhibit (10) (a) (a)
to the 1992 Annual Report).
(10) (e) (e) Credit Agreement dated as of May 14, 1993 between
the Company and Wachovia Bank of North Carolina,
N.A. (incorporated by reference to Exhibit (10) (y)
to the 1993 Annual Report).
(13) Annual Report to Stockholders of the Company for the
fiscal year ended October 2, 1994 (only those portions
of such report incorporated by reference to the Annual
Report on Form 10-K are filed herewith).
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedule
*Items denoted with an asterisk represent management contracts or
compensatory plans or arrangements.
(b) Reports on Form 8-K
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GUILFORD MILLS, INC.
By:/s/ Terrence E. Geremski
Terrence E. Geremski
Vice President, Chief Financial
Officer and Treasurer
Dated: December 30, 1994
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
Chairman of the
Charles A. Hayes Board of Directors
and Chief Executive
Officer (Principal
Executive Officer)
and President and
Chief Operating
Officer
/s/ Maurice Fishman Vice Chairman of the December 30, 1994
Maurice Fishman Board of Directors
Vice Chairman of the
George Greenberg Board of Directors
/s/ Terrence E. Geremski Director, Vice December 30, 1994
Terrence E. Geremski President, Chief
Financial Officer
and Treasurer
(Principal Financial
and Accounting
Officer)
/s/ Paul R. McGarr Director December 30, 1994
Paul R. McGarr
/s/ Tomokazu Adachi Director December 30, 1994
Tomokazu Adachi
/s/ Donald B. Dixon Director December 30, 1994
Donald B. Dixon
/s/ Stephen C. Hassenfelt Director December 30, 1994
Stephen C. Hassenfelt
/s/ Sherry R. Jacobs Director December 30, 1994
Sherry R. Jacobs
Director
Stig A. Kry
Director
Paul G. Gillease
<PAGE>
INDEX TO FORM 10-K SCHEDULES
Report of Independent Public Accountants. . . . . . . . . F-1
Schedule II - Amounts Receivable From Related
Parties and Underwriters, Promoters and Employees
Other Than Related Parties for the Year Ended
October 2, 1994, the Transition Quarter from
June 28, 1993 to September 26, 1993, and the
Years Ended June 27, 1993 and June 28, 1992 . . . . . . . F-2
Schedule V - Analysis of Property, Plant and
Equipment for the Year Ended October 2, 1994,
the Transition Quarter from June 28, 1993 to
September 26, 1993, and the Years Ended
June 27, 1993 and June 28, 1992 . . . . . . . . . . . . . F-3
Schedule VI - Analysis of Accumulated Depreciation
for the Year Ended October 2, 1994, the Transition
Quarter from June 28, 1993 to September 26, 1993,
and the Years Ended June 27, 1993 and June 28, 1992 . . . F-4
Schedule VIII - Analysis of Valuation and
Qualifying Accounts for the Year Ended October 2,
1994, the Transition Quarter from June 28, 1993
to September 26, 1993, and the Years Ended
June 27, 1993 and June 28, 1992 . . . . . . . . . . . . . F-5
Schedule X - Supplementary Income Statement
Information for the Year Ended October 2, 1994,
the Transition Quarter from June 28, 1993 to
September 26, 1993, and the Years Ended
June 27, 1993 and June 28, 1992 . . . . . . . . . . . . . F-6
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Guilford Mills, Inc.:
We have audited in accordance with generally accepted
auditing standards, the financial statements included in the
Guilford Mills, Inc. Annual Report to the Stockholders incorporated
by reference in this Form 10-K, and have issued our report thereon
dated November 16, 1994. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The
schedules on pages F-2 through F-6 are the responsibility of the
Company's management and are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not
part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Greensboro, North Carolina,
November 16, 1994.
<PAGE>
Guilford Mills, Inc.
SCHEDULE II
Amounts Receivable From Related Parties and Underwriters,
Promoters and Employees Other Than Related Parties
For the Year Ended October 2, 1994, the Transition Quarter
from June 28, 1993 to September 26, 1993 and the Years Ended
June 27, 1993 and June 28, 1992
(In Thousands)
<TABLE>
<S> <C> <C> <C> <C>
Balance Balance
Beginning End of
Name of Debtor of Period Additions Deductions Period
For the Year Ended
June 28, 1992: $ - $ - $ - $ -
For the Year Ended
June 27, 1993:
Joseph M. Amdur (1) $ - $ 164 $ - $ 164
John A. Emrich (2) $ - $ 100 $ - $ 100
For the Transition
Quarter Ended
September 26, 1993:
Joseph M. Amdur (1) $ 164 $ - $ - $ 164
John A. Emrich (2) $ 100 $ - $ - $ 100
For the Year Ended
October 2, 1994:
Joseph M. Amdur (1) $ 164 $ - $ 164 $ -
John A. Emrich (2) $ 100 $ - $ - $ 100
</TABLE>
(1) In fiscal 1993, in connection with the Company's request that
Joseph M. Amdur, presently an employee of the Company, relocate
to Greensboro, N.C., the Company loaned Mr. Amdur $164 to
purchase a residence. The loan, secured by a first Deed of
Trust on the residence purchased by Mr. Amdur, was repaid on
October 21, 1993.
(2) In fiscal 1993, in connection with the Company's request that
John A. Emrich, presently an officer of the Company, relocate
to Wilmington, N.C., the Company loaned Mr. Emrich $100 to
purchase a residence. The loan is payable on demand and is
secured by a second Deed of Trust on the residence purchased by
Mr. Emrich.
(3) See Notes to Consolidated Financial Statements.
<PAGE>
Guilford Mills, Inc
SCHEDULE V
Analysis of Property, Plant and Equipment
For the Year Ended October 2, 1994, the Transition Quarter
from June 28, 1993 to September 26, 1993, and the Years Ended
June 27, 1993 and June 28, 1992
(In Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Balance Balance
Beginning Additions End of
of Period at Cost Retirements Other Period
(1)
For the Year Ended
June 28, 1992:
Land and improvements $ 5,763 $ 197 $ --- $ 136 $ 6,096
Buildings and improvements 49,521 1,516 (4,493) 529 47,073
Machinery and equipment 248,578 40,997 (10,788) 4,872 283,659
Construction in progress 12,820 (6,947) --- --- 5,873
$316,682 $ 35,763 $(15,281) $ 5,537 $342,701
For the Year Ended
June 27, 1993:
Land and improvements $ 6,096 $ 789 $ (574) $ (181) $ 6,130
Buildings and improvements 47,073 12,522 (1,145) (1,388) 57,062
Machinery and equipment 283,659 51,038 (14,949) (8,810) 310,938
Construction in progress 5,873 37,825 --- --- 43,698
$342,701 $102,174 $(16,668) $(10,379) $417,828
For the Transition Quarter
Ended September 26, 1993:
Land and improvements $ 6,130 $ 1,601 $ --- $ 10 $ 7,741
Buildings and improvements 57,062 6,152 (692) 185 62,707
Machinery and equipment 310,938 18,008 (568) 282 328,660
Construction in progress 43,698 (1,943) --- --- 41,755
$417,828 $ 23,818 $ (1,260) $ 477 $440,863
For the Year Ended
October 2, 1994:
Land and improvements $ 7,741 $ 409 $ --- $ 3,433 $ 11,583
Buildings and improvements 62,707 14,036 (1,335) 10,394 85,802
Machinery and equipment 328,660 70,467 (6,415) 22,952 415,664
Construction in progress 41,755 (37,201) --- 3 4,557
$440,863 $ 47,711 $ (7,750) $ 36,782 $517,606
</TABLE>
(1) Other amounts represent the effect of exchange rate
fluctuations and the property, plant and equipment
balances of acquired subsidiaries as of the date of
acquisition.
(2) Maintenance and repairs are charged to income; renewals and
betterments are capitalized. Upon disposition of an item, the
cost and accumulated depreciation are removed from the accounts
and the resulting gain or loss is included in income.
(3) See Notes to Consolidated Financial Statements.
<PAGE>
Guilford Mills, Inc.
SCHEDULE VI
Analysis of Accumulated Depreciation
For the Year Ended October 2, 1994, the Transition Quarter
from June 28, 1993 to September 26, 1993, and the Years
Ended June 27, 1993 and June 28, 1992
(In Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Additions
Balance Charged to Balance
Beginning Cost and End of
of Period Expenses Retirements Other Period
(2)
For the Year Ended
June 28, 1992:
Land improvements $ 506 $ 50 $ -- $ -- $ 556
Buildings and improvements 19,458 2,653 (301) 200 22,010
Machinery and equipment 162,876 23,994 (6,478) 2,777 183,169
$182,840 $26,697 $ (6,779) $ 2,977 $205,735
For the Year Ended
June 27, 1993:
Land improvements $ 556 $ 44 $ (9) $ -- $ 591
Buildings and improvements 22,010 2,308 (150) (406) 23,762
Machinery and equipment 183,169 25,021 (15,065) (4,598) 188,527
$205,735 $27,373 $(15,224) $(5,004) $212,880
For the Transition Quarter
Ended September 26, 1993:
Land improvements $ 591 $ -- $ -- $ -- $ 591
Buildings and improvements 23,762 691 -- 31 24,484
Machinery and equipment 188,527 7,814 (962) 445 195,824
$212,880 $ 8,505 $ (962) $ 476 $220,899
For the Year Ended
October 2, 1994:
Land improvements $ 591 $ 76 $ -- $ 8 $ 675
Buildings and improvements 24,484 3,024 -- 4,112 31,620
Machinery and equipment 195,824 36,249 (3,238) 13,966 242,801
$220,899 $39,349 $ (3,238) $18,086 $275,096
</TABLE>
(1) Depreciable lives range from 5 to 20 years for land
improvements, 10 to 35 years for buildings and 5 to 8
years for machinery and equipment.
(2) Other amounts represent the effect of exchange rate
fluctuations and the property, plant and equipment
balances of acquired subsidiaries as of the date of
acquisition.
(3) See Notes to Consolidated Financial Statements.
<PAGE>
Guilford Mills, Inc.
SCHEDULE VIII
Analysis of Valuation and Qualifying Accounts
For the Year Ended October 2, 1994, the Transition Quarter
from June 28, 1993 to September 26, 1993, and the Years
Ended June 27, 1993 and June 28, 1992
(In Thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
Additions
Balance Charged to Balance
Beginning Cost and End of
of Period Expenses Deductions Other Period
(1) (2)
For the Year Ended
June 28, 1992:
Reserve deducted from assets
to which it applies -
Allowance for doubtful
accounts $5,995 $1,566 $(2,081) $ 284 $5,764
For the Year Ended
June 27, 1993:
Reserve deducted from assets
to which it applies -
Allowance for doubtful
accounts $5,764 $2,994 $ (21) $ (159) $8,578
For the Transition Quarter
Ended September 26, 1993:
Reserve deducted from assets
to which it applies -
Allowance for doubtful
accounts $8,578 $ - $ (1) $ (171) $8,748
For the Year Ended
October 2, 1994:
Reserve deducted from assets
to which it applies -
Allowance for doubtful
accounts $8,748 $1,334 $(1,719) $ 182 $8,545
</TABLE>
(1) Deductions are for the purpose for which the reserve was
created.
(2) Other amounts represent the effect of exchange rate
fluctuations.
(3) See Notes to Consolidated Financial Statements.
<PAGE>
Guilford Mills, Inc.
SCHEDULE X
Supplementary Income Statement Information
For the Year Ended October 2, 1994, the Transition Quarter
from June 28, 1993 to September 26, 1993, and the Years
Ended June 27, 1993 and June 28, 1992
(In Thousands)
<TABLE>
<S> <C> <C> <C> <C>
October 2, September 26, June 27, June 28,
1994 1993 1993 1992
Maintenance and repairs $24,618 $5,981 $20,769 $20,182
</TABLE>
(1) Royalties, advertising costs, taxes (other than payroll and
income taxes) and amortization of intangible assets are not
material, as defined by Regulation S-X.
(2) See Notes to Consolidated Financial Statements.
<PAGE>
Exhibit Index
Exhibit No. Description of Exhibit
(3) (a) Restated Certificate of Incorporation of the
Company, as amended through January 14, 1988
(incorporated by reference to Exhibit 3 (a) (1) to
the Company's Annual Report on Form 10-K for the
fiscal year ended July 3, 1988 (the "1988 Annual
Report")).
(3) (b) By-Laws of the Company, as amended through August
19, 1993 (incorporated by reference to Exhibit (3)
(b) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 27, 1993 (the "1993
Annual Report")).
(4) (a) Promissory Note, dated September 4, 1986, issued by
the Company to The Chase Manhattan Bank (National
Association) (incorporated by reference to Exhibit
4(i) to the Company's Annual Report on Form 10-K
for the fiscal year ended June 29, 1986 (the "1986
Annual Report").
(4) (b) Indenture, dated as of March 15, 1987, between the
Company and First Union National Bank of North
Carolina, as Trustee (incorporated by reference to
Exhibit 4(a) to the Company's Registration
Statement on Form S-3 (Registration No. 33-12612)
filed with the SEC on March 13, 1987).
(4) (c) The Note Agreement, dated January 29, 1993, by and
among the Company and the purchasers named in the
purchasers' schedule attached thereto (incorporated
by reference to Exhibit 4 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended
December 27, 1992).
(4) (d) Rights Agreement dated as of August 23, 1990 between
the Company and The First National Bank of Boston,
as Rights Agent (incorporated by reference to
Exhibit 1 to the Company's Current Report on Form
8-K filed with the SEC on September 7, 1990).
(4) (e) The Company has an additional long-term debt
instrument which, pursuant to Item 601 (b)(4)(iii)
of Regulation S-K, will be furnished to the
Securities and Exchange Commission upon request.
(10) (a)* Guilford Mills, Inc. Non-Qualified Profit Sharing
Plan for Certain of its Executive Officers and Key
Employees, effective July 1, 1989 (incorporated by
reference to Exhibit 10 (a) (7) to the Company's
Annual Report on Form 10-K for the fiscal year
ended July 1, 1990 (the "1990 Annual Report")).
(10) (b)* Amended and Restated Incentive Stock Option
Plan-1981 (incorporated by reference to Exhibit (10)
(d) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 28, 1987 (the "1987
Annual Report")).
<PAGE>
(10) (c)* Guilford Mills, Inc. 1991 Stock Option Plan
(incorporated by reference to Exhibit 28 (a) to the
Company's Registration statement on Form S-8
(Registration No. 33-47109) filed with the SEC on
April 10, 1992 (the "Form S-8")).
(10) (d)* Form of Stock Option Contract for key employees in
the 1991 Stock Option Plan (relating to incentive
stock options) (incorporated by reference to Exhibit
28 (b) to the Form S-8).
(10) (e)* Form of Stock Option Contract for Director
participants in the 1991 Stock Option Plan
(incorporated by reference to Exhibit 28 (d) to the
Form S-8).
(10) (f)* Guilford Mills, Inc. 1989 Restricted Stock Plan
(incorporated by reference to Exhibit 10 (b) (2) to
the 1990 Annual Report).
(10) (g)* Amendment to 1989 Restricted Stock Plan.
(10) (h)* Form of Restricted Stock Agreement between the
Company and certain of its officers and key
employees pursuant to the 1989 Restricted Stock Plan
(incorporated by reference to Exhibit 10 (j) to the
Company's Annual Report on Form 10-K for the fiscal
year ended June 28, 1992 (the "1992 Annual
Report")).
(10) (i)* Form of Amendment to Restricted Stock Agreement
between the Company and certain of its officers and
key employees pursuant to the 1989 Restricted Stock
Plan (incorporated by reference to Exhibit (10) (k)
to the 1992 Annual Report).
(10) (j)* Form of Second Amendment to Restricted Stock
Agreement between the Company and certain of its
officers and key employees pursuant to the 1989
Restricted Stock Plan.
(10) (k)* Form of Third Amendment to Restricted Stock
Agreement between the Company and certain of its
officers and key employees pursuant to the 1989
Restricted Stock Plan.
(10) (l)* Form of Fourth Amendment to Restricted Stock
Agreement between the Company and certain of its
officers and key employees pursuant to the 1989
Restricted Stock Plan.
(10) (m)* Amended and Restated Phantom Stock Agreement between
the Company and Charles A. Hayes dated September 21,
1994.
(10) (n)* Retirement Agreement between the Company and Richard
S. Roberts, dated April 2, 1992 (incorporated by
reference to Exhibit (10) (n) to the 1992 Annual
Report).
(10) (o)* Form of Executive Retirement and Death Benefit
Agreements between the Company and certain of its
executive officers and key employees (incorporated
by reference to Exhibit 10 (d) (1) to the 1990
Annual Report).
<PAGE>
(10) (p)* Form of Pension and Death Benefit Agreement between
the Company and certain of its executive officers
and key employees (incorporated by reference to
Exhibit 10 (d) (2) to the 1990 Annual Report).
(10) (q)* Form of Deferred Compensation Agreement between the
Company and certain of its officers and key
employees (incorporated by reference to Exhibit 10
(d) (3) to the 1990 Annual Report).
(10) (r)* Guilford Mills, Inc. Senior Managers' Life Insurance
Plan and related Plan Agreement (incorporated by
reference to Exhibit (10) (r) to the 1992 Annual
Report).
(10) (s)* Guilford Mills, Inc. Senior Managers' Pre-Retirement
Life Insurance Agreement (incorporated by reference
to Exhibit (10) (s) to the 1992 Annual Report).
(10) (t)* Guilford Mills, Inc. Senior Managers' Supplemental
Retirement Plan and related Plan Agreement
(incorporated by reference to Exhibit (10) (t) to
the 1992 Annual Report).
(10) (u)* Form of Severance Agreement between the Company and
certain of its officers and employees (incorporated
by reference to Exhibit (10) (u) to the 1992 Annual
Report).
(10) (v)* Form of Amendment to Severance Agreement between the
Company and certain of its officers and employees.
(10) (w)* Form of Second Amendment to Severance Agreement
between the Company and certain of its officers and
employees.
(10) (x) Stockholders' Agreement, dated as of April 30, 1991
by and among the Company, Maurice Fishman and
Charles A. Hayes (incorporated by reference to
Exhibit (10) (e) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1991).
(10) (y) Amendment, dated June 29, 1994, to Stockholders'
Agreement, dated as of April 30, 1991, by and among
the Company, Maurice Fishman and Charles A. Hayes.
(10) (z) Stockholders' Agreement, dated as of June 22, 1990,
by and among the Company, Charles A. Hayes, George
Greenberg and Maurice Fishman (incorporated by
reference to Exhibit 10 (f) to the 1990 Annual
Report).
(10) (a) (a)* Short Term Incentive Compensation Plan for Key
Managers (incorporated by reference to Exhibit (10)
(x) to the 1992 Annual Report).
(10) (b) (b)* Management Compensation Trust Agreement between
the Company and North Carolina Trust Company dated
July 1, 1991 (incorporated by reference to Exhibit
(10) (y) to the 1992 Annual Report).
(10) (c) (c)* Amendment to the Management Compensation Trust
Agreement between the Company and North Carolina
Trust Company dated April 1, 1992 (incorporated by
reference to Exhibit (10) (z) to the 1992 Annual
Report).
<PAGE>
(10) (d) (d)* Second Amendment to the Management Compensation
Trust Agreement between the Company and North
Carolina Trust Company dated July 1, 1992
(incorporated by reference to Exhibit (10) (a) (a)
to the 1992 Annual Report).
(10) (e) (e) Credit Agreement dated as of May 14, 1993 between
the Company and Wachovia Bank of North Carolina,
N.A. (incorporated by reference to Exhibit (10) (y)
to the 1993 Annual Report).
(13) Annual Report to Stockholders of the Company for the
fiscal year ended October 2, 1994 (only those portions
of such report incorporated by reference to the Annual
Report on Form 10-K are filed herewith).
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedule
*Items denoted with an asterisk represent management contracts or
compensatory plans or arrangements.
AMENDMENT TO THE GUILFORD MILLS, INC. 1989
RESTRICTED STOCK PLAN - APPROVED BY STOCKHOLDERS
OF THE COMPANY AT THEIR NOVEMBER 7, 1991 ANNUAL MEETING
(Replacements and additions are italicized; no deletions are
made)
The first sentence of Article II of the Restricted Plan shall
be amended to read in its entirety as follows:
"The number of shares of common stock of the Company
which may be issued pursuant to the Plan will not exceed,
in the aggregate, one million (1,000,000) shares of the
presently authorized common stock, $.02 par value per
share, of the Company (the "Shares")."
The first sentence of the third paragraph of Article II of
the Restricted Plan shall be amended to read in its entirety as
follows:
"Shares awarded under the Plan shall be either
authorized and unissued Shares or Shares previously
issued but held in the Company's treasury or both at the
discretion of the Company."
SECOND AMENDMENT
TO
RESTRICTED STOCK AGREEMENT
THIS SECOND AMENDMENT TO RESTRICTED STOCK AGREEMENT is entered
into this _____ day of _______________, 1993, by and between
GUILFORD MILLS, INC. (the "Company") and __________________________
(the "Executive").
WITNESSETH:
WHEREAS, pursuant to the Guilford Mills, Inc. 1989 Restricted
Stock Plan (the "Plan"), the Company and the Executive entered into
a Restricted Stock Agreement, dated _______________, 19___, and an
Amendment to such agreement dated _____________, 1992 (collectively
hereinafter referred to as the "Agreement"), under the terms of
which the Company granted the Executive shares of Company Common
Stock, par value $.02 per share, subject to certain restrictions;
and
WHEREAS, the Board of Directors of the Company adopted, at a
meeting held on August 19, 1993, an amendment to the Bylaws of the
Company changing the fiscal year-end of the Company from the Sunday
nearest June 30 of each year to the Sunday nearest September 30 of
each year; and
WHEREAS, the Company and the Executive believe that it is
desirable to amend the Agreement in order to reflect such change in
the Company's fiscal year-end.
NOW, THEREFORE, the Company and the Executive hereby agree as
follows:
1. Section 2(c)(i) of the Agreement is hereby deleted in its
entirety and the following section is substituted in its place:
(i) Subject to Section 2(a)(iv), if the aggregate amount
of the Company's primary net earnings per equivalent share,
exclusive of any extraordinary gains, for its fiscal years ending
June 28, 1992, June 27, 1993 and October 2, 1994 (without regard to
the transition period from June 28, 1993 to September 26, 1993)
equal or exceed $6.11 (the "1992-1994 Target") or the Adjusted
1992-1994 Target, as defined below, then the Executive will become
vested in (x) _________ Performance-Based Shares on January 2,
1995, if he is then employed by the Company or a Subsidiary;
(y) _________ Performance-Based Shares on January 2, 1996, if he is
then employed by the Company or a Subsidiary; and (z) __________
Performance-Based Shares on January 2, 1997, if he is then employed
by the Company or a Subsidiary.
<PAGE>
2. The first sentence of the first paragraph immediately
following Section 2(c)(ii) of the Agreement is hereby deleted in
its entirety and the following sentence is substituted in its
place:
The 1992-1994 Target will be adjusted downward if, for
the 36 month period from July 1, 1991 to June 30, 1992, July
1, 1992 to June 30, 1993 and October 1, 1993 to September 30,
1994 (the "Target Period"), the average QFR Rate, as defined
herein, is less than 8.3%.
3. Example 1 and Example 2 in the second paragraph
immediately following Section 2(c)(ii) of the Agreement are hereby
amended by changing the reference in each such example from June
30, 1994 to September 30, 1994.
4. Except as otherwise expressly set forth above, the
Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
GUILFORD MILLS, INC.
By:_________________________________
Name:____________________________
Title:___________________________
______________________________________
(Signature of Executive)
______________________________________
(Print Name of Executive)
THIRD AMENDMENT
TO
RESTRICTED STOCK AGREEMENT
THIS THIRD AMENDMENT TO RESTRICTED STOCK AGREEMENT is entered
into this 20th day of June, 1994, by and between GUILFORD MILLS,
INC. (the "Company") and ___________________ (the "Executive").
WITNESSETH:
WHEREAS, pursuant to the Guilford Mills, Inc. 1989 Restricted
Stock Plan, the Company and the Executive have entered into a
Restricted Stock Agreement, as amended (hereinafter referred to as
the "Agreement"), under the terms of which the Company granted the
Executive shares of Company Common Stock, par value $.02 per share,
subject to certain restrictions; and
WHEREAS, the Company and the Executive believe that it is
desirable to amend the Agreement as set forth below.
NOW, THEREFORE, the Company and the Executive hereby agree as
follows:
1. Section 2(b) of the Agreement is hereby deleted in its
entirety and the following section is substituted in its place:
(b) Service-Based Shares. The Executive shall become
vested in the Service-Based Shares on October 1, 1994,
provided the Executive remains continuously employed with the
Company or a Subsidiary from the date of this Agreement
through October 1, 1994.
2. Except as otherwise expressly set forth above, the
Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
GUILFORD MILLS, INC.
_______________________________
By: _______________________________ (Signature of Executive)
_______________________________
(Type Name of Executive)
FOURTH AMENDMENT
TO
RESTRICTED STOCK AGREEMENT
THIS FOURTH AMENDMENT TO RESTRICTED STOCK AGREEMENT is entered
into this ____ day of ____________, 1994, by and between GUILFORD
MILLS, INC. (the "Company") and __________________ (the
"Executive").
WITNESSETH:
WHEREAS, pursuant to the Guilford Mills, Inc. 1989 Restricted
Stock Plan (the "Plan"), the Company and the Executive have entered
into a Restricted Stock Agreement, as amended (hereinafter the
"Agreement"), under the terms of which the Company granted the
Executive shares of Company Common Stock, par value $.02 per share,
subject to certain restrictions; and
WHEREAS, the Company and the Executive believe that it is
desirable to amend the Agreement as set forth below.
NOW, THEREFORE, the Company and the Executive hereby agree as
follows:
1. Section 3(b)(i) of the Agreement is hereby deleted in its
entirety and the following section is substituted in its place:
(i) Subject to Section 2(iv), if the aggregate
amount of the Company's primary net earnings per
equivalent share, exclusive of any extraordinary gains,
for its fiscal years ending June 28, 1992, June 27, 1993
and October 2, 1994 (without regard to the transition
period from June 28, 1993 to September 26, 1993) equal or
exceed $_____ (the "1992-1994 Target") or the Adjusted
1992-1994 Target, as defined below, then the Executive
will become vested in (x) ______ Performance-Based Shares
on January 2, 1995, if he is then employed by the Company
or a Subsidiary; (y) _____ Performance-Based Shares on
January 2, 1996, if he is then employed by the Company or
a Subsidiary; and (z) _____ Performance-Based Shares on
January 2, 1997, if he is then employed by the Company or
a Subsidiary.
2. Except as otherwise expressly set forth above, the
Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year
first above written.
<PAGE>
GUILFORD MILLS, INC.
By:__________________________________
Name:_____________________________
Title:____________________________
____________________________________
(Signature of Executive)
____________________________________
(Print Name of Executive)
-2-
GUILFORD MILLS, INC.
AMENDED AND RESTATED PHANTOM STOCK AGREEMENT
THIS AGREEMENT, dated as of September 21, 1994, is made
between GUILFORD MILLS, INC. (the "Company") and CHARLES A.
HAYES (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive entered into a
Phantom Stock Agreement, dated October 26, 1990, and an
amendment thereto, dated May 1, 1992 (collectively, the
"Original Phantom Stock Agreement"); and
WHEREAS, the Company and the Executive desire to amend
further the Original Phantom Stock Agreement and, for purposes
of clarity and convenience, to consolidate such further
amendments and the Original Phantom Stock Agreement with and
into this Amended and Restated Phantom Stock Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. GRANT OF AWARD. The Company hereby grants to the
Executive, subject to the terms and conditions herein set forth
(i) phantom stock with respect to 105,000 shares of common
stock, par value $.02 per share, of the Company (the "Phantom
Stock") and (ii) 84,000 stock appreciation rights (the
"Rights") (the Phantom Stock and the Rights being collectively
hereinafter referred to as the "Stock Award").
2. TERMS AND CONDITIONS. It is understood and agreed
that the award evidenced by this Amended and Restated Phantom
Stock Agreement (the "Agreement") is subject to the following
terms and conditions:
(a) No Stock Issuance; No Voting Rights. In no
event shall the Company issue or deliver shares of its common
stock to the Executive pursuant to this Agreement and nothing
in this Agreement shall be construed to give the Executive any
interest or right in any shares of Company common stock. The
Executive will not have voting rights of any kind with respect
to the Stock Award.
(b) Restrictions. The Executive shall not sell,
transfer, assign, give, place in trust, or otherwise dispose of
or pledge, grant a security interest in, or otherwise encumber
his rights under this Agreement, and any purported sale,
transfer, pledge or other disposition or encumbrance shall be
null and void. Upon termination of the Executive's employment
with the Company for Cause, as hereinafter defined in
Section 5, the Executive shall automatically forfeit any and
all rights, claims or interests in the Stock Award not then
vested, and in any dividends or interest thereon.
<PAGE>
(c) Vesting of the Phantom Stock. If the aggregate
amount of the Company's primary net earnings per equivalent
share, exclusive of any extraordinary gains for its fiscal
years ending June 28, 1992, June 27, 1993 and October 2, 1994
(without regard to the transition period from June 28, 1993 to
September 26, 1993) equal or exceed $6.11, or such lesser
amount as may be determined by the Company's Board of Directors
(the "1992-1994 Target") or the Adjusted 1992-1994 Target, as
hereinafter defined, the Executive shall become vested in the
Phantom Stock on October 2, 1994 (the "Initial Vesting Date"),
if he is then employed by the Company. If neither the 1992-
1994 Target or the Adjusted 1992-1994 Target is met, the
Executive shall become vested in the Phantom Stock as follows:
the Executive shall become vested in (i) 21,000 shares of
Phantom Stock on the Initial Vesting Date if he is then
employed by the Company and (ii) 84,000 shares of Phantom Stock
(the "Performance-Based Phantom Stock") on June 30, 2000 (the
"Deferred Vesting Date"), if he is then employed by the
Company. At the date the Executive becomes vested in any share
of Phantom Stock, he shall thereupon become entitled to
receive, and the Company as soon as practicable thereafter
shall deliver to the Executive, a cash payment equal to the
then Fair Market Value, as hereinafter defined in Section 2(e),
of one share of Company common stock.
The 1992-1994 Target will be adjusted downward if,
for the 36-month period from July 1, 1991 to June 30, 1992,
July 1, 1992 to June 30, 1993 and October 1, 1993 to
September 30, 1994 (the "Target Period"), the average QFR Rate,
as defined herein, is less than 8.3%. The "QFR Rate" shall
mean the annual rate of profit on stockholders' equity before
taxes for corporations in the textile mills products
classification having assets of $25,000,000 and over, as
reported in the Quarterly Financial Report published by the
United States Department of Commerce. If the average QFR Rate
for the Target Period is less than 8.3%, the average QFR Rate
for the Target Period shall be divided by 8.3% and the
resulting quotient (the "Adjustment Quotient") shall then be
multiplied by the 1992-1994 Target (the resulting product being
herein referred to as the "Adjusted 1992-1994 Target"). If the
Adjustment Quotient is less than .75, the Adjustment Quotient
shall be increased to .75 for purposes of the calculations
herein.
The following examples illustrate the manner in which
the Adjusted 1992-1994 Target is calculated (the figures below
are for illustrative purposes only and should not be construed
as forecasts or predictions):
-2-
<PAGE>
Example 1:
12 Months Ending Hypothetical QFR Rate
June 30, 1992 6.0%
June 30, 1993 7.0%
September 30, 1994 8.0%
Average QFR Rate for the Target Period = 7.0%
.07/.083 = .843 [The Adjustment Quotient]
.843 [The Adjustment Quotient] x 6.11 [The
1992-1994 Target] = $5.15 [The Adjusted
1992-1994
Target]
Example 2:
12 Months Ending Hypothetical QFR Rate
June 30, 1992 3.0%
June 30, 1993 3.7%
September 30, 1994 5.0%
Average QFR Rate for the Target Period = 3.9%
.039/.083 = .469 [The Adjustment Quotient]
Because the Adjustment Quotient is less than .75, the
Adjustment Quotient is increased to .75 for purposes
of calculating the Adjusted 1992-1994 Target.
.75 x 6.11 [The 1992-1994 Target] = $4.58
[The Adjusted 1992-1994 Target]
(d) Vesting of the Rights. Provided the 1992-1994
Target or the Adjusted 1992-1994 Target is met, the Executive
shall become vested in the Rights 30 calendar days following
the date upon which he is no longer a "covered employee" within
the meaning of Section 162(m) of the Internal Revenue Code (the
"Second Vesting Date"), for any reason whatsoever other than a
termination of the Executive's employment
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<PAGE>
with the Company for Cause. Upon the vesting of the Rights, the
Executive shall be entitled to receive a cash payment as follows:
(A) If the Second Vesting Date occurs on or
after the Third Valuation Date, as hereinafter
defined, the Executive shall be entitled to receive
a cash payment equal to the sum of (i) the sum of
(x) the product of (aa) the excess, if any, of the
Fair Market Value of one share of Company common
stock on January 2, 1995 (the "First Valuation
Date") over the Fair Market Value of one share of
Company common stock on the Initial Vesting Date and
(bb) 28,000 and (y) interest at the rate of 9% per
annum compounded annually on such product from the
First Valuation Date to the Second Vesting Date;
(ii) the sum of (x) the product of (aa) the excess,
if any, of the Fair Market Value of one share of
Company common stock on January 2, 1996 (the "Second
Valuation Date") over the Fair Market Value of
one share of Company common stock on the Initial
Vesting Date and (bb) 28,000 and (y) interest at the
rate of 9% per annum compounded annually on such
product from the Second Valuation Date to the Second
Vesting Date; and (iii) the sum of (x) the product
of (aa) the excess, if any, of the Fair Market Value
of one share of Company common stock on January 2,
1997 (the "Third Valuation Date") over the Fair
Market Value of one share of Company common stock on
the Initial Vesting Date and (bb) 28,000 and
(y) interest at the rate of 9% per annum compounded
annually on such product from the Third Valuation
Date to the Second Vesting Date;
(B) If the Second Vesting Date occurs before
the First Valuation Date, the Executive shall be
entitled to receive a cash payment equal to the
product of (aa) the excess, if any, of the Fair
Market Value of one share of Company common stock on
the Second Vesting Date over the Fair Market Value
of one share of Company common stock on the Initial
Vesting Date and (bb) 84,000;
(C) If the Second Vesting Date occurs on or
after the First Valuation Date but before the Second
Valuation Date, the Executive shall be entitled to
receive a cash payment equal to the sum of (i) the
cash payment calculated in accordance with
clause (A)(i) above and (ii) the product of (aa) the
excess, if any, of the Fair Market Value of
one share of Company common stock on the Second
Vesting Date over the Fair Market Value of one share
of Company common stock on the Initial Vesting Date
and (bb) 56,000; and
-4-
<PAGE>
(D) If the Second Vesting Date occurs on or
after the Second Valuation Date but before the Third
Valuation Date, the Executive shall be entitled to
receive a cash payment equal to the sum of (i) the
cash payment calculated in accordance with
clause (A)(i) above, (ii) the cash payment
calculated in accordance with clause (A)(ii) above
and (iii) the product of (aa) the excess, if any, of
the Fair Market Value of one share of Company common
stock on the Second Vesting Date over the Fair
Market Value of one share of Company common stock on
the Initial Vesting Date and (bb) 28,000.
If neither the 1992-1994 Target or the Adjusted 1992-
1994 Target is met, the Rights shall expire and the Executive
shall not become vested in the Rights nor be entitled to
receive any payments pursuant to the Rights.
(e) Fair Market Value. For purposes of this
Agreement, the term "Fair Market Value" of one share of Company
common stock on any date shall mean the average of the daily
closing prices per share of such stock for the ten consecutive
business days immediately prior to such date. The closing
price for each day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction
reporting system for securities listed or admitted to trading
on the principal national securities exchange on which the
common stock of the Company is then listed or admitted to
trading or, if the common stock of the Company is not listed or
admitted to trading on any national securities exchange, the
average of the high bid and low asked prices in the over-the-
counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or any
successor system then in use.
(f) Dividends. The Company will establish in its
accounting records a book account in the name of the Executive.
There shall be credited to the book account interest on the
Rights as determined in accordance with Section 2(d) hereof,
provided the 1992-1994 Target or the Adjusted 1992-1994 Target
is met. In addition, there shall be credited to the book
account an amount equal to all dividends and other
distributions (i) that would have been paid on each share of
Phantom Stock if it had been issued and outstanding from and
after October 26, 1990 to and including the Initial Vesting
Date or, if earlier, the date on which it is forfeited in
accordance with the foregoing provisions of this Section 2 and
(ii) that are paid on (aa) 84,000 shares of Company common
stock from the Initial Vesting Date, if the Executive is then
employed by the Company, to the First Valuation Date or the
Second Vesting Date, whichever is earlier, (bb) 56,000 shares
of Company common stock from the First Valuation Date, if the
Executive is then employed by the Company, to the Second
Valuation Date or the Second Vesting Date whichever is earlier
and (cc) 28,000 shares of Company common stock from the Second
Valuation Date,
-5-
<PAGE>
if the Executive is then employed by the Company, to the Third
Valuation Date or the Second Vesting Date whichever is earlier.
All amounts credited to the book account in accordance with the
preceding sentence will be credited with interest at the rate of 9%
per annum, compounded annually. The Executive will be entitled to
receive the dividends credited, in accordance with clause (i) of
this Section 2(f), with respect to each share of Phantom Stock,
together with interest thereon at the rate of 9% per annum, at the
same time as he becomes vested in that share of Phantom Stock under
the vesting provisions set forth in Section 2(c) above; provided,
however, that dividends credited with respect to the
Performance-Based Phantom Stock that cannot vest before the
Deferred Vesting Date as a result of the Company's failure to
achieve the 1992-1994 Target or the Adjusted 1992-1994 Target, as
the case may be, will be forfeited, together with any interest
credited thereon to the date of forfeiture. The Executive will be
entitled to receive the dividends credited, in accordance with
clause (ii) of this Section 2(f), with respect to the shares of
Company common stock described in such clause, together with
interest thereon at the rate of 9% per annum, on the Second Vesting
Date, provided that nothing in this Agreement shall be construed to
give the Executive the right to receive any of the shares of
Company common stock described in clause (ii) or the cash
equivalent thereof.
(g) Change in Control. Notwithstanding the
foregoing provisions of this Section 2, if there is a Change in
Control of the Company (as defined in the Guilford Mills, Inc.
1989 Restricted Stock Plan), all shares of Phantom Stock and
all Rights not previously forfeited will immediately vest, and
the Executive will be entitled to receive any dividends and
interest then credited to his book account in accordance with
Section 2(f) hereof; provided, however, that in the event of
any conflict between the provisions of this Section 2(g) and
any other contract or arrangement between the Executive and the
Company relating to a Change in Control of the Company, the
provisions of such other contract or arrangement shall control.
3. WITHHOLDING. There shall be deducted from each
payment made by the Company to the Executive pursuant to this
Agreement all taxes and other amounts which the Company is
required to withhold under any federal, state or local law or
regulation.
4. NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement
does not confer upon the Executive any right to continued
employment by the Company or any of its subsidiaries or
affiliated companies, nor shall it interfere in any way with
the right of the Company or any such subsidiary or affiliated
company to terminate the Executive's employment at any time for
any reason or no reason.
5. RESTRICTIVE COVENANTS. In consideration of the Stock
Award evidenced by this Agreement and to induce the Company to
grant the award, the Executive agrees:
-6-
<PAGE>
(a) Definitions. As used in this Section 5, the
following terms shall have the meanings ascribed to them in
this subsection:
"Business" shall mean the business of
developing, knitting, dyeing and finishing,
designing, printing or marketing textile yarns or
fabrics for clothing apparel or home furnishings or
for automotive or upholstery applications.
"Cause" shall mean (i) the Executive's willful
and continued failure to perform substantially the
duties assigned to him by Guilford (other than by
reason of illness or mental or physical disability
or incapacity) after a written demand for
substantial performance is delivered to the
Executive by any officer of Guilford, which demand
specifically identifies the manner in which the
Executive has not substantially performed his
duties; (ii) actions by the Executive that violate
policies of Guilford which have been announced or
published to affected employees and that are not
corrected within 30 days of the Executive's receipt
of written notice of such violation from an officer
of Guilford; (iii) theft or misappropriation of
Guilford's assets by the Executive; or (iv) any act
by the Executive that constitutes an act of moral
turpitude which materially injures Guilford or
materially affects the Executive's ability to
perform his duties.
"Competitive Company" shall mean any person,
corporation, association, joint venture,
partnership, or other business entity that engages
in any part of the Business in competition with
Guilford.
"Guilford" shall mean the Company or any of its
subsidiaries, affiliated companies, successors or
assigns.
"Restrictive Period" shall mean a period of
three years following the Executive's voluntary
termination of his employment with Guilford or the
termination of his employment by Guilford for Cause;
provided, however, that the Restrictive Period shall
be extended for an additional period equal to any
period during which the Executive is in violation of
any of the provisions of Section 5(d) below.
"Territory" - (i) The Executive acknowledges
and agrees that Guilford does business on a
nationwide basis, with customers throughout the
country, and that the breach of the Executive's
covenants contained herein would immeasurably and
irreparably damage Guilford regardless of the area
of the country in which the activities constituting
such breach were to occur.
-7-
<PAGE>
Accordingly, the area in which the terms and provisions
of these covenants shall apply (the "Territory") shall
be the entire United States ; and (ii) In the event
that the preceding subparagraph shall be determined by
judicial action to define too broad a territory to
be enforceable, the Territory shall consist of the
following states: California, Georgia, Illinois,
Michigan, New York, North Carolina and Pennsylvania
as well as any other state of the United States in
which Guilford, during the continuation of the
Executive's employment with Guilford or during the
Restrictive Period, maintains a place of business.
(b) Acknowledgements. The Executive acknowledges
that by reason of his position with Guilford he is and will be
acquainted with confidential and privileged information
relating to customer files and special customer information,
vendor sources and information, production methods and
techniques, promotional materials and information, financing,
mergers, acquisitions, selective personnel information and
confidential processes, designs, ideas, machinery, plans,
devices and materials, and other similar matters treated by
Guilford as confidential (the "Confidential Information") and
that use of the Confidential Information against Guilford might
seriously damage Guilford in its Business.
(c) Nondisclosure. The Executive agrees that he
will not, without the prior written consent of Guilford,
divulge, furnish, or make accessible to any third person,
company or other organization or entity (other than in the
regular course of Guilford's business) any Confidential
Information; provided, however, that this covenant will not
apply to any Confidential Information that was rightfully in
the Executive's possession prior to Guilford's disclosure
thereof to him, that is or becomes through no fault of the
Executive generally available to the public or that is
independently developed and supplied to the Executive by a
source other than Guilford.
(d) Covenant Not to Compete. During the
continuation of his employment with Guilford and during the
Restrictive Period if his employment with Guilford is
terminated by him voluntarily or by Guilford for Cause, the
Executive will not, directly or indirectly, within the
Territory:
(i) Own, manage, operate, control, be employed
by, render advisory services to, support or assist
(by loans or otherwise), participate in or be
connected in the management or control of any
Competitive Company, unless his affiliation with
such Competitive Company is not related in any way,
directly or indirectly, to the Business; or
-8-
<PAGE>
(ii) Solicit or attempt in any manner to
persuade or influence any present or future customer
of Guilford to divert its purchases of textile
products or services from Guilford to any
Competitive Company.
(e) Enforcement. In the event of any breach or
threatened breach of the provisions of this Section 5 by the
Executive, Guilford, in addition to any other rights and
remedies it may have, shall be entitled to an injunction
restraining such breach or threatened breach, it being
stipulated and agreed that a breach by the Executive would
cause irreparable damage to Guilford and that its remedies at
law would be inadequate. The existence of any claim or cause
of action on the part of the Executive against Guilford shall
not constitute a defense to the enforcement of these
provisions. The Executive agrees that the terms of the
foregoing covenants, including without limitation the
Restrictive Period and the Territory, are reasonable in all
respects and necessary for the protection of Guilford, and
represents and warrants to Guilford that he will be able to
support himself and his dependents notwithstanding the
covenants. If any court of competent jurisdiction shall
finally adjudicate that any of the covenants provided for
herein are too broad as to area, activity or time covered, such
area, activity or time covered may be reduced to whatever
extent the court deems reasonable and the covenants herein and
the remedy of injunctive relief may be enforced as to such
reduced area, activity or time.
6. ADDITIONAL TERMS.
(a) Construction. This Agreement will be construed
by and administered under the supervision of the Compensation
Committee of the Board of Directors of the Company, and all
determinations of the Compensation Committee will be final and
binding on the Executive.
(b) Dilution. Nothing in this Agreement will
restrict or limit in any way the right of the Board of
Directors of the Company to issue or sell stock of the Company
(or securities convertible into stock of the Company) on such
terms and conditions as it deems to be in the best interests of
the Company, including, without limitation, stock and
securities issued or sold in connection with mergers and
acquisitions, stock issued or sold in connection with any stock
option or similar plan, and stock issued or contributed to any
qualified stock bonus or employee stock ownership plan;
provided, however, that in the event of a stock dividend,
split-up, combination of shares, recapitalization or other
similar capital change in the issued and outstanding shares of
common stock of the Company after the date of this Agreement,
the Compensation Committee shall make appropriate adjustments
to the number of shares of Phantom Stock and Rights subject to
this Agreement to prevent dilution of the benefits intended
hereby. The determination of the Compensation Committee shall
be final and binding on the Executive.
-9-
<PAGE>
(c) No Funding. The obligations of the Company to
make payments under this Agreement shall constitute an
unsecured liability of the Company, and the rights of the
Executive to receive payments from the Company under this
Agreement will be no greater than the right of any other
unsecured general creditor of the Company. Without limiting
the generality of the foregoing, it is understood and agreed
that the Company will not be required to establish or maintain
any special or separate fund or otherwise to segregate assets
to assure that payments under this Agreement will be made, and
the Executive will not have any interest in any asset of the
Company. Nothing contained in this Agreement and no action
taken pursuant hereto will create or be construed to create a
trust of any kind or a fiduciary relationship between the
Company and the Executive.
(d) Notices. Any notice hereunder to the Company
shall be addressed to it at its offices in Greensboro, North
Carolina, Attention: Vice President/Chief Financial Officer,
and any notice hereunder to the Executive shall be addressed to
him at his current address as reflected in the personnel
records of the Company, subject to the right of either party to
designate at any time hereafter in writing some other address.
(e) Counterparts. This Agreement may be executed in
counterparts each of which taken together shall constitute one
and the same instrument.
(f) Governing Law. This Agreement shall be governed
by, and construed and enforced in accordance with, the laws of
the State of Delaware. The parties, however, consent to, and
agree that, jurisdiction and venue shall rest in the courts of
the State of North Carolina for purposes of settling any
controversy or claim arising out of or relating to this
Agreement.
(g) Entire Agreement. This Agreement constitutes
the entire agreement of the parties with respect to the Stock
Award and supersedes and replaces the Original Phantom Stock
Agreement. The Executive waives any right to assert any claim
for payment under the Original Phantom Stock Agreement.
(h) Transferability. None of the Executive's rights
in the Stock Award shall be transferable by the Executive other
than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986, as amended, or Title I of
the Employee Retirement Income Security Act, or the rules
thereunder.
IN WITNESS WHEREOF, the Company has caused this Agreement
to be executed by an appropriate officer and the Executive has
executed this Agreement, both as of the day and year first
above written.
-10-
<PAGE>
GUILFORD MILLS, INC.
By: /s/ Terrence E. Geremski
Name: Terrence E. Geremski
Title: Vice President/Chief Financial
Officer and Treasurer
/s/ Charles A. Hayes
CHARLES A. HAYES
AMENDMENT TO SEVERANCE AGREEMENT
THIS AMENDMENT TO SEVERANCE AGREEMENT is entered into this
24th day of March, 1994, by and between GUILFORD MILLS, INC., a
Delaware corporation (the "Company"), and __________________ (the
"Associate").
WITNESSETH:
WHEREAS, the Company and the Associate have entered into a
Severance Agreement (the "Original Agreement"), which provides for
the payment of specified compensation and benefits to the Associate
upon certain terminations of his employment within two years after
a "Change in Control" of the Company, as such term is defined in
the Original Agreement; and
WHEREAS, Section 5(g) of the Original Agreement provides that
no provision thereof may be modified unless such modification is
agreed to in writing by the Associate and the Company; and
WHEREAS, each of the Company and the Associate believes that
it is desirable to amend the Original Agreement in order to clarify
the nature of the severance payments to be made thereunder.
NOW, THEREFORE, the Company and the Associate hereby agree as
follows:
1. Section 4(a) of the Original Agreement is hereby deleted
in its entirety and the following section is substituted in its
place:
(a) The Company or a Subsidiary will pay to the
Associate as compensation for services rendered, not later
than the fifth business day following completion of the
"Parachute Procedure" (as hereinafter defined), the
Associate's Base Salary through the Date of Termination and
any bonus theretofore granted to the Associate but not yet
paid and a lump sum severance payment (subject to any
applicable payroll or other taxes and charges required to be
withheld computed at the rate for supplemental payments) equal
to three (3) times the sum of the following: (i) the
Associate's Base Salary; (ii) the amount of the Associate's
last annual bonus prior to the Change in Control; (iii) the
amount last contributed prior to the Change in Control to the
account of the Associate under the Company's Qualified Profit-
Sharing Plan; (iv) the amount last contributed prior to the
Change in Control to the account of the Associate under the
Company's Employee Stock Ownership Plan, the value of any
shares of Company Common Stock contributed thereunder being
determined by calculating the average of the closing price for
such shares on the New York Stock Exchange for the ten trading
days preceding the Change in Control; and (v) the amount last
contributed prior to the Change in Control to the account of
the Associate under the Company's excess benefit plan.
<PAGE>
2. Except as otherwise expressly set forth above, the
Original Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
GUILFORD MILLS, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
______________________________________
Signature of Associate
______________________________________
Print Name of Associate
-2-
SECOND AMENDMENT TO SEVERANCE AGREEMENT
THIS SECOND AMENDMENT TO SEVERANCE AGREEMENT is entered into
this 22nd day of August, 1994, by and between GUILFORD MILLS, INC.,
a Delaware corporation (the "Company"), and ________________ (the
"Associate").
WITNESSETH:
WHEREAS, the Company and the Associate have entered into a
Severance Agreement and an amendment thereto (collectively, the
"Agreement") which provides for the payment of specified
compensation and benefits to the Associate upon certain
terminations of his employment within two years after a "Change in
Control" of the Company, as such term is defined in the Agreement;
and
WHEREAS, Section 5(g) of the Agreement provides that no
provision thereof may be modified unless such modification is
agreed to in writing by the Associate and the Company; and
WHEREAS, the parties to the Agreement desire to extend the
term of the Agreement for an additional five-year period.
NOW, THEREFORE, the Company and the Associate hereby agree as
follows:
1. Section 1(c) of the Agreement is hereby deleted in its
entirety and the following section is substituted in its place:
(c) The Company shall be obligated to provide the
payments and benefits referred to in Sections 3 and 4 hereof
following, and the provisions of Section 2 hereof shall apply
to, a Change in Control of the Company only if such Change in
Control shall have occurred within, or as a result of efforts
for such purposes known to the parties hereto to have
commenced prior to August 31, 1999 (or such later date as the
Board shall determine).
2. Except as otherwise expressly set forth above, the
Agreement remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Second
Amendment as of the day and year first above written.
GUILFORD MILLS, INC.
By: __________________________________
Name: ____________________________
Title: ___________________________
______________________________________
Signature of Associate
______________________________________
Print Name of Associate
AMENDMENT TO STOCKHOLDERS' AGREEMENT
THIS AMENDMENT TO STOCKHOLDERS' AGREEMENT is entered into this
29th day of June, 1994, by and among CHARLES A. HAYES ("Hayes"),
MAURICE FISHMAN ("Fishman") (Hayes and Fishman being collectively
hereinafter referred to as the "Stockholders"), and GUILFORD MILLS,
INC., a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Stockholders and the Company entered into a
Stockholders' Agreement, dated April 30, 1991, pursuant to which the
Company is required to purchase, upon the death of either Hayes or
Fishman, such number of shares of his Company common stock as equals
$5,000,000 and $4,000,000, respectively (the "1991 Stockholders'
Agreement"); and
WHEREAS, the Stockholders and the Company believe that it is
desirable to amend the 1991 Stockholders' Agreement as more fully set
forth below.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Section 7(c) of the 1991 Stockholders' Agreement is hereby
deleted in its entirety and the following section is inserted in its
place:
(c) June 22, 1995.
2. Except as otherwise expressly set forth above, the 1991
Stockholders' Agreement remains unmodified and in full force and
effect.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the day and year first above written.
STOCKHOLDERS:
/s/ Charles A. Hayes
Charles A. Hayes
/s/ Maurice Fishman
Maurice Fishman
GUILFORD MILLS, INC.
By: /s/ Terrence E. Geremski
Terrence E. Geremski
Vice President, Chief Financial
Officer and Treasurer
SUBSIDIARIES OF GUILFORD MILLS, INC.
The following table sets forth certain information, as of
December 19, 1994, concerning the subsidiaries of Guilford Mills,
Inc. (the "Company"):
State or Percent Owned
Other Jurisdiction by Company or
Name of Incorporation its Subsidiaries
Guilford International, U.S. Virgin Islands 100%
Inc.
Gold Mills, Inc. Delaware 100%
Gold Mills Farms, New York 100%
Inc. (1)
Guilford Airmont, Inc. North Carolina 100%
Advisory Research North Carolina 100%
Services, Inc.
Guilford Mills Michigan 100%
(Michigan), Inc.
Grupo Ambar, Mexico 75%
S.A. de C.V.
Guilford Mills (UK) Delaware 100%
Limited
Guilford Mills Europe United Kingdom 100%
Limited (2)
Guilford Europe United Kingdom 100%
Limited (3)
Guilford Kapwood GmbH (4) Germany 100%
Scalecount Limited (4) United Kingdom 100%
Guilford Kapwood Pension United Kingdom 100%
Trustees Limited (4)
Guilford Wovens United Kingdom 100%
Limited (4)
Rouquinet Deroy United Kingdom 100%
Limited (5)
Daleside-Hadden United Kingdom 100%
Limited (6)
(1) Owned by Gold Mills, Inc.
(2) Owned by Guilford Mills (UK) Limited.
(3) 1,999,999 shares owned by Guilford Mills Europe Limited and
1 share owned by the Company.
(4) Owned by Guilford Europe Limited.
(5) Owned by Guilford Mills Europe Limited.
(6) Owned by Rouquinet Deroy Limited.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports dated November 16, 1994 included in
and incorporated by reference in this Form 10-K into the Company's
previously filed Registration Statement File No. 2-75943,
Registration Statement File No. 33-46465 and Registration Statement
File No. 33-47109.
ARTHUR ANDERSEN LLP
Greensboro, North Carolina,
December 30, 1994.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-02-1994
<PERIOD-END> OCT-02-1994
<CASH> 6,110
<SECURITIES> 0
<RECEIVABLES> 154,839
<ALLOWANCES> (8,545)
<INVENTORY> 105,735
<CURRENT-ASSETS> 263,969
<PP&E> 517,606
<DEPRECIATION> 275,096
<TOTAL-ASSETS> 565,338
<CURRENT-LIABILITIES> 110,804
<BONDS> 164,611
<COMMON> 393
0
0
<OTHER-SE> 243,667
<TOTAL-LIABILITY-AND-EQUITY> 565,338
<SALES> 703,700
<TOTAL-REVENUES> 703,700
<CGS> 585,244
<TOTAL-COSTS> 651,810
<OTHER-EXPENSES> 551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,428
<INCOME-PRETAX> 38,911
<INCOME-TAX> 13,787
<INCOME-CONTINUING> 25,124
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,124
<EPS-PRIMARY> 1.82
<EPS-DILUTED> 1.71
</TABLE>
Guilford Mills, Inc.
SELECTED FINANCIAL DATA
(In thousands except per share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Transition
Quarter
1994 1993 (2) 1993 1992 1991 1990
Results of Operations
Net sales $703,700 $141,450 $654,435 $614,905 $528,778 $544,059
Income (loss)
before
extraordinary item 25,124 (1,087) 28,852 24,858 13,557 (8,041)
Income (loss) before
cumulative effect
of change in
accounting
principle 25,124 (1,087) 28,852 24,858 15,917 (8,041)
Net income (loss) 25,124 2,013 28,852 24,858 15,917 (8,041)
Per Share Data (1)
Primary:
Income (loss)
before
extraordinary item 1.82 (.08) 2.11 1.85 1.02 (.56)
Income (loss)
before
cumulative effect
of change in
accounting
principle 1.82 (.08) 2.11 1.85 1.19 (.56)
Net income (loss) 1.82 .15 2.11 1.85 1.19 (.56)
Average common and
common equivalent
shares
outstanding 13,776 13,646 13,674 13,465 13,322 14,250
Fully diluted:
Income (loss)
before
extraordinary
item 1.71 (.08) 1.96 1.73 1.01 (.56)
Income (loss)
before
cumulative effect
of change in
accounting
principle 1.71 (.08) 1.96 1.73 1.17 (.56)
Net income (loss) 1.71 .15 1.96 1.73 1.17 (.56)
Average common and
common equivalent
shares
outstanding 16,059 13,650 15,933 15,783 15,665 14,250
Cash dividends .60 .15 .60 .57 .53 .53
Balance Sheet Data
Working capital 153,165 126,766 151,994 139,897 124,078 137,893
Total assets 565,338 500,306 506,742 414,335 379,874 395,425
Long-term debt 164,611 146,736 147,430 76,855 80,316 92,072
Stockholders'
investment 244,060 221,954 219,739 206,170 178,058 175,500
</TABLE>
(1) All share data has been restated to reflect the effect of a three-for-two
stock split effected in January 1992 in the form of a 50% stock dividend.
(2) Due to the change in year end, the transition quarter from June 28, 1993
to September 26, 1993 is presented.
13
<PAGE>
Guilford Mills, Inc.
Management's Discussion and Analysis
of Financial Condition and
Results of Operations
General
Guilford's consolidated sales continued to improve for the year ended October
2, 1994 and were a record $703.7 million. Net income fell short of the
record $28.9 million on $654.4 million in sales in fiscal year 1993, but was
$25.1 million despite additional depreciation of approximately $12 million
over fiscal year 1993.
This increase in the current year sales results from improvements in both
the apparel and automotive businesses. In addition, consolidated sales
include $8.8 million of sales since the acquisition of a majority interest in
the Company's Mexican affiliate.
On August 18, 1994, Guilford purchased an additional 55% of the stock of
Grupo Ambar, S.A. de C.V. This acquisition increases the Company's ownership
to 75%. Grupo Ambar is a leading manufacturer of knit textiles in Mexico.
Management expects this strategic purchase to enhance its global competitive
position in both the apparel and automotive industries.
While Guilford competes as a fabric producer in different markets, it is
regarded as a single segment based upon technology.
The automotive industry experienced significant growth in 1994 with the
North American car build up approximately 11% to 14 million cars and light
trucks. Guilford's automotive sales and operating results reflect this
industry growth as well as incremental market share. In Europe, the economic
recovery continues to boost Guilford's sales. With only slight improvement
in the U.S. retail markets and negligible growth in the apparel industry,
especially in the women's apparel product lines in which Guilford
predominantly competes, growth in the apparel industry has been difficult.
Guilford's increased sales have resulted from improved competitive position
and new products in the apparel, home fashions and industrial markets. Where
two years ago the Company sold primarily to the lingerie, robewear and
sleepwear portions of the apparel industry, today end uses are greatly
expanded. This diversification was precipitated by the foreseen decrease in
demand in the mature, traditional markets. The planned evolution has
resulted in an increase in demand for the Company's apparel, home fashions
and industrial products.
As a portion of Guilford's operations is conducted in the United Kingdom,
fluctuations in foreign exchange rates affect the Company's operating results
and financial position due to translation gains and losses recognized in
converting such activity to U.S. dollars. During fiscal 1994, the U.S.
dollar weakened against the British pound. Although operating results were
not affected, the translation of the Company's U.K. investment from pounds
sterling back to U.S. dollars using year end rates resulted in a reduction of
the translation loss on the balance sheet from $6.4 million at June 27, 1993
to a $3.7 million loss as of October 2, 1994.
The Company has changed its fiscal year for financial reporting purposes
from a fiscal year ending on the Sunday nearest to June 30 to the Sunday
nearest to September 30. The change reflects a natural movement of the
manufacturing cycle closer to the needs and desires of the Company's
customers. The financial statements, notes to the financial statements and
management's discussion include presentation of a transition quarter
beginning June 28, 1993 and ending September 26, 1993. Fiscal year 1994
includes the twelve months ended October 2, 1994.
14
<PAGE>
Results of Operations
1994 Compared to 1993 - Consolidated sales for the year of $703.7 million
increased $49.3 million or 7.5% over fiscal year 1993.
In the Apparel Business Unit, sales of $412.1 million increased 4.2% over
last year's $395.3 million with improvements in lingerie, shapewear, warp and
circular ready-to-wear, swimwear and industrial products. Sales from other
end uses such as sleepwear, robewear, domestics and tickings were flat or off
slightly for the year. Apparel Business Unit increases continue to result
from the Company's Lycra-containing fabrics. Circular knit sales increased
$9.7 million or 11.7% despite sluggish and competitive market conditions.
Home fashion and industrial market products such as diaper closure systems
and shoe linings continue to grow.
Guilford's Automotive Business Unit continued to reflect strong sales gains
with an increase to $182.7 million, approximately $21 million or 13% over
fiscal year 1993 sales. In the U.S., sales to original equipment
manufacturers (OEMs) increased 16% or $20 million to approximately $149
million, recreational vehicle and van sales were up 45% and furniture
upholstery sales declined 38%. Increases in the North American car build and
Ford's market share specifically, were primary reasons for the increase as
higher volume in the Ford Taurus and Windstar/Mercury Sable platforms were
key to Guilford's sales increase over fiscal 1993.
European automotive sales improved to $91.1 million, up slightly from
fiscal 1993. On a foreign exchange rate adjusted basis, sales were up 9%.
Increases are attributed to Ford World Car production, General Motors (Opel)
improvement and a general economic upturn.
The Mexican affiliate contributed $8.8 million to fiscal 1994 sales.
Gross margins of 16.8% for fiscal 1994 declined by nearly 2% from fiscal
1993. The decrease was due primarily to the increased depreciation expense.
(Fiscal year 1994 margins, with depreciation expense at fiscal 1993 levels,
would have been 18.5%.) Further, gross margins were adversely affected by
the Fibers Business Unit expansion start-up and by the relocation of certain
apparel products to North Carolina manufacturing facilities. Pricing
pressures on certain apparel fabrics also reduced margins. Actual gross
profit margins remained flat in the U.S. and European automotive operations
with competitive pricing pressures being offset by improved operating
efficiencies and successful cost reduction programs.
In fiscal 1994, selling and administrative expenses decreased $3.6 million
or 5% to $66.6 million as compared to fiscal 1993. As a percentage of sales,
operating expenses declined from 10.7% in fiscal 1993 to 9.5% in fiscal 1994.
Reductions resulted from reduced R&D discretionary spending to $14.7 million
from $15.8 million, benefits from the Company's re-engineering efforts, and
the non-recurring unusual bad debt reserve adjustment of $2.6 million related
to two customer bankruptcies in fiscal 1993. These reductions were partially
offset by the inclusion of $1.1 million in additional selling and
administrative expenses from the Mexican affiliate.
Interest expense increased in 1994 to $12.4 million from $8.2 million in
1993 primarily due to higher inventory carrying costs during the year, higher
short-term interest rates, the addition of $20 million of long-term debt in
the third quarter of 1994, and the full year impact of the addition of $75
million of long-term debt in January, 1993.
15
<PAGE>
The effective income tax rate was 35.4% compared to 34.2% in the prior
year. Increases were due to a higher Federal statutory rate and other
adjustments.
Net income of $25.1 million declined $3.7 million or 12.9% from the prior
year with volume increases being offset by pricing pressures, depreciation
expense, fibers expansion and apparel product start-ups and incremental
interest expense. Primary earnings per share was $1.82 as compared to $2.11
in the prior year on slightly higher equivalent outstanding shares.
The Transition Quarter (September 26, 1993) Compared to the Prior Year's
Comparable Quarter (September 27, 1992)
For the transition quarter ended September 26, 1993, sales declined 6.8%
from $151.7 million for the comparable prior year quarter's sales to $141.5
million.
The sales decrease was primarily due to apparel market conditions with
total apparel sales declining 8.8% from $89.6 million to $81.7 million. More
specifically, swimwear print sales decreased by 38% due to a weaker demand for
swimwear; warp knit sales declined by 3.7% due to reduced demand for garment
linings; and circular knit sales declined by 8.3% due largely to continued
weakness in plain jersey fabrics and prepared for garment dye fabrics
typically purchased by specialty catalog retailers. European sales also
reflected a significant decline of 18.9% during the transition quarter from
$21.2 million for the comparable prior year quarter to $17.2 million.
However, this decrease was due almost exclusively to a strengthening of the
value of the U.S. dollar exchange rate against the British pound. On an
exchange-adjusted basis, sales were flat. The mix in Europe continued to
move towards automotive fabrics and away from apparel fabrics.
In the Automotive Business Unit, sales increased 4.1% during the transition
quarter from $39.0 million to $40.6 million with sales of headliner and
bodycloth fabrics increasing approximately 8.5% and home furniture sector
sales decreasing 25% from the prior year due to weak furniture sales at
retail.
Margins for the transition quarter of 16.2% compared unfavorably to the
prior year's quarter of 18.9%. Primary factors contributing to this decline
include reduced swimwear print sales (which carry higher margins due to the
Lycra content and higher value added prints), higher depreciation expense
included in cost of sales (associated with the increased capital spending in
fiscal 1993) and the initial start-up costs related to the expansion of the
Fuquay-Varina fibers plant (to increase production capabilities of
proprietary Guilford yarns).
Selling and administrative expenses increased 8.1% during the transition
quarter to $17.3 million from last year's $16.0 million. The increase
reflects the prior year trend of increased research and development
expenditures and an increase in expenses associated with the "Total Quality
and Excellence" program designed to improve operating procedures throughout
the Company.
During the transition quarter, the Company recorded restructuring and other
costs of $5.4 million ($3.2 million after taxes). This charge resulted from
the shutdown of the
16
<PAGE>
wide-width printing facility in Greensboro, North Carolina and the transfer of
those printing operations to the Company's joint venture partner in
Schenectady, New York; the write down of equipment and redundancy costs
associated with the restructuring of European operations to phase out the
manufacturing of apparel fabrics by outsourcing the knitting and finishing;
and severance accruals for early retirements.
Increased borrowings, necessitated by the high capital expenditures during
fiscal 1993 and primarily related to the issuance of $75.0 million of senior,
unsecured notes in January, 1993, resulted in an increase in interest expense
during the transition quarter of $.7 million to $2.5 million compared with
$1.8 million in the prior year.
The effective income tax benefit rate was 56.3% in the transition quarter
compared with an effective income tax rate of 35.2% in the comparable quarter
of the prior year. The transition quarter benefit rate reflects a benefit
higher than the statutory rate due primarily to the utilization of low income
housing credits.
As a result of the above, the Company incurred a loss (before the cumulative
effect of the change in accounting principle) during the transition quarter of
$1.1 million, or $.08 per primary share, compared with income in the prior
year's comparable quarter of $6.8 million, or $.50 per primary share. Before
the effects of the charge for restructuring and other costs, the transition
quarter had income (before the cumulative effect of the change in accounting
principle) of $2.1 million, or $.15 per primary share.
The cumulative effect on prior years of the change in accounting principle
in the transition quarter resulted from the required adoption of SFAS No. 109,
"Accounting for Income Taxes". As a result, net income for the transition
quarter was $2.0 million, or $.15 per primary share.
1993 Compared to 1992 - Guilford's worldwide sales increased $39.5 million,
or 6%, primarily due to new product offerings and increasing market share of
existing automotive, circular knit apparel and warp knit microdenier fabrics.
As adjusted for the effect of the disposition of Rosewood Fabrics in 1992,
comparable sales increased nearly 10%.
In the Apparel Home Fashions Business Unit, warp knit sales in robewear,
shapewear, ready-to-wear and home fashions grew while the more mature
sleepwear, lingerie and solid swimwear sales declined to produce an overall
3% sales growth during fiscal 1993. Circular knit sales increased $16.1
million, or 24% despite sluggish and competitive market conditions. The
increase is due primarily to increased volume of Lycra and Lycra-containing
fabric sales in the ready-to-wear, sleepwear and swimwear product lines. The
sale of Rosewood Fabrics in 1992 represented a change in orientation away
from purchased woven goods towards Guilford's own internal wide-width
circular knit production. This change affected sales of ladieswear prints
which declined $16.9 million, or 73%.
Guilford's worldwide Automotive Business Unit continued to reflect strong
gains in sales in 1993 with a growth of $26.0 million, or 12%, from the prior
year level. In the U.S., sales to OEMs amounted to $128.5 million, an
increase of $13.1 million or 36.3%, which was aided by Ford's push to make
the Taurus model the number one selling car in the United States. Bolster,
headliner and bodycloth sales were favorably impacted by higher market share
and increased car build. On a unit basis, European sales increased slightly
due to the introduction of new automotive headliner products although, due to
foreign exchange fluctuations, recorded sales declined by $5.4 million.
17
<PAGE>
Cost of goods sold in 1993, expressed as a percentage of net sales, was
81.3% and equal to 1992 despite difficult market conditions. The margin
pressure from a very competitive market for apparel goods at the retail level
coupled with higher synthetic yarn costs were offset by improved operating
efficiencies and a higher value added product mix.
Selling and administrative expenses increased to $70.2 million (10.7% of
sales) for 1993 versus $65.7 million (10.7% of sales) in 1992. The increase
in absolute dollars of expenses is attributable to various factors, including
an increase in the provision for doubtful accounts due to two large customer
bankruptcies, an increase in research and development expenditures and an
increase in expenses associated with the "Total Quality and Excellence"
program designed to improve operating procedures throughout the Company.
These cost increases were offset in part by continuing cost containment
programs and lower current year compensation provisions which are based on
targeted earnings.
Interest expense increased $1.2 million to $8.2 million in 1993 primarily
as a result of additional short-term borrowings to meet capital expenditure
and seasonal working capital requirements.
Other expense, net of income, decreased $4.1 million to $.4 million in
1993. Expenses in 1992 were higher due to losses recognized on the disposal
of property.
The effective income tax rate was 34.2% compared with 27.0% in 1992. The
1992 income tax provision was favorably affected by the write off of negative
goodwill resulting from the disposition of certain assets related to the 1985
purchase of TRT Corporation.
Net income rose to $28.9 million, or $2.11 per primary share, in 1993
compared to $24.9 million, or $1.85 per primary share in 1992 on slightly
higher equivalent outstanding shares.
Liquidity and Capital Requirements
At the end of fiscal 1994, cash and cash equivalents of $6.1 million were
available for future capital and other needs.
The assets and liabilities of the Mexican affiliate have been included in
the October 2, 1994 balance sheet. At year-end, the addition of the Mexican
affiliate resulted in a net working capital increase of $2.0 million,
property of $18.6 million and long-term liabilities of $3.9 million.
Cash provided by operations increased in fiscal 1994 compared to fiscal 1993
due to slight increases from working capital changes and adjustments for non-
cash items such as the depreciation increase of $12 million and deferred
income tax provision increase of approximately $6 million.
Gross receivables increased $21 million, inventory increased $1 million and
accrued liabilities increased $6 million not considering the impact of the
Mexican acquisition. The strong sales in the fourth quarter of 1994 ($207.3
million) versus the transition quarter ($141.5) caused the receivables to
increase dramatically. Higher cash collections partially offset the sales
increase. The change in fiscal year results in the accumulation of
additional accurals when comparing the year ended October 2, 1994 to the
quarter ended September 26, 1993.
Net property increased $22.5 million from the transition quarter ended
September 26, 1993 (including the addition of $18.6 million through the
Mexican acquisition).
18
<PAGE>
Capital expenditures were $47.7 million during 1994, $23.8 million in the
transition quarter, $102.2 million in 1993 and $35.8 million in 1992. In
fiscal 1993, management commenced its plan to expand the Fibers operations
to increase capability for proprietary yarn production, broaden automotive
technologies through the addition of woven velour looms, and upgrade
equipment for operational efficiency improvements. In 1994, Guilford
continued to modernize equipment and increase capacity to support new,
innovative products. Expenditure levels for the next two years are expected
to approximate depreciation expense.
Long-term debt increased to $164.6 million at October 2, 1994 compared to
$146.7 million at September 26, 1993 primarily as a result of the issuance of
$20.0 million of senior, unsecured long-term notes which bear interest at
7.49%. The proceeds were used to fund the Mexico acquisition, to repay
certain other debt obligations, and for general corporate purposes.
A $25.0 million revolving line of credit facility was established in fiscal
1993 in order to maintain flexibility with the Company's seasonal working
capital needs. To further supplement its working capital requirements, the
Company has available, uncommitted short-term bank lines of credit
aggregating $100 million and additionally can 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 both the debt and equity markets.
During the next five years management believes that its cash requirements
for working capital, capital expenditures, dividends, interest and debt
repayments will continue to be met through internally generated sources and
utilization of available borrowing sources. In line with management's desire
to better position itself to consider acquisition opportunities and to make
strategic capital investments, management intends to continue examining near
and long-term alternatives to strengthen its balance sheet. Such alternatives
may include equity or debt financing.
Inflation
The Company believes that the relatively moderate inflation rate of the 1990's
has not impacted its operations.
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 will perform (i)
certain measures designed to prevent any potential threats to the environment
at the facility, (ii) an investigation to fully determine the nature of any
release of hazardous substances at the facility and (iii) 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. In the fourth
19
<PAGE>
quarter of 1992, a pre-tax charge of $8.0 million was provided for the
estimated future cost of the additional remediation and is included in
restructuring and other costs in the 1992 statement of income. The Company
initiated litigation against the former stockholders and other parties
involved in the sale of Gold to the Company. The parties have reached a
settlement. No recovery has been recognized in the Company's statement of
income as a result of the settlement.
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. An additional pre-tax charge of $1.3 million was provided in the
fourth quarter of 1992 to reflect the estimated future costs of monitoring
this and other environmental matters, including the removal of underground
storage tanks at the Company's facilities. Such amount is included in
restructuring and other costs in the 1992 statement of income. At October 2,
1994, environmental accruals amounted to $7.2 million of which $6.2 million
is non-current and is included in other deferred liabilities in the 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 environ-
mental 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, future results
of operations and future liquidity.
Outlook
The future is optimistic for Guilford as it moves forward with new innovative
products. For Apparel Home Fashions, sales growth is expected due to new
products such as the diaper closure system, the looped fabric component to
install carpets, Lycra-satins, spacer fabric for shoe linings and the medical
incontinent pad.
In the automotive industry, with a growing car build, worldwide sourcing
opportunities enhanced by the Company's presence in Europe and Mexico,
increased placements in the woven velour fabrics, significant Ford "World Car"
selections, and diverse product offerings, the Company also expects continued
sales growth.
Many manufacturers who use Guilford's fabrics in both the apparel and
automotive sectors are seeking to reduce costs. In addition, the markets are
subject to competition from imported garments. However, through diversity,
innovation and technology, the Company will continue to focus its efforts on
providing high quality, innovative products, with excellent customer service
at the lowest cost and expects to maintain its competitive position in its
markets.
20
<PAGE>
COMMON STOCK MARKET PRICES AND DIVIDENDS
<TABLE>
<S> <C> <C> <C>
Fiscal 1994
Quarter High Low Dividends
First $ 23 7/8 $ 18 7/8 $.15
Second 24 1/8 21 1/4 .15
Third 23 5/8 20 3/8 .15
Fourth 21 5/8 18 1/2 .15
Year $ 24 1/8 $ 18 1/2 $.60
Transition Quarter
Quarter High Low Dividends
$ 22 5/8 $ 19 3/4 $.15
Fiscal 1993
Quarter
High Low Dividends
First $ 26 3/8 $ 20 3/8 $.15
Second 26 1/2 17 3/4 .15
Third 28 24 .15
Fourth 27 1/4 21 5/8 .15
Year $ 28 $ 17 3/4 $.60
</TABLE>
The high and low stock market prices are as reported on the New York Stock
Exchange which is the principal market for the Company's common stock. On
December 2, 1994 there were 557 stockholders of record.
The Company's debt agreements contain restrictions (based on retained earn-
ings) with respect to payments of cash dividends as more fully discussed in
Note 6 of the Notes to Consolidated Financial Statements. Based on continued
favorable future operations and the present level of available retained
earnings, management anticipates continuing its current dividend policies.
Annual Stockholders' Meeting
The Company's 1994 annual meeting of stockholders will be held at 10:00 a.m.
on Thursday, February 2, 1995 at Joseph S. Koury Convention Center, 3121 High
Point Road, Greensboro, North Carolina.
21
<PAGE>
Guilford Mills, Inc.
Consolidated Balance Sheets
October 2, 1994, September 26, 1993 and June 27, 1993
(In thousands except share data)
<TABLE>
<S> <C> <C> <C>
October 2, September 26, June 27,
1994 1993 1993
Assets
Cash and cash equivalents $ 6,110 $ 4,912 $ 17,881
Accounts receivable 146,294 113,819 132,559
Inventories (Note 3) 105,735 98,064 82,540
Prepaid income taxes
(Note 7) 2,016 5,354 11,721
Other current assets 3,814 3,910 3,937
Total current assets 263,969 226,059 248,638
Property, net (Note 4) 242,510 219,964 204,948
Cash surrender value of
life insurance, net of
policy loans (Note 8) 36,715 34,628 33,864
Other 22,144 19,655 19,292
Total assets $565,338 $500,306 $506,742
Liabilities
Short-term borrowings (Note 6) $ 21,422 $ 26,598 $ 5,439
Current maturities of
long-term debt (Note 6) 3,284 2,778 2,778
Accounts payable 49,673 44,646 55,745
Accrued liabilities (Note 5) 36,425 25,271 32,682
Total current liabilities 110,804 99,293 96,644
Long-term debt (Note 6) 164,611 146,736 147,430
Deferred income taxes (Note 7) 16,209 7,738 18,410
Other deferred liabilities (Note 8) 25,468 24,585 24,519
Minority interest (Note 2) 4,186 --- ---
Total liabilities 321,278 278,352 287,003
Commitments and Contingencies
(Notes 9 and 10)
Stockholders' Investment
(Notes 6 and 9)
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,
13,984,037 shares outstanding
at October 2, 1994, 13,845,854 shares
outstanding at September 26, 1993 and
13,830,479 shares outstanding at
June 27, 1993 393 393 393
Capital in excess of par 34,455 33,581 32,413
Retained earnings 260,705 244,006 244,066
Foreign currency translation loss (3,661) (5,536) (6,396)
Unamortized stock compensation (2,802) (5,137) (5,259)
Treasury stock, at cost (5,645,162
shares at October 2, 1994,
5,783,345 shares at September 26,
1993 and 5,798,720 shares at
June 27, 1993) (45,030) (45,353) (45,478)
Total stockholders' investment 244,060 221,954 219,739
Total liabilities and
stockholders' investment $565,338 $500,306 $506,742
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
22
<PAGE>
Guilford Mills, Inc.
Consolidated Statements of Income
For the Year Ended October 2, 1994, the Transition Quarter from June 28, 1993
to September 26, 1993, the Years Ended June 27, 1993 and June 28, 1992
(In thousands except per share data)
<TABLE>
<S> <C> <C> <C> <C>
October 2, September 26, June 27, June 28,
1994 1993 1993 1992
(53 Weeks) (13 Weeks) (52 Weeks) (52 Weeks)
Net Sales $703,700 $141,450 $654,435 $614,905
Costs and Expenses:
Cost of goods sold 585,244 118,548 531,892 499,814
Selling and administrative 66,566 17,311 70,152 65,726
Restructuring and other
costs (Note 12) --- 5,377 --- 3,837
651,810 141,236 602,044 569,377
Operating Income 51,890 214 52,391 45,528
Other Expense:
Interest Expense 12,428 2,536 8,155 6,990
Other Expense 551 165 384 4,480
12,979 2,701 8,539 11,470
Income (Loss) Before Income
Taxes and Cumulative
Effect of Change In
Accounting Principle 38,911 (2,487) 43,852 34,058
Income Tax Provision
(Benefit) (Note 7) 13,787 (1,400) 15,000 9,200
Income (Loss) Before
Cumulative Effect of Change
In Accounting Principle 25,124 (1,087) 28,852 24,858
Cumulative Effect on Prior
Years of Change in Accounting
Principle (Note 7) --- 3,100 --- ---
Net Income $25,124 $2,013 $ 28,852 $ 24,858
Income (Loss) Per Share
Before Cumulative Effect
of Change in Accounting
Principle:
Primary $1.82 $(0.08) $2.11 $1.85
Fully Diluted 1.71 (0.08) 1.96 1.73
Net Income Per Share:
Primary $1.82 $ .15 $2.11 $1.85
Fully Diluted 1.71 .15 1.96 1.73
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
23
Guilford Mills, Inc.
Consolidated Statements of Stockholders' Investment
For the Year Ended October 2, 1994, the Transition Quarter from June 28, 1993
to September 26, 1993, the Years Ended June 27, 1993 and June 28, 1992
(In thousands except share data)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Foreign
Capital in Currency Unamortized
Common Excess of Retained Translation Stock Treasury
Stock Par Earnings Gain (Loss) Compensation Stock
Balance, June
30, 1991 $262 $24,689 $206,345 $ (2,546) $ (2,860) $(47,832)
Three-for-two
stock split 131 (133) -- -- -- --
Issuance of
201,000 shares
of treasury
stock and
vesting of
3,000 shares
under the
restricted
stock plan,
less forfeitures
of 27,000
shares -- 2,044 -- -- (3,339) 1,295
Compensation
under restricted
stock plan -- -- -- -- 605 --
Issuance of
74,222 shares
of treasury
stock under
employee stock
ownership
plan -- (571) -- -- -- 571
Shares to be
issued in fiscal
1993 under
employee stock
ownership plan -- 3,334 -- -- -- --
Issuance of
19,760 shares
of treasury
stock for
options
exercised -- 203 -- -- -- 86
Foreign currency
translation
gain -- -- -- 6,717 -- --
Cash dividends
($.57
per share) -- -- (7,689) -- -- --
Net income -- -- 24,858 -- -- --
Balance, June
28, 1992 393 29,566 223,514 4,171 (5,594) (45,880)
Issuance of
71,422 shares
of treasury
stock and
vesting of
14,000 shares
under the
restricted
stock plan,
less forfeitures
of 91,500
shares -- 1,264 -- -- (313) (951)
Compensation
under restricted
stock plan -- -- -- -- 648 --
Issuance of
134,722 shares
of treasury
stock under
employee stock
ownership
plan -- (1,038) -- -- -- 1,038
Shares to be
issued in
fiscal 1994
under
employee stock
ownership
plan -- 2,489 -- -- -- --
Issuance of
40,750 shares
of treasury
stock for
options
exercised -- 132 -- -- -- 315
Foreign currency
translation
loss -- -- -- (10,567) -- --
Cash dividends
($.60 per
share) -- -- (8,300) -- -- --
Net income -- -- 28,852 -- -- --
Balance, June
27, 1993 393 32,413 244,066 (6,396) (5,259) (45,478)
Issuance of
10,000 shares
of treasury
stock under
the restricted
stock plan -- 123 -- -- (201) 78
Compensation
under
restricted
stock plan -- -- -- -- 323 --
Shares to be
issued in
fiscal 1994
under employee
stock
ownership
plan -- 1,030 -- -- -- --
Issuance of
5,375 shares
of treasury
stock for
options
exercised -- 15 -- -- -- 47
Foreign currency
translation
gain -- -- -- 860 -- --
Cash dividends
($.15 per
share) -- -- (2,073) -- -- --
Net income -- -- 2,013 -- -- --
Balance, September
26, 1993 393 33,581 244,006 (5,536) (5,137) (45,353)
Vesting of
72,400 shares
under the
restricted
stock plan,
less forfeitures
of 76,104
shares -- -- -- -- 1,351 (1,351)
Compensation
under
restricted
stock plan -- -- -- -- 984 --
Issuance of
160,537
shares of
treasury
stock under
employee
stock
ownership
plan -- (1,260) -- -- -- 1,260
Shares to be
issued in
fiscal 1995
under
employee
stock
ownership
plan -- 2,033 -- -- -- --
Issuance of
54,000
shares of
treasury
stock for
options
exercised -- 101 -- -- -- 414
Foreign currency
translation
gain -- -- -- 1,875 -- --
Cash dividends
($.60 per
share) -- -- (8,425) -- -- --
Net income -- -- 25,124 -- -- --
Balance, October
2, 1994 $393 $34,455 $260,705 $(3,661) $(2,802) $(45,030)
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
24
<PAGE>
Guilford Mills, Inc.
Consolidated Statements of Cash Flows
For the Year Ended October 2, 1994, the Transition Quarter from June 28, 1993
to September 26, 1993, the Years Ended June 27, 1993 and June 28, 1992
(In thousands)
<TABLE>
<S> <C> <C> <C> <C>
October 2, September 26, June 27, June 28,
1994 1993 1993 1992
(53 Weeks) (13 Weeks) (52 Weeks) (52 Weeks)
Cash Flows From
Operating Activities:
Net income $25,124 $ 2,013 $28,852 $24,858
Non-cash items included
in net income --
Depreciation and
amortization 40,282 9,466 28,284 26,813
(Gain) loss on
disposition of property 605 111 (1,370) 1,875
Deferred (prepaid)
income taxes 5,715 (1,045) (100) (1,800)
Increase in cash surrender
value of life insurance (2,087) (764) (3,103) (4,527)
Restructuring and
other costs --- 5,377 --- 3,837
Cumulative effect on prior
years of change in accounting
principle --- (3,100) --- ---
Compensation earned
underrestricted stock plan 984 323 648 605
Shares to be issued under
employee stock ownership plan 2,033 1,030 2,489 3,334
Changes in assets and
liabilities --
Receivables (22,474) 18,988 (13,633) (8,054)
Inventories (85) (15,277) (12,507) (5,848)
Other current assets 854 65 1,931 (2,202)
Accounts payable 5,950 (10,827) 9,283 7,200
Accrued liabilities 4,999 (13,267) 2,000 6,284
Other 555 (135) (1,360) (1,098)
Net cash provided (used)
by operating activities 62,455 (7,042) 41,414 51,277
Cash Flows From Investing
Activities:
Additions to property (47,711) (23,818) (102,174) (35,763)
Proceeds from disposition
of property 2,303 686 2,812 6,739
Increase in other assets (4,515) (1,112) (864) (3,188)
Purchase of business,
net of cash acquired
(Note 2) (9,868) --- --- ---
Net cash used in investing
activities (59,791) (24,244) (100,226) (32,212)
Cash Flows From Financing
Activities:
Minority interest 195 --- --- ---
Short-term borrowings
(repayments), net (11,300) 21,029 1,788 (8,169)
Payments of long-term debt (2,801) (694) (6,806) (3,485)
Proceeds from issuance of
long-term debt 20,000 --- 75,000 ---
Cash dividends (8,425) (2,073) (8,300) (7,689)
Common stock options
exercised 515 62 447 289
Net cash provided (used)
by financing activities (1,816) 18,324 62,129 (19,054)
Effect of Exchange Rate
Changes on Cash and
Cash Equivalents 350 (7) (1,339) 1,578
Net Increase (Decrease) In
Cash and Cash Equivalents 1,198 (12,969) 1,978 1,589
Beginning Cash and
Cash Equivalents 4,912 17,881 15,903 14,314
Ending Cash and Cash
Equivalents $ 6,110 $ 4,912 $17,881 $15,903
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
25
<PAGE>
Notes To Consolidated Financial Statements
(In thousands except share data)
1. Description of Business and Summary of Significant Accounting Policies:
Description of Business -- The Company produces, processes and sells warp and
circular knit fabrics and woven velours. The Company sells its finished
fabrics to customers who manufacture a broad range of apparel, automotive and
home furnishings products. During 1994 and the transition quarter, no single
customer accounted for 10% or more of net sales. One customer accounted for
13% of net sales during 1993. No customer accounted for 10% or more of net
sales during 1992.
Principles of Consolidation -- The consolidated financial statements include
the accounts of Guilford Mills, Inc. and its majority owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Minority Interest - Minority interest represents the minority stockholders'
proportionate share of the equity of Grupo Ambar, S.A. de C.V. At October 2,
1994 the Company owned 75% of the capital stock of Grupo Ambar.
Reclassifications - For comparative purposes, certain amounts in the 1993 and
1992 financial statements have been reclassified to conform with the 1994
presentation.
Cash Equivalents -- All highly liquid investments with an original maturity of
three months or less are considered to be cash equivalents. The carrying
amount of cash equivalents approximates fair value.
Accounts Receivable -- As of October 2, 1994, September 26, 1993 and June 27,
1993, approximately 37%, 39% and 40%, respectively, of the Company's accounts
receivable were factored on a non-recourse basis. The Company performs on-
going credit evaluations of its non-factored customers' financial condition
and generally does not require collateral. The Company competes primarily
in the apparel and automotive industries and sells its products to a
multitude of customers in numerous geographical locations throughout the
world. There is not a disproportionate concentration of risk. Allowances
for doubtful accounts were $8,545, $8,748 and $8,578 at October 2, 1994,
September 26, 1993, and June 27, 1993, respectively.
Inventories -- Inventories are carried at the lower of cost or market. Cost
is determined using the last-in, first-out (LIFO) method for substantially all
inventories.
Property -- Property is carried at cost, and depreciation is provided for
financial reporting primarily on the straight-line method. Accelerated methods
are used for income tax reporting. Depreciation rates are reviewed annually
and revised, if necessary, to reflect estimated remaining useful lives.
Income Taxes -- Deferred or prepaid income taxes are provided for differences
in timing of expense and income recognition between tax and financial
reporting. United States income taxes are not provided on the income of
foreign operations, since such income has been reinvested and is not expected
to be repatriated. Undistributed earnings of foreign operations were $14,873
at October 2, 1994, $11,180 at September 26, 1993 and $11,816 at June 27,
1993.
Foreign Currency Translation -- The financial statements of majority owned
foreign subsidiaries are translated into dollars at the year-end rate of
exchange for asset and liability accounts and the average rate of exchange for
income statement accounts. Resulting translation gains or losses are reflected
in the foreign currency translation account in the stockholders' investment
section of the accompanying balance sheets and do not effect the results of
operations.
Revenue Recognition -- The Company recognizes a sale when goods are shipped or
when ownership is assumed by the customer.
26
<PAGE>
Per Share Information -- Primary income per share information has been
determined by dividing the respective income amounts by the weighted average
number of shares of common stock and common stock equivalents outstanding
during the periods (13,776,000 in 1994, 13,646,000 in the transition quarter,
13,674,000 in 1993, and 13,465,000 in 1992). Fully diluted income per share
information also considers as applicable (i) the dilutive effect assuming that
the Company's convertible debentures were converted at the beginning of the
year, with earnings being increased by the interest expense, net of taxes,
that would not have been incurred had conversion taken place and (ii) an
additional dilutive effect for stock options and shares issued under the
restricted stock plan. The weighted average number of fully diluted shares of
common stock and equivalents was 16,059,000 in 1994, 13,650,000 in the
transition quarter, 15,933,000 in 1993, and 15,783,000 in 1992.
Supplemental Cash Flow Information - The Company paid interest of $12,217
during 1994, $5,309 during the transition quarter, $6,317 during 1993 and
$5,729 during 1992. The Company paid income taxes of $7,391 during 1994,
$3,893 during the transition quarter, $14,558 during 1993 and $10,865 during
1992. Non-cash activities consist of $1,351 in 1994 for the forfeiture of
treasury shares under the restricted stock plan and $201 during the transition
quarter, $313 in 1993 and $3,339 in 1992 for the issuance of treasury shares
under the restricted stock plan, net of shares forfeited under the restricted
stock plan.
Change in Fiscal Year - On August 19, 1993, the Board of Directors approved a
change in the Company's fiscal year for financial reporting purposes from a
fiscal year ending on the Sunday nearest to June 30 to the Sunday nearest to
September 30. The change in the fiscal year reflects a natural movement of the
manufacturing cycle closer to the needs and desires of the Company's customers.
The consolidated financial statements include presentation of the transition
quarter beginning on June 28, 1993 and ending on September 26, 1993.
Proforma data for the quarters ended September 26, 1993 and September 27, 1992
consist of the following:
<TABLE>
<S> <C> <C>
1993 1992
(unaudited)
Net sales $141,450 $151,722
Gross profit 22,902 28,623
Operating Income 214 12,637
Income tax provision (benefit) (1,400) 3,700
Income (loss) before cumulative effect
of change in accounting principle (1,087) 6,818
Cumulative effect on prior years of
change in accounting principle 3,100 ---
Net Income 2,013 6,818
Income (loss) per share before
cumulative effect of change in
accounting principle:
Primary (0.08) .50
Fully Diluted (0.08) .47
Net Income Per Share:
Primary .15 .50
Fully Diluted .15 .47
</TABLE>
2. Acquisition of Grupo Ambar, S.A. de C.V. and Subsidiaries
On August 18, 1994, the Company purchased 55% of the outstanding capital
stock of Grupo Ambar, S.A. de C.V. and Subsidiaries (Grupo). Additional
consideration of up to $3,700,000 may be paid based on Grupo's earnings
through December 31, 1995. The acquisition increased the Company's
ownership in Grupo to 75%. Grupo is a leading manufacturer of knit textile
fabrics in Mexico.
The Company recorded its equity in the earnings of Grupo through August 18,
1994, and the consolidated statement of income for fiscal 1994 includes the
operating results of Grupo thereafter. The minority stockholders' 25%
proportionate interest in Grupo's net income after August 18, 1994 is included
in other expense in the 1994 statement of income.
27
<PAGE>
3. Inventories:
Inventories at October 2, 1994, September 26, 1993 and June 27, 1993 consist of
the following:
<TABLE>
<S> <C> <C> <C>
October 2, September 26, June 27,
1994 1993 1993
Finished goods $ 40,455 $ 49,285 $ 40,865
Raw materials and
work in process 65,810 57,140 50,151
Manufacturing supplies 12,311 10,285 9,068
Total inventories valued
at first-in, first-out
(FIFO) cost 118,576 116,710 100,084
Less -- Adjustments to
reduce FIFO cost to
LIFO cost, net 12,841 18,646 17,544
Total inventories $105,735 $ 98,064 $ 82,540
</TABLE>
4. Property:
Property at October 2, 1994, September 26, 1993 and June 27, 1993 consists of
the following:
<TABLE>
<S> <C> <C> <C>
October 2, September 26, June 27,
1994 1993 1993
Land $ 11,583 $ 7,741 $ 6,130
Buildings 85,802 62,707 57,062
Machinery and equipment 415,664 328,660 310,938
Construction in progress 4,557 41,755 43,698
517,606 440,863 417,828
Less -- Accumulated depreciation 275,096 220,899 212,880
Property, net $242,510 $219,964 $204,948
</TABLE>
5. Accrued Liabilities:
Accrued liabilities at October 2, 1994, September 26, 1993 and June 27, 1993
consist of the following:
<TABLE>
<S> <C> <C> <C>
October 2, September 26, June 27,
1994 1993 1993
Payroll and related benefits $18,093 $ 9,566 $14,203
Income taxes 1,695 654 5,053
Other 16,637 15,051 13,426
Total accrued liabilities $36,425 $25,271 $32,682
</TABLE>
6. Short-Term Borrowings and Long-Term Debt:
The Company traditionally uses short-term bank borrowings to meet seasonal
working capital needs. The maximum short-term borrowings during 1994, the
transition quarter, 1993 and 1992 were $42,510, $25,347, $35,144, and $18,219,
respectively; the average borrowings were $26,279, $10,567, $13,827, and
$4,086, respectively; and the weighted average interest rates were 7%, 7%, 4%
and 5% (7%, 7%, 4% and 5% for U.S. borrowings), respectively. The Company
has no compensating balance requirements.
Long-term debt at October 2, 1994, September 26, 1993, and June 27, 1993
consists of the following:
<TABLE>
<S> <C> <C> <C>
October 2, September 26, June 27,
1994 1993 1993
Senior, unsecured notes, due
in annual payments of
$10,714 from 1997 to 2003,
interest at 7.569% $ 75,000 $ 75,000 $ 75,000
Convertible subordinated
debentures, due in various
payments from 1999 through
2012, convertible into common
stock at $29.50 per share,
interest at 6% 66,180 66,180 66,180
Term loan, due in quarterly
payments of $695 to 1997,
interest at 8.38% 5,556 8,334 9,028
Senior, unsecured notes, due in
1999, interest at 7.49% 20,000 --- ---
Other 1,159 --- ---
167,895 149,514 150,208
Less -- Current maturities 3,284 2,778 2,778
Total $164,611 $146,736 $147,430
</TABLE>
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 were used to fund the Mexico acquisition, to repay certain other
debt obligations, and for general corporate purposes.
During 1993, the Company entered into an unsecured revolving credit
agreement which matures on May 1, 1996 and provides for borrowings of up to
$25,000. The agreement provides for various interest rates based on the
prime rate or LIBOR at the Company's option. No borrowings were outstanding
under this facility at October 2, 1994.
The fair value of the Company's publicly traded convertible subordinated
debentures at October 2, 1994, September 26, 1993 and June 27, 1993
approximated $59,562, $63,036 and $64,856, respectively, based upon the quoted
market price of the issue. The fair value of the remaining long-term debt of
the Company approximates the carrying value.
Annual maturities of long-term debt for the next five years are $3,284 in
1995, $3,132 in 1996, $14,804 in 1997, $14,534 in 1998 and $34,520 in 1999.
28
<PAGE>
Under the terms of the Company's debt agreements, $31,615 of retained
earnings as of October 2, 1994 is available for the payment of cash dividends.
Certain requirements and restrictions apply to future indebtedness,
stockholders' investment, tangible net worth, net current assets and
investments. As of October 2, 1994, the Company was in compliance with all
covenants under its debt agreements.
7. Income Taxes:
Effective June 28, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes", utilizing the prospective adoption method. As a result, a benefit of
$3,100 was recognized during the transition quarter ended September 26, 1993
for the cumulative effect on prior years of the change in accounting
principle. As of June 28, 1993, the Company recorded an adjustment of $11,728
to reduce its deferred income tax liabilities, partially offset by a
reduction in its prepaid income taxes of $8,628, for a net reduction the
Company's net deferred income tax liabilities of $3,100.
The net deferred income tax liability is comprised of the following:
<TABLE>
<S> <C> <C> <C>
October 2, September 26, June 28,
1994 1993 1993
Assets $ 22,191 $ 22,856 $ 19,797
Liabilities (36,384) (25,240) (23,386)
Total $(14,193) $ (2,384) $ (3,589)
</TABLE>
No valuation allowances against deferred income tax assets were recorded at
October 2, 1994, September 26, 1993 or June 28, 1993.
Temporary differences and carryforwards which gave rise to significant
deferred income tax assets (liabilities) as of October 2, 1994, September 26,
1993 and June 28, 1993 were as follows:
<TABLE>
<S> <C> <C> <C>
October 2, September 26, June 28,
1994 1993 1993
Current prepaid (deferred)
income taxes:
Allowances for doubtful accounts $ 3,028 $ 3,219 $ 3,220
Inventory valuation differences (2,941) -- --
Accrued restructuring and
other costs 420 1,867 --
Prepaid healthcare costs (413) (1,037) (724)
Accrued expenses not currently
deductible for tax 639 830 739
General business credit carry-
forwards (expire 2005-2009) 1,571 524 210
Accrued environmental expenses 402 402 402
Other, net (690) (451) (754)
Total current prepaid
income taxes $ 2,016 $ 5,354 $ 3,093
Long-term prepaid (deferred)
income taxes:
Property $(28,896) $(22,036) $(20,597)
Accrued pension and other
employee benefits 6,263 7,239 7,702
Alternative minimum and other
tax credit carryforwards
(no expiration) 6,329 5,434 4,449
Accrued environmental expenses 2,286 3,114 3,242
Investments in limited partnerships (2,083) (1,267) (1,249)
Other, net (108) (222) (229)
Total long-term deferred
income taxes $(16,209) $ (7,738) $ (6,682)
</TABLE>
The provision (benefit) for income taxes consists of the following
elements:
<TABLE>
<S> <C> <C> <C> <C>
October 2, September 26, June 27, June 28,
1994 1993 1993 1992
Currently payable
(refundable):
U.S. Federal $ 4,718 $ 318 $10,600 $ 7,700
State 803 87 2,800 2,600
Foreign 2,196 (792) 1,700 700
Deferred payable
(prepaid):
U.S. Federal 5,632 (1,179) 100 (1,000)
State 747 (207) -- (600)
Foreign (309) 373 (200) (200)
$13,787 $(1,400) $15,000 $ 9,200
</TABLE>
The tax provision as a percent of pre-tax income differs from the statutory
U.S. Federal rate for the following reasons:
<TABLE>
<S> <C> <C> <C> <C>
October 2, September 26, June 27, June 28,
1994 1993 1993 1992
Statutory U.S. Federal
income tax rate 35.0% (35.0)% 34.5% 34.0%
State income taxes,
net of Federal
income tax reduction 4.1 (3.4) 4.6 3.9
Tax credits (3.1) (12.6) (2.9) (3.6)
Foreign Sales
Corporation (1.3) (6.2) (1.4) (1.4)
Write-off of negative
goodwill (Note 12) -- -- -- (6.3)
Other 0.7 0.9 (0.6) 0.4
Effective income tax rate 35.4% (56.3)% 34.2% 27.0%
</TABLE>
29
<PAGE>
8. Benefit Plans:
Guilford Mills, Inc. has a noncontributory defined benefit plan for the
majority of its hourly employees. Gold Mills, Inc., a wholly owned
subsidiary, also has a noncontributory defined benefit plan and a multi-
employer pension plan covering the majority of its employees. The financial
status of the domestic defined benefit plans at October 2, 1994, September
26, 1993 and June 27, 1993 is as follows:
<TABLE>
<S> <C> <C> <C>
October 2, September 26, June 27,
1994 1993 1993
Fair value of plan assets,
primarily marketable
securities, short-term
investment funds and
insurance company contracts $16,631 $13,833 $13,833
Accumulated benefit
obligation, including vested
benefits of $16,085, $14,526
and $12,158 16,456 14,964 12,485
Additional benefits based on
estimated future salary levels 4,035 3,037 3,159
Projected benefit obligation 20,491 18,001 15,644
Projected benefit obligation
in excess of plan assets (3,860) (4,168) (1,811)
Unrecognized net loss 5,948 6,201 2,990
Unrecognized net transitional
asset (2,742) (2,932) (3,068)
Accrued pension liability $ (654) $ (899) $(1,889)
</TABLE>
The projected benefit obligation has been determined for 1994 using an
assumed discount rate of 7.25% and an assumed long-term rate of salary
progression of 4%. The assumed long-term rate of return on plan assets is 9%.
For the transition quarter and the fiscal year ended 1993, the projected
benefit obligation has been determined using an assumed discount rate of 8%,
and an assumed long-term rate of salary progression of 5%. The assumed long-
term rate of return on plan assets is 8%.
Guilford Europe Limited, a wholly owned subsidiary, has a defined benefit
pension plan with an actuarial present value of accumulated plan benefits of
$9,070 and net assets available for plan benefits of $9,081 as of December 31,
1993. The present value of plan benefits for Guilford Europe Limited was
determined using an assumed discount rate of 8.5% and an assumed long-term rate
of salary progression of 7%. The assumed long-term rate of return on plan
assets was 8.5%.
Pension expense includes the following components:
<TABLE>
<S> <C> <C> <C> <C>
October 2, September 26, June 27, June 28,
1994 1993 1993 1992
Domestic defined
benefit plans:
Service cost --
benefits earned
during the period $ 1,036 $ 259 $ 857 $ 701
Interest on projected
benefit obligation 1,293 323 1,097 838
Actual return on
plan assets (1,358) (90) (1,238) (990)
Net amortization
and deferral 165 (208) 149 (255)
1,136 284 865 294
Domestic multi-
employer plan 238 74 220 187
Foreign defined
benefit plan 306 101 441 456
Total $ 1,680 $ 459 $ 1,526 $ 937
</TABLE>
The Company maintains defined contribution plans for certain officers and
salaried employees. Contributions under these plans are determined by the
Board of Directors. During 1994, the transition quarter, 1993 and 1992, the
annual provisions under the defined contribution plans were $2,543, $762,
$1,947 and $1,681, respectively.
The Company also maintains deferred compensation plans for certain officers
and salaried employees. These plans are funded through life insurance and are
being provided for currently. During 1994, the transition quarter, 1993 and
1992, the annual provisions under these plans were $1,882, $558, $1,864, and
$2,210, respectively. The liability for deferred compensation was $16,764 at
October 2, 1994, $16,404 at September 26, 1993 and $16,266 at June 27, 1993 and
is included in other deferred liabilities in the accompanying balance sheets.
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<PAGE>
9. Capital Stock and Stock Compensation:
The Company's common stock was split on a three-for-two basis in January 1992
(and was effected in the form of a 50% stock dividend). All common stock and
per share information have been restated to reflect the effect of this split.
The Company has a stock option plan for key employees and directors covering
661,308 shares of common stock. Options granted may be either incentive stock
options or non-qualified options. Under the terms of the plan, the purchase
price of shares subject to each incentive option granted will not be less than
fair market value at the date of grant. Incentive options granted are
exercisable over a three-year period commencing two years after the date of
grant. Non-qualified options are exercisable over a three-year period
commencing in the year of the grant. Option activity under the plan is as
follows:
<TABLE>
<S> <C> <C>
Number of
Shares Exercise Price
Under Option Per Share
Balance, June 30, 1991 554,601 9.33 to 20.75
Granted 356,500 13.67 to 24.38
Exercised (19,760) 15.00 to 20.75
Forfeited (69,215) 9.33 to 17.00
Cash redemption (264,251) 15.00
Balance, June 28, 1992 557,875 9.33 to 24.38
Granted 48,750 22.13 to 25.50
Exercised (40,750) 9.33 to 22.13
Forfeited (39,250) 9.33 to 25.50
Balance, June 27, 1993 526,625 9.33 to 24.50
Granted 2,000 21.00
Exercised (5,375) 9.33 to 13.67
Balance, September 26, 1993 523,250 9.33 to 24.50
Granted 30,000 20.19
Exercised (54,000) 9.33 to 13.67
Forfeited (58,250) 9.33 to 24.50
Balance, October 2, 1994 441,000 9.33 to 24.50
</TABLE>
These options expire at various dates through fiscal 1999. Incentive
options exercisable at October 2, 1994, September 26, 1993 and June 27, 1993
were 48,750, 55,417 and 26,625, respectively. Non-qualified options
exercisable at October 2, 1994, September 26, 1993 and June 27, 1993 were
83,333, 45,417 and 43,750, respectively.
The Company has reserved 1,500,000 shares of common stock for the 1989
Restricted Stock Plan which covers certain key salaried employees. A total
of 397,250 shares are issued and outstanding under the plan at October 2,
1994. These shares carry voting and dividend rights; however, sale of the
shares is restricted prior to vesting. Subject to continued employment,
vesting occurs three years from the date of grant for 20% of the shares and
ten years from the date of grant for the remaining 80% of the shares. The
vesting date for the 20% portion occurred on October 2, 1994. Vesting of the
80% portion has been accelerated to vest evenly over the next three years
beginning January 2, 1995 given that defined earnings levels were achieved.
Dividend payments are being made to an escrow account. Shares issued under
the plan are recorded at their fair market value on date of grant with a
corresponding charge to stockholders' investment representing the unearned
portion of the award.
The unearned portion is being amortized as compensation expense on a
straight-line basis over the related vesting period. Compensation expense
totaled $984, $323, $648 and $605 during 1994, the transition quarter,1993
and 1992, respectively.
Effective July 1, 1990, the Company adopted the Guilford Pride Employee
Stock Ownership Plan covering all U.S. full-time employees who have completed
one year of service. Awards are made to the plan each year, in the form of
shares of the Company's common stock or in cash which is used to purchase
shares of the Company's common stock, based on the approval of the Board of
Directors and are generally tied to targeted earnings levels achieved during
the year. Rights to the stock vest over a seven-year period and vested shares
are payable at retirement, death or disability, or termination of employment.
Shares of common stock in the plan carry normal voting and dividend rights.
Compensation expense for the plan for 1994, the transition quarter, 1993 and
1992 was $2,233, $951, $2,489, and $3,334, respectively and the related
obligation at October 2, 1994, September 26, 1993 and June 27, 1993 for shares
to be issued is included in capital in excess of par.
At October 2, 1994, 2,243,390 shares of common stock were reserved for
conversion of convertible subordinated debentures.
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<PAGE>
The Company has an agreement with two of its directors whereby the Company
will, in the event of their death prior to June 22, 1995, purchase common stock
of the Company owned by the two directors in the amounts of $5,000 and $4,000.
The number of shares purchased will be based on the average market value of the
stock for a 20-day period preceding the date of death.
In 1990, the Board of Directors declared a dividend of one preferred stock
purchase right on each outstanding share of the Company's common stock to
holders of record on September 7, 1990. If the rights become exercisable,
separate certificates evidencing the rights will be distributed and each
right will entitle the holder to purchase from the Company a new series of
preferred stock at a predefined price. The rights also contain an option to
purchase shares in a change of control situation. The preferred stock, in
addition to a preferred dividend and liquidation right, will entitle the
holder to vote on a pro rata basis with the Company's common stock. The rights
are not exercisable until either certain changes in ownership of the Company
occur or an announcement of a tender offer for at least 30% of the Company's
common stock is made. The rights are redeemable by the Company at a fixed
price until 10 days, or longer as determined by the Board, after certain
defined events or at any time prior to the expiration of the rights on August
23, 2000 if such events do not occur. As of October 2, 1994, the Company had
reserved 300,000 preferred shares as issuable pursuant to these rights. At
the present time, the rights have no dilutive effect on the earnings per share
calculation.
10. Commitments and Contingencies:
The Company leases certain of its manufacturing and office facilities and
equipment under non-cancelable operating leases with remaining terms of up
to 22 years. Rent expense under these leases was $4,034 in 1994, $1,013 in
the transition quarter, $3,636 in 1993 and $3,712 in 1992.
At October 2, 1994, future minimum rental payments applicable to these
leases are $3,336 in 1995, $3,103 in 1996, $2,566 in 1997, $1,773 in 1998,
$1,773 in 1999 and $16,596 thereafter.
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 $3,500 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 will perform (i)
certain measures designed to prevent any potential threats to the environment
at the facility, (ii) an investigation to fully determine the nature of any
release of hazardous substances at the facility and (iii) 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. In the fourth quarter
of 1992, a pre-tax charge of $8,000 was provided for the estimated future
cost of the additional remediation and is included in restructuring and other
costs in the accompanying 1992 statement of income.
The Company initiated litigation against the former stockholders and other
parties involved in the sale of Gold to the Company. The parties have reached
a settlement. No recovery has been recognized in the Company's statement of
income as a result of the settlement.
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. An additional
32
<PAGE>
pre-tax charge of $1,250 was provided in the fourth quarter of 1992 to reflect
the estimated future costs of monitoring this and other environmental matters
including the removal of underground storage tanks at the Company's facilities.
Such amount is included in restructuring and other costs in the accompanying
1992 statement of income. At October 2, 1994, environmental accruals amounted
to $7,185 of which $6,188 is non-current and is included in other deferred
liabilities in the accompanying balance sheet.
The Company is also 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.
11. Geographic Information:
The accompanying financial statements include the following amounts related to
the operations of the Company's subsidiaries in Europe and Mexico:
<TABLE>
<S> <C> <C> <C> <C>
October 2, September 26, June 27, June 28,
1994 1993 1993 1992
Net sales $ 99,819 $17,195 $88,886 $94,261
Operating income 6,545 93 3,907 2,561
Income before
income taxes 5,573 (70) 4,408 1,881
Identifiable assets 100,797 59,496 57,268 65,519
</TABLE>
Information for 1994 includes the operating results of Grupo Ambar, the
Company's Mexican subsidiary, from August 18, 1994 (the date of the acquisition
of majority ownership control) and forward through year-end.
Substantially all remaining amounts in the accompanying financial statements
relate to operations in the United States.
12. Restructuring and Other Costs:
During the transition quarter, the Company recorded restructuring and other
costs of $5,377. This charge resulted from the shutdown and move of the
Company's printing facility; the write down of equipment and redundancy costs
associated with the restructuring of European operations; and severance
accruals for early retirements.
During the fourth quarter of 1992, a non-cash charge of $9,250 was recorded
which relates to the environmental contingencies described in Note 10. In
addition, a net gain, including the non-cash write-off of negative goodwill of
$5,726, was recorded which relates to the disposition of the Company's Augusta,
Georgia facilities and certain other assets related to the 1985 purchase of TRT
Corporation which was concluded in the fourth quarter of 1992.
13. Summary of Quarterly Earnings (Unaudited):
<TABLE>
<S> <C> <C> <C> <C>
1994 Quarter First Second Third Fourth
Net sales $157,576 $155,586 $183,235 $207,303
Gross profit 26,424 23,392 33,002 35,638
Net income 3,849 3,929 8,934 8,412
Net income per share:
Primary .28 .28 .65 .61
Fully diluted .28 .28 .59 .56
Transition Quarter
Net sales $141,450
Gross profit 22,902
Income (loss) before
cumulative effect of
change in accounting
principle (1,087)
Cumulative effect on prior
years of change in
accounting principle
(Note 7) 3,100
Net income 2,013
Loss per share before
cumulative effect of
change in accounting
principle:
Primary (.08)
Fully diluted (.08)
Net income per share:
Primary .15
Fully diluted .15
1993 Quarter First Second Third Fourth
Net sales $151,722 $157,488 $153,250 $191,975
Gross profit 28,623 27,678 27,368 38,874
Net income 6,818 5,206 6,143 10,685
Net income per share:
Primary .50 .38 .45 .78
Fully diluted .47 .36 .42 .71
</TABLE>
33
<PAGE>
Report of Independent Public Accountants
To the Stockholders and Board of Directors of Guilford Mills, Inc.:
We have audited the accompanying consolidated balance sheets of Guilford
Mills, Inc. (a Delaware corporation) and subsidiaries as of October 2, 1994,
September 26, 1993 and June 27, 1993, and the related consolidated statements
of income, stockholders' investment and cash flows for the year ended October
2, 1994, the transition quarter from June 28, 1993 to September 26, 1993 and
the years ended June 27, 1993 and June 28, 1992. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Guilford Mills, Inc. and
subsidiaries as of October 2, 1994, September 26, 1993 and June 27, 1993, and
the results of their operations and their cash flows for the year ended
October 2, 1994, the transition quarter from June 28, 1993 to September 26,
1993 and the years ended June 27, 1993 and June 28, 1992 in conformity with
generally accepted accounting principles.
As explained in Note 7 to the financial statements, effective June 28,
1993, the Company changed its method of accounting for income taxes as
required by Statement of Financial Accounting Standards No. 109.
Arthur Andersen LLP
Greensboro, North Carolina,
November 16, 1994
_______________________________________________________________________________
Statement of Management Responsibility
The management of Guilford Mills, Inc. has the responsibility for the
preparation of all information contained in the Annual Report. The financial
statements, including footnotes, have been prepared in accordance with
generally accepted accounting principles appropriate in the circumstances and
include amounts based on the best judgment of management.
In meeting its responsibilities for the accuracy, integrity and objectivity
of data in the financial statements, management maintains a system of internal
accounting controls designed to provide reasonable assurance of the reliability
of financial records and the safeguarding of assets. This system includes an
appropriate division of responsibility and is documented by written policies
and procedures that are communicated to employees with significant roles in
the financial reporting process and updated as necessary. There are limits
inherent in all systems of internal control based on the recognition that the
cost of such systems should be related to the benefits to be derived.
Management believes the Company's systems provide an appropriate balance.
The control environment is complimented by an internal auditing program that
independently assesses the effectiveness of the internal controls and reports
its finding to management throughout the year. The Company's independent
accountants are engaged to express an opinion on the Company's financial
statements. They objectively and independently review the performance of
management in carrying out its responsibility for reporting operating results
and financial condition. Their opinion is based on procedures which they
believe to be sufficient to provide reasonable assurances that the financial
statements contain no material errors.
The Audit Committee of the Board of Directors, which is comprised solely of
directors who are not employees of the Company, is responsible for monitoring
the Company's management control and reporting system. The Audit Committee
meets with management and the internal auditors periodically to review their
activities and responsibilities. The Audit Committee also meets periodically
with the independent auditors along with the internal auditors, both of whom
have free access to the Audit Committee without management's presence.
Terrence E. Geremski
Vice President/Chief Financial
Officer and Treasurer
34
