<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------------------- -----------------
COMMISSION FILE NO. 0-21661
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
17TH FLOOR
ATLANTA, GEORGIA 30339
(Address of principal executive offices) (Zip Code)
770-644-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
----- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by court. Yes X No
---- -----
As of June 28, 1997, there were 10,061,576 outstanding shares of the
registrant's Common Stock, par value $.01 per share, which is the only class of
common or voting stock of the registrant.
<PAGE>
THE BIBB COMPANY
INDEX
PAGE NO.
--------
PART I - FINANCIAL INFORMATION:
Item 1. Condensed Financial Statements:
Condensed Balance Sheets - June 28, 1997 and December 28, 1996 3
Condensed Statements of Operations for the three months ended
June 28, 1997 and June 29, 1996 4
Condensed Statements of Operations for the six months ended
June 28, 1997 and June 29, 1996 4
Condensed Statement of Changes in Stockholders' Equity for the
six months ended June 28, 1997 5
Condensed Statements of Cash Flows for the six months ended
June 28, 1997 and June 29, 1996 6
Notes to Condensed Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
PART II - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 14
(b) Reports on Form 8-K
No reports on Form 8-K were filed during
the three months ended June 28, 1997. 14
Signature Page 15
2
<PAGE>
THE BIBB COMPANY
CONDENSED BALANCE SHEETS
JUNE 28, 1997 AND DECEMBER 28, 1996
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
June 28, December 28,
1997 1996
---------- ------------
<S> <C> <C>
ASSETS (unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 138 $ 3,206
Accounts receivable, net of allowances for doubtful
accounts, discounts, and claims of $1,318 and
$1,588 as of June 28, 1997 and December 28, 1996,
respectively 44,161 55,128
Inventories 65,411 72,282
Assets held for sale 0 37,012
Prepaid expenses and other current assets 3,716 2,033
Total current assets 113,426 169,661
PROPERTY, PLANT AND EQUIPMENT, NET 58,773 58,642
OTHER ASSETS 4,130 4,397
$176,329 $232,700
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,480 $ 5,237
Accounts payable 26,856 36,466
Accrued payroll and other compensation 13,546 14,607
Accrued interest 374 681
Other accrued liabilities 1,407 5,768
Total current liabilities 44,663 62,759
LONG-TERM DEBT, less current maturities 48,884 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; 10,061,576 shares issued and
outstanding 101 100
Additional paid-in capital 88,882 88,348
Retained deficit (6,141) (2,540)
Minimum pension liability adjustment (60) (60)
Total stockholders' equity 82,782 85,848
$176,329 $232,700
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements (unaudited).
3
<PAGE>
THE BIBB COMPANY
CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 28, 1997 AND JUNE 29, 1996,
THE SIX MONTHS ENDED JUNE 28, 1997 AND JUNE 29, 1996
(In Thousands, Except Share Data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 28, | June 29, June 28, | June 29,
1997 | 1996 1997 | 1996
---------- | --------- -------- | --------
<S> <C> | <C> <C> | <C>
NET SALES $ 71,911 | $ 87,500 $ 139,963 | $ 169,038
COST OF SALES 65,033 | 78,480 127,172 | 152,215
Gross Profit 6,878 | 9,020 12,791 | 16,823
| |
SELLING AND ADMINISTRATIVE EXPENSES 6,665 | 8,738 13,250 | 17,322
MANAGEMENT FEES TO AFFILIATE 0 | 656 0 | 1,328
Operating (loss) profit 213 | (374) (459) | (1,827)
OTHER (EXPENSE) INCOME | |
Interest expense: | |
Senior and other debt (1,305) | (1,225) (2,524) | (2,484)
Subordinated bonds 0 | (5,573) 0 | (11,148)
Interest income from T.B. Wood's Corporation 0 | 293 0 | 586
Loan fee amortization and related expense (312) | (408) (586) | (564)
Other, net (6) | (703) (32) | 2,689
(1,623) | (7,616) (3,142) | (10,921)
| |
NET LOSS $ (1,410) | $ (7,990) $ (3,601) | $ (12,748)
NET LOSS PER SHARE OF COMMON STOCK(1) $ (0.14) | -- $ (0.36) | --
WEIGHTED AVERAGE SHARE OUTSTANDING(1) 10,061,576 | -- 10,061,576 | --
</TABLE>
(1) Share and per share amounts for the three months and six months ended
June 29, 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).
4
<PAGE>
THE BIBB COMPANY
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THE SIX MONTHS ENDED JUNE 28, 1997
(In Thousands)
(unaudited)
<TABLE>
<CAPTION>
Minimum
Additional Pension
Common Stock Paid-in Retained Liability
($.01 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 (3,601) 0 (3,601)
Balance, June 28, 1997 $101 $88,882 $(6,141) $(60) $82,782
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements (unaudited).
5
<PAGE>
THE BIBB COMPANY
CONDENSED STATEMENT OF CASHFLOWS
FOR THE SIX MONTHS ENDED JUNE 28, 1997 AND JUNE 29, 1996
(In Thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 28, | June 29,
1997 | 1996
<S> <C> | <C>
CASH FLOWS FROM OPERATING ACTIVITIES: |
Net loss $ (3,601) | $(12,748)
Adjustments to reconcile net (loss) to net cash |
provided by (used in) operating activities: |
Depreciation and amortization 3,625 | 5,553
Loan fee amortization and related expenses 586 | 564
Net (gain) loss on sale and retirement of assets 13 | (395)
Net gain on sale of investment 0 | (3,685)
Interest receivable on note receivable from T.B. |
Wood's Corporation 0 | (586)
Changes in operating assets and liabilities: |
Restricted cash 0 | (4,932)
Accounts receivable 10,967 | 4,354
Inventories 6,871 | (4,650)
Assets held for sale 37,012 | 0
Prepaid expenses and other current assets (1,683) | (1,517)
Accounts payable and accrued liabilities (15,339) | 17,078
Net cash provided by (used in) operating |
activities 38,451 | (964)
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
Capital expenditures (5,814) | (1,885)
Proceeds from sale of fixed assets 2,565 | 738
Proceeds from the sale of investment 0 | 4,185
Other, net (304) | (806)
Net cash (used in) provided by investing |
activities (3,553) | 2,232
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
Repayments of long-term debt (3,046) | 0
Net (repayments) borrowings of senior debt (35,068) | (1,274)
Borrowings of term loan 10,000 | 0
Repayments of term loan (9,852) | 0
Net cash used in financing activities (37,966) | (1,274)
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,068) | (6)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,206 | 150
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 138 | $ 144
SUPPLEMENTAL CASH FLOW DISCLOSURE |
Interest paid $ 3,205 | $ 3,086
</TABLE>
The accompanying notes are an integral part of the condensed financial
statements (unaudited).
6
<PAGE>
THE BIBB COMPANY
----------------
NOTES TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
1. BASIS OF 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 June 28, 1997 and the results of its operations and its cash
flows for the three month period ended June 28, 1997 and June 29, 1996 and the
six month period ended June 28, 1997 and June 29, 1996, have been included.
Operating results for the three and six month periods ended June 28, 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 the
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.
Unless the context otherwise requires, the "Company" means The Bibb
Company, a Delaware corporation.
On September 12, 1996, the United States Bankruptcy Court for the District
of Delaware issued an order confirming the reorganization plan (the "Plan" or
the "Reorganization"). The Plan was consummated on September 27, 1996
(effective September 28, 1996 for financial reporting purposes).
The Company (formerly known as The New Bibb Company) is the successor to
The Bibb Company ("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 the 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 connection with the completion of the Reorganization and the
consummation of the Merger, the Company adopted fresh start reporting,
effective September 28, 1996. 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 for 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.
2. SIGNIFICANT ITEMS AFFECTING FINANCIAL STATEMENTS
Two significant items occurred during the six months ended June 28, 1997,
which included (a) implementation of a plan to restructure operations at the
Company's plants to improve efficiency and (b) the completion of the
previously announced sale of the Company's terry products business.
7
<PAGE>
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 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 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 six-month period ended June 28, 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>
June 28, December 28,
1997 1996
-------- ------------
<S> <C> <C>
Raw materials and supplies $ 8,979 $ 9,018
Work-in-process 27,532 33,463
Finished goods 28,616 29,517
-------- -------
Total at FIFO cost 65,127 71,998
Excess of LIFO cost over FIFO cost 284 284
-------- -------
Total at LIFO cost $ 65,411 $72,282
======== =======
</TABLE>
8
<PAGE>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 28, December 28,
1997 1996
-------- ------------
<S> <C> <C>
Machinery and equipment $ 40,973 $ 36,425
Land, buildings, and improvements 22,933 24,316
-------- --------
63,906 60,741
Less accumulated depreciation 5,133 2,099
-------- --------
$ 58,773 $ 58,642
======== ========
</TABLE>
5. LONG-TERM DEBT
Long-term debt at June 28, 1997 and December 28, 1996 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
June 28, December 28,
1997 1996
-------- ------------
<S> <C> <C>
Line of credit under Loan and Security Agreement $ 36,086 $ 71,154
Term loan under Loan and Security Agreement 14,792 14,644
Industrial development revenue bonds, variable
rate of interest 0 3,000
Other 486 532
-------- --------
51,364 89,330
Less current maturities 2,480 5,237
-------- --------
$ 48,884 $ 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.
6. SUBSEQUENT EVENT
On July 23, 1997, the Company announced the closing of its Juliette, Georgia
finishing facility as part of the previously announced plant restructuring.
Manufacturing operations will cease on or about September 1, 1997.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
LIQUIDITY AND CAPITAL RESOURCES
General. The following discussion and analysis of the financial condition
and the results of operations should be read in conjunction with the unaudited
condensed financial statements included herein and the financial statements
provided in the Company's Form 10 Registration Statement and subsequent
amendments thereto. 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 September
28, 1996. 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 for prior periods. In
addition, the Company completed the sale of the Terry Business to WestPoint
Stevens Inc. 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.
(A) RESULTS OF OPERATIONS
Three Months Ended June 28, 1997 Compared to Three Months Ended June 29,
1996
Net sales for the three months ended June 28, 1997 were $71,911,000,
compared to $87,500,000 for the comparable prior year period, a decrease of
$15,589,000 or 17.8%. The prior year period included sales from the Terry
Business of $19,790,000. 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 three months ended
June 28, 1997 included sales of $3,838,000 under that agreement.
The Company's gross profit for the three months ended June 28, 1997 was
$6,878,000 or 9.6% of net sales compared to $9,020,000 or 10.3% of net sales for
the three months ended June 29, 1996. The decrease in gross profit percentage
reflects the sale of yarn and greige terry cloth at cost to WestPoint.
Selling and administrative expenses for the three months ended June 28, 1997
were $6,665,000 or 9.3% of net sales compared to $8,738,000 or 10.0% of net
sales for the three months ended June 29, 1996. The decrease 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 $656,000 in the three months
ended June 29, 1996 to $0 for the three months ended June 28, 1997, as a result
of the termination (during the third quarter of 1996) of the Management Services
Agreement between the Company and the NTC Group, Inc., a related party, in
conjunction with the Reorganization.
As a result of the above factors, operating profit for the three months
ended June 28, 1997 improved to a gain of $213,000 from a loss of $374,000 in
the three months ended June 29, 1996, representing an increase of $587,000.
10
<PAGE>
Interest expense was $1,305,000 for the three months ended June 28, 1997
compared to $6,798,000 for the three months ended June 29, 1996, a decrease of
$5,493,000 or 80.8%. Subordinated debt interest expense of $5,573,000 in the
three months ended June 29, 1996, was reduced to $0 in the three months ended
June 28, 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 T.B. Wood's and Sons Company ("T.B. Wood's") note
decreased from $293,000 in the three months ended June 29, 1996 to $0 in the
three months ended June 28, 1997 due to the prepayment of the note and all
accrued interest thereon for approximately $10,670,000 during the third quarter
of 1996.
For the three months ended June 28, 1997, the Company had a net loss of
$1,410,000 compared to a net loss of $7,990,000 for the three months ended June
29, 1996.
Six Months Ended June 28, 1997 Compared to Six Months Ended June 29, 1996
Net sales for the six months ended June 28, 1997 were $139,963,000, a
decrease of $29,075,000 or 17.2 % compared to $169,038,000 for the six months
ended June 29, 1996. The prior year sales included sales from the Terry
Business of $35,188,000. 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 six months ended June
28, 1997 included sales of $5,619,000 under that agreement.
The Company's gross profit for the six months ended June 28, 1997 was
$12,791,000 or 9.1% of net sales compared to $16,823,000 or 10.0% of net sales
for the six months ended June 29, 1996. The decrease in gross profit for the
six months ended June 28, 1997 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 six months ended June 29, 1996. In addition, the Company's
gross profit percentage in the six months ended June 28, 1997 was negatively
affected by the sales of yarn and greige terry cloth at cost to WestPoint.
Selling and administrative expenses for the six months ended June 28, 1997
were $13,250,000 or 9.5% of net sales compared to $17,322,000 or 10.2% of net
sales for the six months ended June 29, 1996. The decrease 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 $1,328,000 in the six months
ended June 29, 1996 to $0 in the six months ended June 28, 1997, as a result of
the termination (during the third quarter of 1996) of the Management Services
Agreement between the Company and the NTC Group, Inc., a related party, in
conjunction with the Reorganization.
As a result of the above factors, operating profit improved from a loss of
$1,827,000 in the six months ended June 29, 1996 to a loss of $459,000 in the
six months ended June 28, 1997, representing an improvement of $1,368,000.
11
<PAGE>
Interest expense was $2,524,000 for the six months ended June 28, 1997
compared to $13,632,000 for the six months ended June 29, 1996, a decrease of
$11,108,000 or 81.5%. Subordinated debt interest expense of $11,148,000 in the
six months ended June 29, 1996, was reduced to $0 in the six months ended June
28, 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 T.B. Wood's note decreased from $586,000 in the six
months ended June 29, 1996 to $0 in the six months ended June 28, 1997 due to
the prepayment of the note and all accrued interest thereon for approximately
$10,670,000 during the third quarter of 1996.
For the six months ended June 28, 1997, the Company had a net loss of
$3,601,000 compared to a net loss of $12,748,000 in the six months ended June
29, 1996.
(B) LIQUIDITY AND CAPITAL RESOURCES
General 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.
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 loan reserves.
As of June 28, 1997, the Company had approximately $50.9 million in
borrowings outstanding under the New Credit Agreement. Of the outstanding
borrowings, approximately $2.5 million is due during the twelve months ending
July 4, 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 June 28,
1997, the Company had the ability to borrow an additional $5.6 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 $3 million. The Company does
not have any other outstanding IRB obligations.
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
12
<PAGE>
the New Credit Agreement and operating leases, to meet anticipated working
capital and capital expenditures 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.
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, of which approximately $5.8 million has been spent through
June 28, 1997. 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 increased to $16 million pursuant to an amendment to the
New Credit Agreement entered into in April 1997. The Company's ability to draw
advances under the New Credit Agreement for the purpose of 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 lease financing.
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 June 28,
1997, 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.
FORWARD LOOKING STATEMENTS
A number of matters and subject areas discussed in "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 "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, risks
and uncertainties associated with the textile industry, and other risks and
uncertainties identified from time to time by the Company in its filings with
the Securities and Exchange Commission.
13
<PAGE>
PART II. OTHER INFORMATION
---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed herewith:
Exhibit 27. Financial Data Schedule
(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the second quarter of 1997.
14
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BIBB COMPANY
By: /s/Neal J. McGrail
-----------------------------
Neal J. McGrail
Vice President and Controller
15
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<FISCAL-YEAR-END> JAN-03-1998 DEC-28-1996
<PERIOD-START> DEC-29-1996 DEC-31-1995
<PERIOD-END> JUN-28-1997 JUN-29-1996
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<SECURITIES> 0 0
<RECEIVABLES> 45,479,000 0
<ALLOWANCES> 1,318,000 0
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<INTEREST-EXPENSE> 3,142,000 (10,921,000)
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