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<TITLE> SECOND QUARTER 2000 FORM 10Q</TITLE>
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<H1 ALIGN=CENTER><FONT SIZE=3>FORM 10-Q<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549</FONT></H1>
<H1><FONT SIZE=3> [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</FONT></H1>
<H1><FONT SIZE=3> For the quarterly period ended April 2, 2000</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>OR</FONT></H1>
<H1><FONT SIZE=3> [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE<BR>
SECURITIES EXCHANGE ACT OF 1934</FONT></H1>
<H1><FONT SIZE=3> For the transition period from ______________ to ______________</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>Commission File Number 1-6922</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>GUILFORD MILLS, INC.</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>(Exact name of Registrant as specified in its charter)</FONT></H1>
<H1><FONT SIZE=3> Delaware
13-1995928<BR>
_________________________ ____________________________<BR>
(State or other jurisdiction of (I.R.S. Employer Identification<BR>
incorporation or organization) number)
</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>4925 West Market Street, Greensboro, N.C. 27407</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>(Address of principal executive offices)(Zip Code)</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>Registrant's telephone number, including area code - (336) 316-4000</FONT></H1>
<P><FONT SIZE=3>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 ( )</FONT></P>
<H1 ALIGN=CENTER><FONT SIZE=3>Number of shares of common stock outstanding<BR>
at April 2, 2000 – 19,194,295</FONT></H1>
<PAGE>
<H1 ALIGN=CENTER><FONT SIZE=3>GUILFORD MILLS, INC.</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3>QUARTERLY REPORT ON FORM 10-Q<BR>
FOR THE QUARTER ENDED APRIL 2, 2000</FONT></H1>
<H1 ALIGN=CENTER><FONT SIZE=3><U>PART I - FINANCIAL INFORMATION</U></FONT></H1>
<H2 ALIGN=LEFT><FONT SIZE=3>Item 1. Condensed Consolidated Financial Statements</FONT></H2>
<P><FONT SIZE=3>The condensed 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 Condensed Consolidated Balance Sheet
as of October 3, 1999 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 condensed 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 3, 1999. </FONT></P>
<P><FONT SIZE=3>The condensed 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. For comparative purposes, certain amounts have been
reclassified to conform with fiscal 2000 presentation. The following condensed
consolidated financial statements are included: </FONT></P>
<P><FONT SIZE=3> Consolidated Statements of Income for the thirteen weeks ended<BR>
April 2, 2000 and April 4, 1999<BR>
<BR>
Consolidated Statements of Income for the twenty-six weeks ended<BR>
April 2, 2000 and the twenty-seven weeks ended April 4, 1999<BR>
<BR>
Condensed Consolidated Balance Sheets as of April 2, 2000 and<BR>
October 3, 1999<BR>
<BR>
Condensed Consolidated Statements of Cash Flows for the twenty-six weeks ended<BR>
April 2, 2000 and the twenty-seven weeks ended April 4, 1999<BR>
<BR>
Condensed Notes to Consolidated Financial Statements</FONT></P>
<PAGE>
Guilford Mills, Inc.
CONSOLIDATED STATEMENTS OF INCOME
For the Thirteen Weeks Ended April 2, 2000 and April 4, 1999
(In thousands except per share data)
(Unaudited)
-----------------------------------------------------------------------
April 2, April 4,
2000 1999
-----------------------------------------------------------------------
Net Sales $ 211,089 $ 218,270
Costs and Expenses:
Cost of goods sold 178,380 181,151
Selling and administrative 25,881 25,616
-----------------------------------------------------------------------
204,261 206,767
-----------------------------------------------------------------------
Operating Income 6,828 11,503
Interest Expense 4,692 4,246
Other (Income) Expense, Net (2,506) 1,111
-----------------------------------------------------------------------
Income Before Income Tax Provision 4,642 6,146
Income Tax Provision 1,868 1,391
-----------------------------------------------------------------------
Net Income $ 2,774 $ 4,755
-----------------------------------------------------------------------
Net Income Per Share:
Basic $ 0.15 $ 0.21
Diluted 0.15 0.21
-----------------------------------------------------------------------
Dividends Per Share $ 0.11 $ 0.11
-----------------------------------------------------------------------
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
CONSOLIDATED STATEMENTS OF INCOME
For the Twenty-Six Weeks Ended April 2, 2000 and
the Twenty-Seven Weeks Ended April 4, 1999
(In thousands except per share data)
(Unaudited)
-----------------------------------------------------------------------
April 2, April 4,
2000 1999
(26 Weeks) (27 Weeks)
-----------------------------------------------------------------------
Net Sales $ 417,591 $ 433,183
Costs and Expenses:
Cost of goods sold 353,943 360,866
Selling and administrative 51,689 52,618
-----------------------------------------------------------------------
405,632 413,484
-----------------------------------------------------------------------
Operating Income 11,959 19,699
Interest Expense 9,163 8,373
Other (Income) Expense, Net (6,590) 1,630
-----------------------------------------------------------------------
Income Before Income Tax Provision 9,386 9,696
Income Tax Provision 3,585 2,578
-----------------------------------------------------------------------
Net Income $ 5,801 $ 7,118
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Net Income Per Share:
Basic $ 0.31 $ 0.31
Diluted 0.31 0.31
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Dividends Per Share $ 0.22 $ 0.22
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See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
April 2, 2000 and October 3, 1999
(In thousands)
----------------------------------------------------------------------
April 2, October 3,
2000 1999
(Unaudited)
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Assets
Cash and cash equivalents $ 15,614 $ 22,554
Short-term investments 281 --
Accounts receivable, net 155,597 160,071
Inventories 151,243 136,772
Other current assets 21,226 19,344
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Total current assets 343,961 338,741
----------------------------------------------------------------------
Property, net 312,464 312,415
Other assets 100,636 102,275
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Total assets $ 757,061 $ 753,431
----------------------------------------------------------------------
Liabilities
Short-term borrowings $ 124,498 $ 112,009
Current maturities of long-term debt 540 532
Other current liabilities 88,302 98,540
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Total current liabilities 213,340 211,081
----------------------------------------------------------------------
Long-term debt 145,650 146,137
Other liabilities 55,271 55,268
----------------------------------------------------------------------
Total long-term liabilities 200,921 201,405
----------------------------------------------------------------------
Stockholders' Investment
Common stock 655 655
Capital in excess of par 120,532 120,532
Retained earnings 365,391 363,812
Accumulated other comprehensive loss (12,570) (12,279)
Other stockholders' investment (131,208) (131,775)
----------------------------------------------------------------------
Total stockholders' investment 342,800 340,945
----------------------------------------------------------------------
Total liabilities and
stockholders' investment $ 757,061 $ 753,431
----------------------------------------------------------------------
See accompanying condensed notes to consolidated financial statements.
<PAGE>
Guilford Mills, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twenty-Six Weeks Ended April 2, 2000 and
the Twenty-Seven Weeks Ended April 4, 1999
(In thousands)
(Unaudited)
------------------------------------------------------------------------
April 2 April 4,
2000 1999
(26 Weeks) (27 Weeks)
------------------------------------------------------------------------
Cash Flows From Operating Activities:
Net income $ 5,801 $ 7,118
Depreciation and amortization 33,240 32,713
Other adjustments to net income, net (5,484) 5,157
Net changes in operating assets and liabilities (22,178) (3,241)
------------------------------------------------------------------------
Net cash provided by operating activities 11,379 41,747
------------------------------------------------------------------------
Cash Flows From Investing Activities:
Additions to property (31,303) (31,728)
Other investing activities, net 5,532 3,821
------------------------------------------------------------------------
Net cash used in investing activities (25,771) (27,907)
------------------------------------------------------------------------
Cash Flows From Financing Activities:
Short-term borrowings, net 12,382 6,234
Payments of long-term debt (699) (145,308)
Proceeds from issuance of long-term debt, net of
deferred financing costs paid 229 140,233
Purchases of treasury shares -- (9,248)
Other financing activities, net (4,268) (22,227)
------------------------------------------------------------------------
Net cash provided by (used in) financing
activities 7,644 (30,316)
------------------------------------------------------------------------
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (192) (271)
------------------------------------------------------------------------
Net Decrease In Cash and Cash Equivalents (6,940) (16,747)
Beginning Cash and Cash Equivalents 22,554 30,447
------------------------------------------------------------------------
Ending Cash and Cash Equivalents $ 15,614 $ 13,700
------------------------------------------------------------------------
See accompanying condensed notes to consolidated financial statements.
<PAGE>
<H1 ALIGN=CENTER><FONT SIZE=3>GUILFORD MILLS, INC.<BR>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS<BR>
April 2, 2000<BR>
(In thousands except share data)<BR>
(Unaudited)</FONT></H1>
<P><FONT SIZE=3>1. Reclassifications -- For comparative purposes, certain
amounts for fiscal 1999 have been reclassified to conform to the fiscal 2000
presentation. </FONT></P>
<P><FONT SIZE=3>2. 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. </FONT></P>
<P><FONT SIZE=3>3. Foreign Currency Translation -- The Company has a
majority-owned foreign subsidiary that operates in Mexico. During the
Company’s first quarter in fiscal 1999, the economy in Mexico was
considered highly inflationary and the financial results for the Company’s
Mexican subsidiary were remeasured. Remeasurement adjustments are included in
the results of operations along with transaction gains and losses for the first
quarter of fiscal 1999. Effective with the Company’s second quarter in
fiscal 1999, Mexico’s economy was no longer considered highly inflationary
and the financial results for the Company’s Mexican subsidiary have been
translated. Translation gains or losses are reflected in the stockholders’
investment section of the balance sheet in accumulated other comprehensive loss. </FONT></P>
<P><FONT SIZE=3>4. Per Share Information -- Basic earnings 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, outstanding during the periods
presented. The weighted average shares used in computing basic net income for
the thirteen weeks ended April 2, 2000 and April 4, 1999 were 18,899,000 and
22,478,000, respectively. The weighted average shares used in computing basic
net income for the twenty-six weeks ended April 2, 2000 and the twenty-seven
weeks ended April 4, 1999 were 18,899,000 and 22,654,000, respectively. </FONT></P>
<P><FONT SIZE=3>Diluted earnings per share information also considers the
dilutive effect of stock options and restricted stock grants. The weighted
average shares used in computing diluted net income per share for the thirteen
weeks ended April 2, 2000 and April 4, 1999 were 19,025,000 and 22,491,000,
respectively. The weighted average shares used in computing diluted net income
per share for the twenty-six weeks ended April 2, 2000 and the twenty-seven
weeks ended April 4, 1999 were 18,968,000 and 22,672,000, respectively. </FONT></P>
<P><FONT SIZE=3>The difference between the number of weighted average shares
used to calculate basic and diluted earnings per share was due entirely to the
number of outstanding stock options and restricted stock. During the quarterly
periods ended April 2, 2000 and April 4, 1999, outstanding stock options and
shares of restricted stock of 1,986,000 and 1,881,000, respectively, were
antidilutive and not included in the calculation of diluted net income per
share. During the six-month periods ended April 2, 2000 and April 4, 1999,
outstanding stock options and shares of restricted stock of 2,011,000 and
1,881,000, respectively, were antidilutive for either part or all of the period
and not included in the calculation of diluted net income per share. </FONT></P>
<P><FONT SIZE=3>The Company has authorized 1,000,000 shares of $1 par preferred
stock. As of April 2, 2000 and October 3, 1999, no such shares were issued. </FONT></P>
<P><FONT SIZE=3>5. Inventories -- Inventories are carried at the lower of cost
or market. Cost is determined by using the LIFO (last-in, first-out) method for
the majority of inventories. Cost for all other inventories has been determined
principally by the FIFO (first-in, first-out) method. </FONT></P>
<P><FONT SIZE=3>Inventories at April 2, 2000 and October 3, 1999 consisted of the following:</FONT></P>
<TABLE ALIGN=LEFT WIDTH=600><TR>
<TD><BR><TH ALIGN=CENTER>April 2,<TH ALIGN=CENTER>October 3,<BR>
<TR><TD><BR><TH ALIGN=CENTER>2000<TH ALIGN=CENTER>1999</TH>
<tr><td align=left VALIGN=TOP><BR></td><td align=left>_____________</td><td align=left>_____________</td>
<tr><td align=left VALIGN=TOP> Finished Goods</td><td align=RIGHT>$ 50,868</td><td align=RIGHT>$ 45,143</td>
<tr><td align=left VALIGN=TOP> Raw Materials and work in process</td><td align=RIGHT>103,632</td><td align=RIGHT>96,527</td>
<tr><td align=left VALIGN=TOP> Manufacturing supplies</td><td align=RIGHT>8,228</td><td align=RIGHT>8,056</td>
<tr><td align=left VALIGN=TOP><BR></td><td align=RIGHT>_____________</td><td align=RIGHT>_____________</td>
<tr><td align=left VALIGN=TOP> Total inventories valued at FIFO cost</td><td align=RIGHT>162,728</td><td align=RIGHT>149,726</td>
<tr><td align=left VALIGN=TOP> Less - Adjustments to reduce FIFO cost to LIFO cost, net</td><td align=RIGHT>(11,485)</td><td align=RIGHT>(12,954)</td>
<tr><td align=left VALIGN=TOP><BR></td><td align=RIGHT>_____________</td><td align=RIGHT>_____________</td>
<tr><td align=left VALIGN=TOP> Total inventories</td><td align=RIGHT>$151,243</td><td align=RIGHT>$136,772</td>
<tr><td align=left VALIGN=TOP><BR></td><td align=RIGHT>_____________</td><td align=RIGHT>____________</td>
</TABLE>
<br clear=left>
<P><FONT SIZE=3>6. Accumulated Depreciation -- Accumulated depreciation at April
2, 2000 and October 3, 1999 was $527,684 and $497,871, respectively. </FONT></P>
<P><FONT SIZE=3>7. Comprehensive Income -- For the thirteen weeks ended April 2, 2000
and April 4, 1999, total comprehensive income was $4,235 and $3,913,
respectively. Included in total comprehensive income for the quarters were net
income of $2,774 and $4,755, respectively, and foreign currency translation
gains/(losses) of $1,461 and ($842), respectively. Comprehensive income was
$5,510 and $5,220, consisting of net income of $5,801 and $7,118 and foreign
currency translation losses of ($291) and ($1,898) for the six-month periods
ended April 2, 2000 and April 4, 1999, respectively. </FONT></P>
<P><FONT SIZE=3>8. Financial Instruments -- During fiscal 2000, the Company
adopted a policy to manage the exposure related to sales denominated in the Euro
through the use of forward exchange contracts. The duration of these contracts
is less than 12 months and attempts to match the anticipated receivable
collections. For the quarterly and six-month periods ended April 2, 2000
realized gains totaled $838 and $1,130, respectively. At April 2, 2000 the net
nominal amount of the remaining contracts was $18,661 and unrealized
mark-to-market gains, recorded in other current assets in the balance sheet,
were $2,053. These transactions do not qualify as hedges for financial reporting
purposes and, as a result, changes in the fair value of the contracts are
recorded as other income in the statement of income. </FONT></P>
<P><FONT SIZE=3>9. Segment Information -- Segment information for the quarterly
periods ended April 2, 2000 and April 4, 1999 was as follows: </FONT></P>
Home
April 2, 2000 Apparel Automotive Fashions Other Total
--------- ------------ ---------- ------ ------
External sales $71,901 $103,524 $23,279 $12,385 $211,089
Intersegment sales 29,920 29,920
Operating profit (1,284) 6,999 1,021 92 6,828
Interest expense 4,692
Other income, net (2,506)
Income before income
taxes 4,642
=========== ============ =========== ======== ========
April 4, 1999
External sales $85,016 $89,744 $31,983 $11,527 $218,270
Intersegment sales 31,563 31,563
Operating profit 3,087 6,915 560 941 11,503
Interest expense 4,246
Other expense, net 1,111
Income before income
taxes 6,146
============ ============ =========== ======== ========
<PAGE>
<P><FONT SIZE=3>Segment information for the six-month periods ended April 2,
2000 and April 4, 1999 was as follows: </FONT></P>
Home
April 2, 2000 Apparel Automotive Fashions Other Total
--------- ------------ ---------- ------ -----
External sales $146,644 $199,036 $48,827 $23,084 $417,591
Intersegment sales 58,577 58,577
Operating profit (3,485) 14,585 (336) 1,195 11,959
Interest expense 9,163
Other income, net (6,590)
Income before income
taxes 9,386
=========== ============ =========== ======== ========
April 4, 1999
External sales $166,238 $178,576 $65,179 $23,190 $433,183
Intersegment sales 63,689 63,689
Operating profit 4,051 14,422 1,906 (680) 19,699
Interest expense 8,373
Other expense, net 1,630
Income before income
taxes 9,696
=========== ============ =========== ======== ========
<P><FONT SIZE=3>10. Other income -- Other income for the second quarter of
fiscal 2000 included the hedging gain of $1,065 comprised of $227 of
mark-to-market gain and $838 of realized gain and a $2,479 gain from stock
received from two of the Company’s insurance carriers that demutualized.
For the six months ended April 2, 2000, a hedging gain of $3,182, of which
$2,053 was unrealized, and a demutualization gain of $5,527 was included in
other income. </FONT></P>
<H2 ALIGN=LEFT><FONT SIZE=3>Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></H2>
<H2 ALIGN=LEFT><FONT SIZE=3><U>Results of Operations</U></FONT></H2>
<P><FONT SIZE=3>The second quarter periods of fiscal 2000 and 1999 each
consisted of thirteen weeks. The six-month period of fiscal 2000 consisted of
twenty-six weeks. The six-month period of fiscal 1999 had twenty-seven weeks. </FONT></P>
<P><FONT SIZE=3>Net sales for the second quarter of fiscal 2000 decreased $7.2
million, or 3.3% to $211.1 million, compared to net sales of $218.3 million in
the second quarter of the prior year. For the six-month period ended April 2,
2000, net sales were $417.6 million, a decrease of $15.6 million from net sales
of $433.2 million for the six months ended April 4, 1999. </FONT></P>
<P><FONT SIZE=3>Sales in the Automotive segment increased 15.4% in the second
quarter of fiscal 2000 to $103.5 million as compared to $89.7 million for the
same quarter in the prior year. The continued strength of the North American
automobile production, which generated higher U.S. bodycloth sales, and the
return of a major customer in Mexico caused the sales increase from the prior
year. The Company continued to supply bodycloth for several popular models and
continued to penetrate other models that are increasing in market share.
Partially offsetting the sales growth were Euro currency exposures and
unfavorable product mix changes within the U.K. operations. For the six months
ended April 2, 2000, Automotive sales were $199.0 million compared to $178.6
million in the first six months of fiscal 1999, an increase of 11.4%. This
increase was attributable to the strength of the U.S. automotive market and
higher sales in Mexico. </FONT></P>
<P><FONT SIZE=3>Apparel segment sales for the second quarter ended April 2, 2000
declined 15.4% to $71.9 million from $85.0 million in the comparable quarter of
the prior year. All of the apparel sectors experienced a sales decrease from the
prior year. Sales of elastics/intimate apparel fabrics, including lace products,
were lower than in the prior year as the Company’s customers, faced with
weaker retail sales, concentrated on eliminating existing inventory.
Ready-to-wear fabric sales were down due to the loss of a customer’s
program at a key retailer. While sales of printed swimwear increased during the
quarter, they were more than offset by declines in solid swimwear sales due to
the acquisition by a third party of a major customer. Mature commodity fabric
(linings, sleepwear and robewear) sales declined primarily as a result of a
decline in demand for these products and lower sales to a major customer who
filed bankruptcy late in fiscal 1999. Apparel sales in the first half of fiscal
2000 were $146.6 million and decreased 11.8% from sales in the first half of
fiscal 1999 of $166.2 million. </FONT></P>
<P><FONT SIZE=3>Sales in the Home Fashions segment for the second quarter of
fiscal 2000 decreased 27.2% to $23.3 million from $32.0 million in the prior
year. This sales decrease was due to exiting the cotton jersey knit sheeting
program and lower window curtains sales as a result of foreign imports. The
Company stopped producing the cotton jersey knit sheeting in the first quarter
of fiscal 1999 but continued to have residual sales. Partially offsetting these
declines were increased bedding sales due to new top-of-bed programs introduced
late in fiscal 1999. Home Fashions sales for the first six months were $48.8
million, a decrease of 25.2% from sales of $65.2 million in fiscal 1999.
</FONT></P>
<P><FONT SIZE=3>Second quarter sales in the Other segment, which includes
specialty fabrics and fibers, increased 7.8% to $12.4 million compared to $11.5
million in the second quarter of the previous year. This increase was primarily
attributable to higher sales in Mexico where the economy has been strong and higher sales in
our fibers operations. Partially offsetting these increases were the continued
lower sales volume of hook and loop closure fabrics in the European market.
Year-to-date, Other sales were $23.1 million and slightly lower than sales of
$23.2 million in fiscal 1999. </FONT></P>
<P><FONT SIZE=3>Gross margin for the second quarter of fiscal 2000 decreased to
$32.7 million or 15.5% of net sales, from $37.1 million or 17.0% of net sales,
for the same quarter a year ago. The decrease was predominately the result of
declining sales volume in the Apparel and Home Fashions segments. While the
Company has reduced the impact of capacity underutilization in certain
facilities by shifting production to U.S. Automotive products, the U.S.
Automotive operations continued to suffer from operating inefficiencies caused
by continuous seven-day production. In addition, the strength of the British
sterling disadvantaged the Company’s U.K. operations in the European
marketplace and negatively impacted sales and margin. However, the forward
exchange contracts that the Company entered into to hedge this exposure
generated income, which was included in other income, during the second quarter
of fiscal 2000. Positively impacting gross margin during the quarter was the
receipt of a partial insurance recovery of $0.5 million for business
interruption associated with Hurricane Floyd. The effect of raw material price
increases has been minimal. For the first six months, gross margin was $63.6
million or 15.2% of net sales, a decrease from prior year’s gross margin of
$72.3 million or 16.7% of net sales. </FONT></P>
<P><FONT SIZE=3>Selling and administrative expenses for the second quarter of
fiscal 2000 were $25.9 million or 12.3% of net sales, compared to $25.6 million
or 11.7% of net sales, for the same quarter a year ago. The increase from prior
year was due primarily to additional shipping expenses incurred in the
Automotive segment and the effects of inflation in Mexico. Partially offsetting
these increases were cost reductions throughout the Company and lower markdown
allowances and professional fees in the Home Fashions segment. The second
quarter of fiscal 1999 included a provision for bad debts of $1.8 million.
Selling and administrative expenses for the first six-month period of fiscal
2000 were $51.7 million or 12.4% of net sales, compared to $52.6 million or
12.1% of net sales, for the same period a year ago. Year over year, absolute
dollar costs decreased despite the additional shipping of $1.0 million in the
Automotive segment and severance costs of $1.2 million associated with a recent
downsizing in the Apparel segment. </FONT></P>
<P><FONT SIZE=3>Interest expense for the second quarter of fiscal 2000 was $4.7
million compared to $4.2 million for the second quarter last year. The increase
in interest expense was attributable to an overall increase in the level of debt
and higher weighted average interest rates. For the first six months of fiscal
2000, interest expense was $9.2 million versus $8.4 million in fiscal 1999. The
increase was again the result of an overall higher debt level as well as the
full effect of interest on private placement debt, which replaced lower rate
borrowings during the first quarter of fiscal 1999. </FONT></P>
<P><FONT SIZE=3>For the quarter ended April 2, 2000, other income, net was $2.5
million compared to other expense, net, of $1.1 million for the prior
year’s comparable period. Included in other income for the current year
were foreign currency hedging gains of $1.1 million and insurance
demutualization gains of $2.5 million. For the six months ended April 2, 2000,
other income, net was $6.6 million and included foreign currency hedging gains
of $3.2 million and demutualization gains of $5.5 million. For the comparable
period of fiscal 1999, other expense was $1.6 million. </FONT></P>
<P><FONT SIZE=3>The income tax provision for the first six months of fiscal 2000
was $3.6 million, or 38.2% of income before income taxes, compared to $2.6
million, or 26.6% of income before income taxes for the same period a year ago.
The estimated effective tax rate increased year over year primarily as a result
of the fiscal 1999 tax provision reflecting a one-time net benefit of $3.7
million derived from a dividend paid by Guilford’s UK subsidiaries to the
parent under the Advance Corporation Tax (ACT) rules and the US-UK Income Tax
Treaty. </FONT></P>
<P><FONT SIZE=3>For the quarter ended April 2, 2000, net income was $2.8
million, or $0.15 per diluted share, compared to net income of $4.8 million, or
$0.21 per diluted share, for the second quarter a year ago. Net income for the
six months ended April 2, 2000 was $5.8 million, or $0.31 per diluted share,
compared to $7.1 million, or $0.31 per diluted share, for the comparable
six-month period in the prior year. </FONT></P>
<H2 ALIGN=LEFT><FONT SIZE=3><U>Liquidity and Capital Requirements</U></FONT></H2>
<P><FONT SIZE=3>At April 2, 2000, working capital was $130.6 million compared to
$127.7 million at October 3, 1999. The increase in working capital was primarily
the result of higher inventory in the Automotive and Home Fashions segments for
shipments in the third quarter. Working capital also increased as a result of a
decrease in other current liabilities due to lower accounts payables, payroll
and related benefits and property taxes. Partially offsetting these changes were
a decrease in accounts receivable and an increase in short-term borrowings. </FONT></P>
<P><FONT SIZE=3>The Company generally maintains the annual capital expenditures
near the depreciation expense. However, for the remainder of fiscal 2000 and for
the next fiscal year, capital expenditures are expected to be above depreciation
expense due to the Company’s expansion in Mexico. This expansion will be
funded through the Company’s available credit facilities. </FONT></P>
<P><FONT SIZE=3>The Company maintains flexibility with respect to its working
capital needs through a committed revolving credit facility of $150 million and
its continued access to other traditional sources of funds, including
uncommitted lines of credit aggregating $120 million, and the ability to receive
advances against its factored accounts receivable. At April 2, 2000, borrowing
availability under the Company’s revolving credit facility was $75 million
and availability under its uncommitted bank lines of credit was $43 million. The
Company’s current revolving credit facility expires on September 26, 2000.
The Company is in the process of negotiating a secured, three-year, $130 million
replacement revolving credit facility. This new revolving credit facility will
have higher effective interest rates and more restrictive covenants than under
the Company’s current facility. The textile industry is continuing to
experience a tightening in lending due principally to lower reported earnings.
The new revolving credit facility is expected to be in place in the third
quarter of fiscal 2000. Management believes that the Company has the ability to
obtain necessary capital from the appropriate financial markets. </FONT></P>
<H2 ALIGN=LEFT><FONT SIZE=3><U>Contingencies and Future Operations</U></FONT></H2>
<P><FONT SIZE=3>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.
Subsequently, through negotiations with the EPA, Gold entered into a Final
Administrative Consent Order, 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, upon instruction by the EPA, 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. </FONT></P>
<P><FONT SIZE=3>During fiscal 1992, the Company received a Notice of Violation
from the North Carolina Division of Environmental Management concerning ground
water contamination on or near one of its facilities. The Company voluntarily
agreed to allow the installation of monitoring wells at the site, but denies
that such contaminants originated from the Company’s operations or
property. The Company has removed all underground storage tanks at all its U.S.
facilities. </FONT></P>
<P><FONT SIZE=3>At April 2, 2000, environmental accruals amounted to $4.0
million of which $3.0 million was non-current and was included in other
non-current liabilities in the accompanying balance sheet. </FONT></P>
<P><FONT SIZE=3>Several purported class action lawsuits have been filed on
behalf of purchasers of the Company’s common stock against the Company and
certain of its officers and directors. These lawsuits were consolidated by order
of the Court on January 8, 1999. A Consolidated and Amended Class Action
Complaint (the “Consolidated Complaint”) was filed on February 8,
1999. The Consolidated Complaint purports to allege claims under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder, in connection with the Company’s public disclosure of
accounting irregularities at the Hofmann Laces unit in fiscal year 1998.
Specifically, the Consolidated Complaint alleges that, during the alleged class
period (January 20, 1998 through October 26, 1998), defendants materially
misrepresented the Company’s financial condition and overstated the
Company’s reported earnings. No specific amount of damages is sought in the
Consolidated Complaint. </FONT></P>
<P><FONT SIZE=3>On April 9, 1999, defendants filed a motion to dismiss the
Consolidated Complaint. On July 21, 1999, the Court entered an order dismissing
all claims against one of the Company’s officers but denied the motion to
dismiss of the Company and the remaining individual defendant (Bruno Hofmann). </FONT></P>
<P><FONT SIZE=3>The Court granted plaintiffs' motion for class certification by
Order dated March 22, 2000. On May 8, 2000, the parties reached a settlement
agreement in principle with respect to this lawsuit. Under the terms of the
agreement in principle, the parties have agreed to settle the litigation for
$2.35 million, all of which will be covered by insurance. The agreement in
principle is subject to (i) notice to class members with an opportunity for such
class members to opt-out,and (ii) Court approval. </FONT></P>
<P><FONT SIZE=3>The Securities and Exchange Commission (the
“Commission”) has issued a formal Order Directing Private
Investigation and Designating Officers To Take Testimony (the “Formal
Order”) with respect to accounting irregularities at the Hofmann Laces Unit
which the Company had previously disclosed in press releases in October and
November 1998. Prior to the issuance of the Formal Order, the Company had
voluntarily provided certain information to the Commission concerning the
accounting irregularities at the Hofmann Laces Unit. The Company has delivered
documents to, and intends to continue cooperating fully with, the Commission. </FONT></P>
<P><FONT SIZE=3>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. </FONT></P>
<H2 ALIGN=LEFT><FONT SIZE=3><U>Safe Harbor-Forward-Looking Statements</U></FONT></H2>
<P><FONT SIZE=3>From time to time, the Company may publish forward-looking
statements relative to such matters as anticipated financial performance,
business prospects, technological developments, new products, research and
development activities and similar matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements. </FONT></P>
<P><FONT SIZE=3>All statements other than statements of historical fact included
in this document, including, without limitation the statements under
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” are, or may be deemed to be, forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Important factors that could
cause actual results to differ materially from those discussed in such
forward-looking statements include: </FONT></P>
<OL>
<LI> general economic factors including, but not limited to, changes in interest rates, foreign currency translation rates,
consumer confidence, housing starts, trends in disposable income, changes in consumer demand for goods produced,
and cyclical or other downturns
<LI> the overall level of automotive production and the production of specific car models
<LI> fashion trends
<LI> information and technological advances
<LI> cost and availability of raw materials, labor and natural and other resources
<LI> domestic and foreign competition
<LI> domestic and foreign governmental regulations and trade policies
<LI> reliance on major customers
<LI> success of marketing, advertising and promotional campaigns or
<LI> inability to achieve cost reductions through consolidation and restructuring of acquired companies
</OL>
<H2 ALIGN=LEFT><FONT SIZE=3>Item 3. Quantitative and Qualitative Disclosures About Market Risk</FONT></H2>
<P><FONT SIZE=3>The Company is exposed to market risk for changes in interest
rates and foreign currency exchange rates and has limited exposure to commodity
price risk. The Company does not hold or issue any financial instruments for
trading purposes. During the second quarter ended April 2, 2000, the Company did
not experience any material changes with respect to its sensitivity or
management of interest rate or commodity price risk. However, the Company is
subject to foreign currency risk primarily related to sales and expenditures and
other transactions denominated in foreign currencies and investments in foreign
subsidiaries. The Company manages the exposure related to this risk through
forward exchange contracts with durations generally less than 12 months. The
changes in the market value of such contracts have a high correlation to the
price changes in the currency of the related hedged or anticipated transactions
to which they relate. On April 2, 2000, the Company had the following
outstanding foreign currency forward contracts: </FONT></P>
(1) (2) (3) (4) (5)
Forward
Currency Nominal Average Fair Gain
Contracts Amount Rate Value (Loss)
(Hedge of Firm Commitments) (In thousands)
- ------------------------------------------------------------------------------
14,466 1.5853 14,385 (81)
- ------------------------------------------------------------------------------
Receive German Deutsche Marks/ Pay U.S. Dollar
1,448 2.0209 1,451 3
- ------------------------------------------------------------------------------
Receive Euro/Pay Mexican Peso
393 12.8590 301 (92)
- ------------------------------------------------------------------------------
(Hedge of Anticipatory Flows) (In thousands)
- ------------------------------------------------------------------------------
Receive British Pound/Pay Euro
25,260 0.6602 27,528 2,267
- ------------------------------------------------------------------------------
Receive Euro/Pay British Pound
6,599 0.6210 6,385 (214)
- ------------------------------------------------------------------------------
<OL>
<LI> Contracts generally mature within 12 months
<LI> Nominal contract amount as reflected in the underlying contract
<LI> Weighted average contract rates represent the rates of exchange as reflected in the underlying contract
<LI> Fair value equals the contract amount presented in U.S. dollar equivalents based upon the April 2, 2000 exchange rates
obtained from brokers or referenced from publicly available market information
<LI> Gain/(loss) on firm commitments represents the net unrecognized gain/(loss) based upon the April 2, 2000 exchange rate.
Gain on anticipatory commitments represents the unrealized gain in other income based upon the April 2, 2000
exchange rate
</OL>
<H1 ALIGN=CENTER><FONT SIZE=3><U>PART II. OTHER INFORMATION</U></FONT></H1>
<P><FONT SIZE=3>Item 1. <U><U><U>Legal Proceedings.</U></U></U><U><U></U></U>
Reference is made to Item 3 to the Company’s Annual Report on Form 10-K for
the fiscal year ended October 3, 1999, which item is incorporated herein by
reference, as modified by this report on Form 10-Q. </FONT></P>
<P ALIGN=LEFT><FONT SIZE=3>Items 2 - 5. Not Applicable</FONT></P>
<P ALIGN=LEFT><FONT SIZE=3><U>Item 6. Exhibits and Reports on Form 8-K.</U></FONT></P>
<P><FONT SIZE=3>(a) Exhibits:<BR>
(10)(a) Third Amendment to Revolving Credit Agreement, dated March 30, 2000 by and<BR>
among Guilford Mills, Inc. and the banks listed therein<BR>
(10)(b)* Guilford Mills, Inc. Non-Employee Director Stock Plan<BR>
(27) Financial Data Schedule<BR>
<BR>
* Represents a compensatory plan or arrangement<BR>
<BR>
(b) Reports on Form 8-K. Not Applicable</FONT></P>
<PAGE>
<H1 ALIGN=CENTER><FONT SIZE=3>SIGNATURES</FONT></H1>
<P><FONT SIZE=3>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. </FONT></P>
<P ALIGN=RIGHT><FONT SIZE=3>GUILFORD MILLS, INC. <br>
(Registrant) </FONT></P>
<BR>
<H2 ALIGN=LEFT><FONT SIZE=3>Date: May 17, 2000
<u>By: /s/ Terrence E. Geremski</U></FONT></H2>
<H2 ALIGN=RIGHT><FONT SIZE=3>Terrence E. Geremski <BR> Executive Vice President/
<BR>Chief Financial Officer </FONT></H2>
<PAGE>
<H1 ALIGN=CENTER><FONT SIZE=3>SIGNATURES</FONT></H1>
<P><FONT SIZE=3>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. </FONT></P>
<P ALIGN=RIGHT><FONT SIZE=3>GUILFORD MILLS, INC. <br>
(Registrant) </FONT></P>
<BR>
<H2 ALIGN=LEFT><FONT SIZE=3>Date: May 17, 2000
<u>By: </U></FONT></H2>
<H2 ALIGN=RIGHT><FONT SIZE=3>Terrence E. Geremski <BR> Executive Vice President/
<BR>Chief Financial Officer </FONT></H2>
</BODY>
</HTML>
Exhibit 10 (a)
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment") is
dated as March 30, 2000 among GUILFORD MILLS, INC. (the "Borrower"), WACHOVIA
BANK, N.A. (successor by merger to Wachovia Bank of Georgia, N.A.), as Agent
(the "Agent"), and WACHOVIA BANK, N.A. (successor by merger to Wachovia Bank of
North Carolina, N.A.), BANK OF TOKYO-MITSUBISHI, LTD. (successor by merger to
Bank of Tokyo, Ltd.), FIRST UNION NATIONAL BANK (successor by merger to First
Union National Bank of North Carolina), SUNTRUST BANK (formerly SunTrust Bank,
Atlanta), BANK OF AMERICA, N.A. (formerly NationsBank, N.A., successor by merger
to NationsBank, N.A. (Carolinas)), BANK ONE, NA (formerly the First National
Bank of Chicago (assignee of NBD BANK) and ABN AMRO BANK, N.V. (collectively,
the "Banks");
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks executed and delivered
that certain Credit Agreement, dated as of September 26, 1995, as amended by
First Amendment to Credit Agreement dated as of May 5, 1999 and Second Amendment
to Credit Agreement dated as of November 19, 1999 (the "Credit Agreement");
WHEREAS, the Borrower has requested and the Agent and the Banks have
agreed to certain amendments to the Credit Agreement, subject to the terms and
conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent and the
Banks hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each term used
herein which is defined in the Credit Agreement shall have the meaning assigned
to such term in the Credit Agreement. Each reference to "hereof", "hereunder",
"herein" and "hereby" and each other similar reference and each reference to
"this Agreement" and each other similar reference contained in the Credit
Agreement shall from and after the date hereof refer to the Credit Agreement as
amended hereby.
2. Amendment to Section 5.15. Section 5.15 of the Credit Agreement hereby
is deleted and the following is substituted therefor:
SECTION 5.15. Loans or Advances. Neither the Borrower
nor any of its Subsidiaries shall make loans or advances to any Person
except as permitted by Section 5.16 and except: (i) loans or advances
to employees not exceeding $1,000,000 in the aggregate principal amount
outstanding at any time, in each case made in the ordinary course of
business and consistent with practices existing on July 2, 1995; (ii)
deposits required by landlords, government agencies or public
utilities; (iii) loans or advances to the Borrower or any Guarantor or
permitted pursuant to the Consent and Waiver dated as of March 31, 1999
among the Borrower, the Agent and the Banks pertaining to "UK
Intercompany Loans" (as defined therein); and (iv) other loans or
advances in an aggregate outstanding amount which, together with
Investments permitted by clause (viii) of Section 5.16, do not exceed
(x) for the period from the First Amendment Date through and including
April 30, 2000, 25% of Consolidated Tangible Net Worth, and (y) at all
other times, 10% of Consolidated Tangible Net Worth; provided that
after giving effect to the making of any loans or advances permitted by
clause (iv) of this Section, if there are any Loans outstanding at that
time, no Default shall be in existence or be created thereby.
3. Amendment to Section 5.16. Section 5.16 of the Credit Agreement hereby
is deleted and the following is substituted therefor:
SECTION 5.16. Investments. Neither the Borrower nor
any of its Subsidiaries shall make Investments in any Person except as
permitted by Section 5.15 and except (i) Investments in direct
obligations of the United States Government maturing within one year,
(ii) Investments in certificates of deposit issued by a commercial bank
whose credit is satisfactory to the Agent, (iii) Investments in
commercial paper rated A1 or the equivalent thereof by Standard &
Poor's Rating Group, a division of McGraw-Hill, Inc. or P1 or the
equivalent thereof by Moody's Investors Service, Inc. and in either
case maturing within 6 months after the date of acquisition, (iv)
Investments in tender bonds the payment of the principal of and
interest on which is fully supported by a letter of credit issued by a
United States bank whose long-term certificates of deposit are rated at
least AA or the equivalent thereof by Standard & Poor's Corporation and
Aa or the equivalent thereof by Moody's Investors Service, Inc., (v)
Investments in the Borrower or any Guarantor, (vi) Investments
consisting of acquisitions of stock or assets of any Person which is in
the same or a similar line of business to that of the Borrower
(including, without limitation, manufacturing, sales, marketing,
distribution or other activities relating to components or end-products
used or produced in the textile, fabric, garment or apparel industries)
and which, as a result of such acquisition, becomes a Subsidiary, (vii)
Investments in Persons which are not Subsidiaries of the Borrower and
which are in the same or a similar line of business to that of the
Borrower (including those lines of business described in clause (vi)
above) in an aggregate amount not to exceed 10% of Consolidated Total
Assets and (viii) other Investments in an aggregate which, together
with loans and advances permitted by clause (iv) of Section 5.15, do
not exceed (x) for the period from the First Amendment Date through and
including April 30, 2000, 25% of Consolidated Tangible Net Worth, and
(y) at all other times, 10% of Consolidated Tangible Net Worth;
provided that after giving effect to the making of any Investments
permitted by clauses (vi) or (vii) of this Section, if there are any
Loans outstanding at that time, no Default shall be in existence or be
created thereby.
4. Amendment to Exhibit F (Compliance Certificate). Exhibit F hereby is
amended by deleting paragraphs 1 and 2 thereof and substituting the following
therefor:
1. Loans and Advances (Section 5.15)
Neither the Borrower nor any of its Subsidiaries shall make
loans or advances to any Person except as permitted by Section
5.16 and except: (i) loans or advances to employees not
exceeding $1,000,000 in the aggregate principal amount
outstanding at any time, in each case made in the ordinary
course of business and consistent with practices existing on
July 2, 1995; (ii) deposits required by landlords, government
agencies or public utilities; (iii) loans or advances to the
Borrower or any Guarantor or permitted pursuant to the Consent
and Waiver dated as of March 31, 1999 among the Borrower, the
Agent and the Banks pertaining to "UK Intercompany Loans" (as
defined therein); and (iv) other loans or advances in an
aggregate outstanding amount which, together with Investments
permitted by clause (viii) of Section 5.16, do not exceed (x)
for the period from the First Amendment Date through and
including April 30, 2000, 25% of Consolidated Tangible Net
Worth, and (y) at all other times, 10% of Consolidated
Tangible Net Worth; provided that after giving effect to the
making of any loans or advances permitted by clause (iv) of
this Section, if there are any Loans outstanding at that time,
no Default shall be in existence or be created thereby.
(a) To Employees $__________
Limitation $1,000,000
(b) other loans and advances
pursuant to clause (iv) $__________
(c) sum of (b) and amount in line (c)
of paragraph 2 below $__________
(d) [10%] [25%] of Consolidated Tangible
Net Worth $__________
Limitation (c) may not exceed (d)
2. Investments (Section 5.16)
Neither the Borrower nor any of its Subsidiaries shall make
Investments in any Person except as permitted by Section 5.15
and except (i) Investments in direct obligations of the United
States Government maturing within one year, (ii) Investments
in certificates of deposit issued by a commercial bank whose
credit is satisfactory to the Agent, (iii) Investments in
commercial paper rated A1 or the equivalent thereof by
Standard & Poor's Rating Group, a division of McGraw- Hill,
Inc. or P1 or the equivalent thereof by Moody's Investors
Service, Inc. and in either case maturing within 6 months
after the date of acquisition, (iv) Investments in tender
bonds the payment of the principal of and interest on which is
fully supported by a letter of credit issued by a United
States bank whose long-term certificates of deposit are rated
at least AA or the equivalent thereof by Standard & Poor's
Corporation and Aa or the equivalent thereof by Moody's
Investors Service, Inc., (v) Investments in the Borrower or
any Guarantor, (vi) Investments consisting of acquisitions of
stock or assets of any Person which is in the same or a
similar line of business to that of the Borrower (including,
without limitation, manufacturing, sales, marketing,
distribution or other activities relating to components or
end-products used or produced in the textile, fabric, garment
or apparel industries) and which, as a result of such
acquisition, becomes a Subsidiary, (vii) Investments in
Persons which are not Subsidiaries of the Borrower and which
are in the same or a similar line of business to that of the
Borrower (including those lines of business described in
clause (vi) above) in an aggregate amount not to exceed 10% of
Consolidated Total Assets and (viii) other Investments in an
aggregate which, together with loans and advances permitted by
clause (iv) of Section 5.15, do not exceed (x) for the period
from the First Amendment Date through and including April 30,
2000, 25% of Consolidated Tangible Net Worth, and (y) at all
other times, 10% of Consolidated Tangible Net Worth; provided
that after giving effect to the making of any Investments
permitted by clauses (vi) or (vii) of this Section, if there
are any Loans outstanding at that time, no Default shall be in
existence or be created thereby.
(a) Investments in persons who are not
yet Subsidiaries pursuant to
clause (vii) $__________
(b) 10% of Consolidated Total Assets $__________
Limitation (a) may not exceed (b)
(c) other Investments
pursuant to clause (viii) $__________
(d) sum of (c) and amount in line (b)
of paragraph 1 above $__________
(e) [10%] [25%] of Consolidated Tangible
Net Worth $__________
Limitation (d) may not exceed (e)
5. Supplement to Schedule 4.08 (Subsidiaries). Schedule 4.08, as previously
supplemented, hereby is further supplemented by Supplement to Schedule 4.08
attached hereto.
6. Restatement of Representations and Warranties. The Borrower hereby restates
and renews each and every representation and warranty heretofore made by it in
the Credit Agreement and the other Loan Documents as fully as if made on the
date hereof and with specific reference to this Third Amendment and all other
loan documents executed and/or delivered in connection herewith.
7. Effect of Amendment. Except as set forth expressly hereinabove, all terms of
the Credit Agreement and the other Loan Documents shall be and remain in full
force and effect, and shall constitute the legal, valid, binding and enforceable
obligations of the Borrower. The amendments contained herein shall be deemed to
have prospective application only, unless otherwise specifically stated herein.
8. Ratification. The Borrower hereby restates, ratifies and reaffirms
each and every term, covenant and condition set forth in the Credit Agreement
and the other Loan Documents effective as of the date hereof, except that in
about May, 1999, Altimira Centro de la Confeccion, S.A. de C.V. became a joint
venture 50% owned by the Borrower, rather than a Subsidiary.
9. Counterparts. This Third Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
10. Section References. Section titles and references used in this Third
Amendment shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.
11. No Default. To induce the Agent and the Banks to enter into this Third
Amendment and to continue to make advances pursuant to the Credit Agreement, the
Borrower hereby acknowledges and agrees that, as of the date hereof, and after
giving effect to the terms hereof, there exists (i) no Default or Event of
Default and (ii) no right of offset, defense, counterclaim, claim or objection
in favor of the Borrower arising out of or with respect to any of the Loans or
other obligations of the Borrower owed to the Banks under the Credit Agreement.
12. Further Assurances. The Borrower agrees to take such further actions as
the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Borrower.
13. Governing Law. This Third Amendment shall be governed by and construed
and interpreted in accordance with, the laws of the State of North Carolina.
14. Conditions Precedent. This Third Amendment shall become effective only upon
(i) execution and delivery of this Third Amendment by the Borrower, the Agent
and the Required Banks, (ii) execution and delivery of the Consent and
Reaffirmation of Guarantors at the end hereof by each of the Guarantors, and
(iii) payment to the Agent, for the account of each Bank which executes this
Third Amendment, of an amendment fee in the amount of $5,000 for each such Bank,
and (iv) payment to the Agent, for its own account, of the fees payable pursuant
to the letter agreement between the Agent and the Borrower dated November 3,
1999.
[SIGNATURES CONTAINED ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this Third Amendment to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.
GUILFORD MILLS, INC., (SEAL) WACHOVIA BANK, N.A., (SEAL)
as Borrower as Agent and as a Bank
By:/s/ Terrence E. Geremski By:/s/ Haywood Edmundson V
------------------------- -------------------------
Title: Executive Vice President Title: Senior Vice President
& Chief Financial Officer
BANK OF TOKYO-MITSUBISHI, (SEAL) FIRST UNION NATIONAL BANK, (SEAL)
LTD., as a Bank as a Bank
By: By:/s/ Roger Pelz
-------------------------- ------------------------
Title: Title: Senior Vice President
SUNTRUST BANK, ATLANTA (formerly (SEAL) BANK OF AMERICA, N.A. (SEAL)
Sun Trust Bank, Atlanta), as a Bank (formerly as Nationsbank, N.A.),
as a Bank
By:/s/ Bradley J. Staples By:/s/ E. Phifer Helms
--------------------------- -----------------------
Title: Director Title: Managing Director
BANK ONE, NA (formerly The First ABN AMRO BANK, N.V.,
National Bank of Chicago), as a Bank (SEAL)
as a Bank (SEAL)
By:/s/ James F. Gable By:/s/ Thomas M. Toerpe
--------------------------- -------------------------
Title: Assistant Vice President Title: Vice President
By:/s/ Mary L. Honda
---------------------------
Title: Vice President
<PAGE>
CONSENT AND REAFFIRMATION OF GUARANTORS
Each of the undersigned (i) acknowledges receipt of the foregoing Third
Amendment to Credit Agreement (the "Third Amendment"), (ii) consents to the
execution and delivery of the Third Amendment by the parties thereto and (iii)
reaffirms all of its obligations and covenants under the Guaranty Agreement
dated as of September 26, 1995 executed by Gold Mills, Inc., as supplemented by
Second Supplement to Guaranty entered into by Raschel Fashion Interknitting,
Ltd. and Curtains and Fabrics, Inc., as additional Guarantors, and agrees that
none of such obligations and covenants shall be affected by the execution and
delivery of the Third Amendment. This Consent and Reaffirmation may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument.
GOLD MILLS, INC. (SEAL)
By:/s/ Terrence E. Geremski
-------------------------
Title: Executive Vice President
& Chief Financial Officer
RASCHEL FASHION INTERKNITTING,
LTD. (SEAL)
By:/s/ Terrence E. Geremski
-------------------------
Title: Executive Vice President
& Chief Financial Officer
CURTAINS AND FABRICS, INC. (SEAL)
By:/s/ Terrence E. Geremski
-------------------------
Title: Executive Vice President
& Chief Financial Officer
<PAGE>
Supplement to Schedule 4.08
The Borrower hereby supplements Schedule 4.08 to the Credit Agreement,
as the same has already been supplemented, to reflect the following additional
subsidiaries which are neither Significant Domestic Subsidiaries nor Significant
Foreign Subsidiaries:
--------------------------------------------- ------------------------
Name State or Other Jurisdiction of
Incorporation or Organization
--------------------------------------------- ------------------------
Guilford Mills Texteis Iberica Limitada Portugal
--------------------------------------------- ------------------------
Guilford Mills Automotive (Portugal) Limited United Kingdom
--------------------------------------------- ------------------------
Guilford Mills Automotive (Czech Republic) United Kingdom
Limited
--------------------------------------------- ------------------------
Nustart, S.A. de C.V. Mexico
--------------------------------------------- ------------------------
Exhibit 10(b)
GUILFORD MILLS, INC.
NON-EMPLOYEE DIRECTOR STOCK PLAN
1. PURPOSE
The Guilford Mills, Inc. Non-Employee Director Stock Plan (the
"Plan") is intended to assist in aligning the compensation of the non-employee
directors of Guilford Mills, Inc. (the "Company") to the interests of the
Company's stockholders and the performance of the Company.
2. ADMINISTRATION
The Plan will be administered by the Board of Directors of the Company
(the "Board") or by a committee (the "Committee") appointed by the Board from
among its members (the Board or the Committee being the "Administrator"). The
Administrator is authorized, subject to the provisions of the Plan, to establish
such rules and regulations as it deems necessary for the proper administration
of the Plan and to make such determinations and interpretations and to take such
action in connection with the Plan as it deems necessary or advisable. All
determinations and interpretations made by the Administrator shall be binding
and conclusive on all participants and their legal representatives.
3. PARTICIPANTS
Participation in the Plan shall be limited to members of the Board who
are not employees of the Company or any of its direct or indirect subsidiaries
(a "Participant").
4. ANNUAL GRANTS OF RESTRICTED STOCK UNITS
(a) On the date of each Annual Meeting of Stockholders (the "Annual Meeting"),
each Participant who is serving as a member of the Board immediately following
the Annual Meeting (whether as a result of election, re-election or continuation
of service) shall be automatically granted a number of restricted stock units
("RSUs") determined as set forth below. An RSU represents a notional amount
representing one share of the Company's common stock, par value $0.02 per share
(the "Common Stock"). Upon the initial grant of any RSUs to a Participant, the
Company shall establish an account with respect to such Participant (the
"Participant's Unit Account") in which account the Company shall record the
number of RSUs credited to such Participant.
(b) The number of RSUs granted to each Participant on the date of each Annual
Meeting shall be equal to the quotient of (x) $20,000 divided by (y) the average
fair market value per share of Common Stock (as defined in Section 11 hereof)
over the ten (10) trading days immediately preceding the date of the Annual
Meeting for such year. The number of RSUs credited to a Participant's Unit
Account will be calculated to the nearest one-one thousandth.
(c) Within fifteen calendar days following each Annual Meeting, each Participant
shall make an election (using a form prescribed by the Administrator) to receive
the number of shares of Common Stock distributable to such Participant in
respect of such Participant's Unit Account in accordance with the Plan, either:
(1) in a single distribution on the first day of the month
subsequent to the month in which such Participant ceased to be
a member of the Board, or
(2) in five (5) substantially equal annual installments commencing
on the first day of the month subsequent to the month in which
such Participant ceased to be a member of the Board.
If a Participant fails to make an election, then such Participant shall
be deemed to have made an election to receive a single distribution.
A Participant may amend his or her election by giving written notice to
the Secretary of the Company (on a form prescribed by the Administrator) at any
time up to the date six months prior to the date upon which such Participant
ceases to be a member of the Board.
5. VESTING; NON-TRANSFERABILITY
All grants of RSUs shall vest immediately on the date of grant. Except
as provided in Section 8 hereof, no RSUs or other rights under this Plan shall
be transferable otherwise than by will or the laws of descent and distribution.
6. DIVIDEND EQUIVALENTS
On each dividend payment date in respect of Common Stock, dividend
equivalents in the form of additional RSUs shall be credited to each
Participant's Unit Account in an amount equal to: (a) in the case of a cash
dividend, (X) the per share cash dividend multiplied by the number of RSUs in
the Participant's Unit Account divided by (Y) the average fair market value per
share of Common Stock over the ten (10) trading days immediately preceding the
date on which such dividend was declared; and (b) in the case of a dividend of
property other than cash (a "Non-Cash Dividend), (X) the per share fair market
value of the Non-Cash Dividend, as determined by the Administrator, multiplied
by the number of RSUs in the Participant's Unit Account divided by (Y) the
average fair market value per share of Common Stock over the ten (10) trading
days immediately preceding the date on which such dividend was declared. If a
Participant has elected pursuant to Section 4(c) hereof to receive annual
installments, additional RSUs shall continue to be credited to a Participant's
Unit Account in accordance with this Section 6 following such Participant
ceasing to be a member of the Board. The number of RSUs credited to a
Participant's Unit Account will be calculated to the nearest one-one thousandth.
7. DISTRIBUTIONS
(a) No distributions of shares of Common Stock in respect of RSUs credited to a
Participant's Unit Account shall be made except as provided in this Section 7
and in Section 8.
(b) Subject to Sections 8 and 10 hereof, shares of Common Stock distributable to
a Participant in respect of RSUs credited to such Participant's Unit Account
shall be distributed in accordance with Section 4 hereof as elected by the
Participant. If a Participant has elected to receive annual installments, shares
of Common Stock in respect of additional RSUs credited to a Participant's Unit
Account pursuant to Section 6 hereof following such Participant ceasing to be a
member of the Board shall be included with the next annual installment. No
fractional shares of Common Stock shall be issued pursuant to the Plan, and no
amount of other property shall be issued or paid in lieu of fractional shares.
8. DISTRIBUTIONS UPON DEATH
A Participant may designate a beneficiary or beneficiaries to receive
shares of Common Stock distributable in respect of RSUs in the event of the
Participant's death. A designation of beneficiary or beneficiaries shall be on a
form prescribed by the Administrator and filed with the secretary of the
Company. If no beneficiary has been designated, such shares shall be distributed
to the Participant's estate in the event of death. Notwithstanding a
Participant's election to receive distributions in annual installments, the
Administrator may, in its sole discretion, following the death of a Participant
and at the request of a designated beneficiary or legal representative of the
Participant, accelerate such distributions.
9. COMMON STOCK AVAILABLE UNDER THE PLAN; ADJUSTMENTS
(a) Subject to any adjustments made in accordance with Section 9(b) hereof, the
maximum number of shares of Common Stock that may be delivered to Participants
and their beneficiaries under this Plan shall be equal to 100,000 shares of
Common Stock, which may be authorized and unissued or treasury shares.
(b) If there shall be any change in the Common Stock of the Company, through
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, reverse stock split, split up, spinoff, combination of shares, exchange
of shares, dividend in kind or other like change in capital structure or
distribution (other than normal cash dividends) to stockholders of the Company,
an adjustment shall be made to each RSU such that each such RSU shall thereafter
be convertible into such securities, cash and/or other property as would have
been received in respect of the Common Stock subject to such RSU had such number
of shares of Common Stock issuable in respect of such RSU been issued
immediately prior to such change or distribution, and such an adjustment shall
be made successively each time any such change shall occur. In addition, in the
event of any such change or distribution, in order to prevent dilution or
enlargement of Participants' rights under the Plan, the Administrator shall
adjust, in an equitable manner, the number and kind of shares of Common Stock
that may be issued under the Plan.
10. SECURITIES LAWS COMPLIANCE
The Administrator may require each Participant purchasing or receiving
shares of Common Stock to represent to and agree with the Company in writing
that such Participant is acquiring the shares without a view to the public
resale or distribution thereof in violation of applicable laws and containing
such other representations, warranties and covenants as the Administrator deems
necessary or appropriate to ensure that the issuance of shares of Common Stock
issued pursuant to this Plan are not required to be registered pursuant to the
Securities Act of 1933 or any applicable laws. The certificates for any shares
of Common Stock issued pursuant to this Plan may include any legend that the
Administrator deems appropriate to reflect any restrictions on transfer and such
shares, when issued, may not be immediately transferable.
11. FAIR MARKET VALUE PER SHARE
If shares of Common Stock are listed on a national securities exchange
in the United States on any date on which the fair market value per share is to
be determined, the fair market value per share shall be deemed to be the average
of the high and low quotations at which such shares are sold on such national
securities exchange on the date of determination. If the shares of Common Stock
are listed on a national securities exchange in the United States on the date of
determination, but the shares are not traded on such date, the fair market value
per share shall be deemed to be the average of the closing bid and asked
quotations for such shares as quoted on such national securities exchange on the
date of determination. If shares of Common Stock are listed on more than one
national securities exchange in the United States on the date on which the fair
market value per share is to be determined, the Administrator, in its sole
discretion, shall determine which national securities exchange shall be used for
the purpose of determining the fair market value per share.
If a public market shall exist for shares of Common Stock but such
stock is not listed on a national securities exchange in the United States, the
fair market value per share shall be deemed to be the average of the bid and
asked quotations in the over-the-counter market for such shares on the date of
determination. If there is no bid and asked quotation for such shares on the
date of determination, the fair market value per share shall be determined as of
the closest preceding date on which there were bid and asked quotations for such
shares.
If the shares of Common Stock are not listed on a national securities
exchange in the United States and a public market does not exist for the Common
Stock, the fair market value per share shall be determined by the Administrator
in good faith.
12. DURATION, AMENDMENT AND TERMINATION
The Plan shall continue indefinitely until terminated by the
Administrator. The Administrator may amend the Plan from time to time or suspend
or terminate the Plan at any time.
13. GENERAL PROVISIONS
(a) Nothing in this Plan or in any instrument executed pursuant hereto shall
confer upon any person any right to continue to serve as a director of the
Company.
(b) No shares of Common Stock shall be issued in consideration of an RSU unless
and until all legal requirements applicable to the issuance of such shares have
been complied with in the opinion of counsel to the Company. In connection with
any such issuance, the person acquiring the shares shall, if requested by the
Company, give assurances, satisfactory to counsel to the Company, in respect of
such matters as the Company may deem desirable to assure compliance with all
applicable legal requirements.
(c) Neither a Participant nor any other person shall, by reason of this Plan,
acquire any right in or title to any assets, funds or property of the Company or
any of its direct or indirect subsidiaries whatsoever. A Participant shall have
only a contractual right to shares of Common Stock distributable under, and in
accordance, with this Plan.
(d) RSUs credited to a Participant's Unit Account shall not confer upon such
Participant any rights as a stockholder of the Company prior to the date on
which shares of Common Stock are issued to such Participant pursuant to the
Plan.
(e) Nothing in this Plan is intended to be a substitute for, or shall preclude
or limit the establishment or continuation of, any other plan, practice or
arrangement for the payment of compensation or benefits to Participants that the
Company now has or may hereafter put into effect.
(f) It shall be a condition to the obligation of the Company to issue shares of
Common Stock hereunder, that the Participant pay to the Company, upon its
demand, such amount as may be requested by the Company for the purpose of
satisfying any liability to withhold federal, state, local or foreign income or
other taxes. If the amount requested is not paid, the Company shall have no
obligation to issue, and the Participant shall have no right to receive, shares
of Common Stock.
14. GOVERNING LAW
This Plan, RSUs granted hereunder and actions taken in connection
herewith shall be governed and construed in accordance with the internal laws of
the State of Delaware, without giving effect to its choice-of-law provisions.
15. EFFECTIVE DATE
This Plan shall be effective as of February 2, 2000.
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