<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
----------------
THE BIBB COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 58-2253133
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
100 GALLERIA PARKWAY 30339
17TH FLOOR (ZIP CODE)
ATLANTA, GEORGIA
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
770-644-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
----------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. BUSINESS
The Bibb Company, a Delaware corporation (the "Company"), is a leading
domestic manufacturer and marketer of textile products, principally sheets,
pillowcases and other bedding accessories for use in the home, as well as
sheets and damask table linen products for use by hotels, hospitals, linen
service companies and others serving the hospitality market. The Company also
manufactures fabrics for apparel, principally chambray, and specially
engineered textile products used primarily in producing high-pressure hoses
and conveyor belts. For a description of the Company's corporate history and
matters concerning the bankruptcy reorganization (the "Reorganization") of the
Company on September 27, 1996 under chapter 11 of title 11 of the United
States Code, 11 U.S.C.(S)(S) 101 et seq. (the "Bankruptcy Code"), see "Item 1.
Business--Corporate History."
The Company (formerly known as The New Bibb Company) is the successor to The
Bibb Company, a Delaware corporation ("Old Bibb"), as a result of the merger
of Old Bibb with and into the Company on September 27, 1996 (the "Merger").
Upon consummation of the Reorganization and Merger, the Company was renamed
The Bibb Company. References herein to the business of the Company for periods
prior to September 27, 1996 refer to the business of Old Bibb as the
predecessor to the business and operations of the Company.
In February 1997, the Company sold its terry business, which consisted of
the manufacture and marketing of bath towels and other terry products (the
"Terry Business"), to WestPoint Stevens Inc. In connection therewith,
effective September 28, 1996, the Company classified the assets of the Terry
Business as assets held for sale, and the results of operations of the Terry
Business are, therefore, excluded from the Company's statement of operations
for the fourth quarter of 1996.
DESCRIPTION OF THE BUSINESS
General
The Company is a vertically integrated textile manufacturer that buys basic
raw materials, such as cotton and synthetic fibers, and converts them
primarily into finished textile goods ready for marketing. The Company's
principal products include: muslin and percale sheets and pillowcases; quilted
and nonquilted bedspreads, comforters, slumberbags, draperies and other
bedding accessories; damask table linen; chambray, a light-weight, yarn-dyed,
woven fabric popular for use in sports and casual wear; and specially-treated
engineered yarns and fabrics for industrial uses, such as high-pressure hoses
and conveyor belts. Customers consist primarily of national retail chains,
such as J.C. Penney Company, Inc. ("J.C. Penney") and Sears Roebuck and Co.
("Sears"), mass merchants, such as Wal-Mart, Kmart and Target, and department
stores which resell to consumers at the retail level. In addition, the Company
sells to hotels, hospitals, linen service companies and others serving the
hospitality market. The Company operates eight manufacturing plants located in
the southeastern United States.
PRODUCTS
The Company's three product divisions are Consumer Products ("Consumer
Products"), Apparel Fabrics ("Apparel Fabrics"), and Engineered Products
("Engineered Products").
Consumer Products. The Consumer Products division manufactures sheets,
pillowcases, bedspreads, comforters, draperies, slumberbags and other home
furnishing accessories. These products are sold to department stores, national
retail chains, mass merchants and distributors and wholesalers, under both
private and Company labels. The Royalton(TM) product line of high-quality
fully coordinated bed and bath merchandise is being sold to upscale department
and specialty stores as part of the Company's continuing effort to expand its
share of the home fashions market. Certain of the Company's adult bedding
products are sold pursuant to licensing agreements under designer names such
as Jessica McClintock(TM) and Joseph Abboud(TM). In addition, the Company also
dyes and prints adult bedding products for non-vertically integrated textile
manufacturers.
1
<PAGE>
The Company is one of the market leaders in juvenile bedding products. Many
of the Company's juvenile bedding products are sold bearing themes and
characters under licensing agreements and, to a lesser extent, themes and
characters developed internally by the Company. Current popular licensed
themes and characters include Barbie(TM), Batman(TM) , Space Jam(TM), Looney
Tunes(TM) and logos of Major League Baseball teams (Major League
Baseball(TM)), National Football League teams (NFL(TM)) and NASCAR(TM).
Third party licensing agreements are generally for terms of one to three
years and may include renewal options.
The Consumer Products division also produces sheets, pillowcases and other
bedding accessories for sale to hotels, hospitals, linen service companies and
others serving the hospitality market. The Company concentrates on supplying
hotels and other institutions that require higher quality bedding products,
such as percales and other higher thread-count fabrics, for greater comfort,
longevity and style. The Company believes it is one of the largest suppliers
of sheets to the hospitality market. The Consumer Products division also
includes the manufacture of damask table linen products ("Table Linens").
These products are sold to hotels, hospitals, linen service companies and
others serving the hospitality market.
Apparel Fabrics. The Company produces cotton and blended fabrics,
principally chambray, a light-weight, yarn-dyed, woven fabric popular for use
in sports and casual wear. The Company sells Apparel Fabrics products
primarily to converters that purchase fabric in relatively small quantities,
and services these customers by stocking both finished roll stock for
immediate shipment and semi-finished roll stock which can be readily converted
in accordance with customer specifications.
Engineered Products. The Company manufactures and markets specialty yarns
and fabrics used primarily in producing high-pressure hoses and conveyor
belts. The Company's manufacturing process enhances the rubber adhesion
properties of purchased yarn and woven fabric to meet high-performance
customer specifications. The Company generally sells its Engineered Products
goods to companies which use the specialty yarns and fabrics in the production
of their own products or further process or include these products in the
goods they sell.
MARKETING AND CUSTOMERS
The Company principally markets its products throughout North America,
primarily through its own in-house sales force from principal sales offices in
New York City, Chicago, Dallas, Southern California, Atlanta and Macon. The
Company has a salaried sales force (including support personnel) of
approximately 80 people, as of February 28, 1997. Compensation of the salaried
sales force includes salary and performance-based bonuses. The Company also
utilizes independent sales representatives for certain of its products.
The Company's customers consist primarily of department stores, national
retail chains and mass merchants as well as hotels, hospitals, linen service
companies and others serving the hospitality market. In 1996, net sales to the
Company's ten largest customers were approximately $126 million, or 37.4% of
its net sales (excluding sales from the Terry Business for the fourth
quarter), compared to approximately $150.5 million, or 38.6% of its net sales,
for 1995 (including sales from the Terry Business). Of these, one customer,
J.C. Penney, accounted for approximately 11.6% and 11.5% of net sales in 1996
(excluding sales from the Terry Business for the fourth quarter) and 1995,
respectively.
The Company supplies a number of diverse product programs to each of its
major customers. The purchasing decisions within a product program are
generally not interdependent and, as is common in the industry, the Company
has no long-term supply agreement with any of its major customers. Product
programs are developed specifically for the customer and are typically carried
for a period of one to three years.
COMPETITION
The textile market is highly competitive, with the degree of competition
varying among the Company's product lines.
2
<PAGE>
The Company competes with many companies for sales of Consumer Products
goods. Its primary competition comes from three of the largest home furnishing
textile companies: WestPoint Stevens Inc. ("West Point"), Springs Industries,
Inc. ("Springs"), and Fieldcrest Cannon, Inc. ("Fieldcrest"). These
competitors are larger than the Company and market a broader array of textile
products than the Company. In marketing such products for consumer use, the
Company competes primarily on the basis of styling, service and, to a lesser
extent, price, and by providing customers with specialized offerings such as
licensed products and various "concept" selling programs. In sales to the
hospitality market, the Company competes by offering timeliness of delivery
and a broad array of styles and fabrics at competitive prices.
A large number of weaving companies are involved in the production and sale
of Apparel Fabrics goods. However, the number producing chambray, the
Company's principal apparel fabric, is much smaller. The Company estimates
that four firms, including the Company, Spartan Mills, Greenwood Mills and Dan
River Mills, Inc., account for a majority of the sales in the chambray market.
The Company believes it competes by being very service oriented, offering
customers both finished roll stock for immediate shipment and semi-finished
roll stock which can be readily converted in accordance with customer
specifications.
The Company competes with a variety of firms in the manufacture and sale of
engineered yarns and fabrics. Many competitors are divisions of non-textile
manufacturers, such as chemical companies, or end-users, such as tire
companies. Competition for Engineered Products goods is based on being able to
meet required technical specifications, quality, price and service.
Management of the Company does not believe that competition from foreign
manufacturers has been a significant factor within the Company's principal
lines of business. Foreign textile manufacturers have generally concentrated
their U.S. marketing efforts on finished apparel products rather than on the
types of products manufactured and sold by the Company. However, the Company
does face competition from foreign manufacturers in the sale of lower thread-
count sheets targeted for the hospitality market, especially lower quality
textile products supplied to certain health care institutions and commercial
linen suppliers. In response, the Company has concentrated its sales efforts
on hotels, hospitals and other institutions which require high level
customized quality production, timeliness of delivery and a broad array of
styles and fabrics.
RAW MATERIALS
The Company's operations require substantial quantities of cotton and man-
made fibers, both of which have been and are expected to continue to be
available in sufficient supply from a wide variety of sources. The Company is
not dependent on any one supplier as a source of raw materials. The Company's
general procedure is to match cotton purchases with anticipated production
requirements. However, when management concludes that a certain grade of
cotton may be in short supply or that prices may be substantially higher in
the near term, the Company typically buys additional cotton for future
delivery. It is the Company's policy not to trade in the futures markets for
cotton or any other commodities as a hedge against potential future cost
increases due to the level of risk inherent in such practices. Although the
Company has always been able to acquire sufficient supplies of cotton for its
operations in the past, any shortage in the cotton supply by reason of
weather, disease or other factors could adversely affect the Company's
operations.
The price of man-made fibers such as polyester is influenced by demand,
manufacturing capacity and costs, petroleum prices, cotton prices and the
price of polymers used in producing man-made fibers. Any significant prolonged
petrochemical shortages could significantly affect the availability of man-
made fibers and cause a substantial increase in demand for cotton, resulting
in decreased availability and, possibly, increased price. The Company also
utilizes substantial quantities of dyes and chemicals. Dyes and chemicals also
have been and are expected to continue to be available in sufficient supply
from a wide variety of sources.
3
<PAGE>
SEASONALITY
Demand for certain of the Company's products is affected by, among other
things, the relative strength or weakness of the retail sales industry. The
Company's third and fourth fiscal quarters (July through December) are
generally its strongest sales periods due to increased consumer spending
during these periods, although this seasonal effect is partially offset by the
absence of seasonality in the Company's sales of sheets and Table Linens to
the hospitality market. The seasonal nature of the Company's business requires
the Company to increase its inventory of certain items to meet the seasonal
demand.
BACKLOG
The Company's backlog of unfilled customer orders was approximately
$27,290,000 at March 1, 1997 as compared with approximately $21,979,000 at
March 2, 1996 (excluding in both cases orders relating to the Terry Business).
The typical lead time required to fill the backlog of customer orders ranges
from one week for most Consumer Products to three months for certain
Engineered Products.
EMPLOYEES
The Company employed approximately 3,100 people on March 15, 1997. Of these
employees, approximately 2,850 were employed in manufacturing, 80 in sales and
170 in administration. Approximately 300 employees at the Company's Roanoke
Rapids, North Carolina facility are covered by a collective bargaining
agreement which expires in March 2000. The Company believes that its employee
relations are satisfactory.
MANUFACTURING FACILITIES
The Company's manufacturing process primarily involves the following
operations: (i) spinning raw cotton and polyester into yarn; (ii) weaving yarn
into fabric; (iii) finishing the fabric; (iv) cutting and sewing and (v)
packaging and distributing the product.
The Company produces its greige (unfinished) goods for Consumer Products
(other than Table Linens) at an integrated spinning and weaving plant located
in Greenville, South Carolina and for Apparel Fabrics at its weaving plant
located in Columbus, Georgia. Greige goods for Consumer Products (other than
Table Linens) and Apparel Fabrics are bleached, dyed and printed at the
Company's finishing plants located in Juliette, Georgia and Brookneal,
Virginia. Cut and sew operations and packaging for Consumer Products (other
than Table Linens) are performed at the Company's three cut and sew facilities
located in Fort Valley and Sargent, Georgia and Brookneal, Virginia.
The Company's plant located in Roanoke Rapids, North Carolina produces Table
Linens. This plant is an integrated spinning, weaving, dyeing and finishing,
fabricating and packaging operation.
All of the Company's Engineered Products are manufactured at the Porterdale,
Georgia facility. Fabrics and yarns are treated to enhance rubber adhesion and
other physical property qualities in accordance with customer specifications.
For more information about the Company's facilities, see "Item 3.
Properties."
ENVIRONMENTAL AND OSHA CONSIDERATIONS
Since 1970, a wide variety of federal, state, local and foreign
environmental laws, regulations and ordinances have been, and continue to be,
adopted and amended.
Some of these laws, regulations and ordinances hold current owners or
operators of land or businesses liable for their own and for previous owners'
or operators' releases of hazardous substances. Because of its operations and
the operations of previous owners or operators of certain of its properties
and by predecessor owners of
4
<PAGE>
certain of the businesses, and the use, production and discharge of certain
substances at its facilities, the Company is affected by these laws and
regulations. Various of the Company's facilities have experienced some level
of regulatory scrutiny in the past and are or may be subject to further
regulatory inspections or future requests for investigation.
At the Abbeville facility in South Carolina (which is now closed), the
Company has been working with the South Carolina Department of Health and
Environmental Control to identify the source of low levels of freon and
certain other volatile organic compounds ("VOCs") which were found in a water
supply well located on-site.
At the Company's building on San Carlos Drive in Macon, Georgia, the State
of Georgia required a groundwater investigation and remediation relating to
the presence of VOCs in the groundwater underlying the facility. Monitoring
wells and a pump and treatment system utilizing an air stripper were
installed. Additional pumping wells were also added to control the migration
off-site of impacted groundwater. The State of Georgia notified the Company
that the facility would not be listed on Georgia's Hazardous Site Inventory.
Therefore, the Company does not believe that material expenditures for this
site will be incurred under the Georgia Hazardous Sites Program. However,
there can be no assurance that the Company will not incur costs under some
other program or law with respect to this matter.
On March 27, 1997, the Company received notice from the Georgia Department
of Natural Resources, Environmental Protection Division ("EPD"), that its
Juliette, Georgia facility has been placed on Georgia's Hazardous Site
Inventory as a result of the recent discovery of tetrachloroethene in
groundwater at the site. No investigation or other response action has been
ordered to date.
In connection with the removal of former underground storage tanks, in
November 1993, at the Roanoke Rapids, North Carolina facility, the Company
discovered the presence of petroleum constituents in soils and groundwater.
The presence of these constituents in soils and groundwater was reported to
the State of North Carolina. At the State's direction, impacted soils were
taken off-site for treatment. No active on-site remediation is being required
by the State at this time.
In connection with the removal of former underground storage tanks at the
Rockingham, North Carolina plant (which is now closed) in March 1997, the
Company discovered the presence of petroleum constituents in soils and
groundwater. The presence of these constituents in soils and groundwater was
reported to the North Carolina Department of Environment, Health and Natural
Resources ("NCDEHNR"). To date, no investigation or remediation has been
required by NCDEHNR. As both underground storage tanks were registered with
NCDEHNR, the Company anticipates that if any remediation is required, a
portion of the investigation and remediation expenses will be reimbursed by
the North Carolina Leaking Underground Storage Tank trust fund.
The Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986
("CERCLA") (commonly known as Superfund), provides for responses to and
liability for releases of hazardous substances into the environment. These
obligations are imposed on the current owner or operator of a facility, the
owner or operator of a facility at the time of the disposal of hazardous
substances at the facility, on anyone who arranged for the treatment or
disposal of hazardous substances at the facility, and on any person who
accepted hazardous substances for transport to a facility selected by such
person. Generally, liability to the government under CERCLA is joint and
several.
The Company has been named as one of several hundred third-party defendants
in connection with litigation relating to the Keystone Sanitary Landfill
(located in Adams County, Pennsylvania), a federal Superfund matter. The
Company is alleged to have disposed of 1,800 cubic yards of material at this
site. The United States Environmental Protection Agency reportedly has
estimated the total volume of wastes allegedly disposed of at the site by
viable potentially responsible parties to be in excess of a half a million
cubic yards. The Company disputes its allocated volume, the toxicity of its
waste and further contends that its share of responsibility, if any, is
minimal. Given the large number of potentially responsible parties and the low
volume of waste allocated to
5
<PAGE>
the Company (even if correct), the Company does not believe that it will incur
material costs in connection with this matter. The Company currently
anticipates that it will be able to resolve its liability regarding the site
for less than $3,000.
The Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act, the Safe Drinking Water Act, the Emergency Planning and
Community Right to Know Act, each as amended, and similar state or local
counterparts to these federal laws, regulate air emissions, water discharges,
hazardous substances and wastes and require public disclosure related to the
use of various hazardous substances. The Company's operations are also
governed by laws and regulations relating to workplace safety and worker
health, primarily the Occupational Safety and Health Act and regulations
thereunder. While the Company believes it is in substantial compliance with
these laws and regulations, from time to time the Company receives from
various government agencies notifications or complaints that allege violation
of requirements which the Company then works to resolve. Except with respect
to the Brookneal facility matters described below, no such notice is
outstanding and unresolved for which the Company expects to incur material
costs. Compliance with environmental laws and regulations also may require the
acquisition or modification of permits or other authorizations for certain
activities and compliance with various standards or procedural requirements.
In February, 1996, the Company entered into a Special Order on Consent
("Order") with the Virginia Water Control Board in connection with its
wastewater discharge permit at the Brookneal, Virginia facility. The Order
requires the Company to undertake certain activities including upgrading its
wastewater treatment facilities. The Company estimates that the cost of
complying with the Order, including the construction of new wastewater
treatment facilities, will be approximately $2,000,000 to be incurred over the
next three years. Pursuant to the Order, the Commonwealth of Virginia also
agreed that the Company could perform closure of the existing wastewater
treatment systems and groundwater remediation relating thereto under the
Virginia Voluntary Remediation Program. In addition, on April 10, 1995, the
Company had entered into a Voluntary Remediation Agreement with Virginia
providing for the investigation and on-site remediation of groundwater and
soils. The Company presently estimates that this remediation will cost less
than $200,000, although further investigation is ongoing.
In addition, while the Company believes that its facilities are in
substantial compliance with current regulatory standards applicable to air
emissions, several of its facilities will be required to obtain new operating
permits under the Clean Air Act Amendments of 1990 ("CAAA"). The Company has
submitted Title V permit applications under the CAAA with respect to the
facilities at Juliette, Georgia, Brookneal, Virginia and Porterdale, Georgia.
Synthetic minor permit applications have been submitted for the facilities at
Roanoke Rapids, North Carolina, Columbus, Georgia and Greenville, South
Carolina. The Company also has provided information regarding its wastewater
discharge at the Porterdale, Georgia facility. At this time, the Company
cannot estimate when other new air or wastewater standards or permit
requirements will be imposed or what technologies or changes in processes the
Company may have to install or undertake to achieve compliance with any
applicable new requirements at these or its other facilities. However, the
Company does not believe that such expenditures are likely to be material.
The Company's capital expenditures for environmental matters were
approximately $200,000 in 1996. The Company has budgeted approximately
$300,000 for environmental capital expenditures in 1997 to maintain
compliance. See "Item 2. Financial Information--Management's Discussion and
Analysis of Financial Condition and Result of Operations."
CORPORATE HISTORY
The Company was organized as a Delaware corporation in June, 1996. The
Company (formerly known as The New Bibb Company) is the successor to Old Bibb
as a result of the Merger. Upon consummation of the Reorganization and Merger,
the Company was renamed The Bibb Company. Unless the context otherwise
requires, the "Company" means The New Bibb Company, Old Bibb (formerly known
as The NTC Group, Inc.),
6
<PAGE>
and its predecessor, The Bibb Company, a Georgia corporation. The Company has
been engaged in the manufacturing and marketing of textile products since
1876.
NEGOTIATIONS WITH CREDITORS; REORGANIZATION UNDER THE PLAN
Beginning in the second quarter of 1995, following Old Bibb's failure to
meet certain of its interest payment obligations, representatives of Old Bibb
met with representatives of certain holders of Old Bibb's 14% Senior
Subordinated Notes due 1999 and 13.875% Senior Subordinated Notes due 1999
(collectively, the "Old Subordinated Notes"), who had formed a steering
committee (the "Steering Committee") to discuss the possibility of
restructuring Old Bibb's indebtedness.
Beginning in May, 1995, Old Bibb entered into a series of forbearance
agreements with the group of creditors (the "Banks") led by Citibank, North
America, Inc., as agent, in which the Banks agreed to, among other things,
forbear from exercising their rights with respect to certain events of default
under Old Bibb's Credit Agreement dated as of August 4, 1993 as amended, (the
"Old Credit Agreement") through the filing of Old Bibb's bankruptcy petition.
Until February, 1996, representatives of Old Bibb engaged in extensive
discussions and negotiations regarding the terms and conditions of a
restructuring or reorganization of Old Bibb's outstanding indebtedness with
the Steering Committee.
Old Bibb and each of the specified holders of the Old Subordinated Notes of
the Company and NTC Group, Inc. entered into a Restructuring Agreement dated
as of February 1, 1996 (the "Restructuring Agreement"). The Restructuring
Agreement provided, among other things, that the members of the Steering
Committee: (i) would vote for acceptance of a Plan of Reorganization of Old
Bibb (the "Plan") to be entered into with respect to all Old Subordinated
Notes owned by such member of the Steering Committee and, accordingly, would
tender to Old Bibb an executed and properly-completed ballot in favor of
acceptance of the Plan; (ii) would not withdraw or otherwise revoke the ballot
referred to in clause (i) above; and (iii) would not vote for or otherwise
consent to any action or agreement that would impede, interfere with, delay,
postpone or attempt to discourage consummation of the Plan, including, but not
limited to, any vote for or recommendation in favor of any alternative plan of
reorganization not proposed by Old Bibb under the Bankruptcy Code.
On July 3, 1996, following receipt of approval by the requisite creditors
and securityholders of Old Bibb for a "prepackaged" bankruptcy reorganization,
Old Bibb filed voluntary petitions for relief under chapter 11 of the
Bankruptcy Code with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). On September 12, 1996, the Bankruptcy Court
issued an order confirming the Plan. The Plan was consummated on September 27,
1996 (the "Effective Date").
PRINCIPAL PROVISIONS OF THE PLAN
On the Effective Date and pursuant to the Plan, the following events, among
other things, occurred:
(i) The Loan and Security Agreement dated as of September 12, 1996, by
and among Congress Financial Corporation (Southern), as agent, ("Congress")
and the lenders party thereto (Congress and the lenders are collectively
referred to herein as the "New Banks") and the Company (the "New Credit
Agreement") became operative, thereby providing the Company with a source
of financing. On the Effective Date, all outstanding indebtedness to the
Banks relating to pre-Effective Date obligations arising under the Old
Credit Agreement was repaid (or, in the case of then-outstanding letters of
credit, cash collateralized) in full.
(ii) Each holder of the Company's outstanding 14% Senior Subordinated
Notes and 13.875% Senior Subordinated Notes became entitled to receive
59.9177745 and 57.5877576 shares, respectively, of the Company's Common
Stock, $.01 par value per share (the "Common Stock") for each $1,000
principal amount of Old Subordinated Notes held by such holder (the
issuances with respect to all Old Subordinated
7
<PAGE>
Notes represented in the aggregate approximately 9,500,000 shares, or 95%
of the Common Stock outstanding as of the Effective Date).
(iii) Each holder of pre-Merger common stock, (the "Old Common Stock" or
"Old Equity Interests") became entitled to receive, in exchange for each
share of Old Common Stock, 50.9511043 shares of Common Stock (the issuances
with respect to all Old Equity Interests represented in the aggregate
approximately 500,000 shares, or 5% of the Common Stock outstanding as of
the Effective Date).
THE NEW CREDIT AGREEMENT
Set forth below is a summary of the terms and provisions of the New Credit
Agreement, as currently in effect. Such summary does not purport to be
complete and is qualified in its entirety by reference to the New Credit
Agreement.
A. Available Borrowings
As part of the New Credit Agreement, the Company is entitled to borrow up to
a maximum of $110 million principal amount (and up to a maximum of $115
million principal amount during the months of July through November in each
calendar year). The borrowings under the New Credit Agreement are in the form
of a term loan and revolving loans (including letters of credit of up to $15
million). Borrowings are in the form of a term loan, which was originally in
the amount of $25 million and which was subsequently reduced to $15.76 million
following the sale of the Terry Business, and the remainder of such borrowings
are in the form of revolving loans available to the extent that a sufficient
borrowing base is present. The borrowing base for revolving loans is equal to
a specific percentage of eligible receivables and eligible inventory in which
the New Banks have a perfected first priority security interest subject to
applicable reserves.
B. Interest
Borrowings under the New Credit Agreement bear interest at a rate per annum
equal to, either one (1%) percent per annum above the rate announced from time
to time by CoreStates Bank, N.A. as its "prime rate" and increase or decrease
by an amount equal to each increase or decrease in such prime rate, effective
as of the first day of the month after any such change, or, at the Company's
option, a rate of three and one-quarter percent (3.25%) per annum above the
Adjusted Eurodollar Rate used by the Agent, subject to the Agent's customary
terms applicable to Eurodollar rate-based loans for interest periods of one,
two or three months duration as selected by the Company ("Eurodollar Rate
Loans"). The Adjusted Eurodollar Rate is calculated based on the average of
rates of interest per annum at which CoreStates Bank, N.A. is offered deposits
of U.S. dollars in the London interbank market for the applicable interest
period, adjusted by the reserve percentage prescribed by governmental
authorities as determined by the Agent. The maximum amount of the Eurodollar
Rate Loans at any time shall not exceed eighty percent (80%) of the daily
average of the principal amount of the loans which is anticipated will be
outstanding during the applicable interest period. After maturity or an event
of default under the New Credit Agreement or the termination, interest on all
loans shall be increased by two percent (2%) per annum above the pre-default
rates referred to above. Interest on Eurodollar Rate Loans shall be subject to
reduction based upon certain financial performance.
C. Maturity
The New Credit Agreement is for a minimum term of three (3) years, expiring
on September 27, 1999, subject to one-year extensions, unless terminated by
the New Banks or the Company. The New Credit Agreement shall be subject to
earlier termination upon an event of default.
D. Optional Prepayments; Mandatory Repayments
Under the New Credit Agreement, the Company may repay during the initial
three years of the facility all borrowings in full upon payment of specified
premiums not to exceed 1% of the amount of the then-existing
8
<PAGE>
facility. The foregoing premiums are subject to specified reductions in the
event of a sale of the Company (by way of all of the Company's stock or
substantially all of the Company's assets). The term loan under the New Credit
Agreement shall amortize monthly in an amount equal to 1/84th of the original
amount of the term loan, with the unpaid balance due upon termination or
maturity of such facility.
E. Security
As security for its obligations under the New Credit Agreement, the Company
granted to the New Banks first priority security interests in substantially
all of the assets of the Company, including its receivables.
F. Covenants
The New Credit Agreement contains numerous restrictive financial and other
covenants, including: (i) restrictions on the incurrence of indebtedness and
liens; (ii) restrictions on mergers, acquisitions, asset sales and
transactions with affiliates; (iii) restrictions on dividends and
distributions; (iv) restrictions on capital expenditures; and (v) financial
tests, including, among others, those measuring the Company's debt service
coverage ratio, change in minimum net worth, working capital ratio and minimum
operating cash flow.
G. Events of Default
The New Credit Agreement contains certain standard events of default which
include: (i) failure to pay any principal of a note or letter of credit
obligation when due or any interest when due; (ii) any representation or
warranty made by the Company to the New Banks being false in any material
respect when made; and (iii) default in the observance of certain post-
confirmation provisions or agreements of the New Credit Agreement. If an event
of default occurs, the New Banks may declare all or a portion of the amounts
owing under the New Credit Agreement to be immediately due and payable.
ACCOUNTING FOR RESTRUCTURING
The Company has accounted for the restructuring described herein using the
principles of fresh start reporting as required by SOP No. 90-7. Pursuant to
such principles, the Company's assets and liabilities have been revalued as of
the Effective Date and the assets are stated at their reorganization value
(the "Reorganization Value"), which is defined as the value of the Company
before considering liabilities.
The restatement of the Company's assets and liabilities, referred to as
fresh start reporting, applies the following principles:
(1) The Company's Reorganization Value is allocated to its assets as
though the Company had been acquired in a transaction reported using the
purchase method, under which specific tangible assets and identified
intangible assets of the Company are adjusted to their fair market values.
If any portion of the Reorganization Value cannot be attributed to specific
tangible or identified intangible assets, such portion is reported as an
intangible asset identified as "reorganization value in excess of amounts
allocable to identifiable assets," and such excess would then be amortized
in accordance with applicable financial reporting procedures.
(2) Each liability existing on the Effective Date, other than deferred
taxes, is stated at the present value of the future amounts to be paid
thereon as determined by discounting such payments at an appropriate
current interest rate, if material.
(3) Deferred taxes are reported in conformity with generally accepted
accounting principles. When realized, benefits from pre-confirmation net
operating loss carryforwards reduce the reorganization value in excess of
amounts allocable to identifiable assets and other intangibles until such
excess is exhausted and thereafter are reported as a direct addition to
paid-in capital.
9
<PAGE>
(4) Changes in accounting principles that will be required in the
Company's financial statements within the twelve months following the
adoption of fresh start reporting should be adopted at the time the fresh
start reporting is adopted.
Adopting fresh start reporting in essence results in a new reporting entity
with no beginning retained earnings or deficit.
RECENT DEVELOPMENTS
Sale of Terry Business
On February 21, 1997, the Company completed the sale of the Terry Business
to WestPoint Stevens Inc., for aggregate consideration of approximately $38.8
million. The net cash proceeds of the sale, approximately $37 million, were
used to reduce indebtedness under the New Credit Facility.
Appointment of President and Chief Executive Officer
In August, 1996, Michael L. Fulbright was appointed to serve as President
and Chief Executive Officer of Old Bibb. See "Item 5. Directors and Executive
Officers."
APPOINTMENT OF DIRECTORS
Immediately prior to the Merger, C. Scott Bartlett, Jr., Marvin B. Crow,
Michael L. Fulbright, Irwin N. Gold, Stewart M. Kasen, George A. Poole, Jr.
and James A. Williams were appointed to the Company's Board of Directors. See
"Item 5. Directors and Executive Officers."
RISK FACTORS
In addition to the following considerations, the Company's business and
financial condition are dependent on the factors described under "Item 1.
Business--Description of the Business," including those matters pertaining to
the availability and the price of raw materials, the seasonality and
cyclicality of the Company's business and competitive factors.
Absence of Public Market
The Company's Common Stock is not currently listed or admitted to unlisted
trading privileges on a national securities exchange or included for quotation
through an inter-dealer quotation system of a registered national securities
association. The Company also is not aware of any dealer or "market maker" in
the Common Stock and, consequently, the trading market for such securities is
limited. The Company has filed a preliminary application with The Nasdaq Stock
Market to list the Common Stock on the Nasdaq National Market, subject to the
satisfaction of certain listing requirements. Notwithstanding the foregoing,
the Company is unable to predict whether a more active trading market for the
Common Stock will develop. Even if such a market does develop, due to industry
and other conditions beyond the control of the Company, there can be no
assurance that such a market would continue to exist.
In addition, holders of Common Stock who are deemed to be "underwriters" as
defined in subsection 1145(b) of the Bankruptcy Code or who are otherwise
deemed to be "affiliates" of, or persons who exercise "control" over, the
Company within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), are unable to freely transfer or sell their shares of
Common Stock, except pursuant to an effective registration statement or in
reliance on an available exemption from registration under the Securities Act
and under equivalent state securities or "blue sky" laws.
10
<PAGE>
Capital Expenditure Needs
The Company anticipates it will make significant capital expenditures in the
near term to modernize its facilities and reduce operating costs. Capital
expenditures are budgeted to be approximately $16 million in 1997, although
the Company may seek to finance a portion of its facility modernization
program through operating leases or vendor financing. The Company also intends
to pursue additional projects, with the intention of financing those projects
through operating leases. There can be no assurance that the Company will be
able to fund these capital requirements sufficiently to remain competitive.
Secured Debt; Ability to Refinance
Although completion of the Reorganization and the sale of the Terry Business
have significantly reduced the Company's debt service obligations, the
Company's indebtedness pursuant to the New Credit Agreement is substantial in
relation to its stockholders' equity. Although no assurances can be given, the
Company believes that sufficient cash flow will be generated to meet the
Company's operating requirements. However, it is not anticipated that the
operations of the Company will generate funds sufficient to pay the entire
principal amount due under the New Credit Agreement at maturity. Accordingly,
satisfaction of the principal amount of the indebtedness under the New Credit
Agreement at maturity will depend in part on the ability of the Company to
refinance this facility at maturity, or to raise sufficient capital from other
sources to make such payment. However, there can be no assurance that any such
refinancing or additional capital can be obtained, or that, if obtained, it
will be on terms favorable to the Company and will yield sufficient proceeds
to meet the Company's obligations.
The Company's significant leverage also could limit its ability to withstand
competitive pressures and adverse economic conditions, to make acquisitions or
to take advantage of significant business opportunities that may arise.
Competition
The markets for the Company's products are highly competitive. The Company's
products compete with those of a substantial number of companies, many of
which are larger and have resources, financial or otherwise, substantially
greater than those of the Company. There can be no assurance that the Company
will be able to compete effectively with these companies. See "Item 1.
Business--Competition."
Significance of the Retail Sales Industry
A significant portion of the Company's sales are made to customers in the
retail sales industry. Customers consist primarily of national retail chains,
such as J.C. Penney and Sears, mass merchants, such as Wal-Mart, Kmart and
Target, and department stores which resell to customers at the retail level.
Demand for certain of the Company's products is affected by, among other
things, the relative strength or weakness of the retail sales industry.
Environmental Risks
The Company's operations and properties are subject to federal, state and
local laws, rules, regulations and ordinances relating to the use, storage,
handling, generation, treatment, emission, release, discharge and disposal of
certain materials, substances and wastes. The nature of the Company's current
and historic operations and that of previous owners and operators of certain
of its properties and businesses expose it to the risk of claims with respect
to environmental matters, and there can be no assurance that material costs or
liabilities will not be incurred in connection with such claims or matters.
Based upon the Company's experience to date, the Company believes that the
future cost of compliance with existing environmental laws, rules, regulations
and ordinances will not have a material adverse effect on the
11
<PAGE>
Company's business or financial position. However, future events, such as
changes in existing laws and regulations or their interpretation, may give
rise to additional compliance costs or liabilities that could have a material
adverse effect on the Company's results of operations and financial condition.
Compliance with more stringent laws or regulations, as well as more vigorous
enforcement policies of regulatory agencies or stricter or different
interpretations of existing laws, may require additional expenditures by the
Company which may be material. See "Item 1. Business--Environmental and OSHA
Concerns."
Raw Materials
One of the principal raw materials used by the Company in the manufacture of
its products is cotton in various grades and staple lengths. Because the price
of cotton fluctuates over time, the Company is subject to the risk of
increased cotton prices that may adversely impact the cost of production and
cash flows. See "Item 1. Business--Raw Materials."
Labor Considerations
Approximately 10% of the Company's employees, who are located at the Roanoke
Rapids facility, are represented by a labor union with which the Company has a
collective bargaining agreement. The Company's current union contract expires
in March 2000. The Company believes that its wage rates are competitive with
other unionized competitors and that its relations with its employees and with
its labor unions are generally good. However, there can be no assurance
regarding the impact of any future labor contract negotiations on the
Company's operating results or operating efficiencies or that work stoppages
will not occur in the future in connection with labor negotiations or
otherwise. In addition, the Company cannot predict the extent to which labor
contracts negotiated in the future by the Company's competitors will influence
the Company's labor negotiations in the future. See "Item 1. Business--
Employees."
Dividends
The Company does not anticipate having funds available in the foreseeable
future to pay cash dividends on any shares of Common Stock. Moreover, the New
Credit Agreement prohibits the payment of cash dividends on Common Stock until
after the payment in full of the loans made thereunder. See "Item 1.
Business--Corporate History--The New Credit Agreement."
12
<PAGE>
ITEM 2. FINANCIAL INFORMATION
Selected Financial Data
The following selected financial data of the Company for the fiscal years
1992 through 1996 have been derived from the audited financial statements of
the Company. The financial data for the three month periods ended March 29,
1997 and March 30, 1996, are derived from unaudited financial statements. The
following data should be read in conjunction with the Financial Statements of
the Company and the notes thereto provided as Item 13 of this Registration
Statement and the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" below. Information for periods subsequent to
September 28, 1996 was prepared under the principles of fresh start reporting
(see Note 1 to the Financial Statements) and is not comparable to information
for prior periods. The Statement of Operations data for the period subsequent
to September 28, 1996 excludes the results of the Terry Business (see Note 1 to
the Financial Statements), which was sold on February 21, 1997.
THE BIBB COMPANY
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS YEAR END
ENDED ENDED --------------------------------------------
DECEMBER 28, 1996 SEPTEMBER 28, 1996 1995 1994 1993 1992
----------------- ------------------ --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data
Net Sales............... $ 74,174 | $262,392 $ 389,998 $ 459,192 $487,892 $ 429,896
Cost of Sales........... 66,709 | 239,724 366,040 432,235 410,713 369,751
-------- | -------- --------- --------- -------- ---------
Gross Profit............ 7,465 | 22,668 23,958 26,957 77,179 60,145
Selling and |
Administrative |
Expenses............... 8,342 | 26,002 34,538 41,765 43,134 38,893
Financial Restructuring |
Advisory Fees.......... 0 | 0 1,592 0 0 0
Management Fee to |
NTC(a)................. 0 | 1,993 3,368 4,000 4,000 4,000
-------- | -------- --------- --------- -------- ---------
Operating (Loss) Profit. (877) | (5,327) (15,540) (18,808) 30,045 17,252
Interest Expense |
Senior and Other Debt.. (1,319) | (4,850) (5,627) (4,095) (3,495) (4,131)
Subordinated Bonds..... 0 | (11,151) (22,299) (22,284) (22,110) (22,784)
Interest Income from |
Woods.................. 0 | 659 1,172 1,174 586 0
Loan Fee Amortization |
and Expense............ (235) | (1,928) (2,486) (1,795) (1,847) (1,479)
Gain on Sale of |
Investments............ 0 | 3,949 (c) 0 0 3,182 (b) 0
Other, net.............. (109) | (1,289) (2,811) (2,108) (1,275) 410
-------- | -------- --------- --------- -------- ---------
Income (Loss) |
Before Reorganization |
and Extraordinary |
Items (d)............. (2,540) | (19,937) (47,591) (47,916) 5,086 (10,732)
-------- | -------- --------- --------- -------- ---------
Reorganization Items: |
(e) |
Professional fees and |
Other Expenses........ 0 | (1,423) 0 0 0 0
Adjust accounts to fair |
value................. 0 | 7,921 0 0 0 0
Extraordinary Items: |
Loss from Retirement of |
Debt in Connection |
with Refinancing...... 0 | 0 0 0 (738) 0
Gain from Discharge of |
Debt in Connection |
with the Plan (f)..... 0 | 111,650 0 0 0 0
-------- | -------- --------- --------- -------- ---------
Net Income (Loss) |
Available for Common |
Stockholders........... $ (2,540) | $ 98,211 $ (47,591) $ (47,916) $ 4,348 $ (10,732)
======== | ======== ========= ========= ======== =========
Net Income (Loss) per |
Common Share (g)....... $ (0.25) | $ -- $ -- $ -- $ -- $ --
Cash Dividends Declared |
per Common Share....... 0 | 0 0 0 0 0
Depreciation and |
Amortization (exclusive |
of loan fee |
amortization).......... 2,610 | 9,582 15,644 14,283 12,239 12,292
Capital Expenditures.... 1,658 | 2,940 5,489 11,129 13,807 9,245
Balance Sheet Data (at |
end of period) |
Current Assets........ $169,661 | -- $ 98,134 $ 118,921 $127,354 $ 167,802
Current Liabilities... 62,759 | -- 289,265 259,296 57,252 52,614
Working Capital....... 106,902 | -- (191,131) (140,375) 70,102 115,188
Property, Plant and |
Equipment, net....... 58,642 | -- 77,414 85,024 88,064 86,560
Investment in Woods... 0 | -- 15,270 14,098 14,924 19,898
Total Assets.......... 232,700 | -- 198,638 228,171 238,104 279,638
Long Term Debt Less |
Current Maturities... 84,093 | -- 0 11,000 175,353 225,542
Stockholders' Equity |
(Deficit)............ $ 85,848 | -- $ (90,627) $ (42,125) $ 5,499 $ 1,482
</TABLE>
13
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 29, MARCH 30,
1997 1996
------------ ------------
<S> <C> <C>
Income Statement Data
Net Sales........................................... $ 68,052 | $81,538
Cost of Sales....................................... 62,070 | 73,735
-------- | -------
Gross Profit........................................ 5,982 | 7,803
Selling and Administrative Expenses................. 6,585 | 8,584
Financial Restructuring Advisory Fees............... 0 | 0
Management Fee to NTC(a)............................ 0 | 672
-------- | -------
Operating Loss (603) | (1,453)
Interest Expens |
Senior and Other Debt.............................. (1,219) | (1,259)
Subordinated Bonds................................. 0 | (5,575)
Interest Income from Woods.......................... 0 | 293
-------- | -------
Loan Fee Amortization and Expense................... (274) | (156)
Gain on Sale of Investments......................... 0 | 3,685
Other, net.......................................... (95) | (293)
-------- | -------
Loss Before Reorganization and Extraordinary |
Items(d)........................................... $ (2,191) | $(4,758)
-------- | -------
Reorganization Items: |
Professional fees and Other Expenses............... 0 | 0
Adjust accounts to fair value...................... 0 | 0
-------- | -------
Net Loss Available for Common Stockholders.......... $ (2,191) | $(4,758)
======== | =======
Net Loss per Common Share(g)........................ $ (0.22) | $ --
Cash Dividends Declared per Common Share............ 0 | 0
Depreciation and Amortization (exclusive of loan fee |
amortization)...................................... 2,117 | 2,893
Capital Expenditures................................ 2,527 | 831
Balance Sheet Data (at end of period) |
Current Assets..................................... $125,424 | --
Current Liabilities................................ 50,147 | --
Working Capital.................................... 75,277 | --
Property, Plant and Equipment, net................. 57,546 | --
Investments in Woods............................... 0 | --
Total Assets....................................... 187,165 | --
Long Term Debt Less Current Maturities............. 52,826 | --
Stockholders' Equity (Deficit)..................... $ 84,192 | --
</TABLE>
NOTES TO SELECTED FINANCIAL DATA
(a) Prior to February 1, 1996, pursuant to a management services agreement
dated April 1, 1989 (the "Management Services Agreement"), between the
Company and The NTC Group, Inc. ("NTC"), NTC received fees equal to 2% of
the Company's average month-end equity book value plus interest-bearing
debt. Pursuant to the Restructuring Agreement, during the period between
February 1, 1996 and the Effective Date, NTC was entitled to receive
management fees under the Management Services Agreement equal to $141,633
per month. Pursuant to the Plan, $1,830,000 of accrued management fees
were forgiven by NTC as of September 28, 1996, and the Management Services
Agreement was terminated. See "Item 7. Certain Relationships and Related
Transactions--Management Services Agreement" and Note 8 to the Financial
Statements.
(b) During the year ended January 1, 1994, the Company sold its investment in
an unconsolidated subsidiary.
14
<PAGE>
(c) On December 21, 1989, the Company received $11,388,000 in principal amount
under a note receivable owed to the Company by TB Woods Incorporated
("Woods"), which was an affiliate of the Company. In 1991, the Company
readvanced $5,644,000 to Woods under the note receivable. In 1993, Woods
repaid the Company $5,560,000 and the remaining principal was restructured
to include two new notes and a warrant, pursuant to which the Company
acquired 375,000 shares of common stock of Woods' parent corporation. In
August 1994, one of those notes for $2,000,000 was paid in full. During
the first quarter of 1996 the Company sold the shares of stock in an
underwritten public offering in which it received net proceeds of
$4,185,000. See Note 8 to the Financial Statements.
(d) Prior to the Merger, the Company was an "S" Corporation under the Internal
Revenue Code. Because all items of income, expense and credit of an "S"
Corporation generally pass through to its stockholders, the Company did
not pay federal income taxes or certain state and local income taxes
during the period it was an "S" Corporation. Effective September 28, 1996,
the Company became a "C" Corporation under the Internal Revenue Code and
became ineligible to pass through items of income, expense and credit to
its stockholders. For the three-months ended December 28, 1996, there was
no income tax expense nor benefit recorded. See Note 6 to the Financial
Statements.
(e) In connection with the Plan, reorganization items were recorded for
professional fees and expenses and for adjustments to certain accounts to
reflect fair value.
(f) See Note 5 to the Financial Statements.
(g) Per share amounts for periods prior to September 28, 1996 have not been
presented because the amounts for those periods are not meaningful due to
the implementation of fresh start reporting. See Note 1 to the Financial
Statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
The following discussion and analysis of the financial condition and the
results of operations should be read in conjunction with the Section herein
entitled "Selected Financial Data" and the Financial Statements of the Company
and the notes thereto provided as Item 13 of this Registration Statement. The
Company's fiscal year ends on the Saturday nearest December 31. References
herein to a "fiscal" year mean the Company's 52- or 53-week fiscal year,
ending on the Saturday nearest December 31.
In connection with the completion of the Reorganization and the consummation
of the Merger, the Company adopted fresh start reporting, effective as of
September 28, 1996. As a result of Fresh Start reporting, the three months
ended December 28, 1996, and the nine months ended September 28, 1996, are
reported separately in "Selected Financial Data." See the notes to the
Financial Statements, in which the Plan and fresh start reporting are
described in greater detail. As a result of the implementation of fresh start
reporting, analysis and comparison to prior periods of the results of
operations for all periods that include the period subsequent to September 28,
1996 are not meaningful. In addition, the Company completed the sale of the
Terry Business on February 21, 1997. In connection therewith, the assets of
the Terry Business have been classified as assets held for sale, effective
September 28, 1996, and, therefore, the results of operations of the Terry
Business are excluded from the Company's results of operations from and after
such date.
RESULTS OF OPERATIONS
Fiscal 1996 Compared to Fiscal 1995
Net sales for 1996 were $336,566,000, compared to $389,998,000 for the prior
year, a decrease of $53,432,000 or 13.7%. Sales were lower than the prior year
principally due to (i) the Company's decision in 1995 to down-size the Terry
Business and reduce sales of lower margin terry products which, through the
first nine months of 1995, had accounted for approximately $13,000,000 in
sales, (ii) the exclusion from fourth quarter 1996 sales of $19,982,000 in
sales from the Terry Business, as a result of the reclassification of that
product group, and (iii) the Company's decision to de-emphasize its marketing
and sales of lower-margin commodity bedding, which had accounted for
approximately $19,000,000 in net sales during 1995. The lower-
15
<PAGE>
margin commodity bedding market is not generally characterized by
differentiation in design and printing quality, which have generally been the
Company's principal competitive features. In addition, commodity bedding
products tend to be characterized by seasonal demands, high risk inventory or
limited gross profit. Accordingly, the Company determined to de-emphasize those
commodity products in favor of a focus on its core bedding products, which are
characterized by higher design and quality requirements and higher margin
opportunities. The Company does not anticipate that this change in emphasis
will have any material adverse effect on the Company's sales in the future.
Gross profits for 1996 were $30,133,000 compared to $23,958,000 for the prior
year, an increase of $6,175,000. Gross profit as a percentage of net sales
increased to 9.0% for 1996 from 6.1% for the prior year. The increase in 1996
was principally attributable to a shift in product mix toward higher-margin
products, consistent with the Company's decision to de-emphasize commodity
bedding.
Selling, general and administrative expenses for 1996 were $34,344,000
compared to $36,130,000 for 1995, a decrease of $1,786,000. As a percentage of
net sales, selling, general and administrative expenses increased to 10.2% for
1996 from 9.3% for the prior year. The dollar decrease is attributable to the
Company's downsizing of its sales force in connection with its decision to de-
emphasize its marketing and sales of lower-margin commodity and bedding
products, as well as the exclusion of the selling, general and administrative
expenses attributable to the Terry Business for the fourth quarter of 1996. The
increase as a percentage of net sales is a function of lower overall sales
against which such expenses are applied.
Operating loss for 1996 was $6,204,000, compared to a loss of $15,540,000 in
the prior year, representing an improvement of $9,336,000. The improvement is
primarily attributable to the increase in gross profit and the decrease in
selling, general and administrative expenses, as well as the termination of the
Management Services Agreement with NTC as of the Effective Date.
Interest expense decreased from $27,926,000 in 1995 to $17,320,000 in 1996 as
a result of the extinguishment of the long-term debt in the third quarter as
part of the Reorganization.
The gain on sale of investments of $3,949,000 resulted from the sale by the
Company of shares of stock of Woods' parent as part of the latter company's
initial public offering during the first quarter of 1996.
The Reorganization item "Professional fees and other expenses" represents a
reclassification of expenses related to the Plan. The item "Adjust accounts to
fair value" is associated with the implementation of fresh start reporting (See
Note 1 to the Financial Statements and "Accounting for Restructuring").
Extraordinary Gain of $111,650,000 resulted from the gain on the discharge of
long-term debt as a result of the Reorganization, which represented forgiveness
of principal and interest, reduced by the estimated fair value of the shares of
Common Stock issued pursuant to the Plan.
As a result of the above factors, net income increased from a net loss of
$47,591,000 in prior year to net income of $95,671,000, an increase of
$143,262,000.
Fiscal 1995 Compared to Fiscal 1994
Net sales for 1995 were $389,998,000 compared to $459,192,000 for the prior
year, a decrease of $69,194,000 or 15.1%. Sales were lower than the prior year
due to (i) the Company's decision to de-emphasize its marketing and sales of
lower-margin commodity bedding and terry products, (ii) lower shipments of
bedding products during July caused by a computer systems conversion, and (iii)
weaker demand for products from the Apparel Fabrics division.
Gross profit for 1995 was $23,958,000 compared to $26,957,000 for the prior
year, a decrease of $2,999,000. Gross profit as a percentage of net sales
increased to 6.1% for 1995 from 5.9% for the prior year. The improvement in the
gross profit percentage resulted from improved manufacturing productivity and
offset several significant adverse factors, including (i) record cotton costs
experienced during the second half of 1995, (ii) costs incurred to close out
discontinued commodity bedding and terry products, and (iii) costs incurred to
shut two manufacturing facilities and one distribution facility and to downsize
other continuing facilities.
16
<PAGE>
Selling and administrative expenses were $36,130,000 for 1995 compared to
$41,765,000 for the prior year, a decrease of $5,635,000. Selling and
administrative expenses as a percentage of net sales increased to 9.3% for
1995 from 9.1% for the prior year. The 1995 expenses declined in absolute
dollars in conjunction with the downsizing of the Company's sales base. The
1995 expenses also included advisory costs associated with the financial
restructuring.
As a result of the above factors, operating loss for 1995 decreased to
$15,540,000 from $18,808,000 in the prior year.
Interest expense was $27,926,000 in 1995 compared to $26,379,000 in the
prior year. Payments in the amount of $2,859,000 in 1995 and $2,107,000 in
1994 made to the purchasers of trust certificates issued in connection with
the Company's accounts receivable securitization program (the "Receivables
Trust") are included in Other, Net. Interest expense and Other, Net increased
due to increases in interest rates.
As a result of the above factors, net loss decreased to $47,591,000 from
$47,916,000 in the prior year.
Three Months Ended March 29, 1997 Compared to Three Months Ended March 30,
1996
Net sales for the three months ended March 29, 1997, were $68,052,000
compared to $81,538,000 for the three months ended March 30, 1996, a decrease
of $13,486,000 or 16.5%. The prior year sales included sales from the Terry
Business of $15,398,000. In conjunction with the sale of the Terry Business,
the Company agreed to sell to WestPoint Stevens Inc. certain yarn and greige
terry cloth at cost for a period of up to six months. The first quarter of
1997 included sales of $1,705,000 under that agreement.
The Company's gross profit for the three months ended March 29, 1997 was
$5,982,000 or 8.8% of net sales compared to $7,803,000 or 9.6% of net sales
for the three months ended March 30, 1996. The decrease in gross margin
resulted from approximately $1,300,000 of expenses incurred in the
implementation of the plant consolidation plan, announced in January 1997,
designed to streamline and reduce the operating costs of the Company's
manufacturing facilities and a $400,000 insurance settlement negotiated in the
three months ended March 30, 1996. In addition, the Company's gross margin
percentage in the first quarter of 1997 was negatively affected by the sales
of yarn and greige terry cloth to WestPoint Stevens Inc.
Selling and administrative expenses for the three months ended March 29,
1997 were $6,585,000 or 9.7% of net sales compared to $8,584,000 or 10.5% of
net sales for the three months ended March 30, 1996. The decrease in expenses
resulted from the sale of the Terry Business, and continuing benefits from a
cost reduction plan implemented during the latter part of 1996. In addition,
the Company reduced its management information expenses as a result of (i)
completion of a comprehensive computer systems conversion and (ii) a reduction
of the Company's computer lease expenses.
Management fees to affiliate decreased from $672,000 in the three months
ended March 30, 1996 to $0 for the three months ended March 29, 1997 as a
result of the termination (during the third quarter of 1996) of the Management
Services Agreement between the Company and NTC, in conjunction with the
Reorganization.
Operating loss for the three months ended March 29, 1997 improved to a loss
of $603,000 from a loss of $1,453,000 in the three months ended March 30,
1996, a decrease of $850,000.
Interest expense for the three months ended March 29, 1997 was $1,219,000
compared to $6,834,000 for the three months ended March 30, 1996, a decrease
of $5,615,000 or 82.2%. Subordinated interest expense of $5,575,000 in the
three months ended March 30, 1996, were reduced to $0 in the three months
ended March 29, 1997, as part of the Reorganization completed in the third
quarter of 1996, which resulted in the extinguishment of all such subordinated
debt.
Interest income on the Woods' note decreased from $293,000 in the three
months ended March 30, 1996 to $0 in the three months ended March 29, 1997 due
to the prepayment of the note and accrued interest thereon for approximately
$10,670,000 during the third quarter of 1996.
17
<PAGE>
Gain on sale of investment of $3,685,000 in the three months ended March 30,
1996 represents the gain associated with the sale of stock of Woods' parent
corporation in an underwritten public offering in February 1996. The Company
received net proceeds of $4,185,000 in such offering.
For the three months ended March 29, 1997, the Company had a net loss of
$2,191,000 compared to a net loss of $4,758,000 for the three months ended
March 30, 1996.
INFLATION
The Company believes that the relatively moderate rate of inflation over the
past few years has not had a significant impact on its sales or profitability.
LIQUIDITY AND CAPITAL RESOURCES
General. Prior to the Reorganization, the Company's principal sources of
funds were cash flow from operations, borrowings under various debt agreements
and the repayment and sale of certain securities of Woods and its parent
corporation, which were former affiliates of the Company.
Following the Reorganization, the Company's principal sources of funds have
been, and are expected to continue to be, cash flow from operations and
borrowings under the New Credit Agreement. In addition, in February 1997, the
Company sold the Terry Business for approximately $38.8 million. The Company
received approximately $37 million in net cash proceeds from that sale, all of
which was used to repay outstanding indebtedness. The Company determined that
a sale of the Terry Business, at a favorable price, was consistent with its
approach to de-emphasize its presence in commodity textiles. The Company has
no present intention to place any of its other divisions up for sale.
In the Reorganization, approximately $197 million of the Company's
indebtedness, including accrued interest, was forgiven in exchange for the
issuance of approximately 9.5 million shares of Common Stock. As a result of
the foregiveness of such debt, the Company is expected to achieve an annual
savings in interest expense of approximately $22 million.
As part of the New Credit Agreement, the Company is entitled to borrow up to
a maximum of $110 million principal amount (and up to a maximum of $115
million of principal amount during the months July through November in each
calendar year), subject to borrowing base availability and applicable
revolving loan reserves. See "Item 1. Business--Corporate History--The New
Credit Agreement."
As of March 29, 1997, the Company had approximately $54.8 million in
borrowings outstanding under the New Credit Agreement, after repaying
approximately $37 million in borrowings thereunder with the net proceeds of
the sale of the Terry Business on February 21, 1997. Of the outstanding
borrowings, approximately $2.5 million are due during the twelve months ending
March 31, 1998. As a result of the Company's sale of the Terry Business, the
Company entered into an amendment to the New Credit Agreement on April 25,
1997 which provides for (i) an increase of the Supplemental Capital
Expenditures Allowance, as defined therein, from $6 million to $16 million,
(ii) a release of the $10 million term loan reserve, (iii) an adjustment in
the formula used to determine the interest rate of the Eurodollar Rate loans,
and (iv) changes in the formulas used in determining loan covenant compliance.
As of March 29, 1997, the Company had the ability to borrow an additional
$13.2 million for general operating requirements under the revolver associated
with the New Credit Agreement.
In 1991, industrial development revenue bonds (the "IRBs") were issued and
sold to refinance the purchase of certain of the Company's plants. These IRBs
were backed by letters of credit for which the Company was obligated in the
amount of approximately $11 million. The Company repaid one of the IRBs in
December 1996, in an aggregate amount of $8 million, and repaid the remaining
IRB in February 1997, in an aggregate amount of approximately $3 million. The
Company does not have any other outstanding IRB obligations.
18
<PAGE>
Liquidity. The Company experiences significant fluctuations in its working
capital requirements primarily associated with its retail customers' late
summer and fall inventory purchasing. The Company's primary ongoing cash
requirements will be to fund debt service, make capital expenditures and
finance working capital. The Company believes that it will generate sufficient
cash flow from operations, as supplemented by its available borrowings under
the New Credit Agreement and operating leases, to meet anticipated working
capital and capital expenditure requirements as well as debt service
requirements under the New Credit Agreement, at least until September 1999,
the scheduled maturity of the New Credit Agreement.
Trade Receivables Transaction. In August 1993, the Company had refinanced
its senior revolving credit facility (the "Refinancing") and in connection
therewith sold its trade accounts receivable, exclusive of certain
international and miscellaneous receivables (collectively, the "Receivables"),
to BF Funding, with recourse, for a cash purchase price of $50,000,000 (the
"Trade Receivables Transaction"). BF Funding transferred the Receivables to a
trust in accordance with the terms of an agreement (the "Pooling and Servicing
Agreement") dated August 13, 1993 among BF Funding, the Company, and a
financial institution, as Trustee thereunder, in exchange for trust
certificates, and the trust certificates were sold to investors. The proceeds
from the sale were used to pay the Company for the Receivables purchased by BF
Funding. During the term of the Trade Receivables Transaction, the cash
generated by the receivables was used to make payments to the investors and/or
to purchase additional receivables originated by the Company. Payments made to
investors were based on a floating rate indexed to the London InterBank
Offering Rate ("LIBOR"). Under the terms of the Pooling and Servicing
Agreement, the Company acted as servicer (as defined therein) for the
receivables.
In connection with the Reorganization, on July 5, 1996, the Company
repurchased the accounts receivable from BF Funding for par plus accrued
interest in the total amount of approximately $50,155,000. The repurchase was
financed with proceeds from the Company's senior lenders under its then-
existing credit facility.
Repayment of Woods Note. In April 1993, Woods, a former affiliate of the
Company, acquired new product lines and completed a recapitalization. In
settlement of amounts owed on the note payable to the Company (the "Woods
Note"), the Company received a cash payment of $5,560,000, two new notes and a
warrant exercisable by the Company to purchase up to 375,000 shares of common
stock of Woods at an exercise price of $.003 per share. The new notes received
consisted of (i) a ten-year, $13,218,000 subordinated promissory note, with
semiannual interest payments of $576,000 commencing on the third anniversary
of the date of the note, and a final payment of principal and interest due at
maturity, and (ii) a ten-year, $2,000,000 non-interest bearing, subordinated
promissory note. The $2,000,000 note was paid in full on August 26, 1994. The
carrying value of the $13,218,000 subordinated promissory note plus accrued
interest has been calculated by discounting future cashflows at 8.5%. The
Company believes that the consideration received from Woods approximated the
fair value resulting from an arms length transaction. See Note 8 to the
Financial Statements.
In December 1993, the Company exercised its warrants to purchase 375,000
shares of Woods common stock. During the first quarter of 1996, the Company
sold all 375,000 shares of common stock as part of Woods' initial public
offering. As a result of the sale, the Company received net proceeds of
approximately $4,200,000.
On July 18, 1996, Woods prepaid the subordinated promissory note and all
accrued interest through that date. The Company received approximately
$10,700,000 in consideration for the subordinated promissory note and recorded
a loss, reflected in additional paid-in capital, of $5,016,000.
Capital Expenditures. The Company anticipates that it will make significant
capital expenditures in the near term to modernize its facilities and reduce
operating costs. Capital expenditures are budgeted to be approximately $16
million in 1997, although the Company may seek to finance a portion of its
facility modernization program through operating leases. In 1996, the Company
incurred approximately $4.6 million of capital expenditures. Under the terms
of the New Credit Agreement, a borrowing base availability reserve of
$6 million was created at the time of the Reorganization for the purpose of
funding capital expenditures of a like amount. That amount is expected to be
increased to $16 million pursuant to the pending amendment to the New Credit
Agreement. The Company's ability to draw advances under the New Credit
Agreement for the purpose of
19
<PAGE>
funding capital expenditures, however, remains subject to compliance with the
terms and conditions of the New Credit Agreement (including its borrowing base
requirements). The Company also intends to pursue additional projects, with
the intention of financing those projects through operating leases.
Environmental Contingencies. The Company is involved in certain proceedings
governed by environmental laws and regulations, including a proceeding under
CERCLA in which the Company has been named as one of several hundred third-
party defendants. The potential costs to the Company related to all those
environmental matters are uncertain due to such factors as: the unknown
magnitude of possible pollution and cleanup costs, the complexities and
evolving nature of governmental laws and regulations and their
interpretations, the timing, varying costs and effectiveness of alternative
cleanup technologies, and the determination of the Company's liability in
proportion to other potential responsible parties.
The Company has not accrued any environmental liabilities as of December 28,
1996, due to management's assessment that the likelihood that the on-going
proceedings would have a material adverse outcome is remote. However, the
Company has budgeted and expects to incur approximately $2 million in
environmental capital expenditures, including construction of new wastewater
treatment facilities at the Brookneal plant, over the next three years in
order to comply with a Special Order on Consent with the Virginia Water
Control Board. See "Item 1. Business--Environmental and OSHA Considerations."
FORWARD-LOOKING STATEMENTS
"Safe Harbor" statement under the Private Securities Litigation Reform Act
of 1995. A number of the matters and subject areas discussed in "Item 1.
Business" and in "Item 2. Financial Information--Management's Discussion and
Analysis of Financial Condition and Results of Operations" that are not
historical or current facts deal with potential future circumstances and
developments. The discussion of such matters and subject areas is qualified by
the inherent risks and uncertainties surrounding future expectations
generally, and such discussion also may materially differ from the Company's
actual future experience involving any one or more of such matters and subject
areas. The Company has attempted to identify, in context, certain of the
factors that it currently believes may cause actual future experience and
results to differ from the Company's current expectations regarding the
relevant matter or subject area. The operation and results of the Company's
textile business may also be subject to the effect of other risks and
uncertainties in addition to the relevant qualifying factors identified
elsewhere in "Item 1. Business" and in "Item 2. Financial Information--
Management's Discussion and Analysis of Financial Condition and Results of
Operations," including, but not limited to, general economic conditions in the
markets in which the Company operates, the ability to achieve further market
penetration and additional customers, the cost of raw materials, particularly
cotton, and other risks and uncertainties associated with the textile
industry.
20
<PAGE>
ITEM 3. PROPERTIES
As of February 28, 1997, the Company operated manufacturing and distribution
facilities and office space with a total area of approximately 4,425,000
square feet. Management believes the Company's facilities and equipment are in
good condition and are adequate for the Company's present and anticipated
operations. For more information about the Company's facilities, see "Item 1.
Business--Manufacturing Facilities."
The location, primary use and size of each facility operated by the Company
is as follows:
<TABLE>
<CAPTION>
SQUARE
LOCATION PRIMARY USE OF FACILITY FEET
-------- ---------------------------------------------- ---------
<C> <S> <C>
Macon, GA Corporate administrative offices 78,000
Atlanta, GA (1) Corporate executive and sales offices 19,000
New York, NY (1) Showroom and sales offices 47,000
Columbus, GA Manufacturing and distributing facility for
weaving of Consumer Products and Apparel
Fabrics 1,298,000
Juliette, GA Manufacturing and distributing facility for
Consumer Products and Apparel Fabrics 448,000
Fort Valley, GA (2) Manufacturing facility for Consumer Products 333,000
Manufacturing and distributing facility for
Sargent, GA Consumer Products 431,000
Manufacturing facility for finishing and
Porterdale, GA production of Engineered Products 689,000
Manufacturing facility for weaving of Consumer
Greenville, SC Products 417,000
Brookneal, VA Manufacturing facility for finishing,
printing, fabricating and distributing for
Consumer Products 391,000
Roanoke Rapids, NC Manufacturing facility for weaving, finishing,
fabricating and distribution of Table Linens 274,000
</TABLE>
- --------
(1) All of the Company's facilities are owned except the Company's New York
sales office, which is leased pursuant to a lease which expires in
December 2000, and the Company's Atlanta office, which is leased pursuant
to a lease which expires in July 1998.
(2) The Fort Valley plant consists of two principal buildings, one of which is
subject to a mortgage note of approximately $532,000 in outstanding
principal as of December 28, 1996.
Substantially all of the Company's property, plant and equipment is
encumbered by a first security interest in favor of the lenders under the New
Credit Agreement.
21
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information regarding the beneficial ownership
(as such term is defined under Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), of the Company's Common Stock as of
March 1, 1997 by (i) each of the Company's directors or Named Officers (as
defined in Item 5 below), (ii) all directors and officers as a group and (iii)
each person who is known by the Company to beneficially own more than 5% of
the Company's outstanding Common Stock (based upon the Common Stock issued in
the Reorganization). Except as noted below, the persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them, other than shares deemed to be
beneficially owned by them.
SHARES BENEFICIALLY OWNED
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT
------------------------------------ --------- -------
<S> <C> <C>
Merrill Lynch & Co., Inc.(1)............................ 2,404,485 23.9%
250 Vesey Street, North Tower
New York, NY 10281
Franklin Custodian Funds, Inc.,......................... 2,097,121 20.8
Income Series (2)
777 Mariners Island Blvd.
San Mateo, CA 94404
Buford H. Ortale and Sewanee Ventures, LLC(3)........... 780,793 7.8
104 Woodmont Boulevard
Suite 200
Nashville, Tennessee 37205
Romulus Holdings, Inc. and Related Entities............. 746,778 7.4
25 Coligni Avenue
New Rochelle, NY 10801
Michael L. Fulbright.................................... 0 0
A. William Ott.......................................... 0 0
Neal J. McGrail......................................... 0 0
Frank X. Sheehan........................................ 0 0
C. Scott Bartlett, Jr................................... 0 0
Marvin B. Crow.......................................... 0 0
Stewart M. Kasen........................................ 0 0
George Poole, Jr........................................ 0 0
James A. Williams....................................... 0 0
Irwin N. Gold........................................... 0 0
Thomas C. Foley(4)...................................... 487,408 4.8
All directors and officers as a group (11 persons)(4)... 487,408 4.8
</TABLE>
- --------
(1) Includes 2,073,779 shares beneficially owned by Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of
Merrill Lynch & Co., Inc. ("ML&Co.") and 330,706 shares beneficially owned
by the Merrill Lynch Phoenix Fund, Inc. ("Phoenix Fund"). Phoenix Fund is
an investment company registered under the Investment Company Act of 1940,
the investment adviser of which is a limited partnership of which the
general partner is an indirect, wholly owned subsidiary of ML&Co. ML&Co.
disclaims beneficial ownership of the shares owned by MLPF&S and Phoenix
Fund. MLPF&S disclaims beneficial ownership of any shares of which ML&Co.
or Phoenix Fund may be deemed to be beneficial owners. Phoenix Fund
disclaims beneficial ownership of any shares of which ML&Co. or MLPF&S may
be deemed to be beneficial owners.
22
<PAGE>
(2) Excludes 419,424 shares of Common Stock owned by Franklin ValueMark Funds,
Income Securities Fund, as to which shares Franklin Custodian Funds, Inc.,
Income Series, disclaims beneficial ownership.
(3) Includes 424,589 shares of Common Stock owned by Sewanee Partners II, L.P.
and 356,204 shares owned directly by Mr. Ortale. Sewanee Ventures, LLC,
the general partner of Sewanee Partners II, L.P., is controlled by Mr.
Ortale.
(4) Thomas C. Foley served as Chief Executive Officer of Old Bibb until August
1996, and as a non-voting member of the Board of Directors of the Company
from September 1996 until May 1997.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth the names, ages and positions of the executive
officers and directors of the Company as of May 2, 1997.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael L. Fulbright.... 47 President, Chief Executive Officer, Director
A. William Ott.......... 41 Vice President, Chief Financial Officer and Secretary
Neal J. McGrail......... 40 Corporate Controller and Assistant Secretary
Frank X. Sheehan........ 51 Vice President, Industrial Relations
C. Scott Bartlett, Jr... 64 Director
Marvin B. Crow.......... 64 Director
Stewart M. Kasen........ 57 Director
George A. Poole, Jr..... 65 Director
James A. Williams....... 54 Director
Irwin N. Gold........... 40 Director
</TABLE>
The principal occupations and positions for the past five years, and in
certain cases prior years, of each of such directors and executive officers of
the Company are as follows:
Michael L. Fulbright has been the President and Chief Executive Officer of
the Company since August 1996, and a Director since September 1996. Prior to
coming to the Company, Mr. Fulbright was the President of the Denim Division
of Cone Mills, Inc. from December 1994 until August 1996. From August 1992
through November 1994 Mr. Fulbright was President of the Greige Manufacturing
Division of Springs Industries, Inc., where he also served as the President of
Wamsutta/Pacific Home Products Division from January 1990 through August 1992.
A. William Ott was elected to serve as Vice President--Chief Financial
Officer in April 1995, and was elected to serve as Secretary in November 1996.
From December 1994 to April 1995, he served as Vice President--Finance. He
originally joined the Company in September 1992 as Vice President-Controller.
Prior to coming to the Company, Mr. Ott was the Controller of C.S. Brooks,
Inc., a wholly-owned subsidiary of Springs Industries, Inc., from April 1991
through September 1992. From 1987 to 1991, Mr. Ott was Chief Financial Officer
and Corporate Controller for C.S. Brooks Corporation.
Neal J. McGrail was elected Corporate Controller on March 1, 1995, and was
elected to serve as Assistant Secretary in November 1996. Mr. McGrail
originally joined the Company in November 1992 as Assistant Controller. Mr.
McGrail previously had served as Vice President-Assistant to the Chairman of
Avis Industrial Corporation from November 1989 to May 1992.
Frank X. Sheehan was elected to serve as the Company's Vice-President--
Industrial Relations on April 1, 1989. Mr. Sheehan has been an employee of the
Company since 1968.
C. Scott Bartlett, Jr. has been a Director since September 1996. Since 1990
Mr. Bartlett has been a self-employed consultant specializing in advising
financial institutions in the areas of credit policy, loan approval and loan
workout. Mr. Bartlett is also a director of Harvard Industries, Inc., NVR
Incorporated, The Western Transmedia Company, Inc., Darling International
Inc., Triangle Wire & Cable, Inc., Bucyrus International Inc. and Janus
Industries, Inc.
23
<PAGE>
Marvin B. Crow has been a Director since September 1996. Since 1989 Mr. Crow
has served as President of KBO Enterprises, Inc. Mr. Crow is also a management
consultant and serves as a director of Dyersburg Corporation and National
Spinning Company, Inc.
Stewart M. Kasen has been a Director since September 1996. Mr. Kasen was the
Chief Executive Officer of Best Products Co., Inc., which filed for federal
bankruptcy protection in September 1996, from June 1991 to May 1996. Mr. Kasen
also served as Chairman, President and Chief Operating Officer while at Best.
Mr. Kasen is also a director of Markel Corporation, Spreckels Industries, Inc.
and O'Sullivan Industries Holdings, Inc.
George A. Poole, Jr. has been a Director since September 1996. Mr. Poole has
been a private investor for more than five years and also serves as a director
of Bucyrus International Inc., Anacomp, Inc. and U.S. Home Corporation.
James A. Williams has been a Director since September 1996. Mr. Williams has
been the President and Chief Executive Officer of Great American Knitting
Mills, Inc., a division of Biderman Industries, U.S.A., both of which filed
for federal bankruptcy protection in July 1995, since 1991. Mr. Williams is
also a director of the National Association of Hosiery Manufacturers, The
Fashion Association and the American Apparel Manufacturers Association.
Irwin N. Gold has been a Director since September 1996. Mr. Gold has been
the Managing Director and Co-Head of the Financial Restructuring Group of
Houlihan Lokey Howard & Zukin, Inc. for more than five years. Mr. Gold is also
a director of Cole National Corporation. See "Item 7. Certain Relationships
and Related Transactions."
Each of Messrs. Ott, McGrail and Sheehan served as executive officers of Old
Bibb, which filed a plan of reorganization under the Bankruptcy Code with the
United States Bankruptcy Court for the District of Delaware in July 1996. Such
plan of reorganization was confirmed by the court on September 12, 1996. See
"Item 1. Business--Corporate History."
Directors and executive officers are elected annually and hold office until
their successors are elected and qualified. Pursuant to the Restructuring
Agreement and as part of the Reorganization, the Board of Directors was
reconstituted with individuals who were originally designated by the Steering
Committee. There are, however, no continuing arrangements or understandings
with respect to the designation of such Directors, except that the
Restructuring Agreement provided that Mr. Foley was entitled to serve as a
non-voting member of the Board of Directors for a period of one year from the
Effective Date. Mr. Foley resigned his position as a non-voting member of the
Board of Directors in May 1997. See "Item 7. Certain Relationships and Related
Transactions."
24
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth, for the Company's
fiscal years ending December 28, 1996, December 30, 1995, and December 31,
1994, certain information regarding the cash compensation paid by the Company,
as well as certain other compensation paid or accrued for those years, to the
Company's Chief Executive Officer and to each of the Company's most highly
compensated executive officers (the "Named Officers") whose salary and bonus
exceeded $100,000 for fiscal year 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------------------------------
LONG TERM COMPENSATION AWARDS
----------------------------------
(A) (B) (C) (D) (E) (G) (I)
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL COMPENSATION UNDERLYING ALL OTHER
POSITION YEAR SALARY($)(1) BONUS($)(2) ($)(3) OPTIONS/SARS(#) COMPENSATION($)(4)
------------------ ---- ------------ ----------- ------------ --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Michael L. Fulbright.... 1996 152,535(5) 125,000 17,574 200,000 1,763
President and Chief
Executive Officer
Thomas C. Foley......... 1996 0 -- -- -- --
Chairman and Chief 1995 0 -- -- -- --
Executive Officer (6) 1994 0 -- -- -- --
A. William Ott.......... 1996 187,500 115,000 -- -- 1,458
Vice President, Chief 1995 161,601 -- -- -- 810
Financial Officer and 1994 130,039 10,000 -- 568
Secretary
Neal J. McGrail......... 1996 102,500 50,000 -- -- 714
Corporate Controller and 1995 90,883 -- -- -- 383
Assistant Secretary 1994 77,252 -- -- -- 304
Frank X. Sheehan,....... 1996 112,500 5,000 -- -- 2,419
Vice President, 1995 110,212 -- -- -- 2,304
Industrial Relations 1994 103,002 -- -- -- 1,340
</TABLE>
- --------
(1) The amounts shown include compensation earned in the given fiscal year and
deferred by the named executive officer pursuant to the Company's
Executive Deferred Compensation Plan (described below).
(2) The amounts shown represent bonuses earned in the given fiscal year
pursuant to Old Bibb's bonus plan or discretionary bonuses awarded by the
Board of Directors and, with respect to Mr. Ott and Mr. McGrail, bonuses
accrued in 1996 under the Company's retention bonus plan in the amounts of
$90,000 and $30,000, respectively.
(3) The aggregate amount of personal benefits received by each named executive
officer did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported for each such named executive officer.
(4) The amounts shown represent life insurance premium payments by the
Company.
(5) Reflects compensation for the period after Mr. Fulbright joined the
Company in August 1996. Pursuant to an Employment Agreement,
Mr. Fulbright's annual compensation consists of an initial base salary of
$400,000 plus reimbursement of certain expenses. See "--Employment
Agreements; Termination Provisions."
(6) Effective in August 1996, Mr. Foley resigned as Chairman and Chief
Executive Officer, and Michael L. Fulbright was appointed as President and
Chief Executive Officer.
25
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
- -------------------------------------------------- RATES OF STOCK
NUMBER OF % OF TOTAL PRICE
SECURITIES OPTIONS/SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
---- ------------ ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Michael L.
Fulbright.. 200,000 100% $7.10 9/26/01 $392,320 $866,924
</TABLE>
RETENTION BONUS PLAN
In February 1996, the Company adopted a retention bonus plan covering key
employees, pursuant to which covered employees of the Company on the Effective
Date are entitled to receive specified amounts (aggregating a maximum of
$828,000 for all covered employees) during the first year following the
Effective Date. The only executive officers of the Company covered under such
plan are A. William Ott and Neal J. McGrail.
DEFERRED COMPENSATION PLAN
Since January 1, 1983, the Company has provided to eligible executives the
opportunity of deferring compensation pursuant to the terms of an Executive
Deferred Compensation Plan. As of December 28, 1996, the Company owed
approximately $2,814,000 to participants under such Plan.
EMPLOYMENT AGREEMENTS; TERMINATION PROVISIONS
The Company entered into an employment agreement with Michael L. Fulbright
in August, 1996, (as subsequently modified, the "Employment Agreement"),
pursuant to which he was appointed President and Chief Executive Officer. The
Employment Agreement provides for an initial base salary of $400,000 and
reimbursement of certain expenses. His base salary will be increased to
$425,000 after the first year and $450,000 after the second. Mr. Fulbright is
also entitled to an annual bonus of between 50% and 100% of his base salary,
based upon specified performance, with a guaranteed cash bonus of at least 33%
of his base salary in the first year, and certain stock options. In addition,
Mr. Fulbright is entitled to a $125,000 signing bonus, the purchase by the
Company of his Greensboro, North Carolina residence, and certain additional
relocation expenses. The Employment Agreement is for an initial term of three
years, with automatic one year renewals thereafter unless otherwise
terminated.
Upon a termination of employment by the Company without "Cause" and not as a
result of Mr. Fulbright's death or "Disability," or by Mr. Fulbright for "Good
Reason," (as each such term is defined in the Employment Agreement), Mr.
Fulbright is entitled to specified severance compensation. If the termination
occurs within the first two years of the Employment Agreement, Mr. Fulbright
is entitled to a payment equal to twice his base salary and the continuation
of certain fringe benefits for the remainder of the initial three year
employment period. If the termination occurs after two years of employment
under the Employment Agreement, Mr. Fulbright is entitled to a payment equal
to his base salary and the continuation of certain enumerated benefits. If a
"Change in Control" occurs between the second and third anniversary of the
date of the Employment Agreement and termination as described occurs after
such "Change in Control," Mr. Fulbright is entitled to a payment equal to
twice his base salary and the continuation of certain enumerated benefits.
"Change in Control" is defined in the Employment Agreement as (i) any sale of
all or substantially all of the Company's assets to any person or entity, or
(ii) any sale or series of related sales which, in the aggregate, transfer 50%
or more of the voting shares of the Company to any person or entity or group
of persons or entities (as the term "group" is defined in Section 13(d) (3) of
the Exchange Act or (iii) any merger of the Company with any other person or
entity following which the Company is not the surviving entity; it being
understood and agreed that "Change in Control" shall not include (x) any sale,
merger or consolidation with or to any person or entity in which the
shareholders of the Company immediately prior to such sale, merger or
consolidation own or obtain controlling voting power of such person or entity
immediately following such transaction or (y) the Merger.
26
<PAGE>
Pursuant to the terms of the Employment Agreement, the Company agreed to
grant to Mr. Fulbright options (the "Options") to acquire the Company's shares
of Common Stock as follows: (A) the Options would apply to an amount of shares
of Common Stock equal to 2% of the Company's Common Stock as of the date of
grant calculated on a fully-diluted basis; (B) the exercise price of the
Options would be based upon a $100 million aggregate valuation on all of the
Company's shares of Common Stock calculated on a fully-diluted basis; (C)
shares of Common Stock subject to the Options would vest ratably on the first,
second and third anniversary of the date of grant during the employment
period, provided that, in the event of a "Change in Control" or in the event
of a termination of the Employment Period (other than by the Company for
"Cause" or by Mr. Fulbright without "Good Reason"), all shares of Common Stock
subject to the Option would vest immediately; and (D) the Options would be
exercisable commencing immediately upon vesting and ending on the fifth year
after the grant of the Options. Options were subsequently granted for an
aggregate of 200,000 shares of Common Stock, vesting in three annual
increments, at an exercise price of $7.10 per share.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is paid $24,000 annually
for his services as a director, and $1,000 for attendance at each committee
meeting which does not occur in conjunction with a directors meeting and is
reimbursed for reasonable travel expenses for each such meeting he attends.
COMPENSATION COMMITTEE
The Board of Directors has designated Messrs. Gold, Poole and Kasen to serve
as the members of the compensation committee. Prior to the Merger, Old Bibb's
Board of Directors, of which Mr. Foley (the Chairman and Chief Executive
Officer of Old Bibb) was a member, determined executive officer compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RESTRUCTURING AGREEMENT
The Restructuring Agreement includes the following provisions and covenants:
Co-Sale
Each of Franklin Custodian Fund, Income Series, and Franklin Value Mark
Funds, Income Securities Fund (collectively referred to as the "Franklin
Holder") agreed that, in the event any such Franklin Holder grants to any
other member of the Steering Committee (which would include Merrill Lynch,
Pierce, Fenner & Smith Inc., Showa Leasing (U.S.A.) Inc. and Romulus Holdings,
Inc. and certain of its affiliates) any "co-sale," "tag-along" or other
similar right or other opportunity to sell such other member of the Steering
Committee's equity securities of the Company (or any securities or other
property exchanged therefor) on substantially the same terms and conditions as
any Franklin Holder may sell, each such Franklin Holder shall grant the same
right or other opportunity to each former holder of Old Common Stock as of
February 1, 1996, with respect to equity securities of the Company (or any
securities or other property exchanged therefor).
Non-Voting Director
For a period through and including one year after the effective date of the
Merger, the Company and the members of the Steering Committee have agreed as
follows: (i) Mr. Foley shall be a member of the board of directors of the
Company with full opportunity to attend, participate in and be heard at all
meetings of the board of directors, whether regular, special, telephonic or
otherwise; provided, however, that Mr. Foley shall have no vote as a member of
the board of directors, nor shall he receive any fee for his service on the
board of directors; (ii) the Company shall provide Mr. Foley with as much
advance notice of all meetings as is provided to any other director; (iii) the
Company shall provide Mr. Foley with all other information with respect to
such meetings as is provided to members of the board of directors at the same
time as so provided to such persons; and (iv) the
27
<PAGE>
Company shall provide Mr. Foley with advance notice of, and an opportunity to
be heard with respect to, any action contemplated to be taken by written
consent of its board of directors in lieu of a meeting thereof and, as soon as
reasonably practicable thereafter, shall notify Mr. Foley of any action so
taken. Mr. Foley resigned his position as a non-voting member of the Board of
Directors in May 1997.
MANAGEMENT SERVICES AGREEMENT
Pursuant to the Management Services Agreement, dated as of April 1, 1989,
the Company retained NTC (an entity affiliated with Mr. Foley) to provide
general management, financial and other corporate advisory services. Pursuant
to such agreement, NTC received aggregate fees of approximately $4,000,000,
$4,000,000 and $3,368,000 in fiscal years 1993, 1994 and 1995, respectively.
Pursuant to the Restructuring Agreement, the fee arrangements were modified to
provide that during the period between February 1, 1996 and the Effective
Date, NTC was entitled to receive management fees under the Management
Services Agreement equal to $141,633 per month. Pursuant to those
arrangements, during the period from February 1, 1996 through September 27,
1996, the Company paid NTC an aggregate of approximately $1,125,000. In
accordance with the provisions of the Restructuring Agreement, the Management
Services Agreement was terminated at the effective time of the Merger.
WOODS NOTE
On April 2, 1993, Woods, a subsidiary of a corporation of which Mr. Foley is
a director and a principal stockholder, acquired new product lines and
completed a recapitalization. In settlement of amounts owed to the Company
pursuant to an obligation of Woods, the Company received a cash payment of
$5,560,000, two new notes and a warrant exercisable by the Company to purchase
certain shares of common stock of Woods' parent. The new notes received
consisted of (i) a ten-year, $13,218,000 principal amount subordinated
promissory note, with interest of $576,000 accruing semi-annually, and
payments of interest commencing on the third anniversary of the date of the
note, and (ii) a ten-year, $2,000,000 principal amount non-interest bearing,
subordinated promissory note. In August 1994, the $2,000,000 principal amount
subordinated promissory note was paid in full. In February 1996, the Company
sold 375,000 shares of Common Stock of Woods' parent in an underwritten public
offering for a net purchase price of approximately $4,185,000. In July 1996,
the Company sold the $13,218,000 principal amount subordinated promissory note
to the issuer for approximately $10,700,000.
FINANCIAL ADVISORY SERVICES
The Steering Committee, with the Company's consent, engaged Houlihan Lokey
Howard & Zukin ("Houlihan Lokey"), at the Company's expense, to act as the
Steering Committee's financial advisor in connection with the Reorganization
and to provide certain services to the Company in connection with the
Reorganization. Pursuant to an Agreement between the Company and Houlihan
Lokey, Houlihan Lokey received $390,000 during 1995, for services performed on
behalf of the Steering Committee, plus the reimbursement of reasonable and
documented out-of-pocket expenses incurred by Houlihan Lokey in connection
therewith. In addition, the Company agreed to pay Houlihan Lokey a fee,
payable in shares of Common Stock, equal to seventy-five basis points (0.75%)
of the aggregate value of the Common Stock issued to the holders of the Old
Subordinated Notes pursuant to the Plan, based upon a specified calculated
value of the Company. The number of shares of Common Stock to be issued was to
be based on the average closing trading price of the Common Stock for the 20
days prior to October 15, 1996. On December 31, 1996, the Company issued an
aggregate of 75,163 shares of Common Stock, calculated on the basis of $7.10
per share, to Houlihan Lokey in full payment of such fee. Irwin N. Gold, who
was appointed a Director of the Company in September 1996, is a Managing
Director of Houlihan Lokey.
LEGAL SERVICES
Barton J. Winokur, who served as a director of Old Bibb until the Effective
Date is a partner in the law firm of Dechert Price & Rhoads, which was counsel
for the Company and provided legal services to Old Bibb and the Company in
1995 and 1996.
28
<PAGE>
ITEM 8. LEGAL PROCEEDINGS
On July 3, 1996, Old Bibb commenced a voluntary Chapter 11 bankruptcy case
in the United States Bankruptcy Court for the District of Delaware. For a more
complete description of this case, see "Item 1. Business--Corporate History."
From time to time, the Company is a party to various legal actions arising
in the normal course of its business. The Company is not currently a party to
any litigation which, if adversely determined, would have a material adverse
affect on the liquidity or results of operations of the Company.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Absence of Public Market
The Company's Common Stock is not currently listed or admitted to unlisted
trading privileges on a national securities exchange or included for quotation
through an inter-dealer quotation system of a registered national securities
association. The Company also is not aware of any dealer or "market maker" in
the Common Stock and, consequently, the trading market for such securities is
limited. The Company has filed a preliminary application with The Nasdaq Stock
Market to list the Common Stock on the Nasdaq National Market, subject to the
satisfaction of certain listing requirements. Notwithstanding the foregoing,
the Company is unable to predict whether a more active trading market for the
Common Stock will develop. Even if such a market does develop, due to industry
and other conditions beyond the control of the Company, there can be no
assurance that such a market would continue to exist.
SHARES ELIGIBLE FOR FUTURE SALE
The Common Stock issued under the Plan was issued pursuant to the exemption
from the registration requirements of the Securities Act (and of equivalent
state securities or "blue sky" laws) provided by Section 1145(a)(1) of the
Bankruptcy Code. Generally, Section 1145(a)(1) of the Bankruptcy Code exempts
the issuance of securities from the registration requirements of the
Securities Act and equivalent state securities and "blue sky" laws if the
following conditions are satisfied: (i) the securities are issued by a debtor
(or its successor) under a plan of reorganization; (ii) the recipients of the
securities hold a claim against, an interest in, or a claim for an
administrative expense against, the debtor; and (iii) the securities are
issued entirely in exchange for the recipient's claim against or interest in
the debtor, or are issued "principally" in such exchange and "partly" for cash
or property. The Company believes that the issuance of the Common Stock under
the Plan satisfies the aforementioned requirements.
The Common Stock may be resold by the holders thereof without restriction
unless, as more fully described below, any such holder is deemed to be an
"underwriter" with respect to such securities, as defined in Section
1145(b)(1) of the Bankruptcy Code, or are otherwise deemed to be "affiliates"
or "control persons" of the Company within the meaning of the Securities Act.
Generally, Section 1145(b)(1) of the Bankruptcy Code defines an "underwriter"
as any person who (i) purchases a claim against, or interest in, a bankruptcy
case, with a view towards the distribution of any security to be received in
exchange for such claim or interest; (ii) offers to sell securities issued
under a bankruptcy plan on behalf of the holders of such securities; (iii)
offers to buy securities issued under a bankruptcy plan from persons receiving
such securities, if the offer to buy is made with a view towards distribution
of such securities; or (iv) is an issuer as contemplated by Section 2(11) of
the Securities Act. Although the definition of the term "issuer" appears in
Section 2(4) of the Securities Act, the reference (contained in Section
1145(b)(1)(D) of the Bankruptcy Code) to Section 2(11) of the Securities Act
purports to include as "underwriters" all persons who, directly or indirectly,
through one or more intermediaries, control, are controlled by, or are under
common control with, an issuer of securities. "Control" (as such term is
defined in Rule 405 of Regulation C under the Securities Act) means the
possession, direct or indirect, of the power to direct or cause the direction
of the policies of a person, whether through the ownership of voting
securities by contract, or otherwise. Accordingly, each officer and director
of the Company may be deemed to be
29
<PAGE>
a "control person," particularly if such management position is coupled with
the ownership of a significant percentage of the Common Stock. The legislative
history of Section 1145 of the Bankruptcy Code suggests that a creditor who
owns at least 10% of the securities of a reorganized debtor is a presumptive
"control person."
With respect to "underwriters" of the Common Stock within the meaning of
Section 1145(b), the Common Stock may be eligible for resale by such persons
pursuant to the safe-harbor resale provisions of Rule 144 under the Securities
Act.
Shares of Common Stock acquired from any "affiliate" (as such term is
defined in Rule 144(a)(1) under the Securities Act) of the Company and shares
of Common Stock held by an affiliate of the Company may, under certain
circumstances, be sold to the public without registration under the Securities
Act in reliance on an exemption contained in Rule 144 promulgated thereunder.
In general, under Rule 144 (a "safe harbor" for the resale of restricted
securities or other securities by an "affiliate" of the Company to the public
without registration), a person (or group of persons whose shares are
aggregated) who has beneficially owned restricted shares of the Company
(together with its predecessors) for at least one year, including any person
who may be deemed to be an "affiliate" of the Company, is entitled to sell to
the public, within any three-month period, a number of shares that does not
exceed the greater of (i) one percent of the total number of shares of Common
Stock that are not "restricted securities" (including shares of Plan Common
Stock), and (ii) the average weekly trading volume during the four calendar
weeks preceding the date on which notice of the sale is filed with the
Securities and Exchange Commission. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
adequate "current public information" about the Company. The Company will not
be deemed to have such information available until the expiration of at least
90 days following the effective date of this Registration Statement on Form
10. A person who is not deemed to have been an "affiliate" of the Company at
any time during the 90 days preceding a sale and who has beneficially owned
his or her restricted shares for at least two years would, pursuant to Rule
144(k), be entitled to sell such restricted shares to the public without
regard to the volume limitations described above and the other conditions of
Rule 144.
As of the date hereof, no shares of Common Stock are eligible for resale
under Rule 144. As noted above, there is no active trading market for the
Common Stock, and no prediction can be made of the effect, if any, that sales
of shares of Common Stock under Rule 144 or the availability of shares for
sale will have on the market price of the Common Stock prevailing from time to
time after the date of this Registration Statement on Form 10. The Company is
unable to estimate the number of shares that may be sold in the public market
under Rule 144, because such amount will depend on the trading volume in and
market price for the Common Stock and other factors. Nevertheless, sales of
substantial amounts of shares in the public market, or the perception that
such sales could occur, could adversely affect the market price of the Common
Stock. Due to the limited trading market for the Common Stock, however, the
trading volume therefor may be low and the market price volatile, making
reliance on Rule 144 unpredictable.
NUMBER OF HOLDERS OF RECORD
As of March 1, 1997, there were 5 holders of record of the Company's Common
Stock.
DIVIDENDS
The Company does not anticipate having funds available to pay cash dividends
on any shares of the Common Stock in the foreseeable future. The New Credit
Agreement contains restrictive financial and operating covenants and
prohibitions, including provisions that will prohibit the payment of cash
dividends on the Common Stock and will otherwise limit the Company's ability
to make distributions to holders of Common Stock.
30
<PAGE>
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On December 31, 1996, the Company issued 75,163 shares of Common Stock to
Houlihan Lokey as compensation for advisory services rendered in connection
with the Reorganization. The issuance was made in a private placement in
reliance upon the exemption from the registration provisions of the Securities
Act provided in Section 4(2) thereof.
Effective as of September 27, 1996, the Company issued approximately
10,000,000 shares of Common Stock to holders of claims against and interests
in the Company pursuant to the Plan. All such issuances were made pursuant to
an exemption from the registration requirements of the Securities Act provided
by Section 1145 of the Bankruptcy Code. For details of such issuances, see
"Item 1. Business--Corporate History--Negotiations with Creditors;
Reorganization under the Plan."
Thomas C. Foley, who served as Chief Executive Officer of Old Bibb until
August 1996, acquired 100 shares of Common Stock as part of the Company's
initial capitalization which issuance was made by a private placement in
reliance upon the exemption from the registration provisions of the Securities
Act provided in Section 4(2) thereof.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
Pursuant to the Company's Certificate of Incorporation and amendment thereto
(the "Certificate of Incorporation"), the Company's authorized capital stock
consists of 12,000,000 shares of Common Stock, $.01 par value per share, and
5,000,000 shares of Preferred Stock, $.01 par value per share. As of March 1,
1997, approximately 10,000,000 shares of Common Stock are issued and
outstanding. No shares of Preferred Stock have been issued. The following
summary description of the Common Stock and certain provisions of the
Company's Certificate of Incorporation and By-Laws does not purport to be
complete and is qualified in its entirety by reference to the more detailed
provisions of the Certificate of Incorporation and the By-laws of the Company.
COMMON STOCK
The holders of Common Stock shall vote on all matters as a single class and
each holder of Common Stock shall be entitled to one vote for each share of
Common Stock that it owns, except as may be otherwise required by law. Holders
of Common Stock will not have cumulative voting rights. The Company's
Certificate of Incorporation provides that, subject to the rights of holders
of any series of Preferred Stock, any action required or permitted to be taken
by stockholders must be effected at an annual or special meeting of
stockholders and may not be effected by written consent in lieu thereof.
Subject to the prior rights of holders of Preferred Stock, if any, the
holders of Common Stock will be entitled to such dividends (whether payable in
cash, property or capital stock) as may be declared from time to time by the
Board of Directors from funds, property or stock legally available therefor,
and will be entitled, after payment of all prior claims, to receive pro rata
all assets of the Company upon the liquidation, dissolution or winding up of
the Company. Holders of Common Stock have no redemption, conversion or
preemptive rights to purchase or subscribe for securities of the Company.
Under the Company's Certificate of Incorporation, the Board of Directors of
the Company has the authority to issue up to 12,000,000 shares of Common Stock
(approximately 10,000,000 of which are issued and outstanding). The Company
believes that the Board's ability to issue additional shares of Common Stock
could facilitate certain financings and acquisitions and provide a means for
meeting other corporate needs that might arise. The authorized but unissued
shares of Common Stock will be available for issuance without further action
by the Company's stockholders, unless stockholder action is required by
applicable law or the rules of any stock exchange or system on which the
Common Stock may then be listed. The Board's ability to issue additional
shares of Common Stock could, under certain circumstances, either impede or
facilitate the completion of a merger, tender offer or other takeover attempt.
31
<PAGE>
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of Preferred Stock
without further stockholder approval, except as may be required by applicable
law or other applicable requirements. The shares of Preferred Stock may be
issued in one or more series, with the number of shares of each series and the
rights, preferences and limitations of each series to be determined by the
Board of Directors. Among the specific matters that may be determined by the
Board of Directors are dividend rights, if any, redemption rights, if any, the
terms of a sinking or purchase fund, if any, the amount payable in the event
of any voluntary liquidation, dissolution or winding up of the affairs of the
Company, conversion rights, if any, and voting powers, if any.
The issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For instance, the issuance of a series of Preferred Stock might
impede a business combination by including class voting rights that would
enable the holder to block such a transaction, or facilitate a business
combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, under certain circumstances,
the issuance of Preferred Stock could adversely affect the voting power of the
holders of the Common Stock. Although the Board of Directors is required to
make any determination to issue such stock based on its judgment as to the
best interests of the stockholders of the Company, the Board of Directors
could act in a manner that could discourage an acquisition attempt or other
transaction that some, or a majority, of the stockholders might believe to be
in their best interests or in which stockholders might receive a premium for
their stock over the then market price of such stock. The Board of Directors
does not at present intend to seek stockholder approval prior to any issuance
of currently authorized stock, unless otherwise required by applicable law or
other requirements. The Company has no present plans to issue any Preferred
Stock.
DELAWARE LAW
The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
a corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a Delaware corporation for three
years following the date such person became an interested stockholder unless
(i) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time such transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer) or (iii) following the transaction in which such person became
an interested stockholder, the business combination is approved by the board
of directors of the corporation and authorized at a meeting of stockholders by
the affirmative vote of the holders of at least two-thirds of the outstanding
voting stock of the corporation not owned by the interested stockholder. Under
Section 203, the restrictions described above also do not apply to certain
business combinations proposed by an interested stockholder following the
announcement or notification of one of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors and
whose transaction is approved or not opposed by a majority of the board of
directors then in office.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("Section 145") (a)
gives Delaware corporations broad powers to indemnify their present and former
directors and officers and those of affiliated corporations
32
<PAGE>
against expenses incurred in the defense of any lawsuit to which they are made
parties by reason of being or having been such directors or officers, subject
to specified conditions and exclusions, (b) gives a director or officer who
successfully defends an action the right to be so indemnified and (c)
authorizes the corporation to buy directors' and officers' liability
insurance. Such indemnification is not exclusive of any other right to which
those indemnified may be entitled under any by-law, agreement, vote of
stockholders or otherwise.
As permitted by Delaware law, the Company's Certificate of Incorporation
provides that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability (i) for any breach of the director's duty
of loyalty to the Company or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law,
relating to prohibited dividends or distributions or the repurchase or
redemption of stock, or (iv) for any transaction from which the director
derives an improper personal benefit. In addition, the Company's By-laws
provide for indemnification of the Company's officers, directors, employees
and agents to the fullest extent permitted under Delaware Law. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
The Company also maintains liability insurance in the aggregate amount of
$10,000,000 for the purpose of covering its future potential liability for
indemnification under Section 145 as discussed above and certain future
potential liability of individual officers or directors incurred in their
capacity as such which is not subject to indemnification.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and Supplementary Data required by this item appear
in this Form 10 commencing at page F-1.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) List of Financial Statements
An Index to Financial Statements appears at Page F-1 hereof.
(b) Exhibits.
33
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT+
------- -----------------------
<C> <S>
2(a) Plan of Reorganization of The Bibb Company.
2(b) Restructuring Agreement dated as of February 1, 1996, as amended,
among The Bibb Company and each of the specified holders of 13 7/8%
Senior Subordinated Notes Due 1999 and 14% Senior Subordinated Notes
Due 1999 of The Bibb Company and NTC Group, Inc.
3(a) Certificate of Incorporation of The Bibb Company (formerly The New
Bibb Company), and Amendment thereto.
3(b) Bylaws of The Bibb Company (formerly the New Bibb Company), as
amended.
4 Form of specimen stock certificate
10(a) Loan and Security Agreement dated as of September 12, 1996 by and
among The Bibb Company and Congress Financial Corporation (Southern),
as agent, and the lenders parties thereto.
10(b) Management Services Agreement dated as of April 1, 1989 between The
Bibb Company and NTC Group, Inc.
10(c) The Bibb Company Executives Deferred Compensation Plan originally
effective January 1, 1983, and as revised through January 1, 1992.
10(d) Agreement between TB Woods Incorporated and The Bibb Company dated as
of July 3, 1996.
10(e)* Employment Agreement between The Bibb Company and Michael L. Fulbright
dated as of August 26, 1996, and Amendment to Employment Agreement
dated April 1, 1997.
10(f) Asset Purchase Agreement between The Bibb Company and WestPoint
Stevens Inc. dated as of February 13, 1997.
10(g)* Non-Qualified Stock Option Agreement, dated as of September 27, 1996,
between Michael L. Fulbright and The Bibb Company.
Amendment No. 1 to the Loan and Security Agreement, dated October 31,
10(h)++ 1996.
Amendment No. 2 to the Loan and Security Agreement, dated April 25,
10(i)++ 1997.
27++ Financial Data Schedule
</TABLE>
- --------
* Identifies each exhibit that is a management contract or compensatory plan
or arrangement required to be included as an exhibit hereto.
+ Unless otherwise indicated, all exhibits have been previously filed.
++ Filed herewith.
34
<PAGE>
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
The Bibb Company
By /s/ A. William Ott
___________________________________
Name: A. William Ott
Title: Vice President, Chief
Financial Officer
and Secretary
Date: May 19, 1997
35
<PAGE>
THE BIBB COMPANY
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements as of December 28, 1996, December 30, 1995 and Decem-
ber 31, 1994
Report of Independent Public Accountants................................ F-2
Balance Sheets as of December 28, 1996 and December 30, 1995............ F-3
Statements of Operations for the Three Months Ended December 28, 1996,
the Nine Months Ended September 28, 1996, and the Years Ended December
30, 1995 and December 31, 1994......................................... F-4
Statements of Changes in Stockholders' Equity (Deficit) for the Three
Months Ended
December 28, 1996, the Nine Months Ended September 28, 1996, and the
Years Ended December 30, 1995 and December 31, 1994.................... F-5
Statements of Cash Flows for the Three Months Ended December 28, 1996,
the Nine Months Ended September 28, 1996, and the Years Ended December
30, 1995 and December 31, 1994......................................... F-6
Notes to Financial Statements........................................... F-7
Schedule II--Valuation and Qualifying Accounts.......................... F-21
Condensed Financial Statements (Unaudited) as of March 29, 1997 and March
30, 1996
Condensed Balance Sheets--March 29, 1997 (Unaudited) and December 28,
1996................................................................... F-22
Condensed Statements of Operations (Unaudited) for the Three Months
Ended March 29, 1997 and March 30, 1996................................ F-23
Condensed Statement of Changes in Stockholders' Equity (Unaudited) for
the Three Months Ended March 29, 1997.................................. F-24
Condensed Statements of Cash Flows (Unaudited) for the Three Months
Ended March 29, 1997 and March 30, 1996................................ F-25
Notes to Condensed Financial Statements (Unaudited)..................... F-26
</TABLE>
Supplemental schedules other than that listed above are omitted for the
reason that they are not required or are not applicable, or the information is
included in the Notes to Financial Statements.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
The Bibb Company:
We have audited the accompanying balance sheets of THE BIBB COMPANY (a
Delaware corporation) as of December 28, 1996 and December 30, 1995 and the
related statements of operations, changes in stockholders' equity (deficit),
and cash flows for the three months ended December 28, 1996, the nine months
ended September 28, 1996, and the years ended December 30, 1995 and December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Bibb Company as of
December 28, 1996 and December 30, 1995 and the results of its operations and
its cash flows for the three months ended December 28, 1996, the nine months
ended September 28, 1996, and the years ended December 30, 1995 and December
31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note 1, the Company's reorganization plan was confirmed by
the U.S. Bankruptcy Court on September 12, 1996 and became effective September
27, 1996 (effective September 28, 1996 for financial reporting purposes). In
accordance with Statement of Position 90-7 of the American Institute of
Certified Public Accountants, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code," the Company was required to account
for the reorganization using fresh start reporting. Accordingly, all financial
statements prior to September 28, 1996 are not comparable to the financial
statements for periods after the implementation of fresh start reporting.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule included in the index to
financial statements is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not a required part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 7, 1997
F-2
<PAGE>
THE BIBB COMPANY
BALANCE SHEETS
DECEMBER 28, 1996 AND DECEMBER 30, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1996 | 1995
ASSETS -------- | --------
<S> <C> | <C>
CURRENT ASSETS: |
Cash and cash equivalents...................................................................... $ 3,206 | $ 150
Restricted cash................................................................................ 0 | 7,966
Accounts receivable, net of allowances for doubtful accounts, discounts, and claims |
of $1,588 and $5,134 as of December 28, 1996 and December 30, 1995, respectively............... 55,128 | 7,926
Inventories.................................................................................... 72,282 | 80,185
Assets held for sale........................................................................... 37,012 | 0
Prepaid expenses and other current assets...................................................... 2,033 | 1,907
-------- | --------
Total current assets......................................................................... 169,661 | 98,134
PROPERTY, PLANT AND EQUIPMENT, NET............................................................... 58,642 | 77,414
INVESTMENT IN AND NOTE RECEIVABLE FROM WOODS CORPORATION......................................... 0 | 15,270
OTHER ASSETS..................................................................................... 4,397 | 7,820
-------- | --------
$232,700 | $198,638
======== | ========
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt........................................................... $ 5,237 | $208,971
Accounts payable............................................................................... 36,466 | 33,107
Accrued payroll and other compensation......................................................... 14,607 | 13,999
Accrued interest............................................................................... 681 | 26,984
Other accrued liabilities...................................................................... 5,768 | 6,204
-------- | --------
Total current liabilities.................................................................... 62,759 | 289,265
-------- | --------
LONG-TERM DEBT, less current maturities.......................................................... 84,093 | 0
-------- | --------
COMMITMENTS AND CONTINGENCIES (NOTE 10) |
STOCKHOLDERS' EQUITY (DEFICIT): |
Preferred stock, $.01 par value, 5,000,000 shares authorized, 0 shares issued and outstanding.. 0 | 0
Common stock, $.01 par value; 12,000,000 shares authorized; 10,000,000 shares issued |
and outstanding.............................................................................. 100 | 0
Common stock, $.10 par value; 500,000 shares authorized, 9,600 shares issued and outstanding... 0 | 1
Additional paid-in capital..................................................................... 88,348 | 3,427
Retained deficit............................................................................... (2,540) | (93,105)
Minimum pension liability adjustment........................................................... (60) | (950)
-------- | --------
Total stockholders' equity (deficit)......................................................... 85,848 | (90,627)
-------- | --------
$232,700 | $198,638
======== | ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
THE BIBB COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 28, 1996,
THE NINE MONTHS ENDED SEPTEMBER 28, 1996,
AND THE YEARS ENDED DECEMBER 30, 1995 AND DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 28, SEPTEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1996 1995 1994
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
NET SALES............................................................... $ 74,174 | $262,392 $389,998 $459,192
COST OF SALES........................................................... 66,709 | 239,724 366,040 432,235
---------- | -------- -------- --------
Gross Profit.......................................................... 7,465 | 22,668 23,958 26,957
SELLING AND ADMINISTRATIVE EXPENSES..................................... 8,342 | 26,002 36,130 41,765
MANAGEMENT FEES TO AFFILIATE............................................ 0 | 1,993 3,368 4,000
---------- | -------- -------- --------
Operating loss........................................................ (877) | (5,327) (15,540) (18,808)
---------- | -------- -------- --------
OTHER (EXPENSE) INCOME: |
Interest expense: |
Senior and other debt................................................. (1,319) | (4,850) (5,627) (4,095)
Subordinated bonds.................................................... 0 | (11,151) (22,299) (22,284)
---------- | -------- -------- --------
(1,319) | (16,001) (27,926) (26,379)
Interest income from T.B. Wood's Corporation.......................... 0 | 659 1,172 1,174
Loan fee amortization and related expenses............................ (235) | (1,928) (2,486) (1,795)
Other, net............................................................ (109) | 2,660 (2,811) (2,108)
---------- | -------- -------- --------
(1,663) | (14,610) (32,051) (29,108)
---------- | -------- -------- --------
LOSS BEFORE REORGANIZATION ITEMS AND EXTRAORDINARY ITEM................. (2,540) | (19,937) (47,591) (47,916)
REORGANIZATION ITEMS: |
Professional fees and other expenses.................................. 0 | (1,423) 0 0
Adjust accounts to fair value......................................... 0 | 7,921 0 0
EXTRAORDINARY ITEM, gain on discharge of debt........................... 0 | 111,650 0 0
---------- | -------- -------- --------
NET (LOSS) INCOME....................................................... $ (2,540) | $ 98,211 $(47,591) $(47,916)
========== | ======== ======== ========
NET LOSS PER SHARE OF COMMON STOCK(1)................................... $ (.25) | -- -- --
========== | ======== ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING..................................... 10,000,000 | -- -- --
========== | ======== ======== ========
</TABLE>
- --------
(1) Share and per share amounts for the nine months ended September 28, 1996
and the years ended December 30, 1995 and December 31, 1994 have not been
presented because they are not meaningful due to the implementation of
fresh start reporting and the substantial change in the number of shares
outstanding subsequent to the consummation of the Plan (Note 1).
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
THE BIBB COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED DECEMBER 28, 1996,
THE NINE MONTHS ENDED SEPTEMBER 28, 1996,
AND THE YEARS ENDED DECEMBER 30, 1995 AND DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON COMMON MINIMUM
STOCK STOCK ADDITIONAL RETAINED PENSION
($.01 ($.10 PAID-IN EARNINGS LIABILITY
PAR VALUE) PAR VALUE) CAPITAL (DEFICIT) ADJUSTMENT TOTAL
---------- --------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1,
1994................... $ 0 $ 1 $ 3,427 $ 2,402 $(331) $ 5,499
Net loss.............. 0 0 0 (47,916) 0 (47,916)
Net pension liability
adjustment........... 0 0 0 0 292 292
---- --- ------- ------- ----- -------
BALACE, December 31,
1994................... 0 1 3,427 (45,514) (39) (42,125)
Net loss.............. 0 0 0 (47,591) 0 (47,591)
Net pension liability
adjustment........... 0 0 0 0 (911) (911)
---- --- ------- ------- ----- -------
BALANCE, December 30,
1995................... 0 1 3,427 (93,105) (950) (90,627)
Net income............ 0 0 0 98,211 0 98,211
Exercise of options... 0 0 24 0 0 24
Loss on related party
transaction (Note 8). 0 0 (5,016) 0 0 (5,016)
Consummation of the
restructuring........ 100 (1) 85,757 0 0 85,856
Fresh start equity
reclassifications.... 0 0 4,156 (5,106) 950 0
---- --- ------- ------- ----- -------
BALANCE, September 28,
1996................... 100 0 88,348 0 0 88,448
- ---------------------------------------------------------------------------------------
Net loss.............. 0 0 0 (2,540) 0 (2,540)
Net pension liability
adjustment........... 0 0 0 0 (60) (60)
---- --- ------- ------- ----- -------
BALANCE, December 28,
1996................... $100 $ 0 $88,348 $(2,540) $ (60) $85,848
==== === ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
THE BIBB COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 28, 1996
THE NINE MONTHS ENDED SEPTEMBER 28, 1996,
AND THE YEARS ENDED DECEMBER 30, 1995 AND DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
DECEMBER 28, SEPTEMBER 28, DECEMBER 30, DECEMBER 31,
1996 1996 1995 1994
------------ ------------- ------------ ------------
<S> <C> | <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net (loss) income...................................................... $(2,540) | $ 98,211 $(47,591) $(47,916)
Adjustments to reconcile net (loss) income to net cash provided by |
(used in) operating activities: |
Depreciation and amortization......................................... 2,610 | 9,582 15,644 14,283
Loan fee amortization and related expenses............................ 235 | 1,928 2,486 1,795
Net (gain) loss on sale and retirement of assets...................... (42) | (377) (50) 4
Net gain on sale of investment........................................ 0 | (3,949) 0 0
Interest receivable on note receivable from T.B. Wood's Corporation... 0 | (659) (1,172) (1,174)
Changes in operating assets and liabilities, net of reorganization |
items: |
Restricted cash....................................................... 0 | 7,966 (1,064) (1,558)
Accounts receivable................................................... 5,906 | (53,108) 17,148 (7,800)
Inventories........................................................... 2,621 | (5,252) 6,512 15,763
Assets held for sale.................................................. (1,383) | 0 0 0
Prepaid expenses and other current assets............................. 129 | (255) (1,772) 949
Accounts payable and accrued liabilities.............................. (2,491) | 16,952 17,215 5,294
Reorganization items: |
Professional fees and other expenses................................. 0 | 1,423 0 0
Adjust accounts to fair value........................................ 0 | (7,921) 0 0
Extraordinary gain on discharge of debt.............................. 0 | (111,650) 0 0
------- | -------- -------- --------
Net cash provided by (used in) operating activities................. 5,045 | (47,109) 7,356 (20,360)
------- | -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES: |
Capital expenditures................................................... (1,658) | (2,940) (5,489) (11,129)
Proceeds from sale of fixed assets..................................... 583 | 865 249 32
Proceeds from the sale of investment................................... 0 | 4,185 0 0
Repayment of note receivable from T.B. Wood's Corporation, net......... 0 | 10,677 0 2,000
Other, net............................................................. (804) | (4,493) (2,922) (2,265)
------- | -------- -------- --------
Net cash (used in) provided by investing activities.................. (1,879) | 8,294 (8,162) (11,362)
------- | -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES: |
Repayments of long-term debt........................................... (8,035) | (60) (64) (67)
Net borrowings of senior debt.......................................... 8,106 | 25,485 907 31,756
Borrowings (repayments) of term loan................................... (356) | 15,000 0 0
Proceeds from exercise of stock options................................ 0 | 24 0 0
Loan fees.............................................................. 0 | (1,459) 0 0
------- | -------- -------- --------
Net cash (used in) provided by financing activities.................. (285) | 38,990 843 31,689
------- | -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................... 2,881 | 175 37 (33)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........................ 325 | 150 113 146
------- | -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.............................. $ 3,206 | $ 325 $ 150 $ 113
------- | -------- -------- --------
SUPPLEMENTAL CASH FLOW DISCLOSURE |
Interest paid........................................................... $ 1,497 | $ 4,624 $ 10,538 $ 27,866
======= | ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
The Bibb Company (the "Company") is engaged in the manufacturing and
marketing of consumer products for the home, principally sheets, pillowcases,
and other bedding accessories, as well as apparel fabrics and other specialty
engineered textile products used in making high-pressure hoses and other
industrial products. In April 1991, the Company introduced the Royalton(TM)
product line, which includes licensed designer bed and bath products targeted
to upscale department and specialty stores. The Company has manufacturing
plants located in Georgia, South Carolina, North Carolina, and Virginia and
has been engaged in the manufacturing and marketing of textile products since
1876. The Company's major customers are primarily retailers located throughout
the United States.
In 1993, the Company entered into an agreement of limited partnership with
an affiliate whereby the Company agreed to contribute receivables to BF
Funding, L.P. ("BF Funding" or the "Partnership"), a Georgia limited
partnership, in exchange for limited partnership interests representing 98.5%
of the total capital of BF Funding. The primary purpose of BF Funding was to
acquire receivables of the Company which were transferred to a trust and sold
to third-party investors. Under the agreement, the profits and losses of BF
Funding were allocated in proportion to each partner's share of capital
contributions. On July 5, 1996, the Company repurchased the receivables from
BF Funding for par plus accrued interest, in the total amount of $50,155,000.
The repurchase liquidated the limited partnership interests. The financial
statements as of December 30, 1995 and for each of the two years then ended
include the accounts of the Company and the Partnership.
Consummation of the Restructuring
On July 3, 1996, the Company filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Court.
On September 12, 1996, the United States Bankruptcy Court for the District
of Delaware issued an order confirming the reorganization plan (the "Plan").
The Plan was consummated on September 27, 1996 (the "Effective Date")
(effective September 28, 1996 for financial reporting purposes).
The consummation of the Plan resulted in, among other things, (i) the
discharge of approximately $197 million in long-term debt, including accrued
interest, and (ii) the issuance of 9,500,000 shares of common stock to the
holders of the 14% and 13 7/8% senior subordinated notes and 500,000 shares to
the holders of old common stock. The Plan did not alter, adjust, or reduce the
Company's obligations to its other creditors.
Upon consummation of the Plan, the Company recognized an extraordinary gain
on the discharge of debt of approximately $112 million, which represented
forgiveness of debt, principal and interest, reduced by the estimated fair
value of common stock issued to the holders of the 14% and 13 7/8% senior
subordinated notes.
Pursuant to the Plan, the Company obtained financing from lending
institutions to repay its senior revolving credit facility (Note 5) and
finance additional capital expenditures (the "Loan and Security Agreement").
Under the Loan and Security Agreement, the Company is entitled to borrow up to
a maximum of $110 million ($115 million during the months of July through
November in each calendar year). Borrowings in the form of a term loan of $25
million and in the form of revolving loans are only available to the extent
that a sufficient borrowing base, calculated based on eligible receivables and
inventory, exists.
As of the Effective Date, in accordance with the American Institute of
Certified Public Accountants' Statement of Position 90-7, "Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code," the Company adopted
fresh start reporting (see discussion below).
F-7
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
Sale of the Terry Products Business
In connection with the restructuring, management approved a plan to sell the
Company's terry products business (the "Terry Sale"), which designs and
manufactures bath towels and other terry products sold primarily to retail
chains, specialty chains, and mass merchants, as well as to hotels, hospitals,
and others serving the hospitality market.
On February 21, 1997, the Company sold the business to WestPoint Stevens
Inc. for approximately $38.8 million.
Assets included in the Terry Sale are recorded in the balance sheet as of
December 28, 1996 as "assets held for sale" based on the net proceeds of the
sale, including losses related to the terry products business from December
29, 1996 through February 21, 1997. Terry products business losses for this
period have been eliminated from the statement of operations.
Net sales of the terry products business for the three months ended December
28, 1996 were approximately $20 million. Net losses for the terry products
business for the three months ended December 28, 1996 were approximately $1.8
million.
Fresh Start Reporting
For accounting purposes, the Company assumed that the Plan was consummated
on September 28, 1996. Under the principles of fresh start reporting, the
Company's reorganization value was allocated to identifiable assets on the
basis of their estimated fair values. The total reorganization value assigned
to the Company's assets was estimated by calculating projected cash flows
before debt service requirements for a four-year period, plus an estimated
terminal value of the Company (calculated using a multiple of approximately
six on projected earnings before interest, taxes, depreciation, and
amortization ("EBITDA")), each discounted back to its present value using a
discount rate of 14% (representing the estimated after-tax weighted cost of
capital). The above calculations resulted in an estimated reorganization value
of approximately $238 million, and a resulting $88.4 million of stockholders'
equity after deducting current liabilities of approximately $60 million and
long-term debt of approximately $90 million.
As a result of the implementation of fresh start reporting, the financial
statements of the Company after the consummation of the Plan are not
comparable to the Company's financial statements of prior periods.
F-8
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
The effect of the Plan, the reclassification of assets associated with the
Terry Sale, and the implementation of fresh start reporting on the Company's
balance sheet as of September 28, 1996 was as follows (in thousands)
(unaudited):
<TABLE>
<CAPTION>
PRE-FRESH
START ADJUSTMENTS FRESH START
BALANCE SHEET TO RECORD PLAN ASSETS HELD FAIR VALUE BALANCE SHEET
SEPTEMBER 28, CONFIRMATION FOR SALE ADJUSTMENTS SEPTEMBER 28,
1996 (A) (B) (C) 1996
------------- -------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Cash.................... $ 325 $ 0 $ 0 $ 0 $ 325
Other current assets.... 148,633 0 (18,646) 8,112 138,099
Assets held for sale.... 0 0 27,574 8,055 35,629
Property, plant, and
equipment.............. 72,129 0 (8,928) (3,577) 59,624
Other long-term assets.. 9,915 (1,628) 0 (3,888) 4,399
Current liabilities,
excluding current
maturities of long-term
debt................... 58,829 403 0 781 60,013
Long-term debt,
including current
maturities............. 286,919 (197,304) 0 0 89,615
Stockholders' equity
(deficit).............. (114,746) 195,273 0 7,921 88,448
</TABLE>
- --------
(a) To record the forgiveness of debt, the exchange of old subordinated notes,
and the issuance of common stock pursuant to the Plan.
(b) To reclassify assets associated with the Terry Sale.
(c) To record the adjustments to state assets and liabilities at their
estimated fair value.
The following unaudited pro forma statement of operations combines the
three-month period ended December 28, 1996 and the nine-month period ended
September 28, 1996 and reflects the financial results for the Company as if
the Plan and the Terry Sale had been effective December 31, 1995 (in
thousands, except share data). The pro forma information does not purport to
be indicative of the results that actually would have been obtained had such
transactions been completed as of the beginning of the period presented or
that may be obtained in the future:
<TABLE>
<CAPTION>
PRO FORMA
FOR THE THREE FOR THE NINE FOR THE TWELVE TWELVE MONTHS
MONTHS ENDED MONTHS ENDED MONTHS ENDED ENDED
DECEMBER 28, SEPTEMBER 28, DECEMBER 28, PRO FORMA DECEMBER 28,
1996 1996 1996 ADJUSTMENTS 1996
------------- ------------- -------------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............... $74,174 $262,392 $336,566 $ 53,881(a) $282,685
Operating and other
expenses............... 76,714 282,329 359,043 73,056(b) 285,987
------- -------- -------- -------- --------
Loss before
reorganization items
and extraordinary item. (2,540) (19,937) (22,477) (19,175) (3,302)
Reorganization items.... 0 6,498 6,498 6,498 (c) 0
Extraordinary item:
Gain on discharge of
debt................... $ 0 $111,650 $111,650 $111,650 (c) $ 0
------- -------- -------- -------- --------
Net (loss) income....... $(2,540) $ 98,211 $ 95,671 $(98,973) $ (3,302)
======= ======== ======== ======== ========
Net (loss) income per
share.................. $ (.25) -- -- -- $ (.33)
======= ======== ======== ======== ========
</TABLE>
- --------
(a) To eliminate net sales of the terry products business for the nine months
ended September 28, 1996.
(b) To eliminate cost of sales and expenses of the terry products business for
the nine months ended September 28, 1996, to restate depreciation and
amortization expense to reflect the adjustment of property, plant, and
equipment to fair value, and to restate interest expense to reflect the
restructuring of the Company's debt.
(c) To eliminate items related to the Plan.
F-9
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company's annual reporting period is the 52- or 53-week period ending on
the Saturday nearest December 31. The Company's results of operations and cash
flows are presented for the three months ended December 28, 1996, (13 weeks),
the nine months ended September 28, 1996 (39 weeks), and the years ended
December 30, 1995 (52 weeks) and December 31, 1994 (52 weeks).
For accounting purposes, the Company treated the consummation of the Plan as
if it occurred on September 28, 1996. The financial statements as of and for
the three months ended December 28, 1996 are presented for the Company after
the consummation of the Plan. As discussed previously, these statements were
prepared under the principles of fresh start reporting and are not comparable
to the statements of prior periods. Accordingly, a line has been used to
separate the financial statements of the Company after the consummation of the
Plan from those of the Company prior to the consummation of the Plan.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term deposits with an original maturity of
three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the last-in, first-out ("LIFO") method except for certain supplies, for
which cost is determined using the first-in, first-out ("FIFO") method. Market
is defined as net realizable value. Cost includes raw materials, direct labor,
and manufacturing overhead. Approximately 96% of total inventories were valued
using the LIFO method at December 28, 1996 and December 30, 1995.
Property, Plant, and Equipment
As a result of the adoption of fresh start reporting, property, plant, and
equipment were adjusted to their estimated fair value as of September 28, 1996
and historical accumulated depreciation was eliminated. Depreciation is
provided using the straight-line method over the estimated useful asset lives.
Upon implementation of fresh start reporting, the average of the remaining
useful lives of buildings and improvements was approximately seven years. The
estimated useful life for machinery and equipment is four years. Leasehold
improvements are depreciated over the shorter of the estimated useful asset
life or the term of the related lease.
Maintenance and repair costs are expensed as incurred, and major renewals
and betterments are capitalized. When property or equipment is retired or
otherwise disposed of, the related carrying value and accumulated depreciation
are removed from the accounts and any resulting gain or loss is recorded in
the statement of operations.
F-10
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
Impairment of Long-Lived Assets
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," requires that long-lived assets and certain identifiable intangibles held
and used by a Company be reviewed for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. SFAS No. 121 also requires that long-lived assets and certain
identifiable assets held for sale, be reported at the lower of carrying amount
or fair value, less cost to sell. The Company adopted SFAS No. 121 for the
fiscal periods ending September 28, 1996 and December 28, 1996. The Company
did not record an impairment loss during the three months ended December 28,
1996.
Pensions and Other Postretirement Benefits
SFAS No. 87, "Employers' Accounting for Pensions," requires that a company
record an additional minimum pension liability to the extent that a company's
accumulated pension benefit obligation exceeds the fair value of pension plan
assets and accrued pension liabilities. This additional minimum pension
liability is offset by an intangible asset, not to exceed prior service costs
of the pension plan. Amounts in excess of prior service costs are reflected as
a reduction in stockholders' equity. As a result of the adoption of fresh
start reporting, all previously unrecognized amounts relating to the projected
benefit obligation as of September 28, 1996 were recognized in the nine months
ended September 28, 1996.
Prior to 1993, the Company accounted for retiree health care and life
insurance benefits on a pay-as-you-go basis. Effective January 2, 1993, the
Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions." As a result of the adoption of fresh start
reporting, all previously unrecognized amounts relating to the projected
benefit obligation as of September 28, 1996 were recognized in the nine months
ended September 28, 1996.
Stock Options
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation." This new standard defines a
fair value-based method of accounting for an employee stock option or similar
equity instrument. This statement gives entities a choice of recognizing
related compensation expense by adopting the new fair value method or to
continue to measure compensation using the intrinsic value approach under
Accounting Principles Board ("APB") Opinion No. 25. If APB Opinion No. 25 is
elected for measurement, SFAS No. 123 requires supplemental disclosure to show
the effects of using the new measurement criteria. This statement is effective
for the Company's 1996 fiscal periods. The Company intends to continue using
the measurement prescribed by APB Opinion No. 25, and accordingly, SFAS No.
123 will not affect the Company's financial position or results of operations
(Note 7).
Extraordinary Item
In connection with the restructuring, as described in Note 1, the Company
recorded an extraordinary gain of approximately $111,650,000 on the discharge
of debt.
Net Loss Per Share
Net loss per share is based on the weighted average number of shares of
common stock outstanding, which was 10,000,000 for the three months ended
December 28, 1996.
F-11
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
Fair Value of Financial Instruments
The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments:
Cash, Cash Equivalents, and Accounts Receivable
The carrying amounts approximate fair value due to the short maturity
period of these instruments.
The carrying amounts of the debt under the Loan and Security Agreement
and the industrial development revenue bonds approximate fair value based
on current interest rates for similar financial instruments.
Certain Risks
The Company is subject to certain risks in the ordinary course of business.
Among those is the risk of an increase in cotton prices that significantly
affects the cost of production and cash flows (Note 10).
The Company is self-insured for worker's compensation liability in the
states of Georgia and North Carolina. Provisions for losses expected under
this self-insurance program are recorded based on the Company's estimates of
the aggregate liability for claims incurred. These estimates utilize the
Company's prior experience. The total estimated liability for these losses at
December 28, 1996 and December 30, 1995 was approximately $2,300,000 and
$2,132,000, respectively, and is included in other accrued liabilities.
3. INVENTORIES
The major categories of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28,|DECEMBER 30,
1996 | 1995
------------|------------
<S> <C> |<C>
Raw materials and supplies..................................................................... $ 9,018 | $11,708
Work in progress............................................................................... 33,463 | 40,558
Finished goods................................................................................. 29,517 | 46,592
------- | -------
Total at FIFO cost........................................................................... 71,998 | 98,858
Excess of FIFO cost over LIFO cost............................................................. 284 | (18,673)
------- | -------
Total at LIFO cost........................................................................... $72,282 | $80,185
======= | =======
</TABLE>
Substantially all inventories are pledged as collateral under the Loan and
Security Agreement (Note 5).
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28,|DECEMBER 30,
1996 | 1995
------------|------------
<S> <C> | <C>
Machinery and equipment........................................................................ $36,425 | $119,721
Land, buildings, and improvements.............................................................. 24,316 | 43,922
------- | --------
60,741 | 163,643
Less accumulated depreciation.................................................................. 2,099 | 86,229
------- | --------
$58,642 | $ 77,414
======= | ========
</TABLE>
F-12
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
Substantially all property, plant, and equipment are pledged as collateral
under the Loan and Security Agreement (Note 5).
5. LONG-TERM DEBT
Long-term debt as of December 28, 1996 consisted of the following (in
thousands):
<TABLE>
<S> <C>
Line of credit under Loan and Security Agreement.................. $71,154
Term loan under Loan and Security Agreement....................... 14,644
Industrial development revenue bonds, variable rate interest...... 3,000
Other............................................................. 532
-------
89,330
Less current maturities........................................... 5,237
-------
$84,093
=======
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997.............................................................. $ 5,237
1998.............................................................. 2,267
1999.............................................................. 81,669
2000.............................................................. 154
2001.............................................................. 3
-------
$89,330
=======
</TABLE>
Loan and Security Agreement
As part of the Plan, the Company obtained financing from lending
institutions to repay the old senior revolving credit facility and finance
additional capital expenditures. Under the Loan and Security Agreement, the
Company is entitled to borrow up to a maximum of $110 million ($115 million
during the months of July through November in each calendar year). Borrowings
in the form of a term loan of $25 million and in the form of revolving loans
are only available to the extent that a sufficient borrowing base, calculated
on eligible receivables and inventory, exists. Borrowings under this credit
facility bear interest at prime rate, as defined, plus 1%, or, at the
Company's option, the Adjusted Eurodollar Rate, as defined, plus 3.25%. This
credit agreement is for a minimum of three years, subject to one-year
extensions unless terminated by the lenders or the Company. Substantially all
of the Company's assets are pledged as collateral under the Loan and Security
Agreement.
The agreement contains numerous restrictive financial and other covenants,
including maintaining certain levels of tangible net worth, EBITDA, working
capital, and after-tax fixed charge coverage ratios, as defined, as well as
restrictions on the incurrence of indebtedness, liens, mergers, acquisitions,
asset sales, capital expenditures, and dividends, among others. At December
28, 1996, the interest rate on outstanding borrowings was 8.8%. The annual
interest rate will be reduced by up to a maximum of one-half of 1% if certain
financial performance requirements in the Loan and Security Agreement are met.
In addition, the Company pays an annual service fee of $100,000, a monthly
facility fee of one-half of 1% per annum of the average daily unused portion
of the facility and a monthly letter of credit fee of 2.5% per annum of the
daily outstanding balance of each letter of credit.
F-13
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
Financing fees incurred associated with the Loan and Security Agreement were
approximately $2,541,000.
As of December 28, 1996, the Company had the ability to borrow an additional
$2 million under the revolver associated with the Loan and Security Agreement.
As of December 28, 1996, the Company was not in compliance with certain
financial covenants. Subsequent to year-end, the lenders waived any failure by
the Company to comply with these covenants for the measurement period ended
December 28, 1996, as defined, and thereafter amended the financial covenants
schedule such that the Company is in compliance with all of such revised
covenants.
Industrial Development Revenue Bonds
Industrial development revenue bonds were issued and sold to refinance the
purchase of certain plants from WestPoint Stevens Inc. These bonds were backed
by letters of credit issued under the old senior revolving credit facility in
the amount of approximately $11,141,000, including interest. The bonds'
maturity dates were December 2003 and October 2004. No amortization was
required as the entire principal amounts are due at maturity. Interest on the
bonds was at a floating rate, which was reset weekly. At December 28, 1996,
interest rate on the bonds was 5.5%. The Company was subject to certain
covenants with respect to these bonds, primarily to maintain their tax-exempt
status.
In January 1996, the Company closed the plants that were purchased in
connection with the issuance of the industrial development revenue bonds. On
December 10, 1996, the Company redeemed one bond for $8,000,000. Subsequently,
on February 3, 1997, the Company redeemed the other bond for $3,000,000.
Information with regard to the Company's long-term debt as of December 30,
1995 follows (in thousands):
<TABLE>
<S> <C>
14% senior subordinated notes................................... $127,004
13 7/8% senior subordinated notes............................... 32,761
Payable under old senior revolving credit facility.............. 37,563
Industrial revenue bonds........................................ 11,000
Other........................................................... 643
--------
208,971
Less current maturities......................................... 208,971
--------
$ 0
========
</TABLE>
At December 30, 1995, all debt was classified as current as a result of the
defaults on interest payments due on the 14% and 13 7/8% senior subordinated
notes during 1995, and cross-defaults or cross-acceleration provisions for
other debt instruments. Upon consummation of the Plan, the 14% and 13 7/8%
senior subordinated notes were exchanged for shares representing 95% of the
issued and outstanding common stock of the Company and the payable under the
old senior revolving credit facility was replaced with new debt instruments
under the Loan and Security Agreement discussed previously.
6. INCOME TAXES
Prior to September 28, 1996, the Company was an S corporation and was
generally not subject to corporate-level taxes on its net income because such
income is attributed to the Company's stockholders and taxes on such income is
directly payable by them.
F-14
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
Effective January 3, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," which requires the use of the liability method in accounting
for income taxes. Under SFAS No. 109, deferred tax assets and liabilities are
determined based on the difference between the financial reporting and tax
bases of assets and liabilities using enacted tax rates in effect for the year
in which the differences are expected to reverse. Deferred income taxes also
reflect the value of net operating losses and an offsetting valuation
allowance.
Effective and pursuant to the Plan, the Company became a C corporation for
income tax purposes. There was no income tax expense or benefit recorded in
the three months ended December 28, 1996.
A reconciliation of differences between the statutory U.S. federal income
tax rate and the Company's effective tax rate is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 28,
1996
------------
<S> <C>
Income tax benefit at federal statutory income tax rate..... $864
State income taxes, net of federal income tax benefit....... 101
Other, net.................................................. 1
Change in valuation allowance............................... (967)
----
Income tax benefit.......................................... $ 0
====
</TABLE>
Under federal income tax laws, the Company was not required to include in
its federal taxable income any gain on the discharge of debt pursuant to the
Plan. Accordingly, no income taxes have been provided on the $112 million
extraordinary gain on discharge of debt in the statement of operations for the
nine months ended September 28, 1996.
SFAS No. 109 requires that a valuation allowance be recorded against
deferred tax assets which are not likely to be realized. The Company's
utilization of net operating losses carried forward may be limited to specific
amounts each year. However, due to the uncertain nature of their ultimate
realization based upon past performance, the Company has established a
valuation allowance against these carryforward benefits and is recognizing the
benefits only as reassessment demonstrates they are realizable. Realization is
entirely dependent upon future earnings. While the need for this valuation
allowance is subject to periodic review, if the allowance is reduced, the tax
benefits of the carryforwards will be recorded in future operations as a
reduction of the Company's income tax expense.
F-15
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
Components of the net deferred income tax asset at December 28, 1996 are as
follows (in thousands):
<TABLE>
<S> <C>
Deferred tax liabilities:
Property and depreciation...................................... $ 927
Inventory valuation............................................ 1,808
Other.......................................................... 495
------
Total deferred tax liabilities............................... 3,230
------
Deferred tax assets:
Operating loss carryforwards................................... 2,222
Allowance for doubtful accounts................................ 3,109
Self-insurance reserves........................................ 1,820
Salary-related accruals........................................ 2,003
Intangible assets.............................................. 1,430
Other.......................................................... 1,112
------
Total deferred tax assets.................................... 11,696
------
Net deferred tax asset........................................... 8,466
------
Less valuation allowance......................................... 8,466
------
$ 0
======
</TABLE>
7. BENEFIT PLANS
Pursuant to the Plan, all stock option agreements related to the old common
stock of the Company were effectively terminated.
The Company maintains an incentive compensation plan for its salaried
employees, which provides for incentive awards based on certain levels of
earnings. The amounts awarded under the plan and charged to expense in the
accompanying statements of operations were $0 for the three months ended
December 28, 1996, the nine months ended September 28, 1996 and the year ended
December 30, 1995, and $150,000 for the year ended December 31, 1994.
The Company maintains a separate defined contribution 401(k) profit-sharing
plan covering substantially all hourly and salaried employees. Under this
plan, the Company contributes a specified percentage of each eligible
employee's contributions. Amounts contributed under the plan were
approximately $196,000 for the three months ended December 28, 1996, $506,000
for the nine months ended September 28, 1996, and $786,000 and $874,000 for
the years ended December 30, 1995 and December 31, 1994, respectively.
The Company also maintains an executive deferred compensation plan under
which eligible executives may elect to defer up to 50% of their compensation.
Amounts deferred are paid to the executives or their beneficiaries following
retirement, termination, or death. A liability for amounts deferred under this
plan of approximately $2,814,000 and $2,769,000 at December 28, 1996 and
December 30, 1995, respectively, is included in accrued payroll and other
compensation in the accompanying balance sheets.
On September 27, 1996, the Company granted 200,000 stock options related to
the new common stock to an executive of the Company, at an option price of
$7.10 per share, which represented the Board's estimate of the approximate
fair market value of the Common Stock at that time. None of these shares were
exercised, canceled, or forfeited during 1996. The shares are exercisable
starting September 27, 1997 and vest ratably over a three-year period.
F-16
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
<TABLE>
<S> <C>
Net loss, as reported........................................... $(2,540)
Net loss, pro forma............................................. (2,608)
Net loss per share, as reported................................. $ (.25)
Net loss per share, pro forma................................... (.26)
</TABLE>
The assumption regarding the stock options issued to the executive in 1996
was that 33% of such options vested each year over a three-year period from
the date of grant. The fair value of options granted is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
assumptions: dividend yield of 0%; expected volatility of 35%; risk free
interest rate of 6.58%; and expected life of five years.
Postretirement Benefits
The Company provides reduced life insurance benefits to retired employees
who were employed prior to January 1, 1974. On January 3, 1993, the Company
adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions." This standard requires that the expected cost of these
benefits be charged to expense during the years that the employees render
service. This was a change from the Company's prior policy of recognizing
postretirement benefits on a cash basis. Based on actuarial estimates using
currently available data, the postretirement benefit obligation at January 3,
1993, measured in accordance with SFAS No. 106, was approximately $2,400,000.
The Company elected to amortize the obligation over a 10.5-year period, the
average remaining life expectancy of the participants, beginning January 3,
1993. The Company recognized the unamortized transition obligation associated
with the adoption of SFAS No. 106 in the nine months ended September 28, 1996
as a result of the implementation of fresh start reporting.
The net periodic postretirement benefit cost includes the following
components for the three months ended December 28, 1996, the nine months ended
September 28, 1996, and the years ended December 30, 1995 and December 31,
1994, (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS| NINE MONTHS YEAR YEAR
ENDED | ENDED ENDED ENDED
DECEMBER 28,|SEPTEMBER 28, DECEMBER 30, DECEMBER 31,
1996 | 1996 1995 1994
------------|------------- ------------ ------------
<S> <C> |<C> <C> <C>
Interest cost on accumulated postretirement benefit obligation.......... $32 | $ 96 $146 $165
Amortization of transition benefit...................................... 0 | 172 229 229
Recognition of transition obligation.................................... 0 | 1,543 0 0
--- | ------ ---- ----
$32 | $1,811 $375 $394
=== | ====== ==== ====
</TABLE>
The accumulated postretirement benefit obligation was determined using a
discount rate of 8%.
Pension Plan
The Company maintains a noncontributory defined benefit pension plan
covering substantially all of its hourly and salaried employees. The benefits
under the plan are based on years of service during which the employees
participate in the plan. The Company's funding policy is to contribute an
amount based on actuarially determined values required to sustain the plan on
a sound financial basis.
F-17
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
The Company recognized previously unrecognized and deferred items such as
the net transition obligation, prior service cost, and (gains) losses in the
nine months ended September 28, 1996 as a result of the implementation of
fresh start reporting.
The net periodic pension cost consisted of the following components (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS| NINE MONTHS
ENDED | ENDED
DECEMBER 28,|SEPTEMBER 28, DECEMBER 30, DECEMBER 31,
1996 | 1996 1995 1994
------------|------------- ------------ ------------
<S> <C> |<C> <C> <C>
Service cost--benefits earned during the period......................... $284 | $ 853 $1,358 $1,629
Actual (return) loss on plan assets..................................... (66) | (200) (423) 132
Interest cost on projected benefit obligation........................... 156 | 468 419 311
Net amortization and deferral........................................... 0 | 17 73 (316)
Recognition of deferred items........................................... 0 | 985 0 0
---- | ------ ------ ------
Net periodic pension cost............................................... $374 | $2,123 $1,427 $1,756
==== | ====== ====== ======
</TABLE>
The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheets (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28,|DECEMBER 30,
1996 | 1995
------------|------------
<S> <C> |<C>
Accrued pension cost: |
Accumulated and prejected benefit obligation, including vested benefits of $7,323 and $5,754 for |
1996 and 1995, respectively....................................................................... $7,969 | $6,937
Less plan assets at fair value....................................................................... (7,015) | (5,497)
------ | ------
Projected benefit obligation in excess of plan assets................................................ 954 | 1,440
Unrecognized net loss................................................................................ (60) | (950)
Unrecognized net transition obligation at adoption date of plan, being recognized over 15 years, |
included in other assets............................................................................ 0 | (4)
Unrecognized prior service cost, being recognized over 15 years, included in |
other assets........................................................................................ 0 | (155)
Adjustment required to recognize minimum liability................................................... 60 | 1,109
------ | ------
Accrued pension liability............................................................................ $ 954 | $1,440
====== | ======
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation in 1996 and 1995 was 8.25%. The
expected long-term rate of return on assets used in 1996 and 1995 was 9%.
8. TRANSACTIONS WITH AFFILIATES
On April 2, 1993, T.B. Wood's Corporation ("Woods") acquired new product
lines and completed a recapitalization. In settlement of amounts owed on a
note payable to the Company (the "Woods Note"), the Company received a cash
payment of $5,560,000, two new notes, and a warrant exercisable by the Company
to purchase up to 375,000 shares of common stock of Woods at an exercise price
of $.003 per share. The new notes received consisted of (i) a ten-year,
$13,218,000 subordinated promissory note, with semiannual interest payments of
$576,000 commencing on the third anniversary of the date of the note, and a
final payment of
F-18
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
principal and interest due at maturity, and (ii) a ten-year, $2,000,000
noninterest-bearing subordinated promissory note. The $2,000,000 note was paid
in full on August 26, 1994. The carrying value of the $13,218,000 subordinated
promissory note plus accrued interest was calculated by discounting future
cash flows at 8.5%. The Company believes that the consideration received from
Woods approximated the fair value resulting from an arms-length transaction.
In December 1993, the Company exercised its warrants to purchase 375,000
shares of Woods common stock. The investment in Woods was accounted for under
the cost method. During the first quarter of 1996, the Company sold all
375,000 shares of common stock as part of Woods' initial public offering. As a
result of the sale, the Company received net proceeds of approximately
$4,200,000.
On July 18, 1996, Woods prepaid the subordinated promissory note and all
accrued interest through that date. The Company received approximately
$10,700,000 in consideration for the subordinated promissory note and recorded
a loss, reflected in additional paid-in capital, of $5,016,000.
Pursuant to a management services agreement dated April 1, 1989, The NTC
Group, Inc. ("NTC") provided certain management, corporate development, and
financial consulting services to the Company. The management services
agreement provided that NTC receive a management fee equal to the lesser of 2%
of the Company's average equity book value plus interest-bearing debt, as
defined, or $4,000,000. The Company incurred expenses of $1,993,000,
$3,368,000, and $4,000,000 for the nine months ended September 28, 1996, and
for the years ended December 30, 1995 and December 31, 1994, respectively,
which is shown as management fees to affiliate in the accompanying statements
of operations. Pursuant to the Plan, $1,830,000 of accrued management fees
were forgiven by NTC as of September 28, 1996, and the management services
agreement was terminated.
9. SIGNIFICANT CUSTOMERS
The Company's ten largest customers accounted for approximately 37% of net
sales for the three months ended December 28, 1996 and the nine months ended
September 28, 1996 and 38% for the years ended December 30, 1995 and December
31, 1994. Of these, one customer accounted for approximately 12.3% of net
sales for the three months ended December 28, 1996 and the nine months ended
September 28, 1996, and 11.5% and 10.5% of net sales for the years ended
December 30, 1995 and December 31, 1994, respectively.
10. COMMITMENTS AND CONTINGENCIES
Litigation
The Company is subject to certain legal actions arising in the ordinary
course of its business. In management's opinion, the outcome of these actions
will not have a material adverse effect on the Company's financial position or
results of operations.
Environmental Matters
The Company is involved in certain proceedings governed by environmental
laws and regulations, including a proceeding under CERCLA in which the Company
has been named as one of several hundred third-party defendants. The potential
costs to the Company related to all those environmental matters are uncertain
due to such factors as the unknown magnitude of possible pollution and cleanup
costs, the complexities and evolving nature of governmental laws and
regulations and their interpretations, the timing, varying costs, and
effectiveness
F-19
<PAGE>
THE BIBB COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 28, 1996, DECEMBER 30, 1995, AND DECEMBER 31, 1994
of alternative cleanup technologies, and the determination of the Company's
liability in proportion to other potential responsible parties.
The Company has not accrued any environmental liabilities as of December 28,
1996, due to management's assessment that the likelihood that the ongoing
proceedings would have a material adverse outcome is remote. However, the
Company has budgeted and expects to incur approximately $2 million in
environmental capital expenditures, including construction of new wastewater
treatment facilities at the Brookneal plant, over the next three years in
order to comply with a Special Order on Consent with the Virginia Water
Control Board.
Leases
The Company leases office space, office equipment, and other items under
noncancelable operating leases. Rental expense under these noncancelable
operating leases was approximately $2,426,000 for the three months ended
December 28, 1996, $7,279,000 for the nine months ended September 28, 1996,
and $9,407,000 and $9,344,000 for the years ended December 30, 1995 and
December 31, 1994, respectively.
At December 28, 1996, future minimum lease payments under noncancelable
operating leases are as follows (in thousands):
<TABLE>
<S> <C>
1997...................................... $ 7,334
1998...................................... 6,229
1999...................................... 4,448
2000...................................... 1,903
2001...................................... 5
-------
$19,919
=======
</TABLE>
Other
At December 28, 1996, the Company had contractual commitments in the
ordinary course of business to purchase approximately $17,132,000 of
inventory, with delivery dates through July 1997. These commitments are not
expected to result in future losses. It is the Company's policy to accrue for
any such losses should they occur.
The Company had contractual commitments to make minimum guaranteed payments
under various product licensing agreements expiring through December 31, 1998
of approximately $2,367,000. These commitments are not expected to result in
future losses.
During 1991, the Company entered into a cogeneration energy supply agreement
with an unrelated party wherein the Company has committed to purchase all
steam and chilled water consumed at the Roanoke plants at prices as defined in
the agreement for a period of 25 years. Pursuant to the sale of the Company's
terry operations in February 1997 (Note 1), the agreement was terminated.
F-20
<PAGE>
THE BIBB COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE MONTHS ENDED DECEMBER 28, 1996,
THE NINE MONTHS ENDED SEPTEMBER 28, 1996,
AND THE YEARS ENDED DECEMBER 30, 1995 AND DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
-------------------
BALANCE
AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS* PERIOD
--------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED DECEMBER
28, 1996:
Allowance for doubtful
accounts, discounts, and
claims.................. $ 0 $ 191 $1,397 $ 0 $1,588
NINE MONTHS ENDED SEPTEMBER
28, 1996:
Allowance for doubtful
accounts, discounts, and
claims.................. 5,134 2,388 2,785 (10,307) 0
YEAR ENDED DECEMBER 30,
1996:
Allowance for doubtful
accounts, discounts, and
claims.................. 4,667 491 8,363 (8,387) 5,134
YEAR ENDED DECEMBER 31,
1994:
Allowance for doubtful
accounts, discounts, and
claims.................. 3,686 1,346 7,860 (8,225) 4,667
</TABLE>
- --------
* Deductions represent the write-off of uncollectible receivables, net of
recoveries, and for the nine months ended September 28, 1996, the write-off of
the allowance account in order to state accounts receivable at fair value in
accordance with fresh start reporting.
F-21
<PAGE>
THE BIBB COMPANY
CONDENSED BALANCE SHEETS
MARCH 29, 1997 AND DECEMBER 28, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 29 DECEMBER 28,
1997 1996
ASSETS ----------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................... $ 157 $ 3,206
Restricted cash..................................... 0 0
Accounts receivable, net of allowances for doubtful
accounts, discounts, and claims of $1,458 and
$1,588 as of March 29, 1997 and December 28, 1996,
respectively....................................... 52,144 55,128
Inventories......................................... 69,834 72,282
Assets held for sale................................ 0 37,012
Prepaid expenses and other current assets........... 3,289 2,033
-------- --------
Total current assets.............................. 125,424 169,661
PROPERTY, PLANT and EQUIPMENT, NET.................... 57,546 58,642
INVESTMENT IN AND NOTE RECEIVABLE FROM WOODS
CORPORATION.......................................... 0 0
OTHER ASSETS.......................................... 4,195 4,397
-------- --------
$187,165 $232,700
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt................ $ 2,480 $ 5,237
Accounts payable.................................... 28,899 36,466
Accrued payroll and other compensation.............. 16,165 14,607
Accrued interest.................................... 400 681
Other accrued liabilities........................... 2,203 5,768
-------- --------
Total current liabilities......................... 50,147 62,759
-------- --------
LONG-TERM DEBT, less current maturities............... 52,826 84,093
-------- --------
COMMITMENTS AND CONTINGENCIES......................... -- --
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, 0 shares issued and outstanding........ 0 0
Common stock, $.01 par value, 12,000,000 shares
authorized; 10,075,163 shares issued and
outstanding........................................ 101 100
Additional paid-in capital.......................... 88,882 88,348
Retained deficit.................................... (4,731) (2,540)
Minimum pension liability adjustment................ (60) (60)
-------- --------
Total stockholders' equity........................ 84,192 85,848
-------- --------
$187,165 $232,700
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements (unaudited).
F-22
<PAGE>
THE BIBB COMPANY
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 29, 1997 AND MARCH 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 29 | MARCH 30
1997 | 1996
---------- | --------
<S> <C> | <C>
NET SALES.............................................................................................. $ 68,052 | $ 81,538
COST OF SALES.......................................................................................... 62,070 | 73,735
---------- | --------
Gross Profit......................................................................................... 5,982 | 7,803
SELLING AND ADMINISTRATIVE EXPENSES.................................................................... 6,585 | 8,584
MANAGEMENT FEES TO AFFILIATE........................................................................... 0 | 672
---------- | --------
Operating Loss....................................................................................... (603) | (1,453)
OTHER (EXPENSE) INCOME |
Interest expense: |
Senior and other debt................................................................................ (1,219) | (1,259)
Subordinated bonds................................................................................... 0 | (5,575)
Interest income from T.B Wood's Corporation.......................................................... 0 | 293
Loan fee amortization and related expense............................................................ (274) | (156)
Other, net........................................................................................... (95) | 3,392
---------- | --------
(1,588) | (3,305)
---------- | --------
LOSS BEFORE REORGANIZATION ITEMS AND EXTRAORDINARY ITEM................................................ $ (2,191) | $ (4,758)
REORGANIZATION ITEMS: |
Professional fees and other expenses................................................................. 0 | 0
Adjusts accounts to fair value....................................................................... 0 | 0
EXTRAORDINARY ITEM, gain on discharge of debt.......................................................... 0 | 0
---------- | --------
NET LOSS............................................................................................... $ (2,191) | $ (4,758)
========== | ========
NET LOSS PER SHARE OF COMMON STOCK(1).................................................................. $ (0.22) | $ --
========== | ========
WEIGHTED AVERAGE SHARES OUTSTANDING(1)................................................................. 10,075,163 | --
========== | ========
</TABLE>
- --------
(1) Share and per share amounts for the quarter ended March 30, 1996 have not
been presented because they are not meaningful due to the implementation
of fresh start reporting and the substantial change in the number of
shares outstanding subsequent to the consummation of the Plan (See Note 1
to the Condensed Financial Statements (Unaudited)).
The accompanying notes are an integral part of the condensed financial
statements (unaudited).
F-23
<PAGE>
THE BIBB COMPANY
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 29, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON MINIMUM
STOCK ADDITIONAL RETAINED PENSION
($.01 PAID-IN EARNINGS LIABILITY
PAR VALUE) CAPITAL (DEFICIT) ADJUSTMENT TOTAL
---------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 28,
1996..................... $100 $88,348 $ (2,540) $ (60) $ 85,848
Stock issuance............ 1 534 0 0 535
Net loss.................. 0 0 (2,191) 0 (2,191)
---- ------- -------- ----- --------
Balance, March 29, 1997... $101 $88,882 $ (4,731) $ (60) $ 84,192
==== ======= ======== ===== ========
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements (unaudited).
F-24
<PAGE>
THE BIBB COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 29, 1997 AND MARCH 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
MARCH 29 | MARCH 30
1997 | 1996
--------- | ---------
<S> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES |
Net loss................................................................................................ $ (2,191)| $ (4,758)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: |
Depreciation and amortization.......................................................................... 2,117 | 2,893
Loan fee amortization and related expenses............................................................. 274 | 156
Net (gain) loss on sale and retirement of assets....................................................... 12 | (408)
Net gain on sale of investment......................................................................... 0 | (3,685)
Interest receivable on note receivable from T.B. Wood's Corporation.................................... 0 | (293)
Changes in operating assets and liabilities, net of reorganization items: |
Restricted cash........................................................................................ 0 | (5,963)
Accounts receivable.................................................................................... 2,984 | 2,213
Inventories............................................................................................ 2,448 | (1,059)
Assets held for sale................................................................................... 37,012 | 0
Prepaid expenses and other current assets.............................................................. (1,256)| (541)
Accounts payable and accrued liabilities............................................................... (9,326)| 7,832
Reorganization items: |
Professional fees and other expenses.................................................................. 0 | 0
Adjust accounts to fair value......................................................................... 0 | 0
Extraordinary gain on discharge of debt............................................................... 0 | 0
--------- | ---------
Net cash provided by (used in) operating activities.................................................. 32,074 | (3,613)
--------- | ---------
CASH FLOWS FROM INVESTING ACTIVITIES: |
Capital expenditures.................................................................................... (2,527)| (831)
Proceeds from sale of fixed assets...................................................................... 1,869 | 619
Proceeds from the sale of investment.................................................................... 0 | 4,185
Repayment of note receivable from T.B. Wood's Corporation, net.......................................... 0 | 0
Other, net.............................................................................................. (441)| (424)
--------- | ---------
Net cash (used in) provided by investing activities.................................................. (1,099)| 3,549
--------- | ---------
CASH FLOWS FROM FINANCING ACTIVITIES: |
Repayments of long-term debt............................................................................ (3,019)| 0
Net (repayments) borrowings of senior debt.............................................................. (21,923)| 55
Repayments of term loan................................................................................. (9,082)| 0
Proceeds from exercise of stock options................................................................. 0 | 0
Loan fees............................................................................................... 0 | 0
--------- | ---------
Net cash (used in) provided by financing activities.................................................. (34,024)| 55
--------- | ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS................................................................ (3,049)| (9)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......................................................... 3,206 | 149
--------- | ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................................................... $ 157 | $ 140
--------- | ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES: |
Interest paid........................................................................................... $ 1,211 | $ 2,135
--------- | ---------
Capital stock issued for reorganization expenses........................................................ $ 535 | $ 0
- -------------------------------------------------- |
========= | =========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements (unaudited).
F-25
<PAGE>
THE BIBB COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF INTERIM PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary to present fairly the Company's financial
position as of March 29, 1997 and the results of its operations and its cash
flows for three month period ended March 29, 1997 and March 30, 1996, have
been included. Operating results for the three month period ended March 29,
1997 are not necessarily indicative of the results that may be expected for
the year ending January 3, 1998. Certain information and note disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to SEC's rules and regulations. The condensed financial statements
should be read in conjunction with the Company's audited financial statements
and notes thereto for the year ended December 28, 1996. The balance sheet at
December 28, 1996, has been taken from these statements.
On September 12, 1996, the United States Bankruptcy Court for the District
of Delaware issued an order confirming the reorganization plan (the "Plan").
The Plan was consummated on September 27, 1996 (effective September 28, 1996
for financial reporting purposes).
The financial statements as of and for the three months ended March 29, 1997
are presented for the Company after the consummation of the Plan. These
statements were prepared under the principles of fresh start reporting and are
not comparable to the statements of prior periods, except for the balance
sheets. Accordingly, a line has been used to separate the financial statements
of the Company after the consummation of the Plan from those of the Company
prior to the consummation of the Plan.
Unless the context otherwise requires, the "Company" means The Bibb Company,
a Delaware corporation.
2. SIGNIFICANT ITEMS AFFECTING FINANCIAL STATEMENTS
Two significant items occurred during the quarter ended March 29, 1997,
which included (a) a plan to restructure operations at the plants to improve
efficiency and, (b) the completion of the previously announced sale of the
Company's terry products business.
Plant Restructuring
In January 1997, the Company announced plans to reconfigure its
manufacturing activities at several facilities. The changes included (i)
outsourcing a portion of Consumer Products muslin greige sheeting, (ii)
outsourcing all Apparel Fabrics yarn, (iii) consolidation of all Consumer
Bedding printing at the Brookneal, Virginia facility, (iv) expansion of
automated sheet sewing at Brookneal and (v) consolidation of Consumer Products
retail bedding distribution at the Sargent, Georgia facility. In conjunction
with these changes, the Company reduced manufacturing activities at the
Columbus, Georgia and Juliette, Georgia facilities and increased the
manufacture of muslin greige sheeting at the Greenville, South Carolina
facility.
Sale of the Terry Business
In connection with a restructuring plan, in February 1997, the Company sold
its terry products business, which manufactured bath towels and other terry
products sold primarily to retailers and institutional distributors (the
"Terry Business"), to WestPoint Stevens Inc., ("WestPoint"). In conjunction
therewith, effective September 28, 1996, the Company classified the assets of
the Terry Business as "assets held for sale" based on
F-26
<PAGE>
THE BIBB COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
the net proceeds of the sale, including losses related to the Terry Business
from December 29, 1996 through February 21, 1997, and the results of
operations of the Terry Business were, therefore, eliminated from the
Company's statement of operations in the quarter ended March 29, 1997. In
connection with the sale of the Terry Business, the Company agreed to sell to
WestPoint certain yarn and greige terry cloth at cost, for a period of up to 6
months.
3. INVENTORIES
The major classes of inventories were as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1997 1996
--------- ------------
<S> <C> <C>
Raw materials and supplies.......................... $ 9,486 $ 9,018
Work-in-process..................................... 31,050 33,463
Finished goods...................................... 29,014 29,517
-------- --------
Total at FIFO cost................................ 69,550 71,998
Excess of LIFO cost over FIFO cost.................. 284 284
-------- --------
Total at LIFO cost................................ $ 69,834 $ 72,282
======== ========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1997 1996
--------- ------------
<S> <C> <C>
Machinery and equipment............................. $38,276 $36,425
Land, buildings, and improvements................... 23,040 24,316
------- -------
61,316 60,741
Less accumulated depreciation....................... 3,770 2,099
------- -------
$57,546 $58,642
======= =======
</TABLE>
5. LONG-TERM DEBT
Long-term debt at March 29, 1997 and December 28, 1996 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1997 1996
--------- ------------
<S> <C> <C>
Line of credit under Loan and Security Agreement........ $49,231 $71,154
Term loan under Loan and Security Agreement............. 5,562 14,644
Industrial development revenue bonds, variable rate of
interest............................................... 0 3,000
Other................................................... 513 532
------- -------
55,306 89,330
Less current maturities................................. 2,480 5,237
------- -------
$52,826 $84,093
======= =======
</TABLE>
The Loan and Security Agreement dated as of September 12, 1996, by and among
Congress Financial Corporation, as agent, and the lenders party thereto and
the Company ("The New Credit Agreement") became operative, thereby providing
the Company with a source of financing. The agreement was amended on April 25,
1997 to provide for, (i) an increase of the Supplemental Capital Expenditures
Allowance, as defined, from $6,000,000 to $16,000,000, (ii) a release of the
$10,000,000 Term Loan Reserve, as defined, (iii) an adjustment in the formula
used to determine the interest rate of the Eurodollar Rate loans and, (iv)
changes in the formulas used in determining loan covenant compliance.
F-27
<PAGE>
EXHIBIT 10(h)
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
October 31, 1996
The Bibb Company
237 Coliseum Avenue
Macon, Georgia 31201
Gentlemen:
Reference is made to the Loan and Security Agreement (the "Loan
Agreement"), dated as of September 12, 1996, by and among Congress Financial
Corporation (Southern), as agent (the "Agent"), the Lenders parties thereto and
The Bibb Company ("Borrower"), together with all other agreements, documents and
instruments at any time executed and/or delivered in connection therewith or
related thereto (as the same now exist, are being amended hereby and may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, collectively, the "Financing Agreements"). All capitalized terms used
herein and not herein defined shall have the meanings given to them in the Loan
Agreement.
Borrower has requested that Agent and Lenders agree to amend one of the
affirmative covenants of Borrower contained in the Loan Agreement, and Agent and
the Required Lenders are willing to agree to such amendment, subject to the
terms and conditions set forth herein.
In consideration of the foregoing, the mutual agreements and covenants
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
1. Consultant. Section 9.19(a) of the Loan Agreement is hereby deleted
----------
in its entirety and replaced with the following, effective as of October 27,
1996:
"(a) On or before November 8, 1996, (i) Borrower shall retain a
consulting firm chosen by Borrower and acceptable to Agent and Required Lenders
(the "Consultant") pursuant to an engagement letter having terms (including
compensation, scope, duration of the engagement and work to be performed)
acceptable to Agent and Required Lenders, and (ii) the Consultant shall have
initiated its field work. Thereafter, Borrower shall continue such retention in
effect, or the retention of a replacement or successor Consultant acceptable to
Agent and Required Lenders under a retention agreement having terms acceptable
to Agent and Required Lenders."
2. No Acceleration. The parties hereto hereby agree and acknowledge
---------------
that, notwithstanding the terms and provisions of
<PAGE>
Section 10.2(b) of the Loan Agreement, the Obligations have not been
accelerated, automatically or otherwise, by virtue of the occurrence of an Event
of Default under Section 10.1(a)(ii) of the Loan Agreement by reason of the
default under the provisions of Section 9.19(a) of the Loan Agreement, as such
provisions existed prior to the effectiveness of this Amendment.
3. Condition Precedent. The effectiveness of the amendment contained
-------------------
herein shall be subject to the satisfaction of the following condition: the
receipt by Agent of an original of this Amendment, duly authorized, executed and
delivered by Borrower and the Required Lenders.
4. Effect of this Amendment.
------------------------
(a) Entire Agreement; Ratification and Confirmation of the Financing
----------------------------------------------------------------
Agreements. This Amendment contains the entire agreement of the parties with
- ----------
respect to the subject matter hereof and supersedes all prior or contemporaneous
term sheets, proposals, discussions, negotiations, correspondence, commitments
and communications between or among the parties concerning the subject matter
hereof. This Amendment may not be modified or any provision waived, except in
writing signed by the party against whom such modification or waiver is sought
to be enforced. Except as specifically amended pursuant hereto, the Financing
Agreements are hereby ratified, restated and confirmed by the parties hereto as
of the effective date hereof. No Events of Default have been or are being
waived hereby. To the extent of conflict between the terms of this Amendment
and the other Financing Agreements, the terms of this Amendment shall control.
(b) Governing Law. This Amendment and the rights and obligations
-------------
hereunder of each of the parties hereto shall be governed by and interpreted and
determined in accordance with the laws of the State of Georgia.
(c) Binding Effect. This Amendment shall be binding upon and inure to
--------------
the benefit of each of the parties hereto and their respective successors and
assigns.
(d) Counterparts. This Amendment may be executed in any number of
------------
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
2
<PAGE>
By the signatures hereto of their duly authorized officers, each of the
parties hereto covenants and agrees as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(SOUTHERN), as Agent and Lender
By: /s/ Morris P. Holloway
Title: Vice President
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as Lender
By: /s/ Terrell W. Harris
Title: Vice President
AGREED AND ACCEPTED:
THE BIBB COMPANY
By: /s/ A. William Ott
Title: Chief Financial Officer
3
<PAGE>
EXHIBIT 10(i)
AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
----------------------------------------------
April 25, 1997
The Bibb Company
237 Coliseum Avenue
Macon, Georgia 31201
Gentlemen:
Reference is made to the Loan and Security Agreement (as heretofore
amended, the "Loan Agreement"), dated as of September 12, 1996, by and among
Congress Financial Corporation (Southern), as agent (the "Agent"), the Lenders
parties thereto and The Bibb Company ("Borrower"), together with all other
agreements, documents and instruments at any time executed and/or delivered in
connection therewith or related thereto (as the same now exist, are being
amended hereby and may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, collectively, the "Financing Agreements"). All
capitalized terms used herein and not herein defined shall have the meanings
given to them in the Loan Agreement.
Borrower has requested that Agent and Lenders agree to amend certain
provisions of the Loan Agreement, including, among other things, provisions with
respect to certain Availability Reserves, financial covenants and the Interest
Rate, and Agent and the Lenders or Required Lenders, as applicable, are willing
to agree to such amendments, subject to the terms and conditions set forth
herein.
In consideration of the foregoing, the mutual agreements and covenants
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
1. Supplemental Capital Expenditures. Effective as of December 31,
---------------------------------
1996, the definitions of "Supplemental Capital Expenditures Allowance" and
"Supplemental Capital Expenditures Reserve" contained in Sections 1.93 and 1.94
of the Loan Agreement, respectively, shall each be deemed amended by deleting
the references therein to "$6,000,000" and replacing such references in each
instance with the following: "$16,000,000."
2. Term Loan Reserve. Notwithstanding any contrary terms or
-----------------
unfulfilled conditions for the release of the Term Loan Reserve set forth in the
Loan Agreement, the Term Loan Reserve shall be released by Agent as of the date
hereof.
3. Interest Rate. Section 3.1(f) of the Loan Agreement is hereby
-------------
deleted in its entirety and replaced with the following:
<PAGE>
"(f) The Interest Rate with respect to Eurodollar Rate Loans is
subject to adjustment as follows:
(i) if Borrower's Pre-Tax Profit is at least $2,275,000
for its fiscal year ending December 31, 1997, then the pre-default
Interest Rate for Eurodollar Rate Loans will be reduced to three
(3%) percent per annum above the Adjusted Eurodollar Rate.
(ii) The adjustment in the Interest Rate for Eurodollar
Rate Loans shall be effective as to each Interest Period that
commences on or after the tenth (10th) day after the delivery to
Agent of audited financial statements of Borrower for the fiscal
year ending December 31, 1997 showing that the required financial
results were achieved and accompanied by the unqualified audit
report and opinion thereon of independent certified public
accountants acceptable to Agent.
(iii) No adjustment in the pre-default Interest Rate for
Eurodollar Rate Loans as described in this Section 3.1(f) shall
become effective if, at the time an adjustment would otherwise be
made under this Section 3.1(f), a Default or Event of Default
exists or has occurred and is continuing."
4. Strategic Plan. Effective December 31, 1996, Section 9.19(b) of
--------------
the Loan Agreement is deemed amended in a manner such that on or before May 29,
1997, Borrower shall deliver, or cause to be delivered to, Agent and Lenders (i)
a written final report from the Consultant setting forth the Consultant's advice
and recommendations regarding the Strategic Plan, (ii) a copy of the Strategic
Plan and (iii) evidence of the adoption of the Strategic Plan by the Board of
Directors of Borrower.
5. Financial Covenants Schedule. Effective as of December 31, 1996,
----------------------------
the Financial Covenants Schedule to the Loan Agreement is hereby deleted and
replaced with the Financial Covenants Schedule attached to this Amendment.
6. Working Capital Ratio. Effective as of December 31, 1996, Section
---------------------
9.13 of the Loan Agreement is hereby deleted in its entirety and replaced with
the following:
"9.13 Working Capital Ratio. Borrower shall, at all times,
maintain a Working Capital Ratio of not less than 2.0 to 1.0."
7. Condition Precedent. The effectiveness of the amendments contained
-------------------
herein shall be subject to the satisfaction of the following condition: the
receipt by Agent of an original of this Amendment, duly authorized, executed and
delivered by Borrower and each of the Lenders.
2
<PAGE>
8. Effect of this Amendment.
(a) Entire Agreement; Ratification and Confirmation of the
------------------------------------------------------
Financing Agreements. This Amendment contains the entire agreement of the
- --------------------
parties with respect to the subject matter hereof and supersedes all prior or
contemporaneous term sheets, proposals, discussions, negotiations,
correspondence, commitments and communications between or among the parties
concerning the subject matter hereof. This Amendment may not be modified or any
provision waived, except in writing signed by the party against whom such
modification or waiver is sought to be enforced. Except as specifically amended
pursuant hereto, the Financing Agreements are hereby ratified, restated and
confirmed by the parties hereto as of the effective date hereof. No Events of
Default have been or are being waived hereby. To the extent of conflict between
the terms of this Amendment and the other Financing Agreements, the terms of
this Amendment shall control.
(b) Governing Law. This Amendment and the rights and obligations
-------------
hereunder of each of the parties hereto shall be governed by and interpreted and
determined in accordance with the laws of the State of Georgia.
(c) Binding Effect. This Amendment shall be binding upon and
--------------
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
(d) Counterparts. This Amendment may be executed in any number of
------------
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
By the signatures hereto of their duly authorized officers, each of the
parties hereto covenants and agrees as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(SOUTHERN), as Agent and Lender
By: /s/ Morris P. Holloway
Title: First Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
3
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as Lender
By: /s/ Terrell W. Harris
Title: Vice President
AGREED AND ACCEPTED:
THE BIBB COMPANY
By: /s/ A. William Ott
Title: Vice President and Chief
Financial Officer
4
<PAGE>
FINANCIAL COVENANTS SCHEDULE
----------------------------
<TABLE>
<CAPTION>
Minimum Minimum Minimum Maximum
FIFO After-Tax Change in Base
Basis Fixed Charge Tangible Capital
EBITDA* Coverage To 1.00 Net Worth* Expenditures*
------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
1 month through January 1997 (1,000) N/A (2,000) 667
2 months through February 1997 0 N/A (2,000) 1,333
3 months through March 1997 0 N/A (2,500) 2,000
4 months through April 1997 1,000 N/A (3,000) 2,666
5 months through May 1997 2,000 N/A (3,000) 3,333
6 months through June 1997 3,000 N/A (3,000) 4,000
7 months through July 1997 4,000 N/A (3,000) 4,666
8 months through August 1997 6,000 N/A (2,500) 5,333
9 months through September 1997 7,500 0.20 (1,500) 6,000
10 months through October 1997 10,500 0.50 (500) 6,666
11 months through November 1997 12,500 0.60 -0- 7,333
12 months through December 1997 13,500 0.70 -0- 8,000
12 months through January 1998 14,500 0.80 500 8,000
12 months through February 1998 14,500 0.90 1,000 8,000
12 months through March 1998 15,500 1.00 1,500 8,000
12 months through April 1998 16,500 1.10 2,000 8,000
12 months through May 1998 17,500 1.10 2,500 8,000
12 months through June 1998 18,000 1.10 2,500 8,000
12 months through July 1998 18,500 1.10 2,500 8,000
12 months through August 1998 19,500 1.10 2,500 8,000
12 months through September 1998 20,500 1.10 2,500 8,000
12 months through October 1998 21,000 1.10 2,500 8,000
12 months through November 1998 21,000 1.10 2,500 8,000
12 months through December 1998 21,000 1.10 2,500 8,000
Each 12 month period thereafter 21,000 1.10 2,500 8,000
</TABLE>
- -------------
* In Thousands of Dollars
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED BALANCE SHEET OF THE BIBB COMPANY AS OF MARCH 29, 1997 AND THE RELATED
STATEMENTS OF INCOME, STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE PERIOD ENDED
DECEMBER 28, 1996.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-03-1998 DEC-28-1996
<PERIOD-START> DEC-29-1996 DEC-31-1995
<PERIOD-END> MAR-29-1997 MAR-30-1996
<CASH> 157,000 0
<SECURITIES> 0 0
<RECEIVABLES> 53,602,000 0
<ALLOWANCES> 1,458,000 0
<INVENTORY> 69,834,000 0
<CURRENT-ASSETS> 125,424,000 0
<PP&E> 61,316,000 0
<DEPRECIATION> 3,770,000 0
<TOTAL-ASSETS> 187,165,000 0
<CURRENT-LIABILITIES> 50,147,000 0
<BONDS> 0 0
0 0
0 0
<COMMON> 100,000 0
<OTHER-SE> 84,091,000 0
<TOTAL-LIABILITY-AND-EQUITY> 187,165,000 0
<SALES> 68,052,000 81,538,000
<TOTAL-REVENUES> 68,052,000 81,538,000
<CGS> 62,070,000 73,735,000
<TOTAL-COSTS> 62,070,000 73,735,000
<OTHER-EXPENSES> 6,585,000 9,256,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,588,000 3,305,000
<INCOME-PRETAX> (2,191,000) (4,758,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (2,191,000) (4,758,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,191,000) (4,758,000)
<EPS-PRIMARY> (0.22) 0
<EPS-DILUTED> (0.22) 0
</TABLE>
