<PAGE>
Page 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-6922
GUILFORD MILLS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 13-1995928
-------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) number)
4925 West Market Street, Greensboro, N.C. 27407
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code - (910) 316-4000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes (X)
No ( )
Number of shares of common stock outstanding
at March 31, 1996 - 14,431,231
<PAGE>
Page 2
GUILFORD MILLS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The consolidated financial statements included herein have been
prepared by Guilford Mills, Inc. (the "Company" or "Guilford"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The Consolidated Balance Sheet as of October 1, 1995 has been taken from the
audited financial statements as of that date. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
latest annual report on Form 10-K for the year ended October 1, 1995 and Form
8-K and 8-K/A dated January 17, 1996.
The consolidated financial statements included herein reflect all
adjustments (none of which are other than normal recurring accruals) which are,
in the opinion of management, necessary for a fair presentation of the
information included. The following consolidated financial statements are
included:
Consolidated Statements of Income for the twenty-six weeks ended March
31, 1996 and April 2, 1995
Consolidated Statements of Income for the thirteen weeks ended March
31, 1996 and April 2, 1995
Consolidated Balance Sheets as of March 31, 1996 and October 1, 1995
Consolidated Statements of Cash Flows for the twenty-six weeks ended
March 31, 1996 and April 2, 1995
Condensed Notes to Consolidated Financial Statements
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Page 3
Guilford Mills, Inc.
C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E
For the Twenty-Six Weeks Ended March 31, 1996 and April 2, 1995
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------- ------------------ ------------------
MARCH 31, APRIL 2,
1996 1995
- ---------------------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
NET SALES $381,283 $384,379
- ---------------------------------------------------------------------------------------- ------------------ ------------------
- ---------------------------------------------------------------------------------------- ------------------ ------------------
COSTS AND EXPENSES:
Cost of goods sold 320,308 312,888
Selling and administrative 38,665 38,753
- ---------------------------------------------------------------------------------------- ------------------ ------------------
358,973 351,641
- ---------------------------------------------------------------------------------------- ------------------ ------------------
OPERATING INCOME 22,310 32,738
INTEREST EXPENSE 7,866 7,183
OTHER EXPENSE, NET 1,438 1,988
- ---------------------------------------------------------------------------------------- ------------------ ------------------
INCOME BEFORE INCOME TAXES 13,006 23,567
INCOME TAX PROVISION 4,376 8,088
- ---------------------------------------------------------------------------------------- ------------------ ------------------
NET INCOME $8,630 $ 15,479
- ---------------------------------------------------------------------------------------- ------------------ ------------------
NET INCOME PER SHARE:
Primary $.61 $1.11
Fully Diluted .59 1.03
- ---------------------------------------------------------------------------------------- ------------------ ------------------
DIVIDENDS PER SHARE $.30 $ .30
- ---------------------------------------------------------------------------------------- ------------------ ------------------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Page 4
Guilford Mills, Inc.
C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E
For the Thirteen Weeks Ended March 31, 1996 and April 2, 1995
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------- ------------------ ------------------
MARCH 31, APRIL 2,
1996 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------- ------------------ ------------------
NET SALES $207,097 $201,885
- ---------------------------------------------------------------------------------------- ------------------ ------------------
COSTS AND EXPENSES:
Cost of goods sold 173,721 163,405
Selling and administrative 19,575 20,046
- ---------------------------------------------------------------------------------------- ------------------ ------------------
193,296 183,451
- ---------------------------------------------------------------------------------------- ------------------ ------------------
OPERATING INCOME 13,801 18,434
INTEREST EXPENSE 4,466 3,472
OTHER EXPENSE, NET 427 886
- ---------------------------------------------------------------------------------------- ------------------ ------------------
INCOME BEFORE INCOME TAXES 8,908 14,076
INCOME TAX PROVISION 3,026 4,700
- ---------------------------------------------------------------------------------------- ------------------ ------------------
NET INCOME $5,882 $ 9,376
- ---------------------------------------------------------------------------------------- ------------------ ------------------
NET INCOME PER SHARE:
Primary $.41 $0.67
Fully Diluted .39 0.61
- ---------------------------------------------------------------------------------------- ------------------ ------------------
DIVIDENDS PER SHARE $.15 $ .15
- ---------------------------------------------------------------------------------------- ------------------ ------------------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
C O N S O L I D A T E D B A L A N C E S H E E T S
March 31, 1996 and October 1, 1995
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------ -------------------- -----------------
MARCH 31, October 1,
1996 1995
<S> <C> <C>
- ------------------------------------------------------------------------ -------------------- -----------------
ASSETS
Cash and cash equivalents $ 25,801 $ 17,964
Accounts receivable, net 153,324 148,656
Inventories (Note 3) 151,586 106,008
Prepaid income taxes 5,846 5,530
Other current assets 7,408 7,769
- ------------------------------------------------------------------------ -------------------- -----------------
Total current assets 343,965 285,927
Property, net (Note 4) 291,887 244,592
Cash surrender value of life insurance, net of policy loans 39,600 37,676
Other 21,928 18,176
- ------------------------------------------------------------------------ -------------------- -----------------
Total assets $697,380 $586,371
- ------------------------------------------------------------------------ -------------------- -----------------
LIABILITIES
Short-term borrowings $ 53,909 $ 9,587
Current maturities of long-term debt 4,126 4,078
Accounts payable 51,471 54,677
Accrued liabilities 43,747 39,352
- ------------------------------------------------------------------------ -------------------- -----------------
Total current liabilities 153,253 107,694
Long-term debt 226,335 166,368
Deferred income taxes 19,142 17,518
Other deferred liabilities 23,827 25,011
Minority interest 1,925 2,231
- ------------------------------------------------------------------------ -------------------- -----------------
Total liabilities $424,482 $318,822
- ------------------------------------------------------------------------ -------------------- -----------------
STOCKHOLDERS' INVESTMENT
Preferred stock, $1 par; 1,000,000 shares authorized, none issued
Common stock, $.02 par; 40,000,000 shares authorized, 19,629,199
shares issued, 14,431,231 shares outstanding at March 31, 1996
and 14,108,721 shares outstanding at October 1, 1995 393 393
Capital in excess of par 38,819 37,467
Retained earnings 290,227 285,880
Foreign currency translation loss (13,529) (10,110)
Unamortized stock compensation (611) (1,260)
Treasury stock, at cost (5,197,968 shares at March 31, 1996 and
5,520,478 shares at October 1, 1995) (42,401) (44,821)
- ------------------------------------------------------------------------ -------------------- -----------------
Total stockholders' investment 272,898 267,549
- ------------------------------------------------------------------------ -------------------- -----------------
Total liabilities and stockholders' investment $697,380 $586,371
- ------------------------------------------------------------------------ -------------------- -----------------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Page 6
Guilford Mills, Inc.
CO N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
For the Twenty-six Weeks Ended March 31, 1996 and April 2, 1995
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------- -------------------- ---------------------
MARCH 31, April 2,
1996 1995
<S> <C> <C>
- ---------------------------------------------------------------------------- -------------------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,630 $ 15,479
Non-cash items included in net income --
Depreciation and amortization 26,705 23,789
Loss (Gain) on disposition of property 66 (116)
Minority interest in Net (Income) Loss (46) 209
Deferred income taxes 1,658 168
Increase in cash surrender value of life insurance, net of policy loans (1,736) (754)
Compensation earned under restricted stock plan 649 765
Changes in assets and liabilities --
Receivables 4,729 (7,494)
Inventories (17,901) (14,271)
Other current assets 315 520
Accounts payable (7,584) 8,812
Accrued liabilities 1,570 7,371
Other (846) 471
- --------------------------------------------------------------- ------------- -------------------- ---------------------
Net cash provided by operating activities 16,209 34,949
- --------------------------------------------------------------- ------------- -------------------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property (23,091) (25,596)
Proceeds from disposition of property 823 350
Proceeds from sale of other assets -- 2,600
Decrease in other assets 153 1,671
Purchase of business, net of cash acquired (19,302) --
- --------------------------------------------------------------- ------------- -------------------- ---------------------
Net cash used in investing activities (41,417) (20,975)
- --------------------------------------------------------------- ------------- -------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings (repayments), net 44,608 (9,366)
Payments of long-term debt (65,473) (1,591)
Proceeds from issuance of long-term debt 58,777 4,166
Cash dividends (4,283) (4,197)
Common stock options exercised 187 375
- --------------------------------------------------------------- ------------- -------------------- ---------------------
Net cash provided by (used in) financing activities 33,816 (10,613)
- --------------------------------------------------------------- ------------- -------------------- ---------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (771) (1,851)
- --------------------------------------------------------------- ------------- -------------------- ---------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,837 1,510
EQUIVALENTS
- --------------------------------------------------------------- ------------- -------------------- ---------------------
BEGINNING CASH AND CASH EQUIVALENTS 17,964 6,110
ENDING CASH AND CASH EQUIVALENTS $ 25,801 $ 7,620
- --------------------------------------------------------------- ------------- -------------------- ---------------------
</TABLE>
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Page 7
GUILFORD MILLS, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(In thousands except share data)
1. Seasonal Fluctuations -- Results for any portion of a year are not
necessarily indicative of the results to be expected for a full year, due to
seasonal aspects of the textile industry.
2. Per Share Information -- Primary net income per share information has been
computed by dividing net income by the weighted average number of shares of
common stock, par value $.02 per share, of the Company (the "Common Stock") and
Common Stock equivalents outstanding during the periods. The average shares used
in computing primary net income per share for the twenty-six weeks ended March
31, 1996 and April 2, 1995 were 14,160,000 and 13,887,000, respectively. The
average shares used in computing primary net income per share for the thirteen
weeks ended March 31, 1996 and April 2, 1995 were 14,254,000 and 13,977,000,
respectively.
Fully diluted income per share information also considers as applicable (i)
the dilutive effect, if any, assuming that the Company's convertible debentures
were converted at the beginning of the current fiscal period, with earnings
being increased by the interest expense, net of income taxes, that would not
have been incurred had conversion taken place and (ii) any additional dilutive
effect for stock options and restricted stock grants. The average shares used in
computing fully diluted net income per share for the twenty-six weeks ended
March 31, 1996 and April 2, 1995 were 16,522,000 and 16,188,000, respectively.
The average shares used in computing fully diluted net income per share for the
thirteen weeks ended March 31, 1996 and April 2, 1995 were 16,561,000 and
16,228,000, respectively.
3. Inventories -- Inventories are carried at the lower of cost or market. Cost
is determined for the majority of all inventories using the LIFO (last-in,
first-out) method.
Inventories at March 31, 1996 and October 1, 1995 consisted of the
following:
<TABLE>
<CAPTION>
March 31, October 1,
1996 1995
------------------ -----------------
<S> <C> <C>
Finished goods $ 66,327 $ 45,745
Raw materials and work in process 94,419 69,786
Manufacturing supplies 12,163 11,968
------------------
-----------------
Total inventories valued at first-in, first-out (FIFO) cost 172,909 127,499
Less -- Adjustments to reduce FIFO cost to LIFO cost, net 21,323 21,491
------------------ -----------------
Total inventories $151,586 $106,008
================== =================
</TABLE>
4. Accumulated Depreciation -- Accumulated depreciation at March 31, 1996 and
October 1, 1995 was $325,813 and $302,576 respectively.
<PAGE>
Page 8
5. Acquisition -- On January 17, 1996, the Company acquired 100% of the
outstanding capital stock of Hofmann Laces, Ltd., Raschel Fashion Interknitting,
Ltd., and Curtains and Fabrics, Inc. (collectively "Hofmann Laces"). Hofmann
Laces produces knitted lace fabrics for the apparel, intimate apparel and home
furnishings markets. Hofmann Laces also produces stretch knit fabric for the
apparel, intimate apparel and swimsuit markets. Pursuant to the stock purchase
agreement, the aggregate purchase price consisted of three components: (i) a
cash payment of $22,007, representing an estimate of the combined net worth of
Hofmann Laces as of December 31, 1995, less a loan described below, (ii) 200,000
shares of the Company's Common Stock delivered to the seller at the closing
date, the further transfer of which is prohibited, with certain exceptions,
until December 31, 2000 and (iii) a contingent payment, payable in cash or
shares of the Company's Common Stock, or a combination of cash and Common Stock
based on a specified formula for the five year period ending December 31, 2000.
In addition, the Company loaned one of the Hofmann Laces' companies $16,500, an
amount equal to such company's accumulated adjustments account which was
distributed to the Seller at the closing date. The acquisition was accounted for
using the purchase method of accounting and accordingly the purchase price was
allocated to assets and liabilities based on their estimated fair values as of
the date of the acquisition.
The following unaudited pro forma information shows the results of the
Company's operations as though the purchase had been made at the beginning of
the second quarter of fiscal 1995: for the twenty-six weeks ended April 2, 1995,
sales of $402.8 million, net income of $17.3 million, and earnings per share of
$1.23: for the thirteen weeks ended April 2, 1995, sales of $220.3 million, net
income of $11.1 million, and earnings per share of .79 cents. The unaudited pro
forma results are not necessarily indicative of the actual results of operations
that would have occurred had the purchase actually been made at the beginning of
the second quarter of fiscal 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
For the first six months of fiscal 1996, consolidated sales of $381.3
million decreased $3.1 million from the prior year period. For the second
quarter of fiscal 1996, consolidated sales of $207.1 million increased $5.2
million from the comparable period of the prior year.
Sales of Hofmann Laces for the first six months and for the second quarter
of fiscal 1996 were 4.7% and 8.6% of consolidated sales, respectively. On
January 17, 1996, the Company acquired Hofmann Laces and its operating results
have been included thereafter.
Sales in the apparel and home fashions business unit declined 6.6% for the
first six months of fiscal 1996 compared to the prior year period. This resulted
from sales declines of 22.5% in intimate apparel which consists of lingerie,
sleepwear and robewear products, 8.0% in ready-to-wear warp and circular knit
products and 6.2% in shapewear and swimwear. These declines were
partially offset by sales increases of 8.9% in fastener and industrial products.
Sales for the second quarter of fiscal year 1996 declined 8.2% compared to the
prior year period. This resulted from sales declines of 33.6% in intimate
apparel, 4.8% in swimwear and shapewear, and 15.6% in ready-to-wear warp knit
and circular knit products.
These decreases were partially offset by sales increases of 15.8% in fastener
and industrial products, and 12.1% in linings and furniture fabric products.
Sales for the first six months and second quarter were adversely affected by the
weak retail environment. Although the outlook for the retail markets continues
to appear weak, the Company anticipates flat sales in this business unit for
fiscal 1996 due to a gain in market share of new value added products which is
expected to offset the decline in the traditional products.
Sales in the U.S. automotive business unit were flat for the first six
months and second quarter of fiscal 1996 compared to the prior year periods. For
the second quarter of fiscal 1996, recreational vehicle and van fabric sales
increased 18.5% and were offset by a decline of 6.4% in headliner and bodycloth
fabric sales. Although the domestic automotive original equipment manufacturer
(OEM) market has softened, the Company expects slightly improved sales growth
for fiscal 1996 in this business unit as a result of a change in mix to higher
value added products and continued market share growth in the headliner and
bodycloth markets.
<PAGE>
Page 9
Sales in the Company's U.K. automotive business unit declined 12.7% for the
first six months and 14.7% for the second quarter of fiscal 1996 compared to the
prior year periods. These decreases were the result of a softening European
automotive market with flat market forecasts and excess inventories. While there
is some opportunity for new programs, the Company expects lower full year sales
in its European operations compared to the prior year.
Sales of the Company's Mexican business unit increased 5.5% for the first
six months and 30.5% for the second quarter of fiscal 1996 compared to the prior
year periods. On a peso comparative basis, sales of the Mexican business unit
increased 68.8% for the first six months and 61.5% for the second quarter of
fiscal 1996 compared to the prior year periods. These increases were a result of
a change in sales mix which yielded a greater percentage of apparel sales. The
Company anticipates that the peso's uncertainty will continue to impact future
revenue translation and total sales of its Mexican subsidiary.
Margins for the first six months of fiscal 1996 declined to 16.0% from last
year's 18.6%. Sales volume decreases resulted in a margin loss of $3.9 million.
Margins in the automotive business unit were negatively impacted by $1.1 million
as a result of ten one-time model change launch costs in the Company's key
technologies. In addition, margins declined due to raw material price increases
and manufacturing inefficiences. Margins in the U.K. business unit were
adversely affected by $1.0 million as a result of price decreases due to the
devaluation of the British sterling from the Spanish peseta and German mark
and an unfavorable sales mix. The margins related to the fibers operations
were also impacted by a $1.8 million charge relating to the write-off of
inventory. Manufacturing inefficiencies in the apparel and U.S. automotive
business units also resulted in a loss of margin. Margins for the second quarter
of fiscal 1996 declined to 16.1% from last year's 19.1%. Sales volume decreases
resulted in a margin loss of $2.3 million. Margins in the U.K. business unit
were adversely affected by the devaluation of the British sterling from the
Spanish peseta and German mark and an unfavorable sales mix. These decreases
were partially offset by the inclusion of Hofmann Laces for the first time.
Selling and administrative expenses for the first six months and second
quarter of fiscal 1996 were relatively flat compared to the prior year periods.
Increased selling and administrative costs as a result of the Hofmann Laces
acquisition in the second quarter were offset by lower provision for performance
based incentive compensation plans.
Interest expense increased to $7.9 million for the first six months of
fiscal 1996 from the prior year period of $7.2 million and to $4.5 for the
second quarter of fiscal 1996 compared to the prior year period of $3.5 million.
These increases were due to the additional borrowings related to the acquisition
and consolidation of Hofmann Laces, which increased interest expense of $1.1
million. In addition, average short-term borrowings increased as a result of
working capital requirements but were more than offset by lower interest rates
as a result of favorable credit arrangements and interest income.
The effective income tax rate for the first six months of fiscal 1996 was
33.7% compared to the prior year period of 34.3% and was 34.0% for the second
quarter of fiscal 1996 compared to the prior year period of 33.4%.. The Company
expects the effective tax rate for the year to be approximately 34.0% due to the
proportionate share of U.K., Mexico and Hofmann Laces pre-tax income to the
total pre-tax income at higher statutory rates.
Net income for the first six months of fiscal 1996 decreased to $8.6
million from the prior year period of $15.5 million and to $5.9 million for the
second quarter of fiscal 1996 from the prior year period of $9.4 million.
The results of operations on a consolidated basis for the first six months
and the second quarter of 1996 were not significantly impacted by the
devaluation of the Mexican peso. In the balance sheet, the result of this
translation loss is a reduction in stockholders' equity, as required by
Statement of Financial Accounting Standards No. 52, and accordingly is not
reflected in the income of the Company. In management's view, a risk of loss of
earnings exists in the future related to net U.S. dollar transactions. The
Mexican government has issued guidelines allowing for the increase of selling
prices for both apparel and automotive manufacturers and the Company has
increased utilization of the Mexican operations. The Mexican operation has also
had success in limiting its exposure as a result of the peso devaluation by
invoicing in U.S. dollars certain transactions on products for ultimate export.
The Company cannot determine to what extent these actions may offset the
possible negative impact of this economic uncertainty.
<PAGE>
Page 10
Liquidity and Capital Requirements
At March 31, 1996, working capital was $190.7 million compared to $178.2
million at October 1, 1995. This increase in working capital primarily is a
result of increased accounts receivable of $4.7 million and inventory of $45.6
million, partially offset by increased short-term borrowings of $44.3 million.
Although the Company has experienced raw material cost increases, it has not had
an impact on the Company's liquidity. The Company maintains flexibility with
respect to its seasonal working capital needs through a committed revolving
credit facility of $150 million and its continued access to other traditional
sources of funds, including available uncommitted lines of credit aggregating
over $100 million, and the ability to receive advances against its factored
accounts receivable. Management believes that the Company's financial position
and operating performance will continue to provide the Company with necessary
capital from appropriate financial markets.
On January 17, 1996 the Company acquired 100% of the outstanding capital
stock of Hofmann Laces. On that date the Company borrowed approximately $60
million under its revolving credit facility to fund the purchase of the stock
and to refinance the majority of the existing debt of Hofmann Laces. This amount
has been classified as long-term debt on the Balance Sheet.
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 has performed (i) certain
measures designed to prevent any potential threats to the environment at the
facility and (ii) an investigation to fully determine the nature of any release
of hazardous substances at the facility. In addition, Gold will conduct 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 $8.0 million was provided for the estimated
future cost of the additional remediation. At March 31, 1996, environmental
accruals amounted to $6.1 million of which $5.1 million is non-current and is
included in other deferred liabilities on the Balance Sheet.
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 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; the Company has removed
substantially all underground storage tanks at its facilities). Management
believes at this time that the final resolution of this matter will not have a
material adverse effect on the Company's financial position or future results of
operations.
The Company is also involved in other litigation and environmental matters
arising in the ordinary course of business. Although the final outcome of these
matters cannot be determined, based on the facts presently known, it is
management's opinion that the final resolution of these matters will not have a
material adverse effect on the Company's financial position or future results of
operations.
<PAGE>
Page 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. Reference is made to the discussion regarding the
pending lawsuit brought by Skylon Corporation against George Greenberg, the
former president, and a current director of the Company, contained in
Item 3 to the Company's Annual Report on Form 10-K for the fiscal year ended
October 1, 1995, which item is incorporated herein by reference. On February
20, 1996, the Second Circuit Court of Appeals issued an order denying
Mr. Greenberg's petition for interlocutory appeal from a portion of an order
previously issued by the United States District Court of New York in this
matter. Mr. Greenberg continues to vigorously defend this matter.
Items 2 - 5. Not Applicable
Item 6. Reports on Form 8-K. On February 1, 1996, the Company filed a Form 8-K
in connection with the acquisition of Hofmann Laces and filed a subsequent Form
8-K/A on April 1, 1996 which set forth certain financial information relating to
the acquisition.
<PAGE>
Page 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GUILFORD MILLS, INC.
(Registrant)
Date: May 15, 1996 By: /s/ Terrence E. Geremski
Terrence E. Geremski
Vice President/Chief Financial
Officer and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> USDOLLAR
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-START> OCT-02-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 25,801
<SECURITIES> 0
<RECEIVABLES> 153,324
<ALLOWANCES> 0
<INVENTORY> 151,586
<CURRENT-ASSETS> 343,965
<PP&E> 617,700
<DEPRECIATION> 325,813
<TOTAL-ASSETS> 697,380
<CURRENT-LIABILITIES> 153,253
<BONDS> 0
393
0
<COMMON> 0
<OTHER-SE> 272,505
<TOTAL-LIABILITY-AND-EQUITY> 697,380
<SALES> 381,283
<TOTAL-REVENUES> 381,283
<CGS> 320,308
<TOTAL-COSTS> 320,308
<OTHER-EXPENSES> 1,438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,866
<INCOME-PRETAX> 13,006
<INCOME-TAX> 4,376
<INCOME-CONTINUING> 8,630
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,630
<EPS-PRIMARY> .61
<EPS-DILUTED> .59
</TABLE>
