AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 1994
REGISTRATION NO. 33-53179
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
COLLINS & AIKMAN HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3489233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
8320 University Executive Park, Suite 102, Charlotte, North Carolina 28262 Tel.
(704) 548-2350
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
ELIZABETH R. PHILIPP, ESQ.
Executive Vice President, General Counsel and Secretary
COLLINS & AIKMAN HOLDINGS CORPORATION
210 Madison Avenue, 6th Floor
New York, New York 10016
Tel. (212) 578-1331
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
ROBERT ROSENMAN, ESQ. ROBERT A. PROFUSEK, ESQ.
CRAVATH, SWAINE & MOORE JONES, DAY, REAVIS & POGUE
825 Eighth Avenue 599 Lexington Avenue
New York, New York 10019 New York, New York 10022
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE(3)
Common Stock, par value
$.01 per share(3)........... 28,750,000 $17.00 $488,750,000 $176,466.75
</TABLE>
(1) Includes 3,750,000 shares issuable upon the exercise of the Underwriters'
options to purchase shares solely to cover over-allotment options, if any.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) A Registration Fee of $142,759.62 has been previously paid with respect to
the registration of 23,000,000 shares of Common Stock; the remaining fee of
$33,707.13 is being paid herewith.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTES
The prospectus relating to the Common Stock being registered hereby to be
used in connection with a United States offering (the "U.S. Prospectus") is set
forth following this page. The prospectus to be used in a concurrent
international offering (the "International Prospectus") will consist of
alternate pages set forth following the U.S. Prospectus and the balance of the
pages included in the U.S. Prospectus for which no alternatives are provided.
The contents of the U.S. Prospectus and the International Prospectus are
identical except for the front and back pages, the section captioned
"Underwriting" and the additional section under the caption "Certain United
States Tax Consequences to Non-United States Holders" in the International
Prospectus. Alternate pages for the International Prospectus are separately
designated.
Prior to the consummation of the Offerings, Collins & Aikman Holdings
Corporation will be renamed Collins & Aikman Corporation.
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CROSS-REFERENCE SHEET SHOWING LOCATION
IN THE PROSPECTUS OF THE RESPONSES
TO ITEMS OF FORM S-2
------------------------
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<S> <C> <C>
FORM S-2 ITEM LOCATION
NUMBER AND CAPTION IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus....................... Forepart of the Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................................ Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges................. Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds and Consolidation
5. Determination of Offering Price...................... Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal and Selling Stockholders and Certain
Relationships
8. Plan of Distribution................................. Outside Front Cover Page of Prospectus; Underwriting
9. Description of Securities to be Registered........... Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of the Capital Stock
10. Interests of Named Experts and Counsel............... *
11. Information with Respect to the Registrant........... Prospectus Summary; Dividends; Selected Financial
Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business
12. Incorporation of Certain Information by
Reference.......................................... Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... *
</TABLE>
- ---------------
* Item not applicable or requires a negative response.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 2, 1994
["C&A" LOGO] 25,000,000 SHARES
COLLINS & AIKMAN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 25,000,000 shares of Common Stock offered, 20,000,000 shares are
being offered hereby in the United States and 5,000,000 shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share will be
identical for both Offerings. See "Underwriting".
Of the 25,000,000 shares of Common Stock offered, 20,000,000 shares are
being sold by the Company and 5,000,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
the shares being sold by the Selling Stockholders. Blackstone Capital Partners
L.P. and Wasserstein Perella Partners, L.P. will together own or have the right
to vote approximately 59.3% of the outstanding Common Stock (53.7% assuming the
over-allotment options are exercised in full) after completion of the Offerings
and will be in a position to control the Company. See "Principal and Selling
Stockholders and Certain Relationships".
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price per share will be between $14 and $17. For factors to be considered in
determining the initial public offering price, as well as a discussion of the
requirement that the initial public offering price be recommended by a qualified
independent underwriter, see "Underwriting".
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE COMMON STOCK.
The Common Stock will be listed on the New York Stock Exchange under the
symbol "CKC".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
<TABLE>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY (2) STOCKHOLDERS
-------------- ------------- -------------- -------------------------
<S> <C> <C> <C> <C>
Per Share.......... $ $ $ $
Total(3)........... $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Selling Stockholders have granted the U.S. Underwriters an option for 30
days to purchase up to an additional 3,000,000 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Selling Stockholders have granted the
International Underwriters an option for 30 days to purchase up to an
additional 750,000 shares at the initial public offering price per share,
less the underwriting discount, solely to cover over-allotments. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to the Selling Stockholders will be
$ , $ and $ , respectively. See
"Underwriting".
---------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York, on
or about , 1994.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
WASSERSTEIN PERELLA SECURITIES, INC.
THE NIKKO SECURITIES CO.
INTERNATIONAL, INC.
---------------------
The date of this Prospectus is , 1994.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
["C&A" LOGO] Collins & Aikman
The table below shows all the North American-produced vehicle lines for which
Collins & Aikman supplies at least one of its five major automotive products.
An asterisk identifies recently awarded placements on new or redesigned vehicle
lines or models.
General Motors
Achieva
Aurora*
Beretta
Blazer*
Bonneville
Brougham
Camaro*
Caprice
Cavalier*
Century
Ciera
C-K Truck/10/30
C-K Truck/15/35
Corvette
DeVille/Concours*
Olds '88
Eldorado
Firebird
Grand Am
Grand Prix
LeSabre
Lumina-Van*
Lumina-Car*
Monte Carlo*
Olds '98
Park Avenue
Regal
Riviera*
S-10*
S-10 Blazer
S-15 Jimmy
Safari
Saturn
Seville
Silhouette
Skylark
Sonoma
Chevy Suburban
GMC Suburban
Sunbird*
Supreme*
TransSport
Yukon
Ford
Aerostar
Bronco
Contour*
Cougar
Explorer*
Mustang*
Mystique*
Probe
Quest
Ranger
Taurus
Tempo
Thunderbird
Topaz
Windstar*
Chrysler
Acclaim
Caravan
Cirrus*
Concord*
Dakota
Daytona
Eagle Talon
Grand Cherokee
Intrepid
LeBaron/J/JX*/LHS*
Mini Ram Van
Neon*
New Yorker LHS*
Plymouth Neon
Ram Van/Ram
Shadow
Spirit
Stratus*
Sundance
Town & Country
T-300 Pickup
Vision*
Voyager
Wagoneer
Transplants
Fuji/Isuzu Legacy
Fuji/Isuzu Passport
Fuji/Isuzu Rodeo
Geo Metro
Geo Prism
Honda Accord*
Honda Civic*
Honda Mini-Van*
Hyundai Elantra
Isuzu Pickup*
Mazda MX-6
Mazda Pickup
Mazda 626
Mitsubishi Eclipse
Mitsubishi Galant
Nissan Pickup
Nissan Sentra
Suzuki Sidekick
Suzuki Swift
Suzuki Tracker
Toyota Avalon*
Toyota Camry
Toyota Corolla
Toyota Pickup*
Volvo 740/760
------------------------
IN CONNECTION WITH THESE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
AVAILABLE INFORMATION
Collins & Aikman Corporation (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and, in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports and other
information filed by the Company may be inspected and copied at public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at 7
World Trade Center, New York, New York 10048 and 500 West Madison Street,
Chicago, Illinois 60661. Copies of such materials can be obtained upon written
request from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Company's 15 1/2%
Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share
(the "Merger Preferred Stock"), is listed for trading on the American Stock
Exchange (the "AMEX"). Reports and other information concerning the Company may
also be inspected and copied at the offices of the AMEX, 86 Trinity Place, New
York, New York 10006.
This Prospectus constitutes a part of a registration statement on Form S-2
(herein, together with all exhibits thereto, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933 (the "Securities Act") with respect to the Common Stock. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and the
Common Stock offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
Prior to the date of this Prospectus, reports and other information were
filed under the Company's former name "Collins & Aikman Holdings Corporation"
and, prior to July 15, 1992, reports and other information were filed under the
name "WCI Holdings Corporation".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which were previously filed by the Company with
the Commission (File No. 1-10218) pursuant to Section 13 of the Exchange Act,
are incorporated herein by reference: the Company's Annual Report on Form 10-K,
as amended, for the fiscal year ended January 29, 1994 and the Company's
Quarterly Report on Form 10-Q for the thirteen weeks ended April 30, 1994.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified shall not be deemed to constitute a part of this
Prospectus, except as so modified, and any statement so superseded shall not be
deemed to constitute part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any document incorporated herein by reference
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus incorporates).
Requests for such copies should be directed to Corporate Communications, Collins
& Aikman Corporation, 8320 University Executive Park, Suite 102, Charlotte,
North Carolina 28262 (telephone: (704) 548-2350).
3
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus and is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus or incorporated herein by
reference. The capitalized terms used herein and not otherwise defined have the
meanings ascribed to them elsewhere in this Prospectus. Except where otherwise
indicated, (i) the information in this Prospectus assumes that the
over-allotment options granted to the Underwriters (defined below) are not
exercised, (ii) all references to a year with respect to the Company refer to
the fiscal year of the Company which ends on the last Saturday of January of the
following year, (iii) references to the North American automotive industry
include the U.S. and Canadian markets and products manufactured in Mexico for
export to the U.S. and Canadian markets, (iv) references to the Company include
its direct and indirect subsidiaries and predecessors, as appropriate, and (v)
with respect to market or competitive information, references to the Company as
"a leader" or "one of the leading" manufacturers in a particular product
category mean that the Company is one of the principal manufacturers in that
product category and references to the Company as "the leader," "the largest" or
"the leading" manufacturer in a particular product category mean that the
Company has the largest market share based on dollar sales volume in that
product category.
THE COMPANY
The Company is a leader in each of its three business segments: Automotive
Products, the largest supplier of interior trim products to the North American
automotive industry; Interior Furnishings, the largest manufacturer of
residential upholstery fabrics in the U.S.; and Wallcoverings, the largest
producer of residential wallcoverings in the U.S. Within these three segments,
the Company estimates it holds a number one or number two market share position
in each of its eight major product lines, which together comprised approximately
81% of its 1993 net sales of $1,305.5 million. See "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the risks inherent in the Company's businesses
and the Company's financial performance over the last three years, including its
history of net losses, competitive factors affecting the Company, the Company's
substantial leverage, contingent liabilities and other risks inherent in an
investment in the Common Stock.
AUTOMOTIVE PRODUCTS
Automotive Products, with 1993 net sales of $677.9 million, is a leading
designer and manufacturer of products for automobile OEMs. The segment's primary
products include four major interior trim products--automotive seat fabric,
molded floor carpet, accessory floor mats and luggage compartment trim--and
convertible top stacks. Management believes that Automotive Products offers a
wider variety of interior trim products and has a broader, more uniform
penetration of the OEMs than any of its competitors. Management estimates that
Automotive Products holds a number one or number two market share position in
each of its five major product categories. At least one of the Company's five
major automotive products is used on approximately 87% of all North
American-produced vehicle lines. Management estimates that Automotive Products'
1993 market share in its five major products was approximately 26% at Ford, 40%
at GM, 51% at Chrysler and 36% among the Transplants. Management believes that
Automotive Products' size and broad customer penetration constitute a
competitive advantage.
INTERIOR FURNISHINGS
Interior Furnishings, which is comprised of the Decorative Fabrics and
Floorcoverings groups, had 1993 net sales of $407.2 million. Decorative Fabrics,
with 1993 net sales of $313.6 million, is a leading designer and manufacturer of
residential and commercial upholstery fabric in the U.S.
4
<PAGE>
Decorative Fabrics supplies middle to high-end woven fabrics to furniture
manufacturers and fabric distributors. Management estimates that Decorative
Fabrics' share of the U.S. upholstery fabric market is approximately 15%.
Decorative Fabrics' primary division, Mastercraft, is the number one supplier of
flat-woven upholstery fabrics and is also the industry leader in the
fast-growing Jacquard segment of that market. Mastercraft had 1993 net sales of
$268.9 million. Mastercraft's premier design and manufacturing expertise enables
it to offer a significantly greater variety of patterns than any of its
competitors.
Floorcoverings, with 1993 net sales of $93.6 million, is a leading
manufacturer of high-end specified contract carpeting products for institutional
and commercial customers with high-traffic applications. Differentiated from
competitors by its patented Powerbond RS(R) adhesive system and by its products'
durability characteristics, Floorcoverings occupies a leading position within
this niche sector.
WALLCOVERINGS
Wallcoverings, which operates under the name "Imperial", is a leading
manufacturer and distributor of wallcoverings for the residential and commercial
sectors and had 1993 net sales of $220.4 million. Management estimates that in
1993 Imperial had a 22% market share in the larger residential wallcoverings
sector and held the number one market share position in each of this sector's
two primary distribution channels--chains and dealers.
BUSINESS STRATEGY
FOCUS ON HIGH MARKET SHARE PRODUCTS. Management focuses on developing
products that have high market share potential. Management estimates that each
of the Company's eight major product lines holds a number one or number two
market share position. Together these product lines comprised approximately 81%
of the Company's 1993 net sales. These market positions were achieved primarily
through internal growth and reflect a long-term, Company-wide commitment to
excellence in styling, engineering, product development, value-added
manufacturing and customer service.
<TABLE>
<S> <C> <C>
1993
NET SALES
(IN 1993 MARKET
PRODUCT LINE MILLIONS) POSITION
- ------------------------------------------------------------------------------ ------------ -------------
Automotive Products
Automotive seat fabric................................................. $ 218.4 #1
Molded floor carpet.................................................... 180.5 2
Accessory floor mats................................................... 73.4 1
Luggage compartment trim............................................... 37.4 2*
Convertible top stacks................................................. 28.1 1
Interior Furnishings
Flat-woven furniture fabrics........................................... 268.9 1
Six-foot commercial carpet............................................. 60.3 1
Wallcoverings (residential).............................................. 196.0 1
------------
Subtotal................................................................. $ 1,063.0
Percent of net sales................................................... 81%
Net sales................................................................ $ 1,305.5
</TABLE>
-------------------------------
* Management believes that the Company and a competitor are tied
for the number two market share position.
MAINTAIN BROAD PRODUCT OFFERINGS TO SUPPORT CUSTOMER BASE. The Company
consistently strives to offer a wide variety of products and to become the
primary supplier to each of its customers.
5
<PAGE>
MAINTAIN LOW-COST POSITION. Management's strategy is to maintain the
Company's low-cost position and flexible manufacturing capabilities in order to
protect operating margins from competitive pricing pressures and economic
downturns, while maximizing the benefits of operating leverage during cyclical
upturns.
MAXIMIZE BENEFITS FROM HIGH OPERATING LEVERAGE. Management believes that
substantial available production capacity and high operating leverage have
enabled the Company to benefit from the recent cyclical upturn in its served
markets. The Company has substantial manufacturing capacity to support further
growth.
OFFER VALUE-ADDED PRODUCTS. A key element of the Company's strategy is to
increase market share and unit selling prices by developing increasingly higher
value-added products through innovations in materials construction, product
design and styling.
MAINTAIN PRODUCT DESIGN AND STYLING LEADERSHIP. Design and styling are key
differentiating factors in consumer purchasing decisions. Management believes
that the Company's product design and styling capabilities are currently an
important competitive advantage and intends to devote resources to maintain the
Company's position in these areas.
CONTINUE TO DELEVERAGE. The Recapitalization is designed to increase
operating and financial flexibility by reducing the Company's indebtedness and
significantly lowering its cost of borrowing. Management expects this financial
deleveraging to be enhanced through the application of operating cash flow
augmented by the use of the Company's net operating loss carryforwards and other
favorable tax attributes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and "--Tax
Matters".
HISTORY OF THE COMPANY
The Company was formed in 1988 by Blackstone Capital Partners L.P. and
Wasserstein Perella Partners, L.P. to acquire Wickes Companies, Inc. for
approximately $2,607 million, including the assumption of indebtedness (the
"1988 Acquisition"). Since the 1988 Acquisition, the Company has divested 27
businesses for approximately $1,643 million. By the end of 1993, the Company had
streamlined its operations into its three existing business segments in which it
enjoys a competitive advantage.
The Company's principal executive offices are located at 8320 University
Executive Park, Suite 102, Charlotte, North Carolina 28262. Its telephone number
at that location is (704) 548-2350.
6
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company:
U.S. Offering.................. 16,000,000 shares
International Offering......... 4,000,000 shares
Total........................ 20,000,000 shares
Common Stock offered by the Selling
Stockholders:
U.S. Offering.................. 4,000,000 shares
International Offering......... 1,000,000 shares
Total........................ 5,000,000 shares
Common Stock to be outstanding after
the Offerings..................... 66,710,900 shares(1)
Use of proceeds..................... The net proceeds to the Company from the Offerings (defined below),
together with borrowings under the New Credit Facilities (defined below)
and available cash of the Company, will be used to effect a defeasance and
redemption, or repayment, of an aggregate of $789.4 million principal
amount of debt and an aggregate of $208.1 million liquidation amount of
preferred stock. The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholders. See "Use of Proceeds and
Consolidation".
Proposed New York Stock Exchange
("NYSE") Symbol................... CKC
</TABLE>
- ---------------
(1) Does not include 6,100,000 shares of Common Stock reserved for issuance
under the Company's stock option plans, including approximately 3,200,000
shares subject to outstanding options. See "Management--The Company's Option
Plans".
The offering of shares of Common Stock initially being offered in the
United States (the "U.S. Offering") and the offering of shares of Common Stock
initially being offered outside the United States (the "International Offering")
are referred to herein collectively as the "Offerings". The closing of the
International Offering is conditioned upon the closing of the U.S. Offering, and
vice versa. See "Underwriting". The Offerings are part of the Recapitalization
(described below).
7
<PAGE>
THE RECAPITALIZATION
The recapitalization (the "Recapitalization") is designed to reduce the
Company's indebtedness, significantly lower interest expense, improve operating
and financial flexibility and provide liquidity for operations and other general
corporate purposes. The Recapitalization involves two principal sources of
capital: (i) the sale by the Company of 20,000,000 shares of Common Stock
pursuant to the Offerings and (ii) the establishment of certain new credit
facilities (the "New Credit Facilities"). The proceeds from the New Credit
Facilities, together with the net proceeds to the Company from the Offerings and
the available cash of the Company, will be used to effect a defeasance and
redemption, or repayment, of virtually all indebtedness and all preferred stock
of the Company and its subsidiaries. See "New Credit Facilities".
The following table sets forth a summary of the estimated sources and
anticipated uses of funds in the Recapitalization (assuming the Recapitalization
occurs on June 22, 1994):
SOURCES OF FUNDS
<TABLE> <CAPTION>
(IN
MILLIONS)
------------
<S> <C>
Sale of Common Stock in the Offerings(1)....................................... $ 292.9
Proceeds from the New Credit Facilities(2)..................................... 675.1
Available cash................................................................. 87.9
------------
Total..................................................................... $ 1,055.9
------------
------------
</TABLE>
USES OF FUNDS
<TABLE>
<S> <C>
Repayment and redemption of long-term debt (including current maturities)(3)... $ 789.4
Redemption of preferred stock.................................................. 208.1
Accrued interest and dividends as of June 22, 1994............................. 16.3
Redemption premiums............................................................ 13.4
Defeasance costs............................................................... 7.4
Fees and expenses(4)........................................................... 21.3
------------
Total..................................................................... $ 1,055.9
------------
------------
</TABLE>
- ---------------
(1) The net proceeds to the Company from the sale of Common Stock in the
Offerings are computed based on an assumed initial public offering price of
$15.50 per share (the midpoint of the estimated range of the initial public
offering price) less underwriting discounts.
(2) Includes $150 million of proceeds from the sale of an undivided interest in
a pool of receivables under the Receivables Purchase Agreement. See "New
Credit Facilities".
(3) Does not include $193.2 million of PIK Notes being exchanged for Common
Stock in connection with the consummation of the Offerings.
(4) Includes bank commitment, financial advisory, legal and accounting fees and
other expenses in connection with the Recapitalization, excluding
underwriting discounts.
Following the Offerings, the Partners and their affiliates will
beneficially own or have the right to vote, in the aggregate, 59.3% (53.7%
assuming the Underwriters' over-allotment options are exercised in full) of the
outstanding Common Stock. See "Principal and Selling Stockholders and Certain
Relationships".
8
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS)
The following table presents summary historical financial data derived from
the Company's Consolidated Financial Statements and operating data for the
periods indicated. All information contained in the following table should be
read in conjunction with "Selected Financial Data", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of the Company and the notes thereto included elsewhere in
this Prospectus.
<TABLE> <CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED
----------------------- ---------------------------------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 26, JANUARY 27,
1994 MAY 1, 1993 1994 1993(1) 1992 1991 1990
---------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 390,446 $ 339,043 $ 1,305,517 $ 1,277,500 $ 1,184,316 $ 1,232,403 $ 1,276,442
Gross profit............ $ 100,954 $ 78,948 $ 309,727 $ 299,027 $ 257,499 $ 270,782 $ 262,121
Selling, general and
administrative
expenses................ 55,356 51,872 196,585 218,441 202,690 192,002 209,619
Management equity plan
expense................. 36 -- 26,736 -- -- -- --
Restructuring costs..... -- -- -- 10,000 -- 17,275 --
Goodwill amortization
and write-off......... -- 924 132,630 3,702 3,702 3,798 3,798
---------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income
(loss).................. $ 45,562 $ 26,152 $ (46,224) $ 66,884 $ 51,107 $ 57,707 $ 48,704
Interest expense,
net(2).................. 29,061 27,225 111,291 110,867 107,974 106,099 136,292
Income (loss) from
continuing operations
before income taxes..... 15,372 (2,202) (162,048) (48,497) (61,382) (52,907) (92,102)
Income (loss) from
continuing operations
after income taxes...... 12,754 (5,473) (173,325) (45,341) (73,336) (57,386) (92,109)
Income (loss) before
extraordinary items..... 12,754 (9,069) (277,664) (263,658) (89,701) (86,983) (142,913)
Net Income (loss)....... 12,754 (9,069) (277,664) (263,658) (133,810) (57,908) (15,435)
BALANCE SHEET DATA:
Total assets............ $ 934,048 $ 1,143,689 $ 918,825 $ 1,141,434 $ 1,300,304 $ 1,412,790 $ 1,777,339
Long-term debt,
including current
portion................. 922,243 1,003,975 923,554 982,205 941,838 930,065 1,123,325
Redeemable preferred
stock................... 129,454 104,222 122,368 98,602 79,754 69,240 73,711
Stockholder's equity
(deficit)............... (698,148) (434,859) (702,220) (421,460) (130,921) 18,821 81,075
OTHER DATA (FROM
CONTINUING
OPERATIONS):
EBITDA(3)............... $ 56,689 $ 38,801 $ 155,374 $ 118,748 $ 98,708 $ 106,067 $ 97,072
Capital expenditures.... 15,286 7,267 44,923 37,914 38,928 42,885 44,872
Depreciation............ 11,127 11,725 42,232 45,463 43,899 42,532 44,570
</TABLE>
- ---------------
(1) 1992 was a 53-week year.
(2) Excludes amounts related to discontinued operations of $5,749 in the first
quarter of 1993, $18,871 in 1993, $23,010 in 1992, $25,062 in 1991, $33,040
in 1990 and $112,153 in 1989.
(3) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
9
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents unaudited summary pro forma financial and
other data that are derived from, and should be read in conjunction with, the
pro forma consolidated financial data included elsewhere in this Prospectus. The
following unaudited summary pro forma financial data illustrate the estimated
effects of the Recapitalization. The unaudited summary pro forma operating data
for the thirteen weeks ended April 30, 1994 and May 1, 1993 and for the year
ended January 29, 1994 present the results of operations of the Company as if
the Recapitalization had occurred as of the beginning of each period presented.
The unaudited summary pro forma financial and other data do not purport to
represent what the Company's results of operations would actually have been if
the Recapitalization had occurred as of the beginning of each period presented,
nor do they purport to project the Company's results of operations for any
future period. See "Unaudited Pro Forma Consolidated Financial Data."
<TABLE> <CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED
----------------------------- JANUARY 29,
APRIL 30, 1994 MAY 1, 1993 1994
--------------- ------------ ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................................... $ 390,446 $ 339,043 $ 1,305,517
Gross profit....................................................... 100,954 78,948 309,727
Selling, general and administrative expenses....................... 54,642 51,122 193,585
Non-recurring charges(1)........................................... -- 924 159,366
--------------- ------------ ------------
Operating income (loss)............................................ 46,312 26,902 (43,224)
Interest expense, net(2)........................................... 7,150 8,075 26,519
Loss on sale of receivables(3)..................................... 3,088 2,781 8,008
--------------- ------------ ------------
Income (loss) from continuing operations before income taxes....... 36,074 16,046 (77,751)
Income taxes(4).................................................... 2,318 2,971 10,077
--------------- ------------ ------------
Income (loss) from continuing operations........................... $ 33,756 $ 13,075 $ (87,828)
--------------- ------------ ------------
--------------- ------------ ------------
OTHER DATA:
Total debt(5)(6)................................................... $ 520,558 (9) (9)
EBITDA(7).......................................................... 57,439 39,551 158,374
Income (loss) from continuing operations per share of common
stock.............................................................. .49 .19 (1.31)
Average common shares outstanding(8)............................... 68,860 67,132 67,132
</TABLE>
- ---------------
(1) Includes, for 1993, the write-off and amortization of goodwill of $132,630
and compensation expense of $26,736 related to the 1993 Plan and, for the
thirteen weeks ended May 1, 1993, goodwill amortization of $924.
(2) Reflects adjustments for the elimination of interest expense related to the
defeasance and redemption, repayment or exchange for Common Stock of certain
of the outstanding indebtedness of the Company in connection with the
Offerings and the Recapitalization. See Note (2) to the Unaudited Pro Forma
Consolidated Statements of Operations.
(3) The loss on sale of receivables arises from the sale, on a revolving basis,
of an undivided interest in trade receivables. See Note (3) to the Unaudited
Pro Forma Consolidated Statements of Operations.
(4) Reflects a reduction of state and foreign income taxes due to an
organizational restructuring and to increased borrowings in Canada in
connection with the Recapitalization.
(5) Includes $498,414 of borrowings under the New Credit Facilities and $22,144
of miscellaneous debt.
(6) Excludes $150,000 of off-balance sheet financing provided by the Company's
sale of a participating interest in trade receivables under the terms of the
Receivables Purchase Agreement (see "New Credit Facilities").
(7) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
(8) Includes (i) shares currently outstanding, (ii) shares to be issued in the
Offerings, (iii) shares to be issued in exchange for the PIK Notes and (iv)
the assumed exercise of outstanding stock options, using the treasury
method. Unrecognized compensation on employee stock options is considered as
proceeds in determining the assumed repurchase of shares into treasury.
(9) Pro forma balance sheet data is only required as of April 30, 1994.
10
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the Common Stock offered hereby.
CYCLICALITY OF INDUSTRIES
The Company's business segments are highly cyclical. Downturns in North
American automotive production, consumer spending, commercial and residential
construction and renovation could have a material adverse effect on the Company.
DEPENDENCE ON SIGNIFICANT AUTOMOTIVE CUSTOMERS AND CAR MODELS
The Company's sales are dependent on certain significant customers. Sales
to General Motors Corporation ("General Motors"), Chrysler Corporation
("Chrysler") and Ford Motor Company ("Ford") accounted for approximately 16%,
10% and 8%, respectively, of the Company's 1993 net sales. In addition, certain
of the Company's customers are unionized and have in the past experienced labor
disruptions. The loss of one or more significant customers or a prolonged
disruption in their production could have a material adverse effect on the
Company.
The Company principally competes for new business at the design stage of
new models and upon the redesign of existing models. There can be no assurance
that the Company will continue to be able to obtain such new business or to
improve or maintain its gross margins on such new business. In addition, the
Company may not be able to pass on raw material price increases to its customers
due to pricing pressure from its customers. A decrease in demand for the models
that generate the most sales for the Company, the failure of the Company to
obtain purchase orders for new or redesigned models and pricing pressure from
the major automotive companies could have a material adverse effect on the
Company. See "Business--Automotive Products".
VULNERABILITY TO CHANGES IN CONSUMER TASTES
Consumer tastes in automotive seat fabrics, interior furnishings and
wallcoverings change over time. A shift in consumer preferences away from the
products that the Company produces or has the capability to produce could have a
material adverse effect on the Company.
COMPETITION
The industries in which the Company operates are highly competitive. There
can be no assurance that the Company's products will compete successfully with
those of its competitors. Several competitors are larger and have greater
financial and other resources available to them. There can be no assurance that
the Company will be able to maintain its operating margins if the competitive
environment changes. See "Business".
SUBSTANTIAL LEVERAGE
The Recapitalization is designed to reduce indebtedness, significantly
lower interest expense, improve the Company's operating and financial
flexibility and provide liquidity for operations and other general corporate
purposes. However, the substantial indebtedness of the Company and its
subsidiaries following the Recapitalization could have important consequences to
holders of Common Stock, including the following: (i) the ability of the Company
and its subsidiaries to obtain additional financing in the future to refinance
maturing debt or for working capital, capital expenditures, acquisitions,
general corporate or other purposes could be impaired; (ii) a substantial
portion of the cash flow from operations of the Company and its subsidiaries
must be dedicated to the payment of the principal of and interest on existing
indebtedness, which will have the effect of decreasing the amount available for
working capital, capital expenditures, acquisitions, general
11
<PAGE>
corporate or other purposes; (iii) the Company and its subsidiaries could be
more highly leveraged than certain of their competitors, which may place the
Company and its subsidiaries at a competitive disadvantage; (iv) a significant
portion of the borrowings of the Company and its subsidiaries are expected to be
at variable rates of interest, and consequently the Company and its subsidiaries
will be vulnerable to increases in interest rates; and (v) the high degree of
leverage of the Company and its subsidiaries may make the Company more
vulnerable to economic downturns. After giving effect to the Recapitalization,
the Company will have an aggregate of approximately $547.7 million of
indebtedness outstanding (excluding $150.0 million in off-balance sheet
financing under the Receivables Purchase Agreement) and unused borrowing
availability of approximately $95.0 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "New Credit Facilities".
LIMITATIONS IMPOSED BY THE NEW CREDIT FACILITIES
The New Credit Facilities are expected to contain a number of restrictive
covenants which, among other things, will limit the ability of the Company and
its subsidiaries to incur other indebtedness, to incur liens and to make certain
restricted payments, and which will require the Company to maintain certain
specified financial ratios. A failure by the Company to maintain such financial
ratios or to comply with the restrictions contained in the New Credit Facilities
could result in a default thereunder, which in turn could result in such
indebtedness being declared immediately due and payable. See "New Credit
Facilities".
HISTORICAL LOSSES
The Company has experienced net losses since its inception. Even though the
Company will be operating with lower interest charges after the
Recapitalization, there can be no assurance as to whether or when the Company's
operations will become profitable. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
CONTROL BY AFFILIATES AND CERTAIN TRANSACTIONS WITH AFFILIATES
After giving effect to the Offerings, Blackstone Capital Partners L.P.
("Blackstone Partners") and Wasserstein Perella Partners, L.P. ("WP Partners",
and collectively with Blackstone Partners, the "Partners") and their respective
affiliates will beneficially own or have the right to vote 59.3% of the
outstanding Common Stock of the Company (53.7% assuming the over-allotment
options are exercised in full). Although the Partners intend to elect two
directors who are neither officers nor employees of the Partners or their
affiliates, the Company's Board of Directors has been, and is expected to
continue to be, comprised entirely of designees of the Partners. As a result,
the Partners and their affiliates will continue to have the ability to determine
the policies of the Company, the persons constituting its management, the
outcome of corporate actions requiring stockholder approval by majority action
and the future direction of the Company.
The Partners and the Company will enter into an Amended and Restated
Stockholders Agreement (the "Stockholders Agreement") relating to governance and
management of the Company, including an agreement relating to the nomination of
nine directors (including two independent directors) and voting for each other's
nominees. See "Principal and Selling Stockholders and Certain Relationships".
In the past, the Partners and certain of their affiliates (in such
capacity, the "Managers-Advisors") have been paid fees in connection with
management and advisory services performed by the Managers-Advisors for the
Company and its subsidiaries. The Managers-Advisors will continue to be paid
fees in connection with services to be provided in the future. It is anticipated
that each of the Managers-Advisors will receive a $1 million monitoring fee and
the reimbursement of expenses from the Company pursuant to the Stockholders
Agreement and that any transaction
12
<PAGE>
with affiliates not contemplated by the Stockholders Agreement will be passed
upon by the independent directors. See "Principal and Selling Stockholders and
Certain Relationships".
ANTI-TAKEOVER PROVISIONS
The Certificate of Incorporation and the Bylaws of the Company, which will
be effective upon consummation of the Offerings, will contain provisions which
could delay or frustrate the removal of incumbent directors and could make more
difficult a merger, tender offer or proxy contest involving the Company. The
Company will also be subject to provisions of Delaware corporate law restricting
certain business combinations with certain stockholders. See "Description of the
Capital Stock".
COLLECTIVE BARGAINING AGREEMENTS
The Company is a party to collective bargaining agreements with respect to
hourly employees at seven of its 51 U.S. facilities, its five Canadian
facilities and its three Mexican facilities. Of the Company's 12,000 employees,
approximately 2,200 employees, all of whom are employed in Automotive Products
and Wallcoverings, are covered by such agreements. One such agreement covering
approximately 365 Wallcoverings employees has been extended through July 1994
while negotiations are ongoing, and the remainder of such agreements have terms
of two to five years and expire from 1995 to 1997. The Company has not
experienced any significant labor disruptions during the past five years.
Although management believes that its relationship with the employees covered by
collective bargaining agreements is good, there can be no assurance that the
Company will be able to negotiate new agreements on favorable terms. See
"Business--Employees".
ENVIRONMENTAL MATTERS AND OTHER CONTINGENCIES
The Company is subject to increasingly stringent Federal, state and local
laws and regulations concerning the environment. Changes to environmental laws
and regulations may require the Company to make substantial capital expenditures
and to incur substantial expenses with respect to its ongoing and divested
operations and properties. In addition, the Company has received notices that it
is a potentially responsible party ("PRP") in a number of proceedings for
cleanup of hazardous substances at various sites. The Company may be named as a
PRP at other sites in the future. It is difficult to estimate the total cost of
investigation and remediation due to various factors including incomplete
information regarding particular sites and other PRPs, uncertainty regarding the
extent of environmental problems and the Company's share, if any, of liability
for such problems, the selection of alternative compliance approaches, the
complexity of the environmental laws and regulations and changes in cleanup
standards and techniques. When it has been possible to provide reasonable
estimates of the Company's liability with respect to environmental sites,
provisions have been made in accordance with generally accepted accounting
principles. However, there can be no assurance that the Company has identified
or properly assessed all potential environmental liabilities arising from the
activities or properties of the Company, its present and former subsidiaries and
their corporate predecessors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Environmental Matters".
The Company has significant financial and legal obligations with respect to
certain divested and acquired businesses. In connection with the sale and
acquisition of certain businesses, the Company has indemnified the purchasers
and sellers for certain environmental liabilities, lease obligations and other
matters. In addition, the Company is contingently liable with respect to certain
lease and other obligations assumed by certain purchasers and may be required to
honor such obligations if such purchasers are unable or unwilling to do so. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Environmental Matters" and Notes 6 and 19 to Consolidated Financial
Statements.
13
<PAGE>
PENDING TAX MATTERS
In the course of an examination of the Company's Federal income tax
returns, the Internal Revenue Service ("IRS") has challenged the availability of
$176.6 million of the Company's approximately $434.0 million net operating loss
carryforwards ("NOLs") after giving effect to the Recapitalization. The
examination is at a preliminary stage and management believes that the basis for
the IRS' position is unclear. Management disputes the IRS' challenge and
believes that substantially all the NOLs should be available (subject to certain
limitations) to offset its income, if any, in the future. If the IRS were to
maintain its position and all or a major portion of such position were to be
upheld in litigation, the amount of NOLs available to the Company in future
years would be materially reduced. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Tax Matters".
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for shares of the
Common Stock. The Common Stock has been approved for listing on the NYSE.
However, there can be no assurance as to the liquidity of any markets that may
develop for the Common Stock or the price at which holders would be able to sell
their Common Stock. The initial public offering price for the Common Stock was
determined by negotiations among the Company, the Selling Stockholders and the
representatives of the Underwriters. There can be no assurance that the market
price of the Common Stock after the Offerings will equal or exceed the initial
public offering price. In addition, broad market fluctuations and general
economic and political conditions may adversely affect the market price of the
Common Stock, regardless of the Company's actual performance. For a description
of the factors which were considered in determining the initial public offering
price, see "Underwriting".
SHARES ELIGIBLE FOR FUTURE SALE
Following the Offerings, there will be 41,710,900 shares of Common Stock
outstanding eligible for future sale in the public market (excluding
approximately 3,200,000 shares issuable upon exercise of outstanding options).
No prediction can be made as to the effect, if any, that market sales of shares
of Common Stock or the availability of shares of Common Stock for sale will have
on the prevailing market price of Common Stock from time to time. Sales of a
significant number of shares of Common Stock in the public market following the
Offerings could adversely affect the prevailing market price of the Common Stock
and could materially impair the Company's future ability to raise capital
through an offering of equity securities. See "Description of Capital Stock--
Shares Eligible for Future Sale". See "Underwriting" for a description of
agreements by the Company and certain of the existing stockholders of the
Company not to sell shares of Common Stock owned by them for a period of 180
days after the date of this Prospectus without the prior written consent of the
representatives of the Underwriters.
DILUTION
The negative net tangible book value of the Company as of April 30, 1994,
was approximately $422.3 million or $6.33 per share after giving effect to the
Offerings and the Recapitalization (based upon an assumed initial public
offering price of $15.50 per share). Persons purchasing shares of Common Stock
in the Offerings will incur immediate dilution in net tangible book value of
$21.83 per share. See "Dilution".
14
<PAGE>
DIVIDENDS
The Company has not declared or paid cash dividends on Common Stock since
its incorporation in 1988. The Company currently intends to retain future
earnings, if any, to fund the development and growth of its businesses and,
therefore, does not anticipate paying any cash dividends in the near future. The
New Credit Facilities limit the payment of dividends and certain other payments
in respect of equity securities. See "New Credit Facilities". If the Company
does not have sufficient surplus, under Delaware law the Company could be
prohibited from paying any dividends on Common Stock even after the limitations
under the New Credit Facilities no longer apply.
Under applicable Delaware law, dividends on the Common Stock may only be
paid out of the Company's surplus (defined as the excess of the Company's assets
over the sum of its liabilities and the aggregate par value of its stock) or out
of net profits for the fiscal year in which the dividends are declared and/or
the preceding fiscal year. At April 30, 1994, the Company had a negative surplus
based on its historical financial statements and on a pro forma basis, after
giving effect to the Consolidation and the Recapitalization. However, under
Delaware law, a corporation's board of directors may determine the availability
of surplus based on the actual, current value of its assets and liabilities
rather than their historical book values. The Company's Board of Directors has
in the past relied on this non-book, "revaluation" surplus in the payment of
dividends on the Merger Preferred Stock.
DILUTION
The negative net tangible book value of the Company as of April 30, 1994,
was $20.27 per share of Common Stock. Net tangible book value per share is
determined by dividing the number of outstanding shares of Common Stock into the
net tangible book value of the Company (total assets less net intangible assets
less total liabilities and preferred stock). After giving effect to the sale of
the 20,000,000 shares of Common Stock offered by the Company (at an assumed
initial public offering price of $15.50 per share), the Recapitalization and the
conversion of the PIK Notes into shares of Common Stock, the pro forma negative
net tangible book value of the Company as of April 30, 1994 would have been
$6.33 per share. This represents an immediate increase of $13.94 per share to
existing stockholders and an immediate dilution of $21.83 per share to new
investors. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $ 15.50
Negative net tangible book value per share as of April 30, 1994,
before the Offerings and the Recapitalization...................... $ (20.27)
Increase in net tangible book value per share attributable to new
investors(1)......................................................... 13.94
----------
Pro forma net tangible book value per share after the Offerings and
the Recapitalization................................................. (6.33)
----------
Dilution per share to new investors(2)............................... $ 21.83
----------
----------
</TABLE>
- ---------------
(1) Determined after deducting the underwriting discounts, estimated offering
expenses and effects of the non-recurring charges resulting from the
Recapitalization. See "Unaudited Pro Forma Consolidated Financial Data".
(2) Dilution is determined by subtracting the pro forma net tangible book value
per share after completion of the Offerings from the initial public offering
price paid by a new investor for a share of Common Stock.
15
<PAGE>
USE OF PROCEEDS AND CONSOLIDATION
The net proceeds from the Offerings (estimated to be approximately $292.9
million) will be used, together with $675.1 million of proceeds from the total
available funds of $775 million under the New Credit Facilities, as described
under "New Credit Facilities", and available cash of the Company, to effect a
defeasance and redemption, or repayment, of the indebtedness and preferred stock
described below.
The consummation of the Offerings and the borrowings under the New Credit
Facilities are conditioned upon each other and upon the simultaneous prepayment
or defeasance and irrevocable notice of redemption of the indebtedness and
preferred stock listed below at a total cost of approximately $1,034.6 million,
including interest or dividends accrued to June 22, 1994 and applicable
redemption premiums and defeasance costs, and excluding estimated fees and
expenses of $21.3 million.
The following table sets forth a summary of the estimated sources and
anticipated uses of funds in the Recapitalization (assuming the Recapitalization
occurs on June 22, 1994):
<TABLE> <CAPTION>
(IN MILLIONS)
--------------
<S> <C>
SOURCES OF FUNDS
Sale of Common Stock in the Offerings(1)................................... $ 292.9
Proceeds from the New Credit Facilities(2)................................. 675.1
Available cash............................................................. 87.9
--------------
Total................................................................. $ 1,055.9
--------------
--------------
USES OF FUNDS
Repayment of indebtedness outstanding under a subsidiary credit facility... $ 122.6
Defeasance and redemption of:
Merger Preferred Stock.................................................. 162.9
Series A Preferred Stock................................................ 45.1
Intermediate Preferred Stock............................................ 0.1
14% Subordinated PIK Bridge Notes due December 2, 1996 (which were not
exchanged for Common Stock).................................................. 9.7
7 1/2%/10% Debentures due January 31, 2005.............................. 138.7
11 7/8% Debentures due June 1, 2001..................................... 347.4
15% Notes due May 1, 1995............................................... 137.4
11 3/8% Debentures due May 1, 1997...................................... 24.5
Miscellaneous indebtedness.............................................. 9.1
Accrued interest and dividends as of June 22, 1994...................... 16.3
Redemption premiums..................................................... 13.4
Defeasance costs........................................................ 7.4
Fees and expenses(3).................................................... 21.3
--------------
Total................................................................. $ 1,055.9
--------------
--------------
</TABLE>
- ---------------
(1) The net proceeds to the Company from the sale of Common Stock in the
Offerings are computed based on an assumed initial public offering price of
$15.50 per share (the midpoint of the estimated range of the initial public
offering price) less underwriting discounts.
(2) Includes $150 million of proceeds from the sale of an undivided interest in
a pool of receivables under the Receivables Purchase Agreement. See "New
Credit Facilities."
(3) Includes bank commitment, financial advisory, legal and accounting fees and
other expenses incurred in connection with the Recapitalization, but
excludes the underwriting discount.
In connection with the Recapitalization, and prior to the consummation of
the Offerings, Collins & Aikman Holdings II Corporation ("Holdings II"),
currently the sole stockholder of the Company, will be merged into the Company.
Concurrently, Collins & Aikman Group, Inc., the Company's wholly owned
subsidiary ("Group"), will be merged into its wholly owned subsidiary, formerly
called Collins & Aikman Corporation ("C&A Co."). These mergers are referred to
herein as the "Consolidation".
16
<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth the capitalization of the Company and its
subsidiaries (i) at April 30, 1994 and (ii) as adjusted to give effect to the
Recapitalization and the application of the proceeds of the Offerings as if the
Recapitalization had occurred as of April 30, 1994. This table should be read in
conjunction with the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus. See "Use of Proceeds and Consolidation" and
"Unaudited Pro Forma Consolidated Financial Data".
<TABLE> <CAPTION>
APRIL 30, 1994
-------------------------
ACTUAL AS ADJUSTED
---------- -------------
<S> <C> <C>
Short-Term Debt.................................................................................... $ 3,043 $ 3,043
Current Portion of Long-Term Debt(1)............................................................... 163,715 3,480
---------- -------------
Total............................................................................................ $ 166,758 $ 6,523
---------- -------------
---------- -------------
Long-Term Debt (excluding current portion)(1)(2):
New Credit Facilities............................................................................ $ -- $ 498,414
Senior Indebtedness.............................................................................. 235,512 15,621
Senior Subordinated Indebtedness................................................................. 301,801 --
Subordinated Indebtedness........................................................................ 22,483 --
PIK Notes........................................................................................ 198,732 --
---------- -------------
Total Long-Term Obligations.................................................................... 758,528 514,035
---------- -------------
Preferred Stock and Redeemable Preferred Stock of Subsidiary(3).................................... 313 --
Redeemable Preferred Stock(3)...................................................................... 129,454 --
Stockholder's Deficit:
Common Stock (35,035 actual shares issued and outstanding, 66,711 shares issued and outstanding
on a pro forma basis)(4)........................................................................... 350 667
Other Paid-In Capital(4)......................................................................... 160,285 637,318
Accumulated Deficit(5)........................................................................... (843,669) (1,029,583)
Foreign Currency Translation Adjustments......................................................... (7,367) (7,367)
Pension Equity Adjustment........................................................................ (7,747) (7,747)
---------- -------------
Total Stockholder's Deficit.................................................................... (698,148) (406,712)
---------- -------------
Total Capitalization............................................................................... $ 190,147 $ 107,323
---------- -------------
---------- -------------
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) Reflects (i) the redemption or repayment of an aggregate book amount of $713,892 of outstanding indebtedness utilizing
the net proceeds of the Offerings, borrowings of $498,414 under the Credit Agreement Facilities and $150,000 of net
proceeds on the sale of a participating interest in receivables and (ii) the exchange of the PIK Notes for Common Stock
as follows:
</TABLE>
<TABLE>
<S> <C> <C>
Debt Extinguished:
Subsidiary Credit Facility..................................................................... $ 127,581
7 1/2%-10% Senior Debentures (face value $138,694 net of discount of $33,063).................. 105,631
11 7/8% Senior Subordinated Debentures (face value $347,414 net of discount of $45,613)........ 301,801
15% Subordinated Notes (face value $137,359 net of discount of $244)........................... 137,115
11 3/8% Subordinated Debentures (face value $24,500 net of discount of $2,017)................. 22,483
PIK Notes ($9,482 redeemed and $189,250 exchanged for Common Stock)............................ 198,732
Miscellaneous Debt............................................................................. 9,799
----------
Debt Extinguished.......................................................................... 903,142
New Credit Facilities............................................................................ (498,414)
----------
Reduction in Outstanding Indebtedness...................................................... $ 404,728
----------
----------
Allocated to:
Current Portion................................................................................ $ 160,235
Long-term Portion.............................................................................. 244,493
----------
$ 404,728
----------
----------
</TABLE>
<TABLE>
<S> <C>
(2) Excludes $150,000 of off-balance sheet financing provided by the Company's sale of receivables under the terms of the
Receivable Purchase Agreement (see "New Credit Facilities").
(3) Reflects the redemption of the 15 1/2% Junior Cumulative Exchangeable Redeemable Preferred Stock (" Intermediate
Preferred Stock") of Group, $2.50 Series A Convertible Preferred Stock ("Series A Preferred Stock") of Group and the
Merger Preferred Stock with an aggregate book value of $129,767 with funds provided by the Offerings and the
Recapitalization.
(4) The as adjusted amounts reflect the issuance of 20,000 shares of Common Stock in connection with the Offerings and the
exchange of the PIK Notes for shares of Common Stock. The increases reflect (i) $288,100 for shares of Common Stock to be
sold in the Offerings, net of discounts and commissions and associated expenses and (ii) $189,250 on exchange of PIK
Notes for shares of Common Stock.
(5) Reflects charges for (i) write-off of deferred debt expense and debt discounts of $92,812, (ii) premiums paid in
connection with the redemption of existing indebtedness in the amount of $9,625, (iii) premiums paid in connection with
the redemption of the Intermediate Preferred Stock of Group, the Series A Preferred Stock of Group and the Merger
Preferred Stock of the Company in the amount of $82,077 and (iv) loss of $1,400 on the sale of a $150,000 participating
interest in trade receivables.
</TABLE>
17
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS)
The following table sets forth selected consolidated financial information
for the Company at and for the periods indicated. The selected consolidated
financial information for the years ended January 29, 1994, January 30, 1993,
January 25, 1992, January 26, 1991 and January 27, 1990 have been derived from
the Company's consolidated financial statements which have been audited by
Arthur Andersen & Co. The selected consolidated financial information for the
thirteen weeks ended April 30, 1994 and May 1, 1993 have been derived from
unaudited consolidated financial statements, which in the opinion of management,
reflect all adjustments necessary for a fair presentation of such data. The
statement of operations and balance sheet data have been restated to reflect
discontinued operations (see Note 6 to the Consolidated Financial Statements).
As a result of an acquisition in 1991, and the recognition of a cumulative
adjustment in 1991 to adopt the accrual basis of accounting for postretirement
benefits (see Notes 3 and 13 to the Consolidated Financial Statements), the
financial information set forth below is not comparable for the periods
presented and should not be considered indicative of current or future
operations or income. The following selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and notes
thereto appearing elsewhere in this Prospectus.
<TABLE> <CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED
----------------------- --------------------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 26,
1994 MAY 1, 1993 1994 1993(1) 1992 1991
---------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Automotive Products(2)................. $ 222,991 $ 174,695 $ 677,867 $ 643,827 $ 610,325 $ 657,404
Interior Furnishings(2)................ 107,129 102,998 407,201 391,778 336,773 339,528
Wallcoverings(2)....................... 60,326 61,350 220,449 241,895 237,218 235,471
---------- ----------- ----------- ----------- ----------- -----------
Total Net Sales...................... $ 390,446 $ 339,043 $ 1,305,517 $ 1,277,500 $ 1,184,316 $ 1,232,403
---------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- -----------
Gross profit............................. $ 100,954 $ 78,948 $ 309,727 $ 299,027 $ 257,499 $ 270,782
Selling, general and administrative
expenses................................... 55,356 51,872 196,585 218,441 202,690 192,002
Management equity plan expense........... 36 -- 26,736 -- -- --
Restructuring costs...................... -- -- -- 10,000 -- 17,275
Goodwill amortization and write-off...... -- 924 132,630 3,702 3,702 3,798
---------- ----------- ----------- ----------- ----------- -----------
Operating income (loss).................. $ 45,562 $ 26,152 $ (46,224) $ 66,884 $ 51,107 $ 57,707
Interest expense, net(3)................. 29,061 27,225 111,291 110,867 107,974 106,099
Income (loss) from continuing operations
before income taxes........................ 15,372 (2,202) (162,048) (48,497) (61,382) (52,907)
Income (loss) from continuing operations
after income taxes......................... 12,754 (5,473) (173,325) (45,341) (73,336) (57,386)
Income (loss) before extraordinary
items...................................... 12,754 (9,069) (277,664) (263,658) (89,701) (86,983)
Net Income (loss)........................ 12,754 (9,069) (277,664) (263,658) (133,810) (57,908)
BALANCE SHEET DATA:
Total assets............................. $ 934,048 $ 1,143,689 $ 918,825 $ 1,141,434 $ 1,300,304 $ 1,412,790
Long-term debt, including current
portion.................................... 922,243 1,003,975 923,554 982,205 941,838 930,065
Redeemable preferred stock............... 129,454 104,222 122,368 98,602 79,754 69,240
Stockholder's equity (deficit)........... (698,148) (434,859) (702,220) (421,460) (130,921) 18,821
OTHER DATA (FROM CONTINUING OPERATIONS):
EBITDA(4)................................ $ 56,689 $ 38,801 $ 155,374 $ 118,748 $ 98,708 $ 106,067
Capital expenditures..................... 15,286 7,267 44,923 37,914 38,928 42,885
Depreciation............................. 11,127 11,725 42,232 45,463 43,899 42,532
<CAPTION>
JANUARY 27,
1990
-----------
STATEMENT OF OPERATIONS DATA:
Net sales:
Automotive Products(2)................. $ 661,749
Interior Furnishings(2)................ 358,988
Wallcoverings(2)....................... 255,705
-----------
Total Net Sales...................... $ 1,276,442
-----------
-----------
Gross profit............................. $ 262,121
Selling, general and administrative
expenses................................... 209,619
Management equity plan expense........... --
Restructuring costs...................... --
Goodwill amortization and write-off...... 3,798
-----------
Operating income (loss).................. $ 48,704
Interest expense, net(3)................. 136,292
Income (loss) from continuing operations
before income taxes........................ (92,102)
Income (loss) from continuing operations
after income taxes......................... (92,109)
Income (loss) before extraordinary
items...................................... (142,913)
Net Income (loss)........................ (15,435)
BALANCE SHEET DATA:
Total assets............................. $ 1,777,339
Long-term debt, including current
portion.................................... 1,123,325
Redeemable preferred stock............... 73,711
Stockholder's equity (deficit)........... 81,075
OTHER DATA (FROM CONTINUING OPERATIONS):
EBITDA(4)................................ $ 97,072
Capital expenditures..................... 44,872
Depreciation............................. 44,570
<CAPTION>
</TABLE>
- ---------------
(1) 1992 was a 53-week year.
(2) The Company's business segments have been redefined from those presented in
filings with the Commission prior to April 1994. See Note 18 to the
Consolidated Financial Statements.
(3) Excludes amounts related to discontinued operations of $5,749 in the first
quarter of 1993, $18,871 in 1993, $23,010 in 1992, $25,062 in 1991, $33,040
in 1990 and $112,153 in 1989.
(4) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Statements of Operations for
the year ended January 29, 1994 and for the thirteen week periods ended April
30, 1994 and May 1, 1993, and the Unaudited Pro Forma Consolidated Balance Sheet
as of April 30, 1994 (collectively, the "Pro Forma Statements") were prepared to
illustrate the estimated effects of the Recapitalization. The Unaudited Pro
Forma Consolidated Statements of Operations present the results of operations of
the Company as if the Recapitalization had occurred as of the beginning of each
period presented. The Unaudited Pro Forma Consolidated Balance Sheet as of April
30, 1994 reflects the impact of the Recapitalization as if it had occurred on
that date. The Pro Forma Statements are presented for informational purposes
only and are based on currently available information and upon certain
assumptions that management believes are reasonable under the circumstances. The
Pro Forma Statements and accompanying footnotes should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus. The Pro Forma Statements do not purport
to represent what the Company's financial position or results of operations
would actually have been if the Recapitalization had occurred on April 30, 1994
or as of the beginning of each period presented, or to project the Company's
financial position or results of operations at any future date or for any future
period.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 29, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE> <CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
-------------- -------------------- --------------
<S> <C> <C> <C>
Net sales........................................................ $ 1,305,517 $ -- $ 1,305,517
-------------- --------------
Cost of goods sold............................................... 995,790 -- 995,790
Selling, general and administrative expenses..................... 196,585 (3,000)(1) 193,585
Goodwill amortization and write-off.............................. 132,630 -- 132,630
Management equity plan expense................................... 26,736 -- 26,736
-------------- -------------------- --------------
Total operating expenses....................................... 1,351,741 (3,000) 1,348,741
Operating income (loss).......................................... (46,224) 3,000 (43,224)
Interest expense, net............................................ 111,291 (84,772)(2) 26,519
Loss on sale of receivables...................................... -- 8,008(3) 8,008
Dividends on preferred stock of subsidiary....................... 4,533 (4,533)(4) --
-------------- -------------------- --------------
Income (loss) from continuing operations before income taxes..... (162,048) 84,297 (77,751)
Income taxes..................................................... 11,277 (1,200)(5) 10,077
-------------- -------------------- --------------
Loss from continuing operations.................................. (173,325) 85,497 (87,828)
Preferred stock dividends and accretion.......................... 23,723 (23,723)(4) --
-------------- -------------------- --------------
Income (loss) available for common stock......................... $ (197,048) $ 109,220 $ (87,828)
-------------- -------------------- --------------
-------------- -------------------- --------------
Average common shares outstanding................................ 35,457(6) 67,132(6)
Loss from continuing operations per share of common stock........ $ (5.56) $ (1.31)
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for the period:
<TABLE>
<S> <C>
Depreciation........................................................................... $ 42,232
Amortization of deferred debt expense.................................................. 1,917
Fees and discount on initial sale of receivables....................................... 2,038
</TABLE>
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED APRIL 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE> <CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
------------- -------------------- -------------
<S> <C> <C> <C>
Net sales.............................................. $ 390,446 $ -- $ 390,446
------------- -------------
Cost of goods sold..................................... 289,492 -- 289,492
Selling, general and administrative expenses........... 55,356 (750)(1) 54,606
Management equity plan expense......................... 36 -- 36
------------- -------------------- -------------
Total operating expenses............................. 344,884 (750) 344,134
Operating income....................................... 45,562 750 46,312
Interest expense, net.................................. 29,061 (21,911)(2) 7,150
Loss on sale of receivables............................ -- 3,088(3) 3,088
Dividends on preferred stock of subsidiary............. 1,129 (1,129)(4) --
------------- -------------------- -------------
Income from continuing operations before income
taxes.................................................. 15,372 20,702 36,074
Income taxes........................................... 2,618 (300)(5) 2,318
------------- -------------------- -------------
Income from continuing operations...................... 12,754 21,002 33,756
Preferred stock dividends and accretion................ 7,086 (7,086)(4) --
------------- -------------------- -------------
Income available for common stock...................... $ 5,668 $ 28,088 $ 33,756
------------- -------------------- -------------
------------- -------------------- -------------
Average common shares outstanding...................... 37,184(6) 68,860(6)
Income from continuing operations per share of common
stock.................................................. $ .15 $ .49
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for the period:
<TABLE>
<S> <C>
Depreciation................................................................ $ 11,127
Amortization of deferred debt expense....................................... 530
Fees and discount on initial sale of receivables............................ 1,400
</TABLE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MAY 1, 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE> <CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
------------- -------------------- -------------
<S> <C> <C> <C>
Net sales.............................................. $ 339,043 $ -- $ 339,043
------------- -------------
Cost of goods sold..................................... 260,095 -- 260,095
Selling, general and administrative expenses........... 51,872 (750)(1) 51,122
Goodwill amortization.................................. 924 -- 924
------------- -------------------- -------------
Total operating expenses............................. 312,891 (750) 312,141
Operating income....................................... 26,152 750 26,902
Interest expense, net.................................. 27,225 (19,150)(2) 8,075
Loss on sale of receivables............................ -- 2,781(3) 2,781
Dividends on preferred stock of subsidiary............. 1,129 (1,129)(4) --
------------- -------------------- -------------
Income (loss) from continuing operations before income
taxes.................................................. (2,202) 18,248 16,046
Income taxes........................................... 3,271 (300)(5) 2,971
------------- -------------------- -------------
Income (loss) from continuing operations............... (5,473) 18,548 13,075
Preferred stock dividends and accretion................ 5,620 (5,620)(4) --
------------- -------------------- -------------
Income (loss) available for common stock............... $ (11,093) $ 24,168 $ 13,075
------------- -------------------- -------------
------------- -------------------- -------------
Average common shares outstanding...................... 35,457(6) 67,132(6)
Income (loss) from continuing operations per share of
common stock........................................... $ (.31) $ .19
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for the period:
<TABLE>
<S> <C>
Depreciation................................................................ $ 11,725
Amortization of deferred debt expense....................................... 530
Fees and discount on initial sale of receivables............................ 1,298
</TABLE>
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK PERIODS ENDED
APRIL 30, 1994 AND MAY 1, 1993, AND THE YEAR ENDED JANUARY 29, 1994
(IN THOUSANDS)
The following adjustments reflect the effects of the Recapitalization:
<TABLE>
<S> <C>
(1) Management and financial advisory fees payable to the Managers-Advisors will be reduced by $3,000 per
annum, or $750 per quarter, effective as of the first quarter commencing after the consummation of the
Offerings in accordance with the Stockholders Agreement.
(2) Assumes the following related to interest expense:
</TABLE>
<TABLE>
<S> <C>
(i) The pro forma adjustments to interest expense consist of the following:
</TABLE>
<TABLE> <CAPTION>
THIRTEEN WEEKS ENDED
------------------------------ YEAR ENDED
APRIL 30, 1994 MAY 1, 1993 JANUARY 29, 1994
--------------- ------------- ------------------
<C> <S> <C> <C> <C>
(1) Elimination of interest and
deferred debt expense related to
retirement
of debt and conversion
of PIK Notes..................... $ (28,772) $ (26,931) $ (110,112)
(2) Interest on borrowings under
Credit Agreement Facilities (net
of interest income of $399, $177
and $1,236, respectively)........ 6,366 7,286 23,563
(3) Amortization of deferred debt
expense related to Credit
Agreement Facilities............. 495 495 1,777
--------------- ------------- ------------------
$ (21,911) $ (19,150) $ (84,772)
--------------- ------------- ------------------
--------------- ------------- ------------------
</TABLE>
<TABLE>
<S> <C>
(ii) Base interest rates (average LIBOR in effect during the periods) and weighted average credit
spreads shown below have been used in calculating the pro forma interest on borrowings under the
Credit Agreement Facilities.
</TABLE>
<TABLE> <CAPTION>
THIRTEEN WEEKS ENDED
------------------------------ YEAR ENDED
APRIL 30, 1994 MAY 1, 1993 JANUARY 29, 1994
--------------- ------------- ------------------
<S> <C> <C> <C>
Base interest rate..................... 3.87% 3.27% 3.35%
Average credit spread.................. 1.75% 1.75% 1.75%
A 0.5% change in the interest rate on the Credit Agreement Facilities would result in
changes to pro forma interest expense of:
Year ended January 29, 1994...................................................$2,706
Thirteen weeks ended April 30, 1994..............................................602
Thirteen weeks ended May 1, 1993.................................................716
As of May 27, 1994, the 90-day LIBOR rate was 4.63%. If this rate had been in effect during
the periods presented, interest expense would have increased by:
Year ended January 29, 1994...................................................$7,946
Thirteen weeks ended April 30, 1994............................................1,434
Thirteen weeks ended May 1, 1993...............................................2,002
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
(3) The loss on sale of receivables arises from the sale, on a revolving basis, of an undivided
interest in the Company's trade receivables. This loss also includes financing costs computed using
a base interest rate (average LIBOR in effect during the periods) and weighted average credit
spread, as follows:
</TABLE>
<TABLE> <CAPTION>
<S> <C> <C> <C> <C> <C>
THIRTEEN WEEKS ENDED
------------------------------ YEAR ENDED
APRIL 30, 1994 MAY 1, 1993 JANUARY 29, 1994
--------------- ------------- ------------------
Base interest rate............... 3.87% 3.27% 3.35%
Average credit spread............ .63% .63% .63%
A 0.5% change in the interest rate on the Receivables Facility would result in changes to pro
forma loss on sale of receivables of:
Year ended January 29, 1994......................................................$858
Thirteen weeks ended April 30, 1994...............................................296
Thirteen weeks ended May 1, 1993..................................................296
As of May 27, 1994 the base LIBOR rate was 4.63%. If this had been in effect, the loss on the
sale of receivables would have increased by:
Year ended January 29, 1994....................................................$2,370
Thirteen weeks ended April 30, 1994...............................................510
Thirteen weeks ended May 1, 1993..................................................817
</TABLE>
<TABLE>
<S> <C>
(4) Represents the elimination of dividends related to Series A Preferred Stock and the Intermediate
Preferred Stock of Group and amortization of the discount related to the Intermediate Preferred
Stock. All preferred stock will be redeemed as part of the Recapitalization.
</TABLE>
<TABLE>
<S> <C>
(5) Represents a reduction of state and foreign income taxes due to an organizational restructuring and
to increased borrowings in Canada in connection with the Recapitalization.
</TABLE>
<TABLE>
<S> <C>
(6) Includes (i) shares currently outstanding, (ii) shares to be issued in the Offerings, (iii) shares
to be issued in exchange for the PIK Notes and (iv) the assumed exercise of outstanding stock
options, using the treasury method. Unrecognized compensation on employee stock options is
considered as proceeds in the assumed repurchase of shares into treasury.
</TABLE>
Note: The Unaudited Pro Forma Consolidated Statements of Operations do not
include approximately $185,914 of (i) non-recurring charges consisting of,
(x) premiums paid in connection with redemption of existing debt
securities and (y) the write-off of unamortized deferred financing charges
related to the repayment of a subsidiary credit facility and certain
miscellaneous debt and (ii) a reduction of retained earnings and income
available for common stock representing the difference between the
respective redemption prices of the Series A Preferred Stock of Group,
Intermediate Preferred Stock of Group and Merger Preferred Stock in the
aggregate, and their aggregate carrying value.
22
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1994
(IN THOUSANDS)
<TABLE> <CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
------------ -------------------- --------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 139,282 $ (129,282)(1) $ 10,000
Accounts and notes receivable, net................... 212,708 (150,952)(2) 61,756
Inventories.......................................... 189,709 -- 189,709
Other................................................ 44,832 -- 44,832
------------ -------------------- --------------
Total current assets............................ 586,531 (280,234) 306,297
Property, plant and equipment, net..................... 294,684 -- 294,684
Other assets........................................... 52,833 3,424(3) 56,257
------------ -------------------- --------------
$ 934,048 $ (276,810) $ 657,238
------------ -------------------- --------------
------------ -------------------- --------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Notes payable........................................ $ 3,043 $ -- $ 3,043
Current maturities of long-term debt................. 163,715 (160,235)(4) 3,480
Accounts payable..................................... 78,188 -- 78,188
Accrued expenses..................................... 159,778 (33,751)(5) 126,027
Other................................................ 4,097 -- 4,097
------------ -------------------- --------------
Total current liabilities....................... 408,821 (193,986) 214,835
Long-term debt......................................... 758,528 (244,493)(4) 514,035
Deferred income taxes.................................. 640 -- 640
Other, including postretirement benefit obligation..... 334,440 -- 334,440
Redeemable preferred stock of subsidiary (aggregate
preference in liquidation $129)........................ 132 (132)(6) --
Preferred stock of subsidiary (aggregate preference in
liquidation $45,145)................................... 181 (181)(6) --
Redeemable preferred stock (aggregate preference in
liquidation $162,861).................................. 129,454 (129,454)(6) --
Common stock (150,000 shares authorized, 35,035 shares
issued and outstanding, 66,711 shares issued and
outstanding
on a pro forma basis)................................ 350 317(7) 667
Other paid-in capital.................................. 160,285 477,033(7) 637,318
Accumulated deficit.................................... (843,669) (185,914)(8) (1,029,583)
Foreign currency translation adjustments............... (7,367) -- (7,367)
Pension equity adjustment.............................. (7,747) -- (7,747)
------------ -------------------- --------------
Total common stockholder's deficit.............. (698,148) 291,436 (406,712)
------------ -------------------- --------------
$ 934,048 $ (276,810) $ 657,238
------------ -------------------- --------------
------------ -------------------- --------------
</TABLE>
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1994
(IN THOUSANDS)
The following adjustments reflect the effects of the Recapitalization:
<TABLE>
<S> <C>
(1) Reflects the amount of existing cash to be used in the Recapitalization.
(2) Reflects the sale of a $150,000 participating interest in accounts receivable in connection with the New
Credit Facilities.
(3) Reflects (i) the impact of recording additional deferred debt expense of $15,300 associated with the New
Credit Facilities and (ii) the write-off of $11,876 deferred debt expenses related to the indebtedness
retired.
(4) Reflects (i) the retirement or repayment of an aggregate book amount of $713,892 of outstanding
indebtedness utilizing a portion of the net proceeds of the Offerings and borrowings of $498,414 under
the Credit Agreement Facilities and $150,000 of net proceeds on the sale of a participating interest in
receivables and (ii) the exchange of the PIK Notes for Common Stock as follows:
</TABLE>
<TABLE>
<S> <C>
Debt Extinguished:
Subsidiary credit facility................................................... $ 127,581
7 1/2%-10% Debentures (face value $138,694 net of discount of $33,063)....... 105,631
11 7/8% Debentures (face value $347,414 net of discount of $45,613) 301,801
15% Notes (face value of $137,359 net of discount of $244)................... 137,115
11 3/8% Debentures (face value $24,500 net of discount of $2,017)............ 22,483
14% PIK Notes ($9,482 redeemed and $189,250 exchanged for Common Stock)...... 198,732
Miscellaneous Debt........................................................... 9,799
------------
Debt Extinguished......................................................... 903,142
New Credit Facilities.......................................................... (498,414)
------------
Reduction of Outstanding Indebtedness..................................... $ 404,728
------------
------------
Allocated to:
Current portion.............................................................. $ 160,235
Long-term debt............................................................... 244,493
------------
$ 404,728
------------
------------
</TABLE>
<TABLE>
<S> <C>
(5) Reflects the payment of accrued interest and dividends in the amount of $33,751.
(6) Reflects the redemption of the Intermediate Preferred Stock of Group, Series A Preferred Stock of Group
and the Merger Preferred Stock with an aggregate book value of $129,767 with funds provided by the
Offerings and the Recapitalization.
(7) Reflects the issuance of 20,000 shares of Common Stock in connection with the Offerings and the exchange
of the PIK Notes for shares of Common Stock. Increases reflect (i) $288,100 for shares of Common Stock
to be sold in the Offerings,net of discounts and commissions and associated expenses and (ii) $189,250
on exchange of PIK Notes for shares of Common Stock.
(8) Reflects charges for (i) write-off of deferred debt expense and debt discounts of $92,812, (ii) premiums
paid in connection with the redemption of existing indebtedness in the amount of $9,625, (iii) premiums
paid in connection with the redemption of the Intermediate Preferred Stock of Group, the Series A
Preferred Stock of Group and the Merger Preferred Stock of the Company in the amount of $82,077 and (iv)
loss of $1,400 on the sale of a $150,000 participating interest in trade receivables.
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Data" and the Consolidated Financial Statements of the Company and the
notes thereto, included elsewhere in this Prospectus.
GENERAL
After the 1988 Acquisition, the Company implemented a restructuring plan
designed to focus on certain businesses in which it enjoyed a competitive
advantage and to eliminate unnecessary corporate overhead. The Company
accordingly divested 27 business units which in 1988 contributed 73% of net
sales. The aggregate proceeds from these divestitures were $1,643 million, and
enabled the Company to reduce total indebtedness from $2,483 million at December
8, 1988 to $927.3 million at the end of 1993. In addition, the Company reduced
and consolidated corporate staffs. Throughout this period, the Company made
substantial investments to enhance the competitive position of its three
continuing business segments and to strengthen its position as a low-cost
producer.
The Company's continuing business segments consist of Automotive Products,
Interior Furnishings and Wallcoverings. The Company's 1993 net sales were
$1,305.5 million, with approximately $677.9 million (51.9%) in Automotive
Products, $407.2 million (31.2%) in Interior Furnishings, and $220.4 million
(16.9%) in Wallcoverings.
The industries in which the Company competes are cyclical. Automotive
Products is influenced by the level of North American vehicle production.
Interior Furnishings is primarily influenced by the level of residential,
institutional and commercial construction and renovation. Wallcoverings is also
influenced by levels of construction and renovation and by trends in home
remodeling.
During 1993, the Company disposed of several businesses and reclassified
one subsidiary as a continuing business. Accordingly, the Company's 1993
financial statements reflect (i) the sale of the Company's Engineering Group,
(ii) the disposition of the Company's Builders Emporium division, (iii) the sale
of Kayser-Roth Corporation ("Kayser-Roth"), and (iv) the decision to retain Dura
Convertible Systems ("Dura"). The results of the Engineering Group, Builders
Emporium and Kayser-Roth are classified as discontinued operations for all
periods. The results of Dura are now classified in Automotive Products and prior
reporting periods have been restated to reflect Dura as a continuing operation.
As a result of the foregoing, this discussion is not comparable to the previous
discussions of the Company's operations. See Note 6 to Consolidated Financial
Statements.
The Company reclassified its industry segments during 1993 to realign its
products based on primary customer groups. Businesses related to the automotive
industry which were part of the Company's former Specialty Textiles segment have
been reclassified as Automotive Products. The decorative fabrics and
floorcoverings businesses have been reclassified as Interior Furnishings.
Previously, the floorcovering business was part of the Specialty Textiles
segment. Wallcovering products, which were previously part of the Home
Furnishings segment, have been reclassified as Wallcoverings. Industry segment
information has been restated for the years 1992 and 1991. See Note 18 to the
Consolidated Financial Statements.
Given the current state of the capital markets, the Company believes that
it is in its best interests to restructure the Company's debt and capitalization
by increasing its equity capital and decreasing its interest expense. The
Company believes that, in addition to providing the Partners with an opportunity
to realize proceeds from the sale of shares of Common Stock, the
Recapitalization will benefit the Partners by increasing the value of the Common
Stock of the Company.
25
<PAGE>
RESULTS OF OPERATIONS
The Company's operating results were adversely affected by a $129.9 million
goodwill write-off and a $26.7 million management equity plan charge in 1993 and
$10.0 million of restructuring charges in 1992. Operating expenses include these
charges, as well as goodwill amortization expense which will not occur after
1993 because of the write-off.
<TABLE> <CAPTION>
YEAR ENDED
THIRTEEN WEEKS ENDED ----------------------------------------
------------------------------ JANUARY 29, JANUARY 30, JANUARY 25,
APRIL 30, 1994 MAY 1, 1993 1994 1993 1992
--------------- ------------- ------------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales......................... $ 390.4 $ 339.0 $ 1,305.5 $ 1,277.5 $ 1,184.3
Cost of goods sold................ 289.5 260.1 995.8 978.5 926.8
--------------- ------------- ------------ ------------ ------------
Gross profit...................... 100.9 78.9 309.7 299.0 257.5
Selling, general and
administrative expenses........... 55.4 51.9 196.6 218.4 202.7
Non-recurring charges(1).......... -- 0.9 159.4 13.7 3.7
--------------- ------------- ------------ ------------ ------------
Operating income (loss)........... 45.5 26.1 (46.2) 66.9 51.1
Interest expense, net............. (29.0) (27.2) (111.3) (110.9) (108.0)
Dividends on preferred stock
of subsidiary................... (1.1) (1.1) (4.5) (4.5) (4.5)
Income taxes...................... (2.6) (3.3) (11.3) 3.2 (12.0)
--------------- ------------- ------------ ------------ ------------
Income (loss) from continuing
operations...................... $ 12.8 $ (5.5) $ (173.3) $ (45.3) $ (73.3)
--------------- ------------- ------------ ------------ ------------
--------------- ------------- ------------ ------------ ------------
Income (loss) from continuing
operations per share of common
stock............................. $ .15 $ (.31) $ (5.56) $ (1.81) $ (2.52)
--------------- ------------- ------------ ------------ ------------
--------------- ------------- ------------ ------------ ------------
Gross profit percentage........... 25.8% 23.3% 23.7% 23.4% 21.7%
Operating margin percentage....... 11.7% 7.7% (3.5)% 5.2% 4.3%
</TABLE>
- ---------------
(1) Non-recurring charges are:
<TABLE> <CAPTION>
YEAR ENDED
THIRTEEN WEEKS ENDED ----------------------------------------
------------------------------ JANUARY 29, JANUARY 30, JANUARY 25,
APRIL 30, 1994 MAY 1, 1993 1994 1993 1992
--------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Management equity plan
expense........................... $ -- $ -- $ 26.7 $ -- $ --
Goodwill write-off and
amortization...................... -- 0.9 132.7 3.7 3.7
Restructuring charges...... -- -- -- 10.0 --
--------------- ------------- ------------ ------------ ------------
Total................. $ -- $ 0.9 $ 159.4 $ 13.7 $ 3.7
--------------- ------------- ------------ ------------ ------------
--------------- ------------- ------------ ------------ ------------
</TABLE>
26
<PAGE>
Operating expenses allocated to the Company's three business segments
include the $129.9 million goodwill write-off in 1993 and $10.0 million of
restructuring charges in 1992 as well as goodwill amortization expense which
will not occur after 1993 because of the 1993 goodwill write-off. Management
believes that the segment operating income data presented below are important to
obtaining an understanding of the segments' comparative results in 1993, 1992
and 1991 and in the first quarters of 1994 and 1993.
<TABLE> <CAPTION>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS WALLCOVERINGS
------------------------------------- ------------------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
------------------------------------- ------------------------------------- ------------------------
JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29 JANUARY 30,
1994 1993 1992 1994 1993 1992 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
Net sales................ $677.9 $643.8 $610.3 $407.2 $391.8 $336.8 $220.4 $241.9
Cost of goods sold....... 555.4 532.1 505.8 294.7 282.5 248.9 145.7 163.8
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross margin............. 122.5 111.7 104.5 112.5 109.3 87.9 74.7 78.1
Selling, general and
administrative
expenses............... 54.9 57.1 47.0 68.0 70.8 58.7 62.1 66.1
Goodwill amortization and
write-off and other
non-recurring
charges(1)............. 69.9 1.9 1.9 32.3 0.9 0.9 30.5 10.9
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Segment operating income
(loss)(2).............. $(2.3) $52.7 $55.6 $12.2 $37.6 $28.3 $(17.9) $1.1
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross margin
percentages............ 18.1% 17.3% 17.1% 27.6% 27.9% 26.0% 33.9% 32.3%
Operating margin
percentages............ (0.3)% 8.2% 9.1% 3.0% 9.6% 8.4% (8.1)% 0.5%
<CAPTION>
JANUARY 25,
1992
-----------
<S> <C>
Net sales................ $237.2
Cost of goods sold....... 172.2
-----------
Gross margin............. 65.0
Selling, general and
administrative
expenses............... 70.3
Goodwill amortization and
write-off and other
non-recurring
charges(1)............. 0.9
-----------
Segment operating income
(loss)(2).............. $(6.2)
-----------
-----------
Gross margin
percentages............ 27.4%
Operating margin
percentages............ (2.6 )%
</TABLE>
- ---------------
(1) Goodwill amortization and write-off and other non-recurring charges include:
<TABLE> <CAPTION>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS WALLCOVERINGS
------------------------------------- ------------------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
------------------------------------- ------------------------------------- ------------------------
JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29, JANUARY 30,
1994 1993 1992 1994 1993 1992 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Goodwill
amortization and
write-off........ $69.9 $1.9 $1.9 $32.3 $0.9 $0.9 $30.5 $0.9
Restructuring
charges.......... -- -- -- -- -- -- -- 10.0
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total............ $69.9 $1.9 $1.9 $32.3 $0.9 $0.9 $30.5 $10.9
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
JANAURY 25,
1992
-----------
<S> <C>
Goodwill
amortization and
write-off........ $0.9
Restructuring
charges.......... --
-----------
Total............ $0.9
-----------
-----------
</TABLE>
(2) Excludes $38.3 million, $24.5 million and $26.7 million of unallocated
corporate expense in 1993, 1992 and 1991, respectively. See Note 18 to
Consolidated Financial Statements.
<TABLE> <CAPTION>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS WALLCOVERINGS
---------------------- ---------------------- -----------
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED THIRTEEN
WEEKS ENDED
---------------------- ---------------------- -----------
APRIL 30, MAY 1, APRIL 30, MAY 1, APRIL 30,
1994 1993 1994 1993 1994
----------- --------- ----------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales.......................................................... $223.0 $174.7 $107.1 $103.0 $60.3
Cost of goods sold................................................. 174.8 143.5 75.3 75.4 39.4
----------- --------- ----------- --------- -----------
Gross margin....................................................... 48.2 31.2 31.8 27.6 20.9
Selling, general and administrative expenses....................... 12.8 14.2 18.1 17.6 15.8
Goodwill amortization.............................................. -- 0.5 -- 0.2 --
----------- --------- ----------- --------- -----------
Segment operating income(1)........................................ $35.4 $16.5 $13.7 $9.8 $5.1
----------- --------- ----------- --------- -----------
----------- --------- ----------- --------- -----------
Gross margin percentages........................................... 21.6% 17.9% 29.7% 26.8% 34.7%
Operating margin percentages....................................... 15.9% 9.4% 12.8% 9.5% 8.5%
<CAPTION>
MAY 1, 1993
-----------
Net sales.......................................................... $61.3
Cost of goods sold................................................. 41.3
-----------
Gross margin....................................................... 20.0
Selling, general and administrative expenses....................... 15.6
Goodwill amortization.............................................. 0.2
-----------
Segment operating income(1)........................................ $4.2
-----------
-----------
Gross margin percentages........................................... 32.6%
Operating margin percentages....................................... 6.9%
</TABLE>
- ---------------
(1) Excludes $8.6 million and $4.5 million of unallocated corporate expenses in
the thirteen weeks ended April 30, 1994 and May 1, 1993, respectively.
27
<PAGE>
FIRST QUARTER OF 1994 COMPARED TO FIRST QUARTER OF 1993
NET SALES. Net sales increased 15.2% to $390.4 million in the first quarter
of 1994 from $339.0 million in the corresponding period of 1993. The overall
increase in net sales reflected improvement in Automotive Products and Interior
Furnishings offset by a decrease in net sales at Wallcoverings.
Automotive Products' net sales increased 27.6% in the first quarter of 1994
to $223.0 million as compared to $174.7 million in the first quarter of 1993.
The increase in net sales is due to a 12% increase in North American auto build
as compared to the first quarter of 1993 and to new fabric placements obtained
in the third quarter of 1993 as well as increased production of several of the
car lines served by the Company, including the Ford Mustang and the General
Motors Cadillac.
Interior Furnishings' net sales increased 4.0% in the first quarter of 1994
to $107.1 million as compared to $103.0 million in the first quarter of 1993 as
a result of increases at the Company's Decorative Fabrics and Floorcoverings
group. Net sales of the Decorative Fabrics group increased by 2.7% due to an
improvement in product mix on stable volume. Floorcoverings' net sales increased
9.1% to $22.9 million as a result of increased installations at educational and
government facilities.
Wallcoverings' net sales decreased 1.6% in the first quarter of 1994 to
$60.3 million as compared to $61.4 million in the first quarter of 1993 due to
sluggish demand by chain stores, which was partially offset by modest growth in
independent retailer ("dealer") business. Management believes that the growth in
dealer business reflects benefits of the initiative begun in late 1993 to
increase product offerings.
GROSS MARGIN AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Automotive
Products' gross margin increased to 21.6% in the first quarter 1994 from 17.9%
in the first quarter of 1993, and selling, general and administrative expenses
decreased from 8.1% to 5.7%, due to improved absorption of fixed costs over a
greater sales volume and due to continuing cost reduction initiatives.
Interior Furnishings' gross margin increased to 29.7% from 26.8% as a
result of improved product mix in the Decorative Fabrics and Floorcoverings
groups as well as increased absorption of fixed costs.
Wallcoverings' gross margin increased to 34.7% from 32.6% as a result of
continuing cost reduction initiatives and improved manufacturing efficiencies
TOTAL OPERATING EXPENSES. Total operating expenses were $344.9 million and
$312.9 million in the first quarter of 1994 and the first quarter of 1993,
respectively, including $8.6 million and $4.5 million of unallocated corporate
expenses, respectively. Unallocated corporate expenses in the first quarter of
1994 include $3.2 million of expenses incurred for the performance of services
by Blackstone Partners and $2.8 million for the performance of services by WP
Partners in connection with the Company's review of refinancing and other
strategic alternatives as well as certain other advisory services. Operating
expenses allocated to the Company's three business segments totaled $336.3
million or 86.1% of sales in the first quarter of 1994 compared to $308.4
million or 91.0% of sales in the first quarter of 1993. This 4.9 percentage
point improvement is primarily the result of the allocation of fixed costs over
a larger sales volume, improved manufacturing productivity and continuing cost
reduction initiatives at both the operating and corporate level. Operating
expenses in the first quarter of 1993 included $0.9 million of goodwill
amortization.
INTEREST EXPENSE. Interest expense allocated to continuing operations, net
of interest income of $2.4 million in the first quarter of 1994 and $1.0 million
in the first quarter of 1993, increased to $29.1 million during the first
quarter of 1994 compared to $27.2 million in the first quarter of 1993. Interest
expense, including amounts allocated to discontinued operations in 1993 and
excluding interest income, decreased to $31.4 million during the first quarter
of 1994 compared to $34.0
28
<PAGE>
million in the first quarter of 1993. The decrease in interest expense was due
primarily to a decrease in the Company's average borrowings.
INCOME TAXES. In the first quarter of 1994 income taxes of $2.6 million
consisted of foreign and state taxes. This amount compared to a foreign and
state tax provision of $3.3 million in the first quarter of 1993.
DISCONTINUED OPERATIONS. The Company's loss from discontinued operations,
including losses on disposals of $2.2 million, was $3.6 million for the first
quarter of 1993.
NET INCOME. The combined effect of the foregoing resulted in net income of
$12.8 million in the first quarter of 1994 compared to a net loss of $9.1
million in the first quarter of 1993.
1993 COMPARED TO 1992
NET SALES. Net sales increased 2.2% to $1,305.5 million in 1993 (a 52-week
year) from $1,277.5 million in 1992 (a 53-week year). The overall increase in
net sales reflected improvement in Automotive Products and Interior Furnishings,
offset by a decrease in net sales at Wallcoverings.
Automotive Products' net sales increased 5.3% in 1993 to $677.9 million.
Net sales growth increased, primarily during the second half of 1993, due to a
number of factors. First, the net sales growth appears to reflect cyclical
trends. Since late 1993, U.S. light vehicle sales have accelerated, reflecting
what management believes to be a cyclical upturn. See "Business--Automotive
Products--Industry". Second, in recent years, foreign manufacturers have shifted
production from off-shore auto plants to newly built or expanded Transplant
facilities located in North America. As a consequence, North American production
has risen faster than retail sales. The Company has benefitted from this trend.
Third, the Company won placement of its products on a number of new and
redesigned vehicle lines in 1993. For example, the Company was awarded the
automotive fabric order for the Ford Explorer and displaced one of its bodycloth
competitors on the General Motors "W" and "N" body lines. Fourth, the average
sales content per vehicle of the five principal automotive products produced by
the Company increased in 1993 as it has in each of the last five years. (See
"Business--Automotive Products--Automotive Products Segment Growth Strategy").
In 1993, the Company continued to benefit from this trend. For example, in 1993
General Motors' Cadillac division began using the Company's technically advanced
"foam-in-place" carpet system, which provides significant acoustical benefits
and sells at a significantly higher price than traditional molded floor carpet.
These factors were offset by decreased demand for products for certain key
models in the second quarter due to customers' production downtime during model
changeovers.
Interior Furnishings' net sales increased 3.9% in 1993 to $407.2 million.
The increase in net sales was attributable to an industry-wide strengthening of
furniture sales in 1993 and increased sales of the Company's patented Powerbond
RS(R) floorcovering products. Net sales increased by 5.6% at both Mastercraft,
which represents 66.0% of Interior Furnishings' sales, and Floorcoverings, due
largely to volume increases.
Wallcoverings' net sales decreased 8.9% in 1993 to $220.4 million. The
decrease in sales was due primarily to the consolidation of certain product
distribution channels and to a reduction in shelf space and market share due to
Wallcoverings' downsizing program. In the fourth quarter, management responded
to these reduced sales by aggressively rebuilding dealer shelf space. As a
result, sample book placements in the dealer market increased.
GROSS MARGIN AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Automotive
Products' gross margin increased to 18.1% in 1993 from 17.3% in 1992 and
selling, general and administrative expenses decreased to 8.1% in 1993 from 8.9%
in 1992. This is the result of the allocation of
29
<PAGE>
fixed costs over a larger sales volume, improved manufacturing productivity, and
cost reduction initiatives.
Interior Furnishings' gross margin decreased to 27.6% in 1993 from 27.9% in
1992 due to changes in product mix. Selling, general and administrative expenses
decreased to 16.7% from 18.1% due to cost reduction initiatives.
Wallcoverings' gross margin increased to 33.9% in 1993 from 32.3% in 1992
as a result of improved manufacturing productivity. Selling, general and
administrative expenses increased to 28.2% from 27.3% as a result of lower sales
volume to absorb fixed expenses.
TOTAL OPERATING EXPENSES. Total operating expenses were $1,351.7 million
and $1,210.6 million in 1993 and 1992, respectively, including $38.3 million
($26.7 million of which was a one-time charge related to the 1993 Plan) and
$24.5 million of unallocated corporate expenses, respectively. Operating
expenses allocated to the Company's three business segments totaled $1,313.5
million and $1,186.1 million in 1993 and 1992, respectively. These operating
expenses in 1993 included certain non-recurring charges relating to the
write-off of goodwill in the amount of $129.9 million in the quarter ended
October 30, 1993 and goodwill amortization of $2.8 million for the nine months
prior to the write-off of goodwill. Operating expenses in 1992 included $10.0
million of charges relating to Wallcoverings' downsizing program and $3.7
million of goodwill amortization. See Notes 4 and 5 to the Consolidated
Financial Statements.
INTEREST EXPENSE. Interest expense allocated to continuing operations, net
of interest income of $4.4 million in 1993 and $4.0 million in 1992, increased
to $111.3 million during 1993 compared to $110.9 million in 1992. Interest
expense, including amounts allocated to discontinued operations and excluding
interest income, decreased to $135.1 million during 1993 compared to $138.3
million in 1992. The decrease in interest expense was due to the additional week
in 1992 and a reduction in the Company's weighted average interest rate.
INCOME TAXES. In 1993 income taxes of $11.3 million consisted of foreign
and state taxes. This amount compares with a 1992 tax benefit of $3.2 million
which was comprised of a foreign and state tax provision of $3.5 million offset
by a Federal tax benefit of approximately $6.7 million.
DISCONTINUED OPERATIONS. The Company's loss from discontinued operations
was $104.3 million for 1993 and $218.3 million for 1992, including losses on
disposals of $99.6 million and $168.0 million, respectively.
The 1993 loss is primarily attributable to the $125.5 million additional
charge arising from the Company's determination as of the end of the second
quarter of 1993 that it would be unable to sell Builders Emporium as an ongoing
entity. This was offset by a $28.1 million gain on the sale of Kayser-Roth. The
1992 loss reflected primarily the expected losses on the anticipated disposition
of Builders Emporium.
NET INCOME. The combined effect of the foregoing resulted in a net loss of
$277.7 million in 1993 compared to a net loss of $263.7 million in the prior
year.
1992 COMPARED TO 1991
NET SALES. Net sales increased 7.9% to $1,277.5 million in 1992 (a 53-week
year) from $1,184.3 million in 1991 (a 52-week year).
Automotive Products net sales increased 5.5% to $643.8 million in 1992 from
$610.3 million in 1991, reflecting the impact of a modest increase in the North
American vehicle build as well as an improvement in Automotive Products' product
mix. The molded carpet product line experienced the largest net sales increase.
30
<PAGE>
Interior Furnishings net sales increased 16.3% to $391.8 million in 1992
from $336.8 million in 1991 principally due to two factors. First, 1992 net
sales reflected the full year impact of the acquisition of Doblin, a
manufacturer of high-end Jacquard fabric, in the third quarter of 1991, as well
as substantial incremental sales volume from the full utilization of excess
Doblin manufacturing capacity. Second, Floorcoverings' net sales increased
17.7%, which was primarily attributable to restyled product offerings.
Wallcoverings net sales increased 2.0% to $241.9 million in 1992 from
$237.2 million in 1991. The net sales increase reflected a combination of two
offsetting factors. During the first quarter of 1992, the Company benefited from
the increase in industry demand for wallcoverings. However, this increase was
offset by reduced sales due primarily to Wallcoverings' efforts during 1992 to
consolidate certain product distribution channels and its downsizing program.
GROSS MARGIN AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Automotive
Products' gross margin improved slightly due to greater fixed cost absorption
because of the 5.5% increase in sales volume in 1992. Selling, general and
administrative expenses increased to 8.9% in 1992 from 7.7% in 1991 due to
increased product development and marketing activities.
Interior Furnishings' gross margin improved to 27.9% from 26.0% due to a
shift in the sales mix to higher-margin Floorcoverings' products and to the full
year impact of the Doblin acquisition in the third quarter of 1991. Selling,
general and administrative expenses increased to 18.1% from 17.4% due to product
development activities in Decorative Fabrics.
Wallcoverings' gross margin increased to 32.3% in 1992 from 27.4% in 1991
due to manufacturing efficiency, product yield and quality improvements.
Selling, general and administrative expenses decreased to 27.3% in 1992 from
29.6% in 1991, reflecting cost reduction initiatives.
TOTAL OPERATING EXPENSES. Total operating expenses were $1,210.6 million
and $1,133.2 million in 1992 and 1991, respectively, including $24.5 million and
$26.7 million of unallocated corporate expense. Operating expenses allocated to
the Company's three business segments totaled $1,186.1 million and $1,106.5
million in 1992 and 1991, respectively. Operating expenses in 1992 included
$10.0 million of restructuring costs.
RESTRUCTURING CHARGES. In 1992, the Company reevaluated the distribution
methods as well as certain manufacturing and product lines in Wallcoverings.
This reevaluation resulted in a restructuring charge of $10.0 million for the
closure of certain manufacturing facilities. Of this amount, $2.7 million
related to asset writedowns and $7.3 million related to the consolidation of
Wallcoverings' operations.
INTEREST EXPENSE. Interest expense for continuing operations, net of
interest income of $4.0 million in 1992 and $7.3 million in 1991, increased to
$110.9 million during 1992 compared to $108.0 million in 1991. Interest expense,
including amounts allocated to discontinued operations and excluding interest
income, decreased to $138.3 million during 1992 compared to $141.5 million in
1991 principally as a result of the reduction in the Company's weighted average
cost of borrowings.
INCOME TAXES. The Company's 1992 tax benefit of $3.2 million includes a
foreign and state tax provision of $3.5 million, offset by a Federal tax benefit
of approximately $6.7 million. In 1991, income taxes of $12.0 million consisted
of foreign and state taxes of $11.7 million and Federal income taxes of $0.3
million.
DISCONTINUED OPERATIONS. As previously discussed, loss from discontinued
operations, net of taxes and including loss on disposals, was $218.3 million in
1992 compared to the loss from discontinued operations of $16.4 million in 1991.
The 1992 loss reflected primarily the expected loss on the anticipated sale of
Builders Emporium. The 1991 loss was attributable to the discontinuation of the
remaining businesses of Wickes Manufacturing.
31
<PAGE>
EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING. Loss on early retirement of
indebtedness, net of taxes, was $1.8 million in 1991. See Note 11 to the
Consolidated Financial Statements.
The cumulative effect on prior years of the change in accounting for
post-retirement benefits other than pensions was $42.3 million in 1991. See Note
13 to the Consolidated Financial Statements.
NET INCOME. The combined effect of the foregoing resulted in a net loss of
$263.7 million in 1992 compared to a net loss of $133.8 million in 1991.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1994, the Company and its subsidiaries had cash and cash
equivalents totaling $139.3 million compared to $81.4 million and $83.7 million
at January 29, 1994 and January 30, 1993, respectively. Included in cash and
cash equivalents at April 30, 1994 was $135.3 million held by Group. The
increase in the Company's cash balance is principally due to the receipt of the
cash proceeds of $71.2 million from the payment of the Kayser-Roth note referred
to below. The Company's principal sources of funds are cash generated from
continuing operating activities and borrowings under bank credit facilities. Net
cash provided by the operating activities of its continuing operations was $22.9
million in 1993 and $14.6 million for the quarter ended January 29, 1994. C&A
Co. had $59.5 million of borrowing availability under a credit facility at April
30, 1994. Based on financial covenants in that credit facility, approximately
$42 million could be paid to Group as a dividend. The Company's Canadian
subsidiaries had $8.1 million of borrowing availability under a bank demand line
of credit at April 30, 1994. Restrictions on the payment of dividends contained
in various debt agreements of Group prevented the payment of dividends by Group
to the Company in 1993 and 1992. See Note 11 to Consolidated Financial
Statements.
During 1993, the Company sold Kayser-Roth for approximately $170 million,
including a $70 million note. The Company's Engineering Group, which was
discontinued in 1992, was sold during 1993 for approximately $51 million.
Additionally, the Company has nearly completed the disposition of the real
estate, inventory and other assets of its Builders Emporium home improvement
retail chain, which the Company discontinued at the end of 1992. During 1993,
the Company used cash from the aforementioned sources and new borrowings of
$76.1 million to repay $179.9 million of outstanding indebtedness. On April 27,
1994, the Kayser-Roth note was paid with accrued interest. The Kayser-Roth sale
is subject to post-closing purchase price adjustments.
At April 30, 1994, outstanding long-term indebtedness (substantially all of
which will be defeased and redeemed, or repaid, in connection with the
Recapitalization) amounted to $922.2 million (including current portion of
$163.7 million) at varying interest rates between 5% and 15% per annum. At
January 29, 1994, $512.3 million of debt was due within the succeeding five year
period. See Note 11 to Consolidated Financial Statements. Cash interest paid
during the thirteen weeks ended April 30, 1994 and May 1,1993 was $8.5 million
and $14.7 million, respectively, and during 1993, 1992 and 1991 was $101.5
million, $105.0 million and $120.6 million, respectively.
The Company's principal uses of funds for the next several years will be to
fund principal and interest payments on its indebtedness, net working capital
increases and capital expenditures. The Company makes capital expenditures on a
recurring basis for replacement and improvements. As of April 30, 1994, the
Company had approximately $43.0 million in outstanding capital commitments.
During 1994, the Company anticipates capital expenditures will exceed the annual
expenditures made by its continuing businesses during 1993, 1992 and 1991, which
were $44.9 million, $38.2 million and $38.9 million, respectively. This increase
is due primarily to the planned acquisition of additional machinery and
equipment at Decorative Fabrics' Mastercraft division as part of an $85 million
five-year capital investment plan that was initiated this year for the purpose
of expanding production capacity at Mastercraft to accommodate anticipated
growth (see "Business--Decorative Fabrics--Mastercraft Growth Plan").
Secondarily, this increase is due to the planned completion of an Automotive
Products facility in Mexico for approximately $6.0 million. In
32
<PAGE>
addition, the Company plans to continue ongoing capital expenditures in each of
the Company's three segments in 1994 and future years.
The Company has significant obligations relating to postretirement,
casualty, environmental, lease and other liabilities of discontinued operations.
In connection with the sale and acquisition of certain businesses, the Company
has indemnified the purchasers and sellers for certain environmental
liabilities, lease obligations and other matters. In addition, the Company is
contingently liable with respect to certain lease and other obligations assumed
by certain purchasers and may be required to honor such obligations if such
purchasers are unable or unwilling to do so. Management anticipates that the net
cash requirements of its discontinued operations will be approximately $20.9
million during 1994. However, because the requirements of the Company's
discontinued operations are largely a function of contingencies, it is possible
that the actual net cash requirements of the Company's discontinued operations
could differ materially from management's estimates. Management believes that
the Company's needs relating to discontinued operations can be adequately funded
in 1994 by net cash provided by operating activities from continuing operations
and by additional borrowings under the New Credit Facilities. The Company's NOLs
and unused Federal tax credits may minimize the cash requirement for Federal
income taxes during certain future periods. See "--Tax Matters".
In connection with the Recapitalization, the Company will effect a
defeasance and redemption, or repayment, of all its outstanding indebtedness and
preferred stock, other than (i) $22.6 million of mortgage and other debt which
will remain outstanding and (ii) $202.9 million of PIK Notes, of which
approximately $9.7 million will be redeemed and approximately $193.2 million
will be exchanged for Common Stock of the Company. These amounts are inclusive
of $11.1 million of accrued PIK interest from January 29, 1994 through June 22,
1994. See "Use of Proceeds and Consolidation".
In connection with the Recapitalization, the Company will also enter into
the New Credit Facilities, which will consist of (i) the Closing Date Term Loan
Facility (defined below) in an aggregate principal amount of $450 million with a
term of eight years, (ii) the Delayed Draw Term Loan Facility (defined below) in
an aggregate principal amount of $25 million with a term of eight years, (iii)
the Revolving Facility (defined below) in an aggregate principal amount of up to
$150 million with a term of seven years and (iv) the Receivables Facility
(defined below) in an aggregate amount of up to $150 million with a term of
seven years. These facilities will include various restrictive covenants
including maintenance of EBITDA and interest coverage ratios, leverage and
liquidity tests and various other restrictive covenants which are typical for
such facilities. See "New Credit Facilities".
The Company does not believe that inflation has had a material impact on
sales or income during the three years ended January 29, 1994.
After the Recapitalization, the Company will have approximately $95.0
million available and undrawn under the New Credit Facilities. Management
believes that cash flow from operations and funds available under the New Credit
Facilities will be sufficient to fund the Company's long-and short-term
liquidity requirements, including working capital, capital expenditures and debt
service requirements.
TAX MATTERS
As of January 29, 1994, the Company had NOLs of approximately $434.0
million for Federal income tax purposes, which expire over the period from 1996
to 2008. The Company also has unused Federal tax credits of approximately $18.9
million, $11.9 million of which expire during 1994 to 2003. The Company
anticipates that additional Federal income tax deductions of approximately $37.7
million will be generated during 1994 as a result of write-offs of unamortized
debt discounts and deferred financing costs relating to debt repaid in
connection with the Recapitalization. In addition, the Company estimates that it
will generate tax deductions of approximately $75.4 million in connection with
the ultimate disposition of assets and liabilities of its discontinued
businesses
33
<PAGE>
during the period 1994 to 1996, which were previously accrued for financial
reporting purposes prior to January 29, 1994. The Company anticipates that
utilization of these NOLs, tax credits and deductions will result in minimal
Federal income taxes until these NOLs and tax credits are exhausted.
Approximately $134.0 million of the Company's NOLs and $11.9 million of the
Company's unused Federal tax credits may be used only against the income and
apportioned tax liability of the specific corporate entity that generated such
losses or credits or its successors. After giving effect to the Consolidation,
such NOLs and credits may be used against the income and apportioned tax
liability of C&A Co., which the Company believes will have sufficient taxable
income and apportioned tax liability to fully use such NOLs and tax credits. The
Recapitalization will not constitute a "change in control" that would result in
annual limitations on the Company's use of its NOLs and unused tax credits.
However, future sales of Common Stock by the Company or the Partners, or changes
in the composition of the Partners, could constitute such a "change in control".
Management cannot predict whether such a "change in control" will occur. If such
a change of control were to occur, the resulting annual limitations on the use
of NOLs and tax credits will depend on the value of the equity of the Company
and the amount of "built-in gain" or "built-in loss" in the Company's assets at
the time of the "change in control", which cannot be known at this time.
In the course of an examination of the Company's Federal income tax
returns, the IRS has challenged the availability of $176.6 million of the
Company's approximately $434.0 million of NOLs. The examination is at a
preliminary stage and management believes that the basis for the IRS' position
is unclear. Management disputes the IRS' challenge and believes that
substantially all the NOLs should be available (subject to the potential
limitations noted above) to offset its income, if any, in the future. If the IRS
were to maintain its position and all or a major portion of such position were
to be upheld in litigation, the amount of NOLs available to the Company in
future years would be materially reduced.
ENVIRONMENTAL MATTERS
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and otherwise related to on-site and
off-site soil and groundwater contamination. The Company's management believes
that it has obtained, and is in material compliance with, all material
environmental permits and approvals necessary to conduct its various businesses.
Environmental compliance costs for continuing businesses currently are accounted
for as normal operating expenses or capital expenditures of such business units.
In the opinion of management, based on the facts presently known to it, such
environmental compliance costs will not have a material adverse effect on the
Company's consolidated financial condition or results of operations.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a PRP in a number of proceedings.
The Company may be named as a PRP at other sites in the future, including with
respect to divested and acquired businesses. It is a normal risk of operating a
manufacturing business that liability may be incurred for investigating and
remediating on-site and off-site contamination. The Company is currently engaged
in investigation or remediation at certain sites. In estimating the total cost
of investigation and remediation, the Company has considered, among other
things, the Company's prior experience in remediating contaminated sites,
remediation efforts by other parties, data released by the EPA, the professional
judgment of the Company's environmental experts, outside environmental
specialists and other experts, and the likelihood that other parties which have
been named as PRPs will have the financial resources to fulfill their
obligations at sites where they and the Company may be jointly and severally
liable. Under the scheme of joint and several liability, the Company could be
liable for the full costs of investigation and remediation even if additional
parties are found to be responsible under the applicable laws. It
34
<PAGE>
is difficult to estimate the total cost of investigation and remediation due to
various factors including incomplete information regarding particular sites and
other PRP's, uncertainty regarding the extent of environmental problems and the
Company's share, if any, of liability for such problems, the selection of
alternative compliance approaches, the complexity of environmental laws and
regulations and changes in cleanup standards and techniques. When it has been
possible to provide reasonable estimates of the Company's liability with respect
to environmental sites, provisions have been made in accordance with generally
accepted accounting principles. Excluding sites at which the Company's
participation is anticipated to be de minimis or otherwise insignificant or
where the Company is being indemnified by a third party for the liability, there
are 15 sites where the Company is participating in the investigation or
remediation of the site, either directly or through financial contribution, and
nine additional sites where the Company is alleged to be responsible for costs
of investigation or remediation. The Company's current estimate of its liability
for these 24 sites is approximately $29.5 million. As of January 29, 1994, the
Company has established reserves of approximately $30.8 million for the
estimated future costs related to all its known environmental sites. In the
opinion of management, based on the facts presently known to it, the
environmental costs and contingencies will not have a material adverse effect on
the Company's consolidated financial condition or results of operations.
However, there can be no assurance that the Company has identified or properly
assessed all potential environmental liability arising from the activities or
properties of the Company, its present and former subsidiaries and their
corporate predecessors. See "Item 3. Legal Proceedings--Environmental
Proceedings" incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended January 29, 1994.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for 1994, 1993 and 1992. In the opinion of management, this
information has been prepared on the same basis as the information in the
Consolidated Financial Statements and includes normal recurring adjustments
which management considers necessary for a fair presentation of the information
shown when read in conjunction with the Consolidated Financial Statements,
including the notes thereto, appearing elsewhere in this Prospectus. The
operating results for any quarter are not necessarily indicative of results for
the entire year or for any future period.
<TABLE> <CAPTION>
1994 1993 1992
--------- ------------------------------------------ --------------------------------------------
FIRST FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER(1)
--------- --------- --------- --------- --------- --------- --------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $ 390.4 $ 339.0 $ 289.7 $ 334.6 $ 342.2 $ 319.5 $ 319.7 $ 314.9 $ 323.4
Gross profit........... 101.0 79.0 61.2 84.4 85.1 72.6 74.1 70.8 81.6
Operating income
(loss)(2)............ 45.6(3) 26.2 10.6 (96.4)(4) 13.4(5) 20.2 18.1 19.2 9.4(6)
</TABLE>
- ---------------
<TABLE> <CAPTION>
<S> <C>
(1) The fourth quarter of 1992 includes fourteen weeks.
(2) Includes $0.9 million of goodwill amortization through the third quarter of 1993.
(3) Operating income for the first quarter of 1994 includes $6.0 million of operating expenses for services
performed by Blackstone Partners and WP Partners in connection with the Company's review of refinancing and
strategic alternatives, as well as certain other advisory services.
(4) Operating loss for the third quarter of 1993 includes a $129.9 million write-off of goodwill.
(5) Operating income for the fourth quarter of 1993 includes a $26.7 million charge for the 1993 Plan. See Notes
5 and 15 to the Consolidated Financial Statements.
(6) Operating income for the fourth quarter of 1992 reflects a $10.0 million restructuring charge.
</TABLE>
For a discussion of the operating results for the first quarter of 1994,
see "--First Quarter of 1994 Compared to First Quarter of 1993."
The first quarter of 1993 reflects increased net sales from Automotive
Products which followed an increase in automotive industry unit sales (a trend
which began in the fourth quarter of 1992) and increased net sales from the
Mastercraft division of Interior Furnishings. This increase was offset
35
<PAGE>
by a modest net sales decline at Wallcoverings. Gross profit margin increased
slightly reflecting margin improvement across all business segments. Net sales
in the second quarter of 1993 declined 9.4% from the same period in 1992,
reflecting sales declines across all business segments, particularly at
Automotive Products and Wallcoverings. The decline at Automotive Products was
primarily due to decreased demand for product during model changeovers of
certain key models including the Chrysler C/Y body and the Honda Accord.
Wallcoverings' net sales declined partly as a result of its downsizing and the
reduction in sample book placements. Gross margin declined during the second
quarter of 1993 compared to the second quarter of 1992 primarily as a result of
a lower absorption of fixed costs due to lower sales volumes.
Net sales in the third quarter of 1993 increased by 6.3% versus the prior
year due to increased net sales at Automotive Products and Interior Furnishings
offset by a net sales decline at Wallcoverings. Despite a downturn in the
automotive build, Automotive Products net sales increased due to the completion
of changeovers at Honda, strong orders for the segment's Jacquard automotive
seat fabric and the initiation of model year 1994 Ford Mustang production.
Interior Furnishings' net sales increased reflecting general improvements in the
retail furniture market. Company wide gross profit margin increased 2.7
percentage points, reflecting improved margins across all segments, particularly
Wallcoverings due to the fixed cost reductions associated with the previously
discussed downsizing. Net sales in the thirteen-week fourth quarter of 1993
increased 5.8% over the fourteen-week fourth quarter of 1992. Net sales
increased at both Automotive Products and Interior Furnishings, offset by
further net sales declines at Wallcoverings. Automotive Products net sales
outpaced the automotive build, reflecting continued strong demand for bodycloth
and the ramp-up of the 1994 model Ford Mustang, which uses Dura's convertible
top systems.
36
<PAGE>
BUSINESS
The Company is a leader in each of its three business segments: Automotive
Products, the largest supplier of interior trim products to the North American
automotive industry; Interior Furnishings, the largest manufacturer of
residential upholstery fabrics in the U.S.; and Wallcoverings, the largest
producer of residential wallcoverings in the U.S. Within these three segments,
the Company estimates it holds a number one or number two market share position
in each of its eight major product lines which together comprised approximately
81% of 1993 net sales of $1,305.5 million. With respect to market or competitive
information, references to the Company as "a leader" or "one of the leading"
manufacturers in a particular product category mean that the Company is one of
the principal manufacturers in that product category and references to the
Company as "the leader," "the largest" or "the leading" manufacturer in a
particular product category mean that the Company has the largest market share
based on dollar sales volume in that product category. See "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the risks inherent in the Company's businesses
and the Company's financial performance over the last three years, including its
history of net losses, competitive factors affecting the Company, the Company's
substantial leverage, contingent liabilities and other risks inherent in an
investment in Common Stock.
<TABLE>
<S> <C> <C> <C>
COLLINS & AIKMAN CORPORATION
AND SUBSIDIARIES
|
------------------------------------------------------------------------------
| | |
AUTOMOTIVE INTERIOR |
PRODUCTS ---- FURNISHINGS ---- WALLCOVERINGS
. AUTOMOTIVE SEAT FABRIC | | . RESIDENTIAL AND COMMERICAL
. MOLDED FLOOR CARPETS | | WALLCOVERINGS
. ACCESSORY FLOOR MATS | |
. LUGGAGE COMPARTMENT TRIM | |
. CONVERTIBLE TOP STACKS | |
DECORATIVE |
FABRICS FLOORCOVERINGS
| . SIX-FOOT CARPET
| . MODULAR CARPET TILE
|
--------------------------------------------------------------------
| | | |
MASTERCRAFT CAVEL GREEFF WARNER
. FLAT-WOVEN . VELVETS . PRINTS . PRINTS
JACQUARDS AND
DOBBIES
</TABLE>
See Note 18 to the Consolidated Financial Statements for financial information
with respect to the three segments for each of the last three fiscal years.
37
<PAGE>
BUSINESS STRATEGY
Management believes the Company is well-positioned to achieve continued
growth in each of its three segments as a result of its pursuit of the following
strategic objectives:
FOCUS ON HIGH MARKET SHARE PRODUCTS. Management focuses on developing
products that have high market share potential. Management estimates that each
of the Company's eight major product lines holds a number one or number two
market share position. Together these product lines comprised approximately 81%
of the Company's 1993 net sales. These market positions were achieved primarily
through internal growth and reflect a long-term, Company-wide commitment to
excellence in styling, engineering, product development, value-added
manufacturing and customer service.
The table below sets forth management's estimates of the Company's 1993
market share positions in its eight major product lines.
<TABLE> <CAPTION>
1993 1993 MARKET
NET SALES SHARE
Product Line (MILLIONS) POSITION
- -------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Automotive Products
Automotive Seat Fabric................................................... $ 218.4 #1
Molded Floor Carpets..................................................... 180.5 2
Accessory Floor Mats..................................................... 73.4 1
Luggage Compartment Trim................................................. 37.4 2*
Convertible Top Stacks................................................... 28.1 1
Interior Furnishings
Flat-woven Furniture Fabrics............................................. 268.9 1
Six-foot Commercial Carpet............................................... 60.3 1
Wallcoverings (Residential)................................................ 196.0 1
-----------
Subtotal................................................................... $ 1,063.0
Percent of net sales..................................................... 81%
Net sales.................................................................. $ 1,305.5
</TABLE>
-------------------------------
* Management believes that the Company and a competitor are tied
for the number two market share position.
MAINTAIN BROAD PRODUCT OFFERINGS TO SUPPORT CUSTOMER BASE. The Company
consistently strives to offer a wide variety of products and to become the
primary supplier to each of its customers. The breadth and variety of fabrics
and styles offered by Decorative Fabrics supports the Company's goal of being
the primary supplier to its customers. Wallcoverings has manufacturing
capabilities in all types of printing technologies, utilizes a vast library of
designs and color concepts and supports the most extensive dealer network in the
industry, selling to approximately 15,000 dealers and most of the leading retail
chains in the country.
Automotive Products offers a wide variety of interior trim products and
thereby maintains a broader, more uniform sales penetration at foreign owned
North American automotive production and assembly facilities ("Transplants") and
U.S. automotive original equipment manufacturers (together with Transplants,
"OEMs") than any of its competitors. Management estimates that for 1993
Automotive Products' overall share in its five major automotive product lines
was 26% at Ford Motor, 40% at General Motors and 51% at Chrysler, and that its
share was 36% among the Transplants.
38
<PAGE>
MAINTAIN LOW-COST POSITION. Management's strategy is to maintain the
Company's low-cost position and flexible manufacturing capabilities in order to
protect operating margins from competitive pricing pressures and economic
downturns, while maximizing the benefit from cyclical upturns. The Company
established its low-cost position through a systematic long-term focus on
improving materials yields and labor productivity and reducing overhead
expenses. These initiatives helped offset the impact of volume declines on
operating margins during the recent economic recession and position the Company
to take full advantage of industry upturns.
MAXIMIZE BENEFITS FROM HIGH OPERATING LEVERAGE. Management believes that
substantial available production capacity and high operating leverage have
enabled the Company to benefit from the recent cyclical upturn in its served
markets. In addition, the Company has substantial available manufacturing
capacity to support further growth.
Over the past several years, the Company has made considerable investments
in product development, MIS upgrades and other areas of capital improvement. The
Company does not currently anticipate the need to make significant capital
expenditures to expand capacity to meet cyclical increases in demand, with the
exception of an $85 million five-year capacity expansion program planned for the
Mastercraft division of Interior Furnishings. Future capital expenditures are
currently targeted primarily toward further cost reduction and modernization.
Recently, sales and production volumes have been increasing rapidly in the
Company's served markets. During the second half of 1993, the seasonally
adjusted annual rate of U.S. light vehicle sales was 14% higher than during the
1991 recession lows, and the seasonally adjusted annual rate of U.S. furniture
sales for the second half of 1993 was 19% higher than in 1991. If the current
upward trends in the Company's businesses continue, management believes that the
Company may continue to achieve higher capacity utilization rates, which
generally result in higher operating margins.
OFFER VALUE-ADDED PRODUCTS. A key element of the Company's strategy is to
increase market share and unit selling prices by developing increasingly higher
value-added products through innovations in materials construction, product
design and styling. The Company produces virtually no inventory or commodity
type products other than in Wallcoverings. The Company recently developed the
"Top-in-a-Box" convertible top assembly, enabling the Company to capture
substantial additional materials and assembly value in its unit selling price by
shipping a fully-assembled module directly to the OEMs. Previously, convertible
top systems were assembled on high-cost OEM assembly lines or in specialty
conversion shops. In recent years, through these and other innovations, the
Company has realized higher unit sales prices.
MAINTAIN PRODUCT DESIGN AND STYLING LEADERSHIP. Design and styling are key
differentiating factors in consumer purchasing decisions. Management believes
that the Company's product styling and design capabilities are currently an
important competitive advantage and intends to devote resources to maintain the
Company's position in these areas. The Decorative Fabrics group introduces more
than twice as many designs each year as its largest competitors and has a design
library built by such well known designers as Wesley Mancini, Carl Miller and
Stanley King. Similarly, Wallcoverings has a leading in-house design staff and
also licenses designs from industry leaders such as Laura Ashley, Mario Buatta
and Clarence House. Automotive Products operates a technical design center with
state-of-the-art, computer-aided design/computer-aided manufacturing ("CAD/CAM")
systems.
CONTINUE TO DELEVERAGE. The Recapitalization is designed to increase
operating and financial flexibility by reducing the Company's indebtedness and
significantly lowering its cost of borrowing, thereby freeing more cash for debt
repayment, continued reinvestment in the Company's businesses and the pursuit of
niche acquisitions. Management expects this financial deleveraging to be
39
<PAGE>
enhanced through the application of operating cash flow augmented by the use of
the Company's NOLs, which management believes will total approximately $434.0
million after the Recapitalization, and by other favorable tax attributes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "--Tax Matters".
COMPLETE STRATEGIC RESTRUCTURING OF WALLCOVERINGS. In late 1993, a newly
installed management team instituted a restructuring plan at Wallcoverings
designed to rebuild the segment's product offerings, to increase its sample book
introduction rate through aggressive marketing and design and to improve
utilization of its extensive distribution network and manufacturing
capabilities. Management is also expanding Wallcoverings' quick-ship and
in-stock programs and enhancing its order processing systems. Management
believes that the results of the restructuring are becoming evident in the
segment's financial results, as the operating income margin increased to 8.5% in
the first quarter of 1994 from a 6.9% operating income margin in the first
quarter of 1993.
AUTOMOTIVE PRODUCTS
GENERAL
The Company is a leading designer and manufacturer of automotive products
with 1993 net sales of $677.9 million. Automotive Products supplies four major
interior trim products--automotive seat fabric ("bodycloth"), molded floor
carpets, accessory floor mats and luggage compartment trim--and convertible top
stacks. Management estimates that Automotive Products holds a number one or
number two market share position in each of its five major product categories.
At least one of its five major automotive products is used on approximately 87%
of all North American-produced vehicle lines. Automotive Products has supplied
interior trim products to the automotive industry for over 60 years. Management
estimates that the total market for Automotive Products' five major product
lines in 1993 was approximately $1.4 billion. Accordingly, management believes
that Automotive Products' 1993 sales of $537.8 million in these product lines
represents a market share of approximately 37%. While some interior trim
suppliers have sales volumes equivalent to or greater than that of the Company
in a single product line, management believes that the Company sells a wider
variety of interior trim products, has products on more vehicle lines and has a
broader, more uniform sales penetration at the OEMs than any of its competitors.
INDUSTRY
Automotive industry demand historically has been influenced by both
cyclical factors and long-term growth trends. Since nearly all of the historic
growth in the stock of light vehicles has been associated with increases in the
driving age population and real per capita income, the Company anticipates that
the fleet of light vehicles will continue to grow at rates consistent with these
factors.
Vehicle replacement demand is significantly influenced by the overall
health of the economy and consumer confidence generally. Management believes
that light vehicle sales may also be influenced by scrappage rates and the
average fleet age. Currently, the average age of the U.S. passenger car fleet is
at a modern high of nearly 8.0 years per vehicle compared to 7.1 years in the
early 1980's and to 6.3 years in 1970. This trend may give rise to replacement
demand for the aging vehicles still in use.
Annual new car and truck sales historically have been cyclical. In the most
recent cycle, U.S. light vehicle sales declined from an average of 15.4 million
units per year in 1986-1988 to a low of 12.3 million units in 1991. Since late
1993, however, U.S. light vehicles sales have accelerated. In
40
<PAGE>
the first quarter of 1994, U.S. light vehicles sold at a 15.6 million annualized
rate, a level 27% higher than during the lowpoint of 1991.
In 1993, approximately 95% of Automotive Product's sales related to North
American-produced vehicles rather than imported units. In recent years, the
share of retail sales accounted for by North American-produced vehicles has
risen from a low of approximately 72% in 1987 to approximately 78% in 1991 and
to approximately 84% in 1993. This trend reflects the shift of production by
foreign manufacturers from off-shore auto plants to Transplant facilities
located in North America. Based on announced production schedules, management
anticipates that the three largest traditional vehicle importers, Toyota, Honda
and Nissan, will build approximately 60% of their combined North American sales
volume in Transplant facilities during the current calendar year compared to
approximately 49% in 1992 and to approximately 10% in 1986. As a consequence of
the increased share of import "nameplates" produced in Transplant facilities,
North American production has risen faster than retail sales. Between 1991 and
1993, for example, North American production increased by 22% compared to a 13%
increase in U.S. light vehicle sales during the same period. Management believes
this trend provides the Company with additional sales opportunities. In 1993,
the Company sold nearly $100 million of its major auto product lines to
Transplants, with its business spread among virtually all such assembly plants
then in production.
PRODUCTS
Automotive Products manufactures five principal products: automotive seat
fabric, molded floor carpets, accessory floor mats, luggage compartment trim and
convertible top stacks. Automotive Products also produces a variety of other
automotive and nonautomotive products. The following table sets forth Automotive
Products' net sales by product line for the past three years.
<TABLE> <CAPTION>
1991 1992 1993
---------------------- ----------------------- ----------------------
% OF % OF % OF
NET TOTAL NET TOTAL NET TOTAL
PRODUCT LINE SALES SALES SALES SALES SALES SALES
- ------------------------------------------- ----------- --------- ------------ --------- ----------- ---------
(IN
MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Automotive Seat Fabric..................... $ 189.8 31.1% $ 191.1 29.7% $ 218.4 32.2%
Molded Floor Carpets....................... 161.9 26.5 173.1 26.9 180.5 26.6
Accessory Floor Mats....................... 73.1 12.0 79.5 12.3 73.4 10.8
Luggage Compartment Trim................... 25.4 4.2 26.8 4.2 37.4 5.6
Convertible Top Stacks..................... 19.9 3.3 20.9 3.2 28.1 4.1
Other...................................... 140.2 22.9 152.4 23.7 140.1 20.7
----------- --------- ------------ --------- ----------- ---------
Total................................. $ 610.3 100.0% $ 643.8 100.0% $ 677.9 100.0%
----------- --------- ------------ --------- ----------- ---------
----------- --------- ------------ --------- ----------- ---------
</TABLE>
AUTOMOTIVE SEAT FABRIC. Automotive Products manufactures a wide variety of
bodycloth, including flat-wovens, velvets and knits. Automotive Products also
laminates foam to bodycloth. Management believes that in 1993 Automotive
Products was the largest supplier of bodycloth to OEMs with net sales and
estimated market share of $218.4 million and 38%, respectively.
MOLDED FLOOR CARPETS. Molded floor carpets includes polyethylene,
barrier-backed and molded urethane underlay carpet. Management believes that in
1993 Automotive Products was the second largest producer of molded floor carpets
with net sales and estimated market share of $180.5 million and 35%,
respectively. In the Company's automotive molded floor product line, it has
developed a "foam-in-place" process to provide floor carpeting with enhanced
acoustical and fit characteristics, resulting in a substantial gain in unit
selling prices.
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<PAGE>
ACCESSORY FLOOR MATS. Automotive Products produces carpeted automotive
accessory floor mats for both North American produced vehicles and imported
vehicles. In 1993, management estimates that approximately 63% of all vehicles
produced in North America included accessory mats as original equipment.
Management believes that in 1993 Automotive Products was the market leader in
this product line with net sales of $58.1 million, representing approximately
47% of all mats sold to OEMs. In addition, in 1993 Automotive Products sold
approximately $15.3 million of accessory mats to vehicle importers.
LUGGAGE COMPARTMENT TRIM. Luggage compartment trim includes one-piece
molded trunk systems and assemblies, wheelhouse covers, seatbacks, tireboard
covers, center pan mats and other trunk trim products. Management believes that
in 1993 Automotive Products was tied with another competitor as the second
largest supplier of luggage compartment trim to OEMs with net sales and
estimated market share of $37.4 million and 25%, respectively.
CONVERTIBLE TOP STACKS. Automotive Products designs, manufactures and
distributes convertible top stacks through Dura. Management believes that in
1993 Dura was the market leader in convertible top stacks with net sales and
estimated market share of approximately $28.1 million and 75%, respectively. In
October 1993, Dura began shipping its "Top-in-a-Box" product for Ford's
redesigned Mustang vehicle.
OTHER. Automotive Products also produces a variety of other auto products,
including die cuts for automotive interior trim applications, convertible power
train units, headliner fabric, molded package shelves, molded hood insulator
pads, foam laminated door fabrics and carpet trim and roll goods for export and
domestic consumption. Small volumes of certain products, such as residential
floor mats, casket and tie linings and sliver knits, are sold to other
commercial and industrial markets.
AUTOMOTIVE PRODUCTS SEGMENT GROWTH STRATEGY
The Company's business objective is to achieve strong growth in sales and
earnings through a three-pronged approach. First, the Company pursues
innovations in styling, materials construction and product performance, which
add value and revenue yield to its products. Second, the Company seeks to obtain
increased product placements on OEM vehicle lines. Third, the Company intends to
capitalize on an industry-wide increase in interior trim content per vehicle.
First, Automotive Products seeks to increase market share and selling
prices through product innovation. For example, the Company recently developed a
new, distinctive Jacquard velvet fabric which provides OEMs with a diversity of
pattern and color not available in traditional plain velours. Management
believes this new fabric will generate a significantly higher sales content per
vehicle than the traditional velours it will replace. To date, the Company has
been awarded 20 vehicle line placements for its new Jacquard velvet.
Second, the Company has succeeded in capitalizing on its deep OEM
relationship network to win product placements on new vehicle lines in addition
to increasing placements on lines currently supplied by the Company. In the case
of the new Ford Mustang, which was launched in model year 1994, the Company is
supplying all five of its major products, resulting in an average sales content
of approximately $400 per Mustang produced.
The Company's strategy is to focus its substantial styling, engineering and
product development capabilities on the design phase of new vehicle lines and on
each OEM's model changeover cycle. Typically, car and truck model lines are
replaced or substantially redesigned at four to eight year intervals. The
Company's experience has been, with few exceptions, that business awarded on
such new or redesigned model lines has been retained until the next changeover.
Over the last several years, the Company has been successful in placing one
or more of its products on new or redesigned OEM vehicle lines. The Company has
won product placements on
42
<PAGE>
23 new or redesigned North American vehicle lines, some of which have multiple
models, launched in model year 1994 or scheduled for launch over the next 18
months. The Company supplies three or more products to 10 of the 23 new or
redesigned vehicle lines. Six of the 23 lines use all four major interior trim
products. Two of the 23 use all five of the Company's major automotive products.
Third, the Company intends to capitalize on certain industry trends. In
recent years, OEMs have sought to differentiate their vehicles by strengthening
their consumer appeal through the increased use of interior trim. As a
consequence, the average sales content per vehicle of the five principal
automotive products produced by the Company has increased each year over the
last five years. Management estimates that in 1988 the total North American OEM
market for its five major products was $1.2 billion, resulting in an average
interior trim sales content for the market of $89 per vehicle. By 1993,
according to management estimates, OEM purchases of these products had increased
to $105 per vehicle, representing a 3.3% per year compound growth rate. This
trend has been accelerated by the growing popularity of mini vans and sports
utility vehicles in the light truck category. Because of their size, these
vehicles generally use more interior trim than traditional passenger vehicles.
In addition, automobile manufacturers are upgrading the interiors of these
vehicles by using higher-value fabrics, carpet and other trim materials than
were used previously in such vehicles.
This continuing upgrade of interior trim and convertible applications is
enabling the Company to achieve strong gains in its sales content per North
American vehicle produced. In 1993, its net sales of automotive products to
North American OEMs totalled $568 million, reflecting an average sales content
per North American-produced vehicle of approximately $43.
43
<PAGE>
The table below shows all the North American-produced vehicle lines for
which Automotive Products supplies at least one of its five major products. An
asterisk identifies recently awarded placements on new or redesigned vehicle
lines or models.
VEHICLE LINES SUPPLIED
COMPANY MODELS
General Motors Achieva
Aurora*
Beretta
Blazer*
Bonneville
Brougham
Camaro*
Caprice
Cavalier*
Century
Ciera
C-K Truck/10/30
C-K Truck/15/35
Corvette
DeVille/Concours*
Olds '88
Eldorado
Firebird
Grand Am
Grand Prix
LeSabre
Lumina-Van*
Lumina-Car*
Monte Carlo*
Olds '98
Park Avenue
Regal
Riviera*
S-10*
S-10 Blazer
S-15 Jimmy
Safari
Saturn
Seville
Silhouette
Skylark
Sonoma
Chevy Suburban
GMC Suburban
Sunbird*
Supreme*
TransSport
Yukon
Ford Aerostar
Bronco
Contour*
Cougar
Explorer*
Mustang*
Mystique*
Probe
Quest
Ranger
Taurus
Tempo
Thunderbird
Topaz
Windstar*
Chrysler Acclaim
Caravan
Cirrus*
Concord*
Dakota
Daytona
Eagle Talon
Grand Cherokee
Intrepid
LeBaron/J/JX*/LHS*
Mini Ram Van
Neon*
New Yorker LHS*
Plymouth Neon
Ram Van/Ram
Shadow
Spirit
Stratus*
Sundance
Town & Country
T-300 Pickup
Vision*
Voyager
Wagoneer
Transplants Fuji/Isuzu Legacy
Fuji/Isuzu Passport
Fuji/Isuzu Rodeo
Geo Metro
Geo Prism
Honda Accord*
Honda Civic*
Honda Mini-Van*
Hyundai Elantra
Isuzu Pickup*
Mazda MX-6
Mazda Pickup
Mazda 626
Mitsubishi Eclipse
Mitsubishi Galant
Nissan Pickup
Nissan Sentra
Suzuki Sidekick
Suzuki Swift
Suzuki Tracker
Toyota Avalon*
Toyota Camry
Toyota Corolla
Toyota Pickup*
Volvo 740/760
<PAGE>
Net sales by customer for 1993 are set forth below (in millions):
<TABLE> <CAPTION>
1993
------------------------
% OF
NET SALES NET SALES
----------- -----------
<S> <C> <C>
General Motors...................................................... $ 211.5 31.2%
Chrysler............................................................ 130.0 19.2
Ford................................................................ 102.4 15.1
Transplants......................................................... 118.0 17.4
Other............................................................... 116.0 17.1
----------- -----------
Net Sales...................................................... $ 677.9 100.0%
----------- -----------
----------- -----------
</TABLE>
VALUE-ADDED MANUFACTURING AND QUALITY
Most OEMs require deliveries on a "just-in-time" ("JIT") basis to meet
precise production schedules. The most stringent requirement demands
color-sequenced JIT delivery of parts within four hours. To meet these
requirements, the Company has instituted a JIT manufacturing process to
complement its customers' manufacturing processes, thereby minimizing
inventories and administrative and materials handling costs and simplifying the
production process for both the Company and the OEMs.
In response to OEM-mandated price reductions, the Company has implemented
value analysis and value engineering programs to reduce costs . Management has
established a standardized format for monitoring cost of nonconformance
throughout the Company.
In addition, OEMs expect suppliers to take on increased design and
engineering responsibilities. The Company's participation with customers in the
early phase of product design and engineering enables it to improve the quality
of its products as well as to meet its customers' cost targets and design
service requirements. The Company has made substantial investments in product
technology and product design capability to support its products and to provide
its customers with value-added engineering and design services. For example, the
Company operates a technical design center with state-of-the-art,
computer-aided-design/computer-aided-manufacturing ("CAD/CAM") systems.
Automotive Products' CAD systems are linked to the design and engineering
systems of its principal customers. These systems enable the Company to simulate
numerous three-dimensional designs for rapid submission to customers, thereby
increasing customer service and lowering development costs.
The Company's goal is to continue to manufacture its products to meet the
exacting standards of its customers. The Company has been recognized as a
quality supplier to the automotive industry as evidenced by numerous awards from
virtually all OEM's, including the Transplants.
ACQUISITIONS/STRATEGIC ALLIANCES
The Company pursues niche acquisitions and strategic alliances that would
further serve to broaden the Company's customer base and products. In 1993, the
Company acquired a Mexican-based molded floor carpet manufacturer and began
construction of a new facility in Mexico to take advantage of opportunities in
the Mexican market.
COMPETITION
The automotive supply business is highly competitive. The primary
competitors in molded floor carpet are Masland Corporation and JPS Automotive
Products Corp. The primary competitor in bodycloth is Milliken & Company. In
accessory floor mats, the Company competes primarily against Pretty Products
Company. Automotive Products' primary competition in luggage compartment trim is
Masland Corporation and Gates Corporation. In convertible top stacks, Automotive
Products competes primarily against American Sunroof Corporation.
FACILITIES
Automotive Products has 28 manufacturing facilities located in the U.S.,
Canada and Mexico. Approximately 90% of the total square footage of these
facilities is owned and the remainder is leased. Many facilities are
strategically located to provide JIT inventory delivery to the Company's
customers. The Company believes that these facilities have sufficient capacity
to meet anticipated needs.
45
<PAGE>
The following list provides certain information regarding the Automotive
Products' manufacturing facilities:
<TABLE> <CAPTION>
SQUARE
FOOTAGE OWNED/
LOCATION (000) LEASED FUNCTION
- --------------------------------- ----------- --------- ----------------------------------------------------------
<S> <C> <C> <C>
Farmville, NC.................... 508 Owned Knit Manufacturing
Roxboro, NC(*)................... 545 Owned Auto Upholstery--Dyeing and Finishing
Roxboro, NC(*)................... 330 Owned Auto Upholstery--Weaving
Roxboro, NC(*)................... 137 Owned Auto Upholstery--Knitting
Roxboro, NC(*)................... 67 Owned Auto Upholstery--Warehouse
Albemarle, NC.................... 585 Owned Auto Carpet Tufting/Finishing
Old Fort, NC..................... 375 Owned Auto Carpet Molding
Old Fort, NC..................... 60 Owned Mold Manufacturing
Clinton, OK...................... 158 Owned Auto Carpet Molding
Salisbury, NC.................... 106 Owned Die Cut/Sewing
Troy, NC......................... 98 Owned Non-Woven Carpet
Troy, NC......................... 153 Owned Yarn Spinning Mill
Norwood, NC...................... 275 Owned Yarn Spinning Mill
St. Clair, MI.................... 100 Owned Auto Carpet Molding
Canton, OH....................... 146 Owned Manufacturing--Rubber/Mats
Holmesville, OH.................. 84 Owned Manufacturing--Mats
Ravenna, OH...................... 204 Owned Manufacturing--Rubber
Zanesville, OH................... 599 Owned Manufacturing--Mats
Farnham, Quebec.................. 266 Owned Auto Carpet--Tufting and Finishing/Non-Woven
Lacolle, Quebec.................. 107 Owned Auto Carpet--Molding
Ingersoll, Ontario............... 104 Owned Auto Carpet--Molding
Elmira, Ontario.................. 133 Owned Sliver Knit Carpet Manufacturing
Queretaro, Mexico................ 93 Owned Auto Carpet--Molding
-----------
Total Owned............... 5,233
-----------
Farmville, NC.................... 138 Leased Warehouse
Roxboro, NC(*)................... 88 Leased Warehouse
Roxboro, NC...................... 42 Leased Warehouse
Barberton, OH.................... 41 Leased Manufacturing--Mats
Orange, CA....................... 10 Leased Warehouse
Adrian, MI(East)................. 155 Leased Convertible Tops--Manufacturing
Adrian, MI(West)................. 34 Leased Convertible Tops--Engineering
Plymouth, MI..................... 16 Leased Convertible Tops--Manufacturing
Bloomfield Hills, MI............. 8 Leased Sales Office
Vallejo, Mexico.................. 102 Leased Auto Carpet--Molding
Monterrey, Mexico................ 35 Leased Non-Woven Carpet
-----------
Total Leased.............. 669
-----------
Total..................... 5,902
-----------
-----------
</TABLE>
- ---------------
(*) Also utilized by Decorative Fabrics.
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<PAGE>
INTERIOR FURNISHINGS
Interior Furnishings designs and manufactures residential and commercial
upholstery fabrics through its Decorative Fabrics group and high-end specified
contract floorcoverings through its Floorcoverings group. In 1993, Interior
Furnishings had net sales of $407.2 million. Net sales by products are set forth
below (in millions):
<TABLE> <CAPTION>
1991 1992 1993
------------------------ ------------------------ ------------------------
% OF % OF % OF
PRODUCT LINE NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Decorative Fabrics
Flat-Woven.................................. $ 214.5 63.7% $ 254.7 65.0% $ 268.9 66.0%
Other....................................... 47.0 14.0 48.5 12.4 44.7 11.0
Floorcoverings................................ 75.3 22.3 88.6 22.6 93.6 23.0
----------- ----------- ----------- ----------- ----------- -----------
Net sales................................... $ 336.8 100.0% $ 391.8 100.0% $ 407.2 100.0%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
DECORATIVE FABRICS
GENERAL. Interior Furnishings' Decorative Fabrics group is the largest
designer and manufacturer of upholstery fabrics in the U.S., with 1993 net sales
of $313.6 million. Management estimates that its share of the U.S. upholstery
fabric market is approximately 15%, based on data published in the May 1994
edition of Furniture Today, a leading trade publication. Decorative Fabrics
strives to be the preferred supplier of middle-to high-end flat-woven upholstery
fabrics to furniture manufacturers and fabric distributors. This group's primary
division, Mastercraft, is the leading manufacturer of flat-woven upholstery
fabrics and had 1993 net sales of $268.9 million. Management believes that
Mastercraft has substantially more Jacquard looms and styling capacity dedicated
to upholstery fabrics, and offers more patterns (approximately 14,000) in a
greater range of price points than any of its competitors. The breadth and size
of Mastercraft's manufacturing and design capabilities provide it with
exceptional flexibility to respond to changing customer demands and to develop
innovative product offerings.
INDUSTRY. The three primary types of upholstery fabric are flat-wovens,
velvets and prints. Based upon published industry estimates, management believes
that flat-woven fabrics were the fastest growing sector in the upholstery
fabrics industry over the last five years and accounted for approximately 53% of
the estimated $1.7 billion upholstery fabric industry in 1993. Flat-woven
fabrics are made in two major styles: Jacquard, which is produced on high-speed
computerized looms capable of weaving and knitting intricate designs into the
fabric, and Dobby, a plain fabric produced on standard looms.
Demand for upholstery fabric generally varies with economic conditions,
particularly sales of new and existing homes, and is directly associated with
sales of upholstered furniture at the retail level. After a period of slow
growth during the 1991 recession, the dollar value of U.S. upholstered furniture
shipments (including both fabric and leather) increased by 7.4% in 1992 and
13.4% in 1993, according to the American Furniture Manufacturers Association. In
the first quarter of 1994, according to that source, U.S. upholstered furniture
shipments increased by 7.8% as compared to the corresponding period for the
prior year. Mastercraft is currently operating at approximately 100% capacity.
In order to accommodate anticipated growth, the Company recently initiated a
plan to invest $85 million in Mastercraft between 1994 and 1998. See
"--Mastercraft Growth Plan".
Management believes there are three significant trends within the U.S.
furniture marketplace that have affected and may continue to affect Decorative
Fabrics. First, fabric design is being increasingly used by residential
furniture manufacturers as a differentiating characteristic for their products.
Jacquard fabric has become increasingly popular due to its incorporation of
intricate designs. A proliferation of Jacquard patterns and styles has been made
possible by recent
47
<PAGE>
technological developments in the electronic Jacquard loom, which has made the
rapid introduction of new designs significantly less expensive.
Second, the consolidation in both the furniture manufacturing and retailing
industries has resulted in fewer and larger buyers of upholstery fabrics. These
manufacturers and retailers generally are interested in purchasing fabrics from
suppliers that can provide a broad spectrum of their fabric requirements. The
wide range of products offered by Decorative Fabrics enables it to be a primary
supplier to the majority of its customers.
Third, management believes that furniture manufacturers and retailers are
shifting from item-by-item selling to complete room presentations, thus creating
a demand for furniture fabric suppliers that offer a broad array of coordinating
fabrics.
Management believes that Decorative Fabrics is well positioned to benefit
from these trends because it is one of the few industry participants able to
deliver the breadth of styles and quantity of fabrics needed to satisfy the
increasing demands of furniture manufacturers and retailers.
STYLE AND DESIGN. Management believes that the continued development of
superior product designs and styles is the most critical strategic objective of
Decorative Fabrics. The pattern and style of a particular fabric are considered
to be strong influences in the purchasing decision of consumers. Decorative
Fabrics utilizes a combination of in-house design studios, independent signature
designers and consultants to create innovative product designs and styles
utilizing CAD technology. Its product design flexibility also enables Decorative
Fabrics to offer custom fabric designs to its largest customers. Decorative
Fabrics creates approximately 2,000 new designs and styles per year,
substantially more than any of its competitors.
PRODUCTS. Decorative Fabrics' four operating divisions are Mastercraft,
Cavel, Warner and Greeff. Mastercraft and Cavel design and manufacture
Jacquards, velvets and other woven fabrics for the furniture, interior design,
commercial, recreational vehicle and industrial markets. Greeff and Warner
design and distribute high-end designer fabrics to interior designers and
specialty retailers in the U.S. and the U.K., respectively.
MASTERCRAFT DIVISION. Mastercraft is Decorative Fabrics' largest division.
Mastercraft focuses on the medium-to-upper price range, and its products had an
average wholesale price per yard of $6.38 in 1993. Management estimates that
Mastercraft's share of the U.S. flat-woven upholstery fabric market is
approximately 22%, based on data published in the May 1994 edition of Furniture
Today. Over the last ten years, Mastercraft's net sales grew at a compound
annual rate of approximately 14%. Mastercraft serves the diverse furniture
industry through the following four separate product lines which emphasize
different styles and price points:
Mastercraft Fabrics is the largest of the four product lines offered by the
Mastercraft division, currently offering over 8,000 designs. Management believes
that this Jacquard product line is the most diverse in style. The product
offerings range from a wholesale price of $3.50 to $12.00 per yard.
Home Fabrics is a leading line of traditionally styled Jacquard fabrics.
The design focus is on the middle-to-upper wholesale price ranges of $5.50 to
$14.00 per yard and is under the direction of Wesley Mancini Studios, a
world-renowned designer of classic, formal and traditional styles. The products
are known for their color, quality and innovation. Mancini designs fabrics
exclusively for the Home Fabrics product line and the Greeff division. Mancini's
15-person design staff creates approximately 500 designs per year for Home
Fabrics.
Doblin is a Jacquard product line renowned for its natural fibers and
elegant designs and constructions. It is targeted at the upper-end of the
market. Doblin's studio consists of twelve design professionals (both in-house
and external) who create approximately 300 designs annually.
48
<PAGE>
Mastercraft Contract serves the wall panel, wallcovering and office seating
markets and the product line features approximately 50 Jacquard fabric designs
annually. The eight-member design team focuses on Jacquard yarn-dyed and
patterned fabrics, which management believes to be an increasingly favored
fabric in the wall panel, wallcovering and office seating markets.
MASTERCRAFT GROWTH PLAN. Management's strategy is to continually shift its
product mix toward higher price ranges and to increase its manufacturing
capacity in the fast growing Jacquard market. Due to the resulting high sales
volumes, Mastercraft has experienced a "sold-out" order position for nearly
every quarter during the last five years. Its capacity utilization rate has
consistently averaged nearly 100%. In order to accommodate anticipated growth,
the Company recently initiated a plan to invest $85 million in Mastercraft
between 1994 and 1998. Investment is targeted toward the purchase of high-speed
looms to increase capacity and productivity, new electronic Jacquard heads to
reduce pattern changeover times, and computer monitoring systems to provide
information about the manufacturing processes and to improve quality,
productivity and capacity.
Following the anticipated completion of the Company's current capital
investment plan in 1998, management expects that Mastercraft's production
capacity will have been materially enlarged, and that up to 75% of its weaving
equipment will consist of the latest generation, high-speed Jacquard looms with
electronic heads. Management anticipates that this program will result in higher
labor productivity, reduced materials loss, lower overhead expense and higher
volumes of finished product than presently achieved.
Consistently high capacity utilization rates, as well as demand for
higher-priced products, have also enabled Mastercraft to gradually shift its
product mix toward the higher price ranges, further enhancing operating profit.
The average wholesale price per yard for its fabrics has increased from $5.58 in
1989 to $6.38 in 1993.
OTHER DECORATIVE FABRICS DIVISIONS. With 1993 net sales of $39.6 million,
the Cavel division is a leading manufacturer of velvets. Cavel manufactures both
Dobby and Jacquard velvets. Cavel manufactures fabrics for home furnishings,
recreational vehicles and specialized industrial products such as paint rollers.
Cavel's 13-person design staff produces approximately 250 designs annually for
these markets. The two smaller divisions of Decorative Fabrics, Greeff and
Warner, supply the interior design and specialty retailer markets in the U.S.
and the U.K., respectively.
CUSTOMERS. Decorative Fabrics is a primary supplier to virtually all major
furniture manufacturers in the U.S., including La-Z-Boy, Ethan Allen,
Thomasville, Flexsteel, Bassett, Broyhill, Baker, Henredon, Rowe and Robert
Allen. Due to the breadth of its product offerings, strong design capabilities
and superior customer service, the Company has developed close relationships
with many of Decorative Fabrics' over 1,000 customers.
Nearly all of Decorative Fabrics' products are made to customer order. This
reduces the amount of raw materials and finished goods inventory required and
greatly reduces product returns, thereby improving profit margins.
CUSTOMER SERVICE. Decorative Fabrics invests significant capital resources
in customer service technology. Key service-related objectives include providing
custom-tailored design capabilities to large customers, reducing lead time for
orders and providing consistent, on-time delivery.
To enhance customer satisfaction, Decorative Fabrics began implementation
of a computerized material requirements' inventory system, MRP II, in 1992.
Implementation of the MRP II system has significantly improved inventory control
and enabled the Company to reduce manufacturing lead times. The completion of
the MRP II project in 1993 also provided significant enhancements to Decorative
Fabrics' electronic data interchange ("EDI") systems. The improved use and
availability of EDI allows customers to place orders faster and significantly
reduces order processing time.
49
<PAGE>
MARKETING AND SALES. Fabrics are sold domestically by 31 commissioned sales
representatives who exclusively represent the Mastercraft and Cavel divisions of
Decorative Fabrics. The Mastercraft and Cavel divisions maintain showrooms in
seven key locations throughout the United States. Products are presented in
collections which suggest a complete room environment using the Company's
diverse mix of fabrics.
Mastercraft's 1993 export sales were $30.5 million, or 11.3% of its net
sales. Export sales have increased at a compound annual growth rate of 30% since
1988. All export fabrics are sold through commissioned sales representatives and
agents in key countries. Major export regions include the United Kingdom,
Scandinavia, Europe, the Middle East, Australia, New Zealand, the Far East,
Canada and South America.
MANUFACTURING. Decorative Fabrics invests significant capital resources to
upgrade manufacturing facilities and continually improve productivity.
Management believes that continued commitment to technological improvements is
essential to remain competitive in the decorative fabrics business. All plants
typically operate on a six-day, three-shift schedule and operate an adjustable
schedule on the seventh day in order to balance production and customer demand.
COMPETITION. The U.S. upholstery fabrics market is highly competitive.
Manufacturers compete on the basis of design, quality, price and customer
service. Decorative Fabrics' primary competitors include Quaker Fabric
Corporation, Culp, Inc., Joan Fabrics Corp. and the Burlington House Upholstery
Division of Burlington Industries, Inc.
FACILITIES. Mastercraft owns and operates four weaving plants and one
finishing plant in North Carolina. Cavel shares manufacturing capacity with
Automotive Products at three plants in Roxboro, North Carolina. Greeff and
Warner are designers and distributors, subcontracting all manufacturing. The
Company believes that these facilities have sufficient capacity to meet
anticipated needs.
FLOORCOVERINGS
GENERAL. The Floorcoverings group of the Interior Furnishings segment is a
leading producer of high-end specified contract carpeting products for
institutional and commercial customers. In 1993, net sales were $93.6 million.
Floorcoverings differentiates itself from its competitors in part by its
patented Powerbond RS(R) adhesive system and by its products' durability
characteristics. It is currently the largest manufacturer of six-foot wide rolls
and the third-largest supplier of modular carpet tiles in the U.S.
Floorcoverings produces virtually no product for inventory or for commodity
markets.
Since 1990, Floorcoverings has repositioned its product offerings, shedding
those products in which it lacked either a low-cost position or proprietary
product advantage. By focusing on areas of competitive advantage, Floorcoverings
has prospered, notwithstanding a significant downturn in commercial construction
and renovation, and increased its average selling price per square yard by over
13%.
Management believes that Floorcoverings' niche market position in the high
performance specified sector, differentiated value-added products and
proprietary patented technology provide it with a competitive advantage.
INDUSTRY. Management estimates that 70% of the Company's floorcoverings
business is based on renovation rather than new construction projects.
Historically, renovation activity has been significantly less cyclical than new
construction. Also, approximately 60% of Floorcoverings 1993 net sales were to
institutional customers such as government, healthcare, and education facilities
rather than to commercial market customers. Management believes that government,
healthcare and educational customers are stable, growth sectors, as illustrated
by the fact that new construction spending in these areas has increased by 7%
per year since 1987. As a result of
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these two factors, sales of six-foot wide rolls and modular carpet tiles have
doubled since 1987 while the U.S. commercial construction market has been flat.
PRODUCTS. Floorcoverings' key competitive advantage is in its patented
Powerbond RS(R) adhesive technology, which has 14 years of patent protection
remaining. Because the Powerbond RS(R) system uses a peel-and-stick adhesive as
opposed to a wet adhesive, it permits the installation of floorcoverings
directly on floor surfaces, including existing carpeting, with substantially
reduced labor costs and without the fumes of conventional wet adhesives. This
allows for less disruptive and less time-consuming installation and, for this
reason, is particularly attractive to institutions such as schools and
hospitals. By contrast, conventional carpet installation requires a more costly
and disruptive removal of old carpet and a curing period for the wet adhesive
before the facility can be returned to use. In addition to reducing installation
downtime for customers to as little as one day, management believes
Floorcoverings' product exhibits demonstrably superior durability and cleaning
characteristics ideally suited for high-traffic areas such as airline terminals
and customers such as Discovery Zone and Blockbuster.
COMPETITION. The commercial carpet industry is highly competitive, and
several of Floorcoverings' competitors have substantially greater commercial
carpet sales in the commodity segments of the industry, segments in which
Floorcoverings does not compete. Floorcoverings' niche products have demanding
specifications and generally cannot be manufactured using the equipment which
currently supplies most of the industry's commodity products. The Company's
primary competitors are Interface, Milliken & Company, Mohawk Industries and
Shaw Industries.
FACILITIES. Floorcoverings owns and operates four facilities in Dalton,
Georgia. The Company believes that these facilities have sufficient capacity to
meet anticipated needs.
WALLCOVERINGS
GENERAL
Wallcoverings, which operates under the name "Imperial", had 1993 net sales
of $220.4 million. It is a leading manufacturer and distributor of a full range
of wallcoverings for the residential and commercial sectors of the wallcoverings
market. Management estimates that in 1993 Imperial had a 22% market share in the
larger residential wallcoverings sector and held the number one market share
position in each of this sector's two primary distribution channels--chains and
dealers. It is the only producer of wallcoverings in the U.S. that is fully
integrated from paper production through design and distribution. In addition,
management believes that Imperial has a competitive advantage due to its
extensive in-house design expertise and licensing arrangements, its low cost,
vertically-integrated manufacturing capability and its advanced customer
ordering and service network.
INDUSTRY
The wallcoverings industry experienced significant and consistent growth
from the early 1980s through 1987. This growth resulted in part from increases
in new construction starts and existing home sales which peaked in 1986-87. In
addition, a one-time surge in demand created a new industry-wide layer of
inventory as a result of the rapid growth of large in-stock retailers. Between
1983 and 1987, the industry's physical shipment volume increased from 137
million to 200 million rolls of wallpaper per year, a 9.9% annual growth rate.
Between 1987 and 1990, the industry underwent a contraction, with volume
declining dramatically from 200 million rolls in 1987 to 174 million rolls in
1990, a 4.5% annual decline. This resulted from a slowdown in the overall
economy, particularly in the housing market, coupled with a reduction in
inventory by over-stocked retailers. From 1991 to 1993, the industry's physical
shipment volumes increased at a compound annual growth rate of 3.0%.
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Management estimates that in 1993, total sales for the U.S. wallcovering
market were approximately $1.1 billion on a wholesale basis. The wallcoverings
market can generally be divided into the residential and commercial sectors. The
residential sector is the larger of the two sectors, with estimated total 1993
U.S. sales of $748.0 million. The two primary distribution channels within the
residential sector are dealers and retail chains.
STRATEGIC RESTRUCTURING
The industry contraction of the late 1980s and early 1990s left Imperial
with unutilized manufacturing capacity, an oversized distribution network and
excess product offerings. Between 1989 and 1992, Imperial implemented a
comprehensive downsizing program designed to bring Imperial's high fixed-cost
structure into better alignment with the changed industry environment. Imperial
closed 22 showrooms and 12 warehouses and reduced fixed costs by nearly 15%.
Imperial also substantially reduced the annual introduction rate of new
collections and virtually eliminated its use of independent distributors in
favor of exclusive captive distribution. This restructuring program improved
manufacturing efficiencies, but it adversely affected sales and led to a
reduction in shelf space and market share. As a result, Imperial's sales
declined during 1992 and into 1993, despite what management now believes to have
been a moderate upturn in industry conditions.
A new management team installed in February 1993 determined that the
reduction in new collections had been too severe. Accordingly, in late 1993,
management instituted a second restructuring program to bolster its new product
introduction rate through aggressive product design efforts. This product line
renewal led to 62 collections being introduced in 1993 and 70 collections being
planned for introduction in 1994, compared to 45 in 1992. Management is also
broadening its selection of in-stock programs and improving its order
fulfillment capabilities. For example, in 1993 Imperial introduced a guaranteed
shipment program on 15 of its best selling collections. Through the program
called "On Time Or On Us", free product is offered to dealers for orders
unfilled within 48 hours. The number of collections covered by this program was
increased to 26 in the first quarter of 1994. Imperial also implemented a number
of other MIS and service initiatives designed to enhance customer service and
distribution.
In 1994, Imperial is implementing a plan to improve sales momentum in the
chain store channel, including a tripling of its product development budget for
the national chains, consolidating order entry and customer service activities
under dedicated national account teams, developing innovative product/packaging
approaches for warehouse clubs, and broadening its product offerings with newly
licensed products such as borders featuring National Hockey League and National
Collegiate Athletic Association logos and insignias.
PRODUCT
Management believes Imperial has maintained its market position due to its
competitive edge in color and design. Its in-house studio of approximately 35
artists represents a major strategic investment by Imperial which is
supplemented by an active licensing program under which Imperial licenses proven
designs from well-known designers. Imperial is continuously introducing new
designs and color concepts that supplement its already vast library.
Imperial offers a large number of well-known brand names, including
Imperial, United, Sterling Prints, Katzenbach & Warren, Greeff, Albert Van Luit
and Plexus. In addition to these in-house brands, Imperial licenses a number of
well-known brand names, including Gear, Laura Ashley, Pfaltzgraff, Croscill,
Mario Buatta, David and Dash, Louis Nichole, Clarence House and Carlton Varney,
for which it converts home furnishing designs into wallcovering designs.
Imperial also distributes the lines of John Wilman, Great Britain's largest
wallcoverings designer and manufacturer. Imperial's products sell at the retail
level from $5 per single roll to more than $100 per single roll, with most
products selling in the $8 to $14 range.
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In recent years, there has been increasing demand for wallcoverings
coordinated with decorative accessories such as window treatments, bedding,
upholstery fabric and other textile products. To satisfy this demand from
upscale home furnishings customers, Imperial provides fabrics, which it
generally purchases outside the Company, that are coordinated with its
wallcovering designs. Some of these fabrics are supplied by the Mastercraft and
Greeff divisions of the Company.
CUSTOMERS
Dealers and chains account for the largest portion of Imperial's customer
base. Management believes that the Company has the leading share in each of
these channels. Management believes that Imperial has the most extensive dealer
network in the U.S., selling to approximately 15,000 dealers. Imperial also
sells to many of the leading chains in the country, including Home Depot, Lowes,
Sears, Sherwin Williams and Target.
MANUFACTURING
Imperial is the only manufacturer of wallcoverings that is vertically
integrated from paper production to the design and distribution of finished
wallcoverings. Management estimates that Imperial accounts for approximately 30%
of wallpaper manufacturing capacity in North America. Imperial's objective is to
be the lowest cost manufacturer in the industry. In pursuit of this objective,
Imperial has completed several manufacturing efficiency programs over the past
several years, including significantly reducing the set up times in gravure
printing through implementation of single-minute-exchange-of-die techniques.
COMPETITION
As a result of the recent economic downturn in the wallcoverings industry,
many weaker competitors withdrew from the U.S. wallcoverings market. In
addition, further contraction is expected to occur as sales of wallcoverings
shift to chain stores, which along with other retailers prefer working with
fewer, larger suppliers. Imperial is well positioned to benefit from these
developments.
Competition in the wallcoverings industry is based on design, price and
customer service. Imperial's principal competitors are Borden, GenCorp, F.S.
Schumacher and Seabrook Wallcoverings.
FACILITIES
Imperial owns and operates five manufacturing facilities in the United
States and three in Canada, as well as three distribution centers in the United
States. The Company believes that these facilities have sufficient capacity to
meet anticipated needs.
EMPLOYEES
As of January 29, 1994, the Company's subsidiaries employed approximately
12,000 persons on a full-time or full-time equivalent basis. Approximately 2,200
of such employees are represented by labor unions. Management believes that the
Company's relations with its employees and with the unions that represent
certain of them are good. See "Risk Factors--Collective Bargaining Agreements".
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
As of the consummation of the Offerings and giving effect to the
Recapitalization, the executive officers and directors of the Company, and their
ages as of April 10, 1994, will be as follows:
<TABLE> <CAPTION>
NAME AGE POSITIONS
- ------------------------------------ ----------- ---------------------------------------------------------------------
<S> <C> <C>
Thomas E. Hannah.................... 55 Chief Executive Officer and Director
William J. Brucchieri............... 51 President of Imperial Wallcoverings
John D. Moose....................... 57 President of North American Auto Group
Harry F. Schoen III................. 58 President of Mastercraft Division
Elizabeth R. Philipp................ 37 Executive Vice President, General Counsel and Secretary
Mark O. Remissong................... 41 Senior Vice President and Chief Financial Officer
Paul W. Meeks....................... 41 Vice President and Treasurer
David A. Stockman................... 47 Co-Chairman of the Board of Directors
Bruce Wasserstein................... 46 Co-Chairman of the Board of Directors
James R. Birle...................... 58 Director
John P. McNicholas.................. 31 Vice Chairman
Stephen A. Schwarzman............... 47 Director
Randall J. Weisenburger............. 35 Vice Chairman and Director
W. Townsend Ziebold, Jr............. 32 Director
</TABLE>
Set forth below is certain information about each of the Company's
executive officers and directors. Unless otherwise indicated, positions listed
are with the Company. Following the Offerings, the Company expects to elect two
additional directors who are not affiliated with the Company or the Partners. In
connection with the Offerings, the Company will adopt a charter provision
creating a classified Board consisting of three classes of three directors each.
Each class of directors of the Company will be elected at an annual meeting of
stockholders on staggered three-year terms, such that only one class of
directors will be elected each year. See "Description of the Capital
Stock--Anti-takeover Provisions".
THOMAS E. HANNAH. Chief Executive Officer of the Company as of the
consummation of the Offerings. President and Chief Executive Officer of the
Collins & Aikman Textile and Wallcoverings Group from November 1991 to
consummation of the Offerings, and named an executive officer of the Company in
April 1993. President and Chief Executive Officer of the Collins & Aikman
Textile Group from February 1989 to November 1991. President of Milliken &
Company's Finished Apparel Division prior to that.
WILLIAM J. BRUCCHIERI. President of Imperial Wallcoverings since February
1993 and named an executive officer of the Company in April 1994. Executive Vice
President of Imperial from March 1992 to January 1993. Executive Vice President
of the Mastercraft division from January 1990 to February 1992. Vice President,
Operations of the Mastercraft division from August 1989 to January 1990. Mr.
Brucchieri joined a wholly-owned subsidiary of the Company in 1988.
JOHN D. MOOSE. President of the North American Auto Group since June 1989,
and named an executive officer of the Company in April 1994. Mr. Moose joined a
wholly-owned subsidiary of the Company in 1960.
HARRY F. SCHOEN III. President of the Mastercraft division since January
1993 and named an executive officer of the Company in April 1994. Executive Vice
President and Chief Operating Officer of the Mastercraft division from April
1992 to December 1992. General Manager of Milliken & Company's Greige Fine Goods
Group prior to that.
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ELIZABETH R. PHILIPP. Executive Vice President, General Counsel and
Secretary of the Company since April 1994. Vice President, General Counsel and
Secretary of the Company from April 1993 to April 1994. Vice President and
General Counsel from September 1990 to April 1993. Prior to that, associated
with the law firm of Cravath, Swaine & Moore.
MARK O. REMISSONG. Senior Vice President and Chief Financial Officer of the
Company as of the consummation of the Offerings. Since December 1993, Senior
Vice President and Chief Financial Officer of a wholly-owned subsidiary of the
Company and an executive officer of the Company. Vice President of Finance for
Burlington Industries from 1989 until December 1993.
PAUL W. MEEKS. Vice President and Treasurer of the Company since September
1992. Assistant Treasurer of the Company from April 1988 to September 1992. Mr.
Meeks joined a wholly-owned subsidiary of the Company in 1982.
DAVID A. STOCKMAN. Co-Chairman of the Board of Directors of the Company
since July 1993 and a Director of the Company since October 1988. General
Partner of Blackstone Group Holdings L.P. (the "Blackstone Group") since 1988.
Mr. Stockman is also a director of Edward J. DeBartolo Corporation.
BRUCE WASSERSTEIN. Co-Chairman of the Board of Directors of the Company
since June 1992. Chief Executive Officer and Chairman or President of
Wasserstein Perella Group, Inc. ("WP Group") since 1988 and Chairman and Chief
Executive Officer of Wasserstein Perella Management Partners, Inc. ("WP
Management") since June 1992. Mr. Wasserstein is also Chairman of the Board of
Maybelline, Inc.
JAMES R. BIRLE. A Director of the Company since 1988 and Co-Chairman of the
Board of Directors of the Company from October 1988 until July 1993. General
Partner of the Blackstone Group since 1988. Mr. Birle is also a director of
Connecticut Mutual Life Insurance Co., Great Lakes Dredge & Dock Corporation,
and Transtar, Inc.
JOHN P. MCNICHOLAS. Vice Chairman of the Company since April 1994. Deputy
Chairman of the Company from July 1992 to April 1994. Vice President of the
Blackstone Group since January 1992; Associate of the Blackstone Group from
November 1990 to December 1991; Associate, Merchant Banking Group--Merrill Lynch
Capital Markets from August 1989 to November 1990.
STEPHEN A. SCHWARZMAN. A Director of the Company since October 1988 and
President of the Company from its inception to consummation of the Offerings.
Co-Founding Partner of the Blackstone Group and President and Chief Executive
Officer of The Blackstone Group L.P. ("Blackstone") since 1985. Mr. Schwarzman
is also a director of Great Lakes Dredge & Dock Corporation and Transtar, Inc.
RANDALL J. WEISENBURGER. Vice Chairman of the Company since April 1994 and
a Director of the Company since 1989. Deputy Chairman of the Company from July
1992 until April 1994. Managing Director of Wasserstein Perella & Co., Inc.
("WP&Co.") since December 1993; Director of WP&Co. from December 1992 to
December 1993; Vice President of WP&Co. from December 1989 to December 1992;
Associate of WP&Co. from 1988 to December 1989. Mr. Weisenburger is also Vice
Chairman of the Board of Maybelline, Inc. and Chairman of the Yardley Lentheric
Group.
W. TOWNSEND ZIEBOLD, JR. Director of the Company since December 1992.
Director of WP&Co. since December 1993; Vice President of WP&Co. from December
1991 to December 1993; Associate of WP&Co. from 1988 to December 1991. Mr.
Ziebold is also a director of Maybelline, Inc.
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<PAGE>
COMPENSATION OF DIRECTORS
Effective upon consummation of the Offerings, each director (or the Partner
who designates such director to the Board of Directors) will receive an annual
fee of $40,000, payable quarterly.
In July 1992, C&A Co. entered into an employment agreement with Mr. Hannah,
which was amended as of February 1994. The agreement, as amended, provides for
an initial base salary of $525,000 and participation in any executive bonus plan
of C&A Co., with a target bonus of 75% of base salary then in effect up to a
maximum of 150% of base salary. Under the executive bonus plan currently in
effect, Mr. Hannah is to receive the target bonus with respect to any fiscal
year in which the Company achieves all the goals set by the Company's Board of
Directors or an appropriate committee thereof for such year. Financial goals for
the current fiscal year relate to earnings before interest and taxes. The
executive bonus plan may change at any time. The agreement expires January 31,
1997, with automatic one-year renewals thereafter unless C&A Co. notifies Mr.
Hannah prior to that time of its intention to terminate the agreement. In the
event of involuntary termination for reasons other than cause and other than a
change of control, the agreement provides for severance benefits equal to Mr.
Hannah's base salary then in effect for a period of one year from the
termination date plus any unpaid cash bonus for the prior year and a pro rata
portion of any bonus he would have received had he been employed for the entire
year. C&A Co. also entered into a letter agreement with Mr. Hannah in May 1991
pursuant to which Mr. Hannah is entitled to receive an amount equal to two times
his base salary then in effect in the event his employment is terminated within
three months prior to or one year following a change of control (as defined) of
C&A Co.. In 1993, Mr. Hannah received a base salary of $415,000, a cash bonus of
$783,960, and payouts under the Equity Share Plan referred to below and other
compensation aggregating $2,339,388.
THE COMPANY'S OPTION PLANS
In 1988, Group implemented the Wickes Equity Share Plan (the "Equity Share
Plan") for the purposes of attracting, retaining and motivating key employees of
Group and its subsidiaries. In October 1993, the Equity Share Plan was
terminated in accordance with its terms. Concurrently, Group announced its
intention to implement a new stock option plan. Accordingly, the Company created
a special purpose 1993 Employee Stock Option Plan (the "1993 Plan") to provide
for the one-time award of options to purchase shares of Common Stock to active
key employees in recognition of their prior service. In addition, the 1994
Employee Stock Option Plan (the "1994 Plan") was created as a successor to the
1993 Plan to facilitate future awards of Options to key employees and to
consultants. The term "Option" as used herein refers to either a NQSO or an ISO
(each as defined below), as the case may be.
Each of the Company's stock option plans is administered, and options
thereunder are granted, by a duly authorized committee (the "Committee") of the
Board of Directors (the members of which shall be disinterested (as defined in
Rule 16b-3 under the Exchange Act), unless otherwise determined by the Board),
or by the Board if there is no such committee.
Based on the midpoint of the estimated initial public offering price range,
the estimated fair market value of a share of Common Stock underlying an Option
as of June 1, 1994 was $15.50.
1993 EMPLOYEE STOCK OPTION PLAN
The Company adopted the 1993 Plan effective January 28, 1994 (the
"Effective Date of the 1993 Plan").
SHARES SUBJECT TO OPTIONS. The 1993 Plan authorizes the issuance of up to
3,119,466 shares of Common Stock (with no more than 1,000,000 shares to any
employee in any calender year) upon the exercise of non-qualified stock options
("NQSOs") granted to certain key employees of the
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<PAGE>
Company. Key employees are those active executive officers and other valuable
employees of the Company that are selected by the Committee to participate in
the 1993 Plan. Under the 1993 Plan no Options may be granted after December 31,
1995.
OPTIONS. Options issued pursuant to the 1993 Plan will be exercisable at
such price, not less than the par value of the Common Stock purchasable
thereunder, as may be fixed by the Committee. Shares of Common Stock purchased
pursuant to the exercise of Options shall be paid for at the time of exercise as
follows: (i) in cash or by check, bank draft or money order; (ii) if the Common
Stock is traded on a national securities exchange, through the delivery of
instructions to a broker to deliver the purchase price; or (iii) on other terms
acceptable to the Committee (which may include payment by transfer of shares
owned by the participant for at least six months or the surrender of Options).
Options granted under the 1993 Plan are subject to restrictions on transfer
and exercise. No Option granted under the 1993 Plan may be exercised prior to
the earlier of the closing of a Public Offering (as defined in the 1993 Plan) or
the expiration of two years from the Effective Date of the 1993 Plan, subject to
acceleration in the event of a Change in Control of the Company (as defined in
the 1993 Plan) and subject to the authority of the Committee to permit earlier
exercise in its sole discretion. The Committee may set a schedule of
exerciseability with regard to each Option grant, subject to acceleration in the
event of a Change in Control of the Company. Also, no Option may be exercisable
after the expiration of ten years from the date of its grant. Moreover, no
Option may be transferred, assigned, pledged or hypothecated in any way except
by will or under applicable laws of descent and distribution. Shares of Common
Stock purchased upon exercise of an Option ("Shares") may not be transferred for
a period of two years following the initial Public Offering of the Company, or
such shorter time as the Committee may in its sole discretion determine.
In consideration of the grant of Options, an employee shall be required to
agree not to engage, without the written consent of the Committee, in any
Competitive Activity (as defined in the 1993 Plan) during the participant's
employment by the Company and, in the event any Options shall vest, for a period
of one year following termination of employment. Options that were exercisable
upon a participant's termination of employment by the Company other than for
cause remain exercisable following such termination for a period of: (a) one
year, in the case of death or disability, (b) 90 days, in the case of retirement
or termination by the Company other than for cause and (c) in all other
instances, 30 days following such termination, in each case subject to extension
by the Committee. Except as otherwise determined by the Committee, Options that
were not exercisable at the time of a participant's termination of employment by
the Company shall automatically be canceled upon such termination. The Committee
has the discretion under the 1993 Plan to impose in a participant's Option
Agreement such other conditions, limitations and restrictions as it determines
are appropriate in its sole discretion, including any waivers of rights which a
participant may have.
The 1993 Plan provides for the Committee to have the right to make
appropriate adjustments in the number and kind of securities receivable upon the
exercise of Options or the exercise price in the event of a stock split, stock
dividend, merger, consolidation, reorganization, spinoff, partial or complete
liquidation or other similar changes in the capital structure or other corporate
transactions. The 1993 Plan also gives the Committee the option to terminate all
outstanding Options effective upon the consummation of a merger or consolidation
in which the Company is not the surviving entity or of any other transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or upon the consummation of the sale or
transfer of all of the Company's assets (any such event an "Acquisition Event"),
subject to the right of participants to exercise all outstanding Options prior
to the effective date of the Acquisition Event.
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As of the date hereof, Options for approximately 3,000,000 Shares granted
to approximately 60 employees are outstanding. At the date the 1993 Plan was
adopted, approximately 65 employees were eligible to participate in the 1993
Plan.
1994 EMPLOYEE STOCK OPTION PLAN
The Company adopted the 1994 Plan effective April 15, 1994 (the "Effective
Date of the 1994 Plan").
SHARES SUBJECT TO OPTIONS. The 1994 Plan authorizes the issuance of up to
2,980,534 shares of Common Stock (with no more than 1,000,000 shares to any
employee or consultant in any calender year, with any unused portion thereof
carried forward) upon the exercise of Incentive Stock Options ("ISOs") and NQSOs
granted to certain key employees and NQSOs granted to executive consultants of
the Company. Key employees are those active executive officers or other valuable
employees of the Company that are selected by the Committee to participate in
the 1994 Plan. Executive consultants are those executive-level consultants of
the Company that are selected by the Committee to participate in the 1994 Plan.
No Options may be granted after ten years from the Effective Date of the 1994
Plan.
OPTIONS. In the case of ISOs, the exercise price of an Option may not be
less than 100% of the Fair Market Value (as defined in the 1994 Plan) of a share
of Common Stock at the time of grant (or 110% of such Fair Market Value if the
grantee owns more than 10% of the shares of Common Stock outstanding at the time
of grant (a "Ten Percent Shareholder")). NQSOs issued pursuant to the 1994 Plan
will be exercisable at such price, not less than the Fair Market Value of a
share of Common Stock at the time of grant, as may be fixed by the Committee,
provided, that, prior to the initial Public Offering of the Company, Options may
be issued with an exercise price below the Fair Market Value of a share of
Common Stock at the time of the grant. Shares purchased pursuant to the exercise
of Options shall be paid for at the time of exercise as follows: (i) in cash or
by check, bank draft or money order; (ii) if the Shares are traded on a national
securities exchange, through the delivery of instructions to a broker to deliver
the purchase price; or (iii) on other terms acceptable to the Committee (which
may include payment by transfer of shares owned by the participant for at least
six months or the surrender of Options).
Options granted under the 1994 Plan are subject to restrictions on transfer
and exercise. No Option granted under the 1994 Plan may be exercised prior to
the earlier of the closing of a Public Offering (as defined in the 1994 Plan) or
the expiration of five years from the Effective Date of the 1994 Plan, subject
to acceleration in the event of a Change in Control of the Company (as defined
in the 1994 Plan) and subject to the authority of the Committee to permit
earlier exercise in its sole discretion. In addition, the Committee may set a
schedule of exerciseability with regard to each Option grant, subject to
acceleration in the event of a Change in Control of the Company. Also, no Option
may be exercisable after the expiration of ten years from the date of its grant
(or five years, in the case of ISOs granted to a Ten Percent Shareholder).
Moreover, no Option may be transferred, assigned, pledged or hypothecated in any
way except by will or under applicable laws of descent and distribution. Shares
of Common Stock purchased upon exercise of an Option may not be transferred for
a period of two years following the initial Public Offering of the Company, or
such shorter time as the Committee may in its sole discretion determine.
In consideration of the grant of Options, each employee will be required to
agree not to engage, without the written consent of the Committee, in any
Competitive Activity (as defined in the 1994 Plan) during the participant's
employment by the Company, and in the event any Options shall vest, for a period
of one year following termination of employment. Options that were exercisable
upon a participant's termination of employment or consultancy by the Company
other than for cause remain exercisable following such termination for a period
of: (a) one year, in the case of death or disability, (b) 90 days, in the case
of retirement or termination other than for cause and (c) in all
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other instances, 30 days following such termination, in each case subject to
extension by the Committee. Except as otherwise determined by the Committee,
Options that were not exercisable at the time of a participant's termination of
employment or consultancy by the Company shall automatically be canceled upon
such termination. The Committee has the discretion under the 1994 Plan to impose
in a participant's Option Agreement such other conditions, limitations and
restrictions as it determines are appropriate in its sole discretion, including
any waivers of rights which a participant may have.
The 1994 Plan provides for the Committee to have the right to make
appropriate adjustments in the number and kind of securities receivable upon the
exercise of Options or the exercise price in the event of a stock split, stock
dividend, merger, consolidation, reorganization, spinoff, partial or complete
liquidation or other similar changes in the capital structure or other corporate
transactions. The 1994 Plan also gives the Committee the option to terminate all
outstanding Options effective upon the consummation of a merger or consolidation
in which the Company is not the surviving entity or of any other transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or upon the consummation of the sale or
transfer of all of the Company's assets (any such event an "Acquisition Event"),
subject to the right of participants to exercise all outstanding Options prior
to the effective date of the Acquisition Event.
As of the date hereof, Options for approximately 200,000 Shares granted to
seven employees are outstanding, leaving Options for approximately 2,800,000
Shares available for grant to employees and consultants in the future. At the
date the 1994 Plan was adopted, approximately 500 employees were eligible to
participate in the 1994 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Under Federal income tax law as currently in effect, neither ISOs nor NQSOs
require an optionee to recognize income at the time of grant. However, upon the
exercise of a NQSO, the optionee will recognize ordinary income in an amount
equal to the excess of the fair market value of the Common Stock over the
aggregate exercise price. With respect to an ISO, no income is recognized by the
optionee in connection with the exercise, although the excess of the fair market
value of the Common Stock at exercise over the aggregate exercise price results
in alternative minimum taxable income which is used in determining for the
optionee alternative minimum tax liability. The optionee will be subject to
taxation at the time Shares acquired upon the exercise of an ISO are sold. If
the sale occurs at least two years after the date the ISO was granted and at
least one year after the date it was exercised, the optionee generally will
recognize capital gain in an amount equal to the excess of the proceeds of the
sale over the aggregate exercise price of the Shares sold. If the optionee
disposes of such Shares within two years of the date an Option was granted or
within one year of receipt of the Shares pursuant to the exercise of an ISO, the
optionee will recognize ordinary income, in an amount equal to the excess of the
fair market value of the Shares on the date of the exercise over the exercise
price. The excess, if any, of the amount realized upon disposition of such
Shares over the fair market value of the Shares on the date of exercise will be
long or short term capital gain, depending upon the holding period of the
Shares, providing the optionee holds the shares as a capital asset at the time
of disposition. If such disposition of the Shares by the optionee within two
years of the date of grant of the Option is a sale or exchange with respect to
which a loss (if sustained) would be recognized by the optionee, then the amount
which is includable in the gross income of the optionee shall not exceed the
excess (if any) of the amount realized on the sale or exchange over the adjusted
basis of such Shares.
The Company's tax consequences will also depend upon whether an option is
an ISO or a NQSO. In the case of a NQSO, the Company will be entitled, subject
to the possible application of Sections 162(m) and 280G of the Code as discussed
below, to a deduction in connection with the
59
<PAGE>
optionee's exercise in an amount equal to the income recognized by the optionee,
provided that the Company complies with applicable withholding tax requirements,
if any. If the Option is an ISO, however, the Company will not be entitled to a
deduction if the optionee satisfies holding period requirements and recognizes
capital gain. If those requirements are not satisfied, the Company will be
entitled to a deduction corresponding to the ordinary income recognized by the
optionee, subject to the possible application of Section 162(m) of the Code as
discussed below. Section 162(m) of the Code denies a deduction to any
corporation, whose common shares are publicly held, for compensation paid to
certain covered employees in a taxable year to the extent that such compensation
exceeds $1 million. Covered employees are a company's chief executive officer on
the last day of the taxable year and any other individual whose compensation is
required to be reported to shareholders under the Exchange Act by reason of
being among the four highest compensated officers in office at the end of the
taxable year. The amount of ordinary income recognized by an optionee in the
year of exercise (or in the case of an ISO, disqualifying sale) is considered in
determining whether a covered employee's compensation exceeds $1 million.
Compensation paid under certain qualified performance based compensation
arrangements, which provide for compensation based on preestablished performance
goals established by a compensation committee that is comprised solely of two or
more outside directors and which is disclosed to, and approved by, the majority
of the company's shareholders, is not considered in determining whether a
covered employee's compensation exceeds $1 million. The legislative history to
Section 162(m) and the proposed regulations recently issued under Section 162(m)
provide that compensation attributable to options which provide for an exercise
price less than the fair market value of the underlying shares on the date of
grant ("discount options") will not be treated as paid pursuant to a qualified
performance based compensation arrangement. The proposed regulations generally
provide, although the matter is not entirely clear, that option plans (and any
options issued thereunder) that were adopted prior to the time a company
publicly offers its common equity securities will not be subject to the Section
162(m) limitation, provided such plan is adequately disclosed by the company in
a prospectus issued in connection with a public offering of common equity
securities. Since the 1993 Plan and the 1994 Plan were adopted prior to the
effective date of the Registration Statement of which this Prospectus is a part,
the 1993 Plan and the 1994 Plan (and any options issued thereunder) may be
exempt from the application of Section 162(m). The Company intends to review
this issue (including any additional guidance which may hereafter be issued by
the Internal Revenue Service or the courts) at the time any employee exercises
options, the compensation element of which, when combined with other
compensation received by such employee during the taxable year, exceeds $1
million, and consider whether and to what extent the 1993 Plan and the 1994 Plan
and the options at issue are subject to the Section 162(m) limitation.
If there is an acceleration of the exercisability of Options upon a change
of ownership or control of the Company or a change in the ownership of a
substantial portion of the assets of the Company (within the meaning of Section
280G of the Code), all or a portion of the income realized by the optionee (from
the exercise of Options and from any other payments made to the optionee by the
Company) may constitute "excess parachute payments" under Section 280G. The
optionee receiving excess parachute payments incurs an excise tax of 20% of the
amount of the payments in excess of the employee's average annual compensation
for the five calendar years preceding the year of the event causing the
acceleration and the Company is not entitled to a deduction for such excess
amounts.
NEW PLAN BENEFITS
The table below shows Options that have been granted or will be granted
prior to the consummation of the Offerings under the 1993 Plan and the 1994 Plan
to (i) any Named Executive Officer (as defined below), (ii) any executive
officer who is a member of the continuing management group and who is not a
Named Executive Officer, (iii) all current executive officers as a group and
(iv) all employees, including all current officers who are not executive
officers, as a group. The term
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"Named Executive Officer" is defined for these purposes to include (i) Mr.
Stockman and Mr. Wasserstein, the Company's Co-Chairmen of the Board, Mr.
Schwarzman, the Company's President prior to the consummation of the Offerings,
Mr. Birle, the Company's former Co-Chairman of the Board, and two former
executive officers who would have been among the Company's four most highly
compensated executive officers but for the fact that they were not serving as
executive officers at the end of the fiscal year ended January 29, 1994, none of
whom has been granted any Options, and (ii) the Company's four most highly
compensated executive officers who were serving as executive officers at the end
of the fiscal year ended January 29, 1994 and whose total annual salary and
bonus exceeded $100,000.
EMPLOYEE STOCK OPTION GRANTS
<TABLE> <CAPTION>
NUMBER OF
PER SHARE SHARES
EXERCISE UNDERLYING EXPIRATION
NAME AND POSITION AFTER THE OFFERINGS PRICE OPTIONS DATE PLAN
- ------------------------------------------------------------- ----------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
Thomas E. Hannah............................................. $ 3.99 841,230 (1) 1993
Chief Executive Officer 8.26 140,205 (1) 1993
William J. Brucchieri........................................ 3.99 77,184 (1) 1993
President of Imperial Wallcoverings 8.26 61,757 (1) 1993
John D. Moose................................................ 3.99 146,555 (1) 1993
President of North American Auto Group 8.26 50,074 (1) 1993
Harry F. Schoen III.......................................... 3.99 97,998 (1) 1993
President of Mastercraft Division 8.26 66,007 (1) 1993
Elizabeth R. Philipp......................................... 3.99 83,508 (1) 1993
Executive Vice President, General Counsel and Secretary 8.26 8,345 (1) 1993
Mark O. Remissong............................................ 4.43 44,735 (2) 1994
Senior Vice President and Chief Financial Officer 8.26 33,267 (2) 1994
Paul W. Meeks................................................ 3.99 11,403 (1) 1993
Vice President and Treasurer
Executive Group--1993 Plan................................... 3.99 1,257,878 (1) 1993
8.26 326,388 (1) 1993
Executive Group--1994 Plan................................... 4.43 44,735 (2) 1994
8.26 33,267 (2) 1994
Non-Executive Employee Group--1993 Plan...................... 3.99 1,292,465 (1) 1993
4.43 67,261 (1) 1993
8.26 92,220 (1) 1993
Non-Executive Employee Group--1994 Plan...................... 4.43 76,507 (2) 1994
8.26 15,125 (2) 1994
</TABLE>
- ---------------
(1) January 28, 2004
(2) April 15, 2004
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
AND CERTAIN RELATIONSHIPS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by the existing holders of
Common Stock in excess of 5% after giving effect to the Recapitalization
(including the exchange by Blackstone Partners and WP Partners of $94.3 million
and $98.9 million, respectively, of the PIK Notes of the Company held by them
for shares of Common Stock), (i) before the Offerings, (ii) as adjusted to give
effect to the Offerings and (iii) assuming the over-allotment options are
exercised in full. All information with respect to beneficial ownership has been
furnished by the respective stockholder. Unless otherwise indicated below, after
the Offerings the persons named below have sole voting and investment power with
respect to the number of shares set forth opposite their names.
<TABLE> <CAPTION>
SHARES
BENEFICIALLY
OWNED AFTER
THE
OFFERINGS,
AND AFTER
THE
SHARES BENEFICIALLY OWNED EXERCISE OF
SHARES BENEFICIALLY OWNED OVERALLOTMENT
BEFORE THE OFFERINGS AFTER THE OFFERINGS OPTIONS
-------------------------- --------------------------- -----------
OVERALLOTMENT
OPTION SHARES
NAME AND ADDRESS SHARES TO TO BE
OF SELLING STOCKHOLDER NUMBER PERCENTAGE BE SOLD NUMBER PERCENTAGE OFFERED(1) NUMBER
- ------------------------ ----------- ------------- --------- ------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Blackstone Capital 21,494,417 46.0% 2,500,000 18,994,417 28.5% 1,875,000 17,119,417
Partners L.P.(2)(3)
118 North Bedford Road
Suite 300
Mount Kisco, NY 10549
Wasserstein Perella 23,075,953 49.4% 2,500,000 20,575,953 30.8% 1,875,000 18,700,953
Partners, L.P.(4)
31 West 52nd Street
New York, NY 10019
<CAPTION>
NAME AND ADDRESS
OF SELLING STOCKHOLDER PERCENTAGE
- ------------------------ -------------
<S> <C>
Blackstone Capital 25.7%
Partners L.P.(2)(3)
118 North Bedford Road
Suite 300
Mount Kisco, NY 10549
Wasserstein Perella 28.0%
Partners, L.P.(4)
31 West 52nd Street
New York, NY 10019
</TABLE>
- ---------------
(1) The Partners have granted the U.S. Underwriters an overallotment option to
purchase up to 3,000,000 shares of Common Stock and the International
Underwriters an overallotment option to purchase up to 750,000 shares of
Common Stock.
(2) Includes 1,290,741 shares of Common Stock owned of record by Blackstone
Family Investment Partnership II L.P. and 113,447 shares of Common Stock
owned of record by Blackstone Advisory Directors Partnership L.P., each an
affiliate of Blackstone Partners. Blackstone Partners possesses an
irrevocable proxy to vote these shares.
(3) Blackstone Partners is a Delaware limited partnership formed for the purpose
of, among other things, (i) committing capital to facilitate corporate
restructurings, leveraged buyouts, bridge financings and other investments
and (ii) capitalizing affiliates which will engage in investment and
merchant banking activities. The sole general partner of Blackstone Partners
is Blackstone Management Associates L.P. ("Blackstone Associates"), a
Delaware limited partnership whose general partners include Messrs. Birle,
Schwarzman and Stockman. At present, the business of Blackstone Associates
consists of performing the function of, and serving as, the general partner
of certain limited partnerships, including Blackstone Partners. Messrs.
Birle, Schwarzman and Stockman are also general partners of Blackstone
Management.
(4) WP Partners is a Delaware limited partnership, the general partner of which
is WP Management. Mr. Wasserstein is Chairman and Chief Executive Officer of
WP Management and WP Group. WP Partners was formed by WP Group for the
purpose of participating in merchant banking activities, including
committing capital to the organization and consummation of leveraged buyout
transactions. WP Management and WP Group are both Delaware corporations. WP
Management is engaged in managing WP Partners. WP Group is an international
private advisory and merchant banking firm. The principal subsidiary of WP
Group is WP & Co., an international investment banking firm.
Prior to the consummation of the Recapitalization, each of Blackstone
Partners and WP Partners beneficially owns, through Holdings II, 50% of the
outstanding voting Common Stock of the Company. After consummation of the
Recapitalization and the issuance of shares of Common Stock in the Offerings
(assuming that the Underwriters' over-allotment options are not exercised), each
of Blackstone Partners and its affiliates and WP Partners will beneficially own
28.5% and 30.8%,
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respectively, of the outstanding Common Stock and will be in a position to
control the Company. It is also expected that the Partners and their respective
affiliates may in the future act in various capacities in connection with
transactions to which the Company is a party.
In 1993, Group paid each of the Managers-Advisors an annual operating
management fee of $1 million. Group also paid each of the Managers-Advisors an
annual management and financial advisory services fee of $1.5 million, paid
quarterly in advance. Group also has reimbursed the Managers-Advisors for
out-of-pocket expenses in connection with their management services.
Since the beginning of 1993, in connection with the divestiture of the
Engineering Group, Group has paid divestiture fees (i) to Blackstone Management
Partners L.P., an affiliate of Blackstone ("Blackstone Management") in the
amount of approximately $512,500 and (ii) to WP&Co. and WP Partners in an
aggregate amount of $512,500. Since the beginning of 1993, in connection with
the consummation of two credit agreements by Kayser-Roth, Group has paid fees
(i) to Blackstone Management in the amount of $375,000 and (ii) to WP&Co. and WP
Partners in an aggregate amount of $375,000. Since the beginning of 1993, Group
has paid $1,394,000 to each of the Managers-Advisors in connection with the
divestiture of Kayser-Roth.
In September 1993, Blackstone entered into an agreement with Group to
provide advisory services and assistance in connection with the sale or
disposition by Group of its Builders Emporium division. The agreement provides
for reimbursement of out-of-pocket expenses plus payment of fees to be paid by
Group to Blackstone of (i) $100,000 per month, commencing with the month ending
September 25, 1993 and ending with the month ending January 29, 1994 and (ii)
$100,000 for the quarter commencing January 30, 1994 and ending April 30, 1994.
Since the beginning of 1993, Group has paid $600,000 under this agreement. In
addition, Blackstone negotiated with Arkaid Incorporated, a real estate
consultant ("Arkaid"), to receive 20% of the incentive fees payable to Arkaid by
Group in connection with the resolution of lease liabilities of Builders
Emporium. Since the beginning of fiscal 1993, no such incentive fees have been
accrued or paid to Arkaid.
The Board of Directors of Group has authorized the investment by Group from
time to time of amounts not to exceed $5 million in a short-term investment fund
to which Blackrock Financial Management L.P. serves as investment advisor.
Blackrock Financial Management L.P., an affiliate of Blackstone, charges annual
management fees equal to 0.3% of the amount invested, plus nominal out-of-pocket
expenses. Since the beginning of 1993, Group has paid to Blackrock Financial
Management L.P. fees of approximately $7,000.
During the first quarter of 1994, the Company incurred expenses of $2.5
million for services performed by Blackstone Partners and WP Partners in
connection with a comprehensive review of the Company's liabilities associated
with discontinued operations, including surplus real estate, postretirement and
workers compensation liabilities. During the first quarter of 1994, the Company
incurred expenses of $3.25 million for services performed by Blackstone Partners
and $2.75 million for services performed by WP Partners in connection with the
Company's review of refinancing and strategic alternatives as well as certain
other advisory services.
It is anticipated that each of the Managers-Advisors will receive a $1
million monitoring fee and the reimbursement of expenses from the Company
pursuant to the Stockholders Agreement, which will be effective as of the
consummation of the Recapitalization, and that any transaction with affiliates
not contemplated by the Stockholders Agreement will be passed upon by the
independent directors.
Each Partner and the Company has a right of first refusal with regard to
sales of Common Stock by each Partner (with certain exceptions as long as the
transferee has a similar obligation). Each Partner also has the right to sell
along with the other (with certain exceptions). The Prudential Insurance Company
of America and certain of its affiliates, which upon consummation of
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<PAGE>
the Offerings will own approximately 1,712,424 Shares of Common Stock, have
certain rights to participate in any sale by Blackstone Partners.
Each Partner has the right to require the Company to effect up to five (but
no more than two in any year) registration statements covering sales of Common
Stock by such Partner. All expenses of such demand registration shall be paid by
the selling Partner. Each Partner also has unlimited rights to "piggyback" on
any Company registration. No demand registration may be requested prior to
January 1, 1995.
Pursuant to the Stockholders Agreement, each Partner will initially be
entitled to designate three nominees to the Board of Directors.
NEW CREDIT FACILITIES
The Company has entered into a commitment letter (the "Commitment Letter")
with Chemical Bank ("Chemical") pursuant to which Chemical has committed to
provide the New Credit Facilities in an aggregate amount of $775 million,
subject to the execution of definitive documentation (including a new credit
agreement (the "New Credit Agreement") and a receivables purchase agreement (the
"Receivables Purchase Agreement")) and to other terms and conditions set forth
in the Commitment Letter. Chemical, through one of its affiliates, intends to
form a syndicate of banks and other financial institutions to participate in the
New Credit Facilities.
The New Credit Facilities will consist of (i) an eight-year senior secured
term loan facility (the "Closing Date Term Loan Facility") in an aggregate
principal amount of $450 million, which will be drawn in full on the Closing
Date, (ii) an eight-year senior secured term loan facility (the "Delayed Draw
Term Loan Facility") in an aggregate principal amount of $25 million, which may
be drawn in full or in part on or prior to the first anniversary of the Closing
Date, (iii) a seven-year senior secured revolving credit facility (the
"Revolving Facility", together with the Closing Date Term Loan Facility and the
Delayed Draw Term Loan Facility, the "Credit Agreement Facilities") in an
aggregate principal amount of up to $150 million and (iv) a seven-year
receivables facility (the "Receivables Facility") in an aggregate amount of up
to $150 million.
The proceeds of loans under the Closing Date Term Loan Facility will be
used by the Company, together with the net proceeds of the Offerings, borrowings
under the Revolving Facility, proceeds of the Receivables Facility and the
Company's existing cash, to refinance existing indebtedness and preferred stock
of the Company and certain of its subsidiaries. See "Use of Proceeds and
Consolidation". Borrowings may be effected under the Delayed Draw Term Loan
Facility during the one-year period following the date of the inital funding
under the Credit Agreement Facilities (the "Closing Date"); provided, however,
that borrowings under the Delayed Draw Term Loan Facility will not be available
unless the Company receives at least $275 million in gross cash proceeds in
connection with the Offerings. The proceeds of loans under the Delayed Draw Term
Loan Facility will be used by the Company (i) if the Company establishes an ESOP
following the completion of the Offerings, to finance purchases of shares by
such ESOP or (ii) to finance acquisitions permitted by the terms of the New
Credit Agreement. The proceeds of loans under the Revolving Facility (other than
as set forth in the first sentence of this paragraph) will be used by the
Company for general corporate purposes, including working capital and
acquisitions.
CREDIT AGREEMENT FACILITIES
The Company's wholly-owned subsidiary, Group, will be the borrower (the
"Borrower") under the Credit Agreement Facilities, although a portion of the
Closing Date Term Loan Facility and the Revolving Facility will be available for
loans to certain Canadian subsidiaries of the Borrower. Loans outstanding under
the Credit Agreement Facilities will bear interest, which will be due quarterly,
at a rate equal to the Borrower's choice of (i) Chemical's Alternate Base Rate
(which is
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<PAGE>
the highest of Chemical's announced prime rate, the Federal Funds Rate plus 1/2%
and Chemical's base certificate of deposit rate plus 1%) ("ABR") plus the ABR
Margin per annum or (ii) the offered rates for Eurodollar deposits for one, two,
three, six, nine, or twelve months (as selected by the Borrower) appearing on
page 3750 (or any successor page) of the Dow Jones Telerate Screen as of 11:00
am, London time, on the day that is two business days prior to the first day of
the applicable interest period ("LIBOR") plus the LIBOR Margin per annum.
Pursuant to the terms of the New Credit Agreement, the "ABR Margin" initially
will be 3/4% and the "LIBOR Margin" initially will be 1 3/4%. Such margins will
be subject to step-downs in certain circumstances and will increase by 1/4% over
the margins then in effect on the fifth anniversary of the Closing Date.
Loans under the Closing Date Term Loan Facility will amortize on an equal
quarterly basis in annual amounts equal to (i) $25 million in the second year
following the Closing Date, (ii) $45 million in the third year following the
Closing Date, (iii) $65 million in the fourth year following the Closing Date,
(iv) $75 million in the fifth year following the Closing Date and (v) $80
million in the sixth, seventh and eighth years following the Closing Date. Loans
under the Delayed Draw Term Loan Facility will amortize on an equal quarterly
basis in annual amounts, which are ratably based on the annual payments of the
Closing Date Term Loan Facility. The Revolving Facility will mature on the
seventh anniversary of the Closing Date. In addition, the New Credit Agreement
will provide for mandatory prepayments of the Credit Agreement Facilities with
certain excess cash flow of the Company, net cash proceeds of certain asset
sales or other dispositions by the Company and its subsidiaries, net cash
proceeds of sale/leaseback transactions, net cash proceeds of certain issuances
of debt obligations and net cash proceeds received by the Company in connection
with loans to the ESOP. Mandatory prepayments will be applied pro rata across
remaining scheduled maturities. Loans under the Credit Agreement Facilities will
be voluntarily prepayable by the Borrower at any time without penalty. Voluntary
prepayments will be applied against the most current scheduled maturities.
The Credit Agreement Facilities will be guaranteed by the Company and each
existing and subsequently acquired or organized United States subsidiary of the
Company (other than, except for loans to its Canadian subsidiaries, the
Borrower) and by each foreign subsidiary of the Borrower, subject to certain
exceptions. The Credit Agreement Facilities and the Guarantees will be secured
by a first priority pledge of all the capital stock of the Borrower and each
subsidiary of the Borrower (or, in the case of any foreign subsidiary, 65% the
capital stock of such subsidiary) and certain intercompany indebtedness.
The Commitment Letter contains, and the New Credit Agreement will contain,
certain conditions precedent to the Credit Agreement Facilities, including
without limitation the following conditions: (i) consummation of the
Recapitalization simultaneously with the Closing, (ii) receipt by the Company of
at least $250,000,000 in gross cash proceeds in connection with the Offerings,
(iii) after giving effect to the Recapitalization, the Company and its
subsidiaries having no obligations for borrowed money other than loans under the
New Credit Agreement and industrial revenue bonds and other debt in an aggregate
amount not to exceed $15,000,000, (iv) satisfaction of the conditions precedent
under the Receivables Facility, (v) receipt by the Lenders of certain audited
and pro forma consolidated financial statements for the Company and its
subsidiaries for the fiscal years ended January 29, 1994 and January 30, 1993,
(vi) the Lenders' satisfaction (a) that the Company will have sufficient sources
of funds to effect the Recapitalization and pay related fees and expenses, (b)
with the Company's tax position, (c) with the amount and nature of the Company's
and its subsidiaries' environmental and employee health and safety exposures,
(d) with the sufficiency of the amount available under the Revolving Facility to
meet the ongoing working capital requirements of the Company and the Borrower
following the Recapitalization and (e) with all material legal, tax and
accounting matters relating to the Recapitalization, (vii) the Administrative
Agent's reasonable satisfaction with the Company's cash management procedures,
(viii)
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<PAGE>
receipt of all requisite governmental and third party approvals and (ix) absence
of outstanding material litigation.
The New Credit Agreement will contain various restrictive covenants typical
for facilities and transactions of this type (with customary qualifications and
exceptions), including limitations on indebtedness of the Company and its
subsidiaries, limitations on dividends and on redemptions and repurchases of
capital stock; limitations on prepayments, redemptions and repurchases of debt;
limitations on liens and sale/leaseback transactions; limitations on loans and
investments; limitations on capital expenditures; a prohibition on the Company's
direct ownership of any subsidiary other than Group or certain unrestricted
subsidiaries; limitations on mergers, acquisitions and asset sales; limitations
on transactions with affiliates and stockholders; limitations on fundamental
changes in business conducted; limitations on the amendment of debt and other
material agreements and licenses. In addition to the foregoing, the New Credit
Agreement will contain covenants requiring the Company and its subsidiaries to
maintain a minimum EBITDA level, a minimum ratio of EBITDA to cash interest
expense, a maximum ratio of indebtedness to EBITDA and a minimum ratio of
current assets to current liabilities, in each case tested at the end of each
fiscal quarter of the Company.
The New Credit Agreement will contain various events of default typical for
facilities and transactions of this type (with customary qualifications and
exceptions), including nonpayment of principal or interest; violation of
covenants; material breaches of representations and warranties; cross default
and cross acceleration; bankruptcy; material undischarged judgments; certain
ERISA events; invalidity of security documents; invalidity of subordination
provisions; and Change in Control. "Change In Control" will be defined in the
New Credit Agreement to require (a) a majority of the board of directors of the
Company to be comprised of Continuing Directors (defined as any director of the
Company who either (x) was a member of the board of directors on the Closing
Date or (y) after the Closing Date became a member of the board of directors and
whose election was approved by a vote of the Continuing Directors then on the
board of directors of the Company), (b) that no person or group (other than WP
Partners, Blackstone Partners and their designated affiliates) beneficially own,
directly or indirectly, shares representing more than 25% of the aggregate
ordinary voting power represented by the outstanding capital stock of the
Company at any time that WP Partners, Blackstone Partners and their designated
affiliates do not beneficially own, free and clear of liens and claims, shares
representing at least 50% of the aggregate ordinary voting power represented by
the outstanding capital stock of the Company, and (c) that the Company maintain
direct ownership of the Borrower, free of liens and claims.
In addition to the foregoing, the New Credit Agreement will contain other
miscellaneous provisions, including provisions concerning (i) assignments by
lenders, (ii) indemnification by the Borrower of each lender from and against
any losses, claims or other expenses and (iii) payment by the Borrower of
certain fees and expenses of the lenders and their respective advisors and
consultants.
RECEIVABLES FACILITY
In connection with establishing the Receivables Facility, Group will form
and capitalize a wholly owned, bankruptcy-remote subsidiary (the "Receivables
Company"). The Receivables Company will purchase, on a revolving basis, all
trade receivables generated by certain subsidiaries of the Company (such
subsidiaries, the "Sellers"). The Receivables Company will purchase such
receivables from the Sellers pursuant to a receivables sale agreement (the
"Receivables Sale Agreement"), at purchase prices equal to the face amount of
such receivables less a discount factor to reflect collection risks, finance
costs and similar matters. The Receivables Company will finance its initial
purchase of receivables in part with the initial capital contribution received
from Group and in part through the Receivables Purchase Agreement entered into
with Chemical and, if Chemical elects, a syndicate of financial institutions
(together with Chemical, the "Buyers"). Ongoing
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<PAGE>
purchases of receivables by the Receivables Company will be financed in part
from collections in respect of receivables, in part with new purchases made by
the Buyers, in part through the issuance of subordinated promissory notes to the
Sellers or Group, in part with additional capital contributions from Group and
in part through offsets against certain repurchase obligations of the Sellers to
the Receivables Company.
The purchases by the Buyers of interests in the receivables under the
Receivables Facility will be made with limited recourse and at an initial
interest cost to the Receivables Company equal to, at the Receivables Company's
election, LIBOR plus 5/8% per annum or ABR. The Buyers' interest in receivables
of up to $150 million will be an undivided senior interest in all receivables
owned by the Receivables Company. The Receivables Company will retain a
subordinated interest in the receivables that will vary from time to time. If at
any point in time the Sellers generate insufficient receivables, or the
character of the receivables purchased by the Receivables Company do not satisfy
customary eligibility criteria (such as no bankruptcy, no delinquency and no
excessive concentration levels), the investment of the Buyers may be less than
$150 million.
The proceeds received by the Receivables Company from purchases by the
Buyers pursuant to the Receivables Purchase Agreement will be dividended or
distributed from time to time to Group to be used on the Closing Date in
connection with financing the Recapitalization and thereafter for working
capital purposes.
The Receivables Sale Agreement will contain certain restrictions on the
Sellers customary for facilities of this type, including but not limited to
limitations on liens on the Sellers' receivables; limitations on modifications
of the terms of the Sellers' receivables; limitations on changes from historical
credit and collection practices; and limitations on changes in payment
instructions. The Sellers will continue to service the receivables (including
all billing and collection activities) and will receive a customary servicing
fee from the Receivables Company for providing such services. Group will act as
a master servicer, overseeing the servicing activities of the Sellers.
The Receivables Purchase Agreement will contain certain restrictions
customary for facilities of this type, but will restrict the Receivables Company
only. In addition, the Board of Directors of the Receivables Company will
include at least one independent director not affiliated with the Company.
The Receivables Purchase Agreement also will contain certain conditions
precedent customary for facilities of this type, including the satisfaction or
waiver of all conditions precedent to the Credit Agreement Facilities;
Chemical's satisfaction with the arrangements for the collection of receivables;
Chemical's satisfaction with the original purchase of receivables by the
Receivables Company and Chemical's receipt of an agreed-upon procedures letter
of the Receivables Company's independent accountants.
The commitments under the Receivables Facility will terminate on the
earlier of (i) seven years following the date of the initial purchases by the
Buyers thereunder and (ii) upon the occurrence of certain termination events,
including but not limited to nonpayment of amounts when due; violation of
covenants; bankruptcy; change in control of the Receivables Company; material
judgments; and invalidity of the Receivables Purchase Agreement.
The Company anticipates that the Receivables Purchase Facility will be
replaced by a similar facility under which the Receivables Company will issue
asset-backed commercial paper, medium-term notes or other securities. The
interest rate on the Receivables Facility will increase to a rate equal to the
then-applicable rate on the Credit Agreement Facilities 270 days after the date
of the initial purchases by the Buyers thereunder.
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<PAGE>
DESCRIPTION OF THE CAPITAL STOCK
The authorized capital stock of the Company consists of 150 million shares
of Common Stock, par value $.01 per share, and 16 million shares of Preferred
Stock, par value $.01 per share. Reference is made to the Restated Certificate
of Incorporation and Bylaws which are included as exhibits to the Registration
Statement of which this Prospectus forms a part (the "Restated Certificate of
Incorporation" and "Bylaws", respectively) for a more complete description of
the capital stock of the Company. See "Principal and Selling Stockholders and
Certain Relationships--Stockholders Agreement" for a description of certain
rights and restrictions relating to the capital stock of the Company.
COMMON STOCK
Subject to the rights of holders of Preferred Stock then outstanding,
holders of Common Stock are entitled to receive such dividends as may from time
to time be declared by the Board. See "Dividends". Holders of Common Stock are
entitled to one vote per share on all matters on which the holders of Common
Stock are entitled to vote. Because holders of Common Stock do not have
cumulative voting rights, the holders of the majority of the shares of Common
Stock represented at a meeting can select all the directors. In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
would be entitled to share ratably in all assets of the Company available for
distribution to the holders of the Common Stock.
Upon full payment of the purchase price therefor, shares of Common Stock
will not be liable to further calls or assessments by the Company. There are no
preemptive rights for the Common Stock in the Restated Certificate of
Incorporation.
The Transfer Agent and Registrar for the Common Stock is
[ ].
PREFERRED STOCK
At April 30, 1994, the Company had outstanding approximately 6,514,000
shares of Merger Preferred Stock. All of the shares of Merger Preferred Stock
will be redeemed in connection with the consummation of the Recapitalization.
Pursuant to the Restated Certificate of Incorporation of the Company, the
Board is authorized, subject to any limitations prescribed by law, to provide
for the issuance of the shares of Preferred Stock in series and to establish
from time to time the number of shares to be included in each such series and to
fix the designation, powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof. Because the
Board has the power to establish the preferences and rights of each series, it
may afford the holders of any Preferred Stock preferences, powers and rights
(including voting rights) senior to the rights of the holders of Common Stock.
No shares of Preferred Stock will be outstanding following the consummation of
the Recapitalization, and the Company has no present intention to issue such
shares. 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.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have outstanding
66,710,900 shares of Common Stock. Of these shares, the 25,000,000 shares sold
in the Offerings (28,750,000 shares if the Underwriters' over-allotment options
are exercised in full) will be freely tradeable without
68
<PAGE>
restriction or further registration under the Securities Act except for shares
purchased by "affiliates" of the Company, as such term is defined in Rule 144
under the Securities Act (which may generally be sold only in compliance with
Rule 144 or Rule 701 under the Securities Act or pursuant to a subsequent
registration). Upon completion of the Offerings, 41,710,900 shares of Common
Stock outstanding upon completion of the Offerings (assuming no exercise of the
Underwriters' over-allotment options) will be deemed "restricted securities" as
defined in Rule 144 under the Securities Act and may not be resold without
registration under the Securities Act or pursuant to an exemption from such
registration, including exemptions provided by Rule 144 under the Securities
Act. Of the 41,710,900 shares of "restricted" Common Stock referred to above,
2,189,691 shares are held by investors who may sell such shares after the
completion of the Offerings without limitation under Rule 144. With respect to
registration rights of certain investors, see "Principal and Selling
Stockholders and Certain Relationships."
In general, Rule 144 provides that, subject to its provisions and other
applicable Federal and state securities law requirements, any person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" of the Company, who has beneficially owned "restricted securities"
for at least two years is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or the average weekly trading volume of the
same class during the four calendar weeks preceding the sale. A person who is
not deemed to have been an "affiliate" of the Company at any time during the 90
days preceding the sale and who has beneficially owned "restricted securities"
for at least three years is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above.
The holders of 41,710,900 shares of Common Stock have agreed that they will
not offer, sell or otherwise dispose of any shares for a period of 180 days from
the date of this Prospectus without the prior written consent of the
representatives of the Underwriters. If such consent is given, the Company will
make a public announcement thereof. See "Underwriting."
ANTI-TAKEOVER PROVISIONS
The Restated Certificate of Incorporation and the Bylaws of the Company
contain certain provisions that may delay, defer or prevent a change in control
of the Company and make removal of management more difficult. These provisions
are intended to enhance the likelihood of continuity and stability in the
composition of the Board and in the policies formulated by the Board and to
discourage certain types of transactions which may involve an actual or
threatened change of control of the Company. The provisions are designed to
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover of the Company that does not contemplate the acquisition of all its
outstanding shares or an unsolicited proposal for the restructuring or sale of
all or part of the Company. The provisions also are intended to discourage
certain tactics that may be used in proxy fights.
Set forth below is a description of such provisions in the Restated
Certificate of Incorporation and the Bylaws.
Pursuant to the Restated Certificate of Incorporation, the Board will be
divided into three classes serving staggered three-year terms. This provision
may only by amended or repealed by vote of 80% or more of the outstanding voting
stock. Directors can be removed from office only for cause and only by the
affirmative vote of the holders of a majority of the combined voting power of
the then outstanding shares of voting stock, voting together as a single class.
Vacancies on the Board and newly created directorships may be filled only by the
remaining directors and not by the stockholders.
69
<PAGE>
The Restated Certificate of Incorporation provides that the number of
directors will be fixed by, or in the manner provided in, the Bylaws. The Bylaws
provide that the whole Board will consist of such number of members as fixed
from time to time by the Board. Accordingly, the Board, and not the
stockholders, has the authority to determine the number of directors and (to the
extent such action is consistent with its fiduciary duties) could delay any
stockholder from obtaining majority representation on the Board by enlarging the
Board and filling the new vacancies with its own nominees until the next
stockholder election.
The Bylaws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board or a committee
thereof, of candidates for election as directors and with regard to certain
matters to be brought before an annual meeting of stockholders of the Company.
In general, notice as to any such stockholder nomination or other proposal must
be received by the Company with respect to annual meetings not less than 90 nor
more than 120 days prior to the anniversary of the immediately preceding annual
meeting and must contain certain specified information concerning the person to
be nominated or the matters to be brought before the meeting and concerning the
stockholder submitting the proposal.
Subject to the terms of any Preferred Stock, any action required or
permitted to be taken by the stockholders of the Company may be taken only at a
duly called annual or special meeting of stockholders and may not be taken by
written consent without a meeting. Special meetings of the stockholders may be
called only by the Chairman or one of the Co-Chairmen of the Board or a majority
of the entire Board, and the business transacted at any special meeting will be
confined to the matters specified in the notice of meeting.
The foregoing provisions, together with the ability of the Board to issue
Preferred Stock without further stockholder action, could delay or frustrate the
removal of incumbent directors or the assumption of control by the holder of a
large block of the Company's Common Stock even if such removal or assumption
would be beneficial, in the short term, to stockholders of the Company. The
provisions could also discourage or make more difficult a merger, tender offer
or proxy contest even if such event would be favorable to the interests of
stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of Delaware General Corporate Law ("DGCL") prevents an
"interested stockholder" (defined in Section 203, 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 publicly held 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 owned at least 85% of the voting stock of the corporation
outstanding at the time the 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 rights 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 two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder. The provisions of
Section 203 will apply to the Company upon the consummation of the Offerings and
may have the effect of delaying, deferring or preventing a change of control of
the Company. Blackstone Partners and WP Partners will be interested stockholders
following consummation of the Offerings;
70
<PAGE>
however, Section 203 will not apply to them because Holdings II has held in
excess of 15% of the Company's outstanding voting stock for more than three
years and because the Board of Directors of the Company has approved the
acquisition by Blackstone Partners and WP Partners of a direct ownership
interest in the Company in connection with the Recapitalization.
DIRECTORS' LIABILITY AND INDEMNIFICATION
The Restated Certificate of Incorporation contains a provision which
eliminates the personal liability of the Company's directors for monetary
damages resulting from breaches of their fiduciary duty to the fullest extent
permitted by the DGCL. Under the DGCL, the Company may not eliminate directors'
liability for breaches of the duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
violations under Section 174 of the DGCL or any transaction from which the
director derived an improper personal benefit. This provision also has no effect
on the ability of stockholders to seek equitable relief, such as an injunction,
that may be available to redress a breach of fiduciary duty, even though such
stockholders could not seek monetary damages from the directors for such breach.
The Bylaws contain provisions requiring, subject to certain procedures, the
indemnification of the Company's directors and officers to the fullest extent
permitted by Section 145 of the DGCL, including circumstances in which
indemnification is otherwise discretionary, and provide for the mandatory
advancement of litigation expenses incurred in defense of a claim upon the
receipt by the Company of any undertaking required by law. The Board of
Directors of the Company is further authorized, in its discretion, to provide
such rights to employees and agents of the Company. In addition, the Company may
enter into indemnification agreements with its directors and executive officers
that generally provide for similar rights to indemnification and advancement of
expenses. Management believes that these provisions are necessary to attract and
retain qualified persons as directors and officers.
71
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Wasserstein Perella Securities, Inc. and
The Nikko Securities Co. International, Inc., are acting as representatives, has
severally agreed to purchase from the Company, the respective number of shares
of Common Stock set forth opposite its name below:
<TABLE>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ----------------------------------------------------------------------------- --------------
<S> <C>
Goldman, Sachs & Co..........................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................
Wasserstein Perella Securities, Inc..........................................
The Nikko Securities Co.
International, Inc.........................................................
--------------
Total........................................................... 20,000,000
--------------
--------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the International Offering (the "International Underwriters") providing for the
concurrent offer and sale of 5,000,000 shares of Common Stock in an
international offering outside the United States. The initial public offering
price and aggregate underwriting discounts and commissions per share for the two
offerings are identical. The closing of the offering made hereby is a condition
to the closing of the International Offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International, Merrill Lynch International Limited, Wasserstein Perella
Securities, Inc. and Nikko Europe Plc.
72
<PAGE>
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (i) any individual who is a resident of the United States or
(ii) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the International
Offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person who it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any share so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Selling Stockholders have granted the U.S. Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 3,000,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their overallotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 20,000,000 shares of Common Stock offered. The Selling
Stockholders have granted the International Underwriters a similar option to
purchase up to an aggregate of 750,000 additional shares of Common Stock.
The Company and the Selling Stockholders have agreed, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 calendar days after the date of the Prospectus, not to offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of the Common
Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of the Common Stock, without the prior
written consent of the representatives, except for the shares of Common Stock
offered in common with the concurrent U.S. and International Offerings. The
Company has informed the representatives of the Underwriters that, if such
consent is given, the Company will make a public announcement thereof.
The provisions of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. apply to the offering because Wasserstein Perella
Securities, Inc. may be deemed to be an affiliate of the Company for purposes of
Schedule E. In addition, The Nikko Securities Co. International, Inc. ("Nikko"),
may be deemed to be an affiliate of the Company for purposes of Schedule E
because affiliates of Nikko have limited partnership interests in an affiliate
of Blackstone Partners, which presently owns or has the power to vote 45.0% of
the Common Stock. See "Principal and Selling Stockholders and Certain
Relationships". Accordingly, the initial public offering price can be no higher
than that recommended by a "qualified independent underwriter"
73
<PAGE>
meeting certain standards. In accordance with this requirement, Goldman, Sachs &
Co. has served in such role and has recommended a price in compliance with the
requirements of Schedule E. Goldman, Sachs & Co. in its role as qualified
independent underwriter has performed due diligence investigations and reviewed
and participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus forms a part. The representatives of the U.S.
Underwriters have informed the Company that the U.S. Underwriters do not intend
to confirm sales to any account over which they exercise discretionary
authority.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price was negotiated among the Company, the
Partners and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors considered in determining the initial public
offering price of the Common Stock, in addition to prevailing market conditions,
was the Company's historical performance, estimates of the business potential
and earnings prospects of the Company, an assessment of the Company's management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
The Common Stock has been approved for listing on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
Certain affiliates of Wasserstein Perella Securities, Inc. will be entitled
to designate three members of the Board of Directors of the Company pursuant to
the Stockholders Agreement. Messrs. Wasserstein, Weisenburger and Ziebold are
currently serving as directors of the Company. See "Management" and "Principal
and Selling Stockholders and Certain Relationships".
From time to time, Goldman, Sachs & Co. has provided financial advisory
services to Blackstone Partners with respect to matters unrelated to the
Company, for which Goldman, Sachs & Co. has received customary fees in the
ordinary course of business. From time to time, each of Merrill Lynch & Co. and
Wasserstein Perella Securities, Inc. has provided financial advisory services to
certain affiliates of the Partners, with respect to matters unrelated to the
Company, for which each has received customary fees in the ordinary course of
business.
In addition, in 1992 Merrill Lynch & Co. and Wasserstein Perella & Co.,
Inc., an affiliate of Wasserstein Perella Securities, Inc., each provided
financial advisory services relating to the solicitation by Group of consents
from the holders of Group's 11 7/8% Senior Subordinated Debentures due 2001, for
which each received fees of approximately $300,000. In 1991, Wasserstein Perella
Securities, Inc. received fees of approximately $400,000 in connection with
repurchases by the Company on the open market of certain securities of the
Company. For further information with respect to financial advisory and other
services provided and the fees received by and the ownership interests of
certain affiliates of Wasserstein Perella Securities, Inc., see "Principal and
Selling Stockholders and Certain Relationships".
74
<PAGE>
LEGAL OPINIONS
The validity of the Common Stock will be passed upon for the Company by
Cravath, Swaine & Moore, New York, New York, and for the Underwriters by Jones,
Day, Reavis & Pogue, New York, New York. From time to time, Jones, Day, Reavis &
Pogue provides legal services to the Company and other entities in which the
Partners have an interest.
EXPERTS
The consolidated financial statements included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the reports of said firm and
upon the authority of said firm as experts in accounting and auditing.
75
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES:
As of April 30, 1994 (unaudited), January 29, 1994, and January 30, 1993,
and for the thirteen weeks ended April 30, 1994 (unaudited) and May 1, 1993
(unaudited) and for the fiscal years ended January 29, 1994, January 30, 1993,
and January 25, 1992:
<TABLE>
<S> <C>
Report of Independent Public Accountants......................................................... F-2
Consolidated Statements of Operations............................................................ F-3
Consolidated Balance Sheets...................................................................... F-4
Consolidated Statements of Other Paid-in Capital................................................. F-5
Consolidated Statements of Accumulated Deficit................................................... F-5
Consolidated Statements of Cash Flows............................................................ F-6
Notes to Consolidated Financial Statements....................................................... F-7
</TABLE>
F-1
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
-----------
Available Information.............................. 3
Incorporation of Certain Documents
by Reference..................................... 3
Prospectus Summary................................. 4
Risk Factors....................................... 11
Dividends.......................................... 15
Dilution........................................... 15
Use of Proceeds and Consolidation.................. 16
Capitalization..................................... 17
Selected Financial Data............................ 18
Unaudited Pro Forma Consolidated Financial Data.... 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........................ 25
Business........................................... 37
Management......................................... 54
Principal and Selling Stockholders and Certain
Relationships...................................... 62
New Credit Facilities.............................. 64
Description of the Capital Stock................... 68
Underwriting....................................... 72
Legal Opinions..................................... 74
Experts............................................ 74
Index to Financial Statements...................... F-1
------------------------
UNTIL , 1994 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
25,000,000 SHARES
COLLINS & AIKMAN
CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
["C&A" LOGO]
------------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
WASSERSTEIN PERELLA
SECURITIES, INC.
THE NIKKO SECURITIES CO.
INTERNATIONAL, INC.
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED JUNE 2, 1994
["C&A" LOGO] 25,000,000 SHARES
COLLINS & AIKMAN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 25,000,000 shares of Common Stock offered, 5,000,000 shares are
being offered hereby in an international offering outside the United States and
20,000,000 shares are being offered in a concurrent United States offering. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting".
Of the 25,000,000 shares of Common Stock offered, 20,000,000 shares are
being sold by the Company and 5,000,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
the shares being sold by the Selling Stockholders. Blackstone Capital Partners
L.P. and Wasserstein Perella Partners, L.P. will together own or have the right
to vote approximately 59.3% of the outstanding Common Stock (53.7% assuming the
over-allotment options are exercised in full) after completion of the Offerings
and will be in a position to control the Company. See "Principal and Selling
Stockholders and Certain Relationships".
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price per share of Common Stock will be between $14 and $17. For factors to be
considered in determining the initial public offering price, as well as a
discussion of the requirement that the initial public offering price be
recommended by a qualified independent underwriter, see "Underwriting".
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE COMMON STOCK.
The Common Stock will be listed on the New York Stock Exchange under the
symbol "CKC".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
<TABLE> <CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
-------------- ------------- -------------- -----------------------
<S> <C> <C> <C> <C>
Per Share................... $ $ $ $
Total(3).................... $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Selling Stockholders have granted the International Underwriters an
option for 30 days to purchase up to an additional 750,000 shares at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Selling Stockholders have
granted the U.S. Underwriters an option for 30 days to purchase up to an
additional 3,000,000 shares at the initial public offering price per share,
less the underwriting discount, solely to cover over-allotments. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to the Selling Stockholders will be
$ , $ and $ , respectively. See
"Underwriting".
---------------------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery in New York, New
York, on or about , 1994.
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL LIMITED
WASSERSTEIN PERELLA SECURITIES, INC.
NIKKO EUROPE PLC
---------------------
The date of this Prospectus is , 1994.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the International Underwriters named
below, and each of such International Underwriters, for whom Goldman Sachs
International, Merrill Lynch International Limited, Wasserstein Perella
Securities, Inc. and The Nikko Europe, Co. Plc are acting as representatives,
has severally agreed to purchase from the Company, the respective number of
shares of Common Stock set forth opposite its name below:
<TABLE> <CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ------------------------------------------------------------------------------- ------------
<S> <C>
Goldman Sachs International....................................................
Merrill Lynch International Limited............................................
Wasserstein Perella Securities, Inc............................................
Nikko Europe Plc...............................................................
------------
Total........................................................... 5,000,000
------------
------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain brokers and dealers. After the shares of
Common Stock are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "U.S. Underwriting Agreement") with the underwriters of the U.S.
offering (the "U.S. Underwriters") providing for the concurrent offer and sale
of 20,000,000 shares of Common Stock in a U.S. offering in the United States.
The initial public offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
International Offering made hereby is a condition to the closing of the U.S.
Offering, and vice versa. The representatives of the U.S. Underwriters are
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Wasserstein Perella Securities, Inc. and The Nikko Securities Co. International,
Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
International Underwriters has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") or to any U.S. persons or (b) to any person who it
believes intends to reoffer, resell or deliver the shares in the United States
or to any U.S. persons, and (ii) cause any dealer to whom it may sell such
shares at any concession to agree to observe a similar restriction. The term
U.S. person shall mean, for purposes of this paragraph: (a) any individual who
is a resident of the United States or (b) any corporation,
74
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
partnership or other entity organized in or under the laws of the United States
or any political subdivision thereof and whose office most directly involved
with the purchase is located in the United States. Each of the U.S. Underwriters
named herein has agreed pursuant to the Agreement Between that, as a part of the
distribution of the shares offered as a part of the U.S. Offering, and subject
to certain exceptions, it will only offer, sell or deliver shares of Common
Stock, directly or indirectly, in the United States and to U.S. persons.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Selling Stockholders have granted the International Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase up
to an aggregate of 750,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the International Underwriters exercise their
over-allotment option, the International Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them, as shown in
the foregoing table, bears to the 5,000,000 shares of Common Stock offered. The
Selling Stockholders have granted the U.S. Underwriters a similar option to
purchase up to an aggregate of 3,000,000 additional shares of Common Stock.
The Company and the Selling Stockholders have agreed, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 calendar days after the date of the Prospectus, not to offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of Common Stock
or which are convertible or exchangeable into securities which are substantially
similar to the shares of the Common Stock without the prior written consent of
the representatives, except for the shares of Common Stock offered in connection
with the concurrent U.S. and International Offerings. The Company has informed
the representatives of the Underwriters that, if such consent is given, the
Company will make a public announcement thereof.
Each International Underwriter has also agreed that (a) it has not offered
or sold, and will not offer or sell, in the United Kingdom, by means of any
document, any shares of Common Stock other than to persons whose ordinary
business it is to buy or sell shares or debentures, whether as principal or
agent, or in circumstances which do not constitute an offer to the public within
the meaning of the Companies Act 1985 of Great Britain, (b) it has complied, and
will comply with, all applicable provisions of the Financial Services Act of
1986 of Great Britain with respect to anything done by it in relation to the
shares of Common Stock in, from or otherwise involving the United Kingdom, and
(c) it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of the
shares of Common Stock to a person who is of a kind described in Article 9(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988 (as amended) of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
Buyers of shares of Common Stock offered hereby may be required to pay
stamp taxes and other charges in accordance with the laws and practice of the
country of purchase in addition to the initial public offering price.
The provisions of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. apply to the offering because Wasserstein Perella
Securities, Inc. may be deemed to be an affiliate of the Company for purposes of
Schedule E. In addition, Nikko Europe Plc ("Nikko") could be deemed to be an
affiliate of the Company for purposes of Schedule E because affiliates of Nikko
have limited partnership interests in an affiliate of Blackstone Partners, which
presently owns or has the power to vote 45.0% of the Common Stock. See
"Principal and Selling Stockholders and Certain Relationships". Accordingly, the
initial public offering price can be no higher than that
75
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
recommended by a "qualified independent underwriter" meeting certain standards.
In accordance with this requirement, Goldman, Sachs & Co. has served in such
role and has recommended a price in compliance with the requirements of Schedule
E. Goldman, Sachs & Co. in its role as qualified independent underwriter has
performed due diligence investigations and reviewed and participated in the
preparation of this Prospectus and the Registration Statement of which this
Prospectus forms a part. The representatives of the U.S. Underwriters have
informed the Company that the U.S. Underwriters do not intend to confirm sales
to any account over which they exercise discretionary authority.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price was negotiated among the Company, the
Partners and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors considered in determining the initial public
offering price of the Common Stock, in addition to prevailing market conditions,
was the Company's historical performance, estimates of the business potential
and earnings prospects of the Company, an assessment of the Company's management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
Application has been made to list the Common Stock on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
Certain affiliates of Wasserstein Perella Securities, Inc. will be entitled
to designate three members of the Board of Directors of the Company pursuant to
the Stockholders Agreement. Messrs. Wasserstein, Weisenburger and Ziebold are
currently serving as directors of the Company. See "Management" and "Principal
and Selling Stockholders and Certain Relationships."
From time to time, Goldman, Sachs & Co. has provided financial advisory
services to Blackstone Partners with respect to matters unrelated to the
Company, for which Goldman, Sachs & Co. has received customary fees in the
ordinary course of business. From time to time, each of Merrill Lynch & Co. and
Wasserstein Perella Securities, Inc. has provided financial advisory services to
certain affiliates of the Partners, with respect to matters unrelated to the
Company, for which each has received customary fees in the ordinary course of
business.
In addition, in 1992 Merrill Lynch & Co. and WP & Co. each provided
financial advisory services relating to the solicitation by Group of consents
from the holders of Group's 11 7/8% Senior Subordinated Debentures due 2001, for
which each received fees of $300,000. In 1991, Wasserstein Perella Securities,
Inc. received fees of approximately $400,000 in connection with repurchases by
the Company on the open market of certain securities of the Company. For further
information with respect to financial advisory and other services provided and
the fees received by and the ownership interests of certain affiliates of
Wasserstein Perella Securities, Inc., see "Principal and Selling Stockholders
and Certain Relationships".
LEGAL OPINIONS
The validity of the Common Stock will be passed upon for the Company by
Cravath, Swaine & Moore, New York, New York, and for the Underwriters by Jones,
Day, Reavis & Pogue, New York, New York. From time to time, Jones, Day, Reavis &
Pogue provides legal services to the Company and other entities in which the
Partners have an interest.
EXPERTS
The consolidated financial statements included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the reports of said firm and
upon the authority of said firm as experts in accounting and auditing.
76
<PAGE>
[ALTERNATIVE WRAP FOR INTERNATIONAL PROSPECTUS]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
-----------
Available Information.............................. 2
Incorporation of Certain Documents
by Reference..................................... 2
Prospectus Summary................................. 3
Risk Factors....................................... 10
Dividends.......................................... 13
Dilution........................................... 14
Use of Proceeds and Consolidation.................. 15
Capitalization..................................... 16
Selected Financial Data............................ 17
Unaudited Pro Forma Consolidated Financial Data.... 18
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........................ 23
Business........................................... 32
Management......................................... 50
Principal and Selling Stockholders and Certain
Relationships...................................... 58
New Credit Facilities.............................. 59
Description of the Capital Stock................... 63
Certain United States Tax Consequences to
Non-United States Holders.......................... 67
Underwriting....................................... 69
Legal Opinions..................................... 71
Experts............................................ 71
Index to Financial Statements...................... F-1
------------------------
UNTIL , 1994 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
25,000,000 SHARES
COLLINS & AIKMAN
CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
["C&A" LOGO]
------------------------
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL LIMITED
WASSERSTEIN PERELLA SECURITIES, INC.
NIKKO EUROPE PLC
REPRESENTATIVES OF THE UNDERWRITERS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses of the Company in
connection with the issuance and distribution of the securities being
registered, other than underwriting compensation and subject to further
contingencies:
<TABLE>
<S> <C>
SEC Registration Fee........................................................ $ 176,466.75
NASD Filing Fee............................................................. 30,500.00
NYSE Listing Fee............................................................ 319,100.00
Legal Fees and Expenses..................................................... 350,000.00
Transfer Agent and Registrar Fee............................................ *
Blue Sky Fees and Expenses.................................................. 10,000.00
Accounting Fees and Expenses................................................ 250,000.00
Printing and Engraving Expenses............................................. 250,000.00
Miscellaneous............................................................... *
---------------
Total..................................................................... $ *
---------------
---------------
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware (the "DGCL")
authorizes the Company to indemnify each director and officer of the Company
against expenses (including attorney's fees, judgments, fines and amounts paid
in settlement) actually and reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceedings in which
he is involved by reason of the fact that he is or was a director or officer of
the Company or is or was serving as a director, officer, employee or agent of
another corporation or organization at the request of the Company, provided that
he acted in good faith and in a manner that he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, provided he had no reasonable cause to believed
that his conduct was unlawful. The determination whether a director or officer
has met the applicable standard of conduct may be made by (1) the Board of
Directors by vote of a quorum consisting of directors who were not parties to
such action, suit or proceedings, or (2) if such a quorum is not obtainable, or
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel, in a written opinion, or (3) by the stockholders.
Indemnification is mandatory in any instance in which the director or officer is
successful on the merits or otherwise in the defense of any proceeding or any
claim, issue or matter thereof. If the legal proceeding, however, is by or in
the right of the Company, Section 145 provides that the director or officer may
not be indemnified in respect to any claim, issue or matter as to which he shall
have been adjudged to be liable to the Company unless a court determines
otherwise. Section 145 also authorizes the payment of expenses incurred in
defense of any proceeding in advance of its final disposition upon the receipt
by the Company of an undertaking of the director or officer to repay the amounts
so advanced if it is ultimately determined that he is not entitled to indemnity.
It further provides that the power to indemnify includes the power to indemnify
persons who served as directors and officers of Holdings II prior to its merger
into the Company, as well as persons who cease to be directors or officers of
the Company.
Article Seventh of the Restated Certificate, provides that, to the fullest
extent permitted by the DGCL, as now or hereafter in effect, no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for any breach of his fiduciary duty as a director. However,
under Section 102(b)(7) of the DGCL, a director cannot be absolved from
II-1
<PAGE>
liability (1) for any breach of his duty of loyalty to the Company or its
stockholders, (2) for acts or omissions that are not in good faith or involve
intentional misconduct or a knowing violation of the law, (3) under Section 174
of the DGCL, or (4) for any transaction from which the director derived an
improper personal benefit.
Article VIII of the Company's By-Laws, a copy of which is filed as Exhibit
4.2, provides that any person made a party to, threatened to be made a party to,
or otherwise involved in, any action, suit or proceeding by reason of the fact
that he is or was a director or officer of the Company or is or was a director,
officer, employee or agent of any corporation for which he served as such at the
request of the Company (including service with respect to employee benefit
plans), shall be indemnified by the Company to the fullest extent authorized by
the DGCL against all expenses, including attorneys' fees, reasonably incurred by
him in connection therewith except for expenses incurred in connection with
certain proceedings (or parts thereof) initiated by the indemnitee. Such right
of indemnification includes the right to be paid, in advance, all expenses
incurred in connection with the defense of a proceeding (upon receipt of any
required undertaking) and grants to an indemnitee the right to bring suit to
enforce the rights to indemnification and to the advancement of expenses
provided in Article VIII. The rights to indemnification and to the advancement
of expenses provided therein shall not be deemed exclusive of any other rights
to which such director or officer may be entitled apart from the indemnification
provisions of said Article VIII of the Company's By-Laws. Additionally, the
Company intends to maintain directors and officers liability insurance that
insures the directors and officers of the Company against any expense, liability
or loss to the extent such insurance is available at prices the Company
determines are reasonable.
ITEM 16. EXHIBITS.
(a) Exhibits. See Exhibit Index on page E-1.
(b) Financial Statement Schedules. See Index to Financial Statement
Schedules on page S-1.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in The City of New York, State of New York, on the 2nd day of
June 1994.
COLLINS & AIKMAN
HOLDINGS CORPORATION
By: /s/ DAVID A. STOCKMAN
..................................
David A. Stockman
Co-Chairman of the
Board of Directors
By: /s/ BRUCE WASSERSTEIN
..................................
Bruce Wasserstein
Co-Chairman of the Board
of Directors
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
NAME TITLE DATE
- ---------------------------------------------- ---------------------------------------------- -----------------
* Co-Chairman of the Board of Directors June 2, 1994
..............................................
David A. Stockman
* Co-Chairman of the Board of Directors June 2, 1994
..............................................
Bruce Wasserstein
* President and Director June 2, 1994
.............................................. (Principal Executive Officer)
Stephen A. Schwarzman
* Principal Financial and Accounting Officer June 2, 1994
..............................................
David J. McKittrick
/s/ RANDALL J. WEISENBURGER Vice Chairman and Director June 2, 1994
..............................................
Randall J. Weisenburger
* Director June 2, 1994
..............................................
James R. Birle
* Director June 2, 1994
..............................................
W. Townsend Ziebold, Jr.
*By: /s/ RANDALL J. WEISENBURGER
..............................................
Randall J. Weisenburger
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Please note that in the following description of exhibits, the title of any
document entered into, or filing made, prior to July 15, 1992 reflects the name
of the entity a party thereto or filing, as the case may be, at such time.
Accordingly, documents and filings described below may refer to WCI Holdings II
Corporation, WCI Holdings Corporation or Wickes Companies, Inc., if such
documents and filings were made prior to July 15, 1992.
<TABLE> <CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- --------- ------------------------------------------------------------------------------------------ ---------------
<S> <C> <C>
+1.1 Form of Underwriting Agreement (U.S. Version).
+1.2 Form of Underwriting Agreement (International Version).
4.1 Certificate of Incorporation of the Company, as amended, is hereby incorporated by
reference to Exhibit 4.1 to Collins & Aikman Holdings Corporation's Registration
Statement on Form S-8 (Registration No. 33-53321) filed April 28, 1994.
4.2 By-laws of the Company is hereby incorporated by reference to Exhibit 3.1 to Collins &
Aikman Holdings Corporation's Report on Form 10-Q for the fiscal quarter ended April 30,
1994.
*4.3 Specimen Stock Certificate for the Common Stock.
4.4 Indenture dated as of May 1, 1985, pursuant to which 11 3/8% Usable Subordinated
Debentures due 1997 of Collins & Aikman Group, Inc. (formerly named Wickes Companies,
Inc.) were issued is hereby incorporated by reference to Exhibit 4(f) of Wickes
Companies, Inc.'s Current Report on Form 8-K dated May 21, 1985 (SEC File No. 1-6761).
*4.5 Form of New Credit Agreement to be entered into by Collins & Aikman Group, Inc. and a
syndicate of banks and other financial institutions for whom Chemical Bank will act as
agent.
*5. Opinion of Cravath, Swaine & Moore as to the legality of the shares being issued.
10.1 Employment Agreements dated as of June 16, 1989 between Wickes Companies, Inc. and certain
executive officers are hereby incorporated by reference to Exhibit 10.1 of Wickes
Companies, Inc. Form 10-K for the fiscal year ended January 27, 1990.
10.2 First Amendment to Employment Agreements dated as of March 20, 1990 between Wickes
Companies, Inc. and certain executive officers is hereby incorporated by reference to
Exhibit 10.2 of Wickes Companies, Inc.'s Form 10-K for the fiscal year ended January 27,
1990.
10.3 Employment Agreement dated as of July 18, 1990 between Wickes Companies, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.3 of Wickes
Companies, Inc. Form 10-K for the fiscal year ended January 26, 1991.
10.4 Agreement dated as of March 23, 1992 between Collins & Aikman Group, Inc. and an executive
officer is hereby incorporated by reference to Exhibit 10.6 of Collins & Aikman Holdings
Corporation's Report on Form 10-K for the fiscal year ended January 30, 1993.
10.5 First Amendment to Agreement, dated as of April 4, 1994 between Collins & Aikman Group,
Inc. and an executive officer is hereby incorporated by reference to Exhibit 10.14 of
Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended
January 29, 1994.
10.6 Letter Agreement dated as of May 16, 1991 and Employment Agreement dated as of July 22,
1992 between Collins & Aikman Corporation and an executive officer are hereby
incorporated by reference to Exhibit 10.7 of Collins & Aikman Holdings Corporation's
report on Form 10-K for the fiscal year ended January 30, 1993.
</TABLE>
E-1
<PAGE>
<TABLE> <CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- --------- ------------------------------------------------------------------------------------------ ---------------
<S> <C> <C>
10.7 First Amendment to Employment Agreement dated as of February 24, 1994 between Collins &
Aikman Corporation and an executive officer.
10.8 Employment Agreement dated as of May 1, 1991 between Kayser-Roth Corporation and an
executive officer is hereby incorporated by reference to Exhibit 10.8 of Collins &
Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30,
1993.
10.9 First Amendment to Employment Agreement dated as of May 1, 1991 between Kayser-Roth
Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.9
of Collins & Aikman Holdings Corporation's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1993.
10.10 Letter Agreement dated as of August 12, 1992 between Collins & Aikman Group, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.9 of Collins &
Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30,
1993.
10.11 Agreement dated as of February 25, 1993 and First Amendment dated as of March 29, 1993
between Collins & Aikman Group, Inc. and a former executive officer are hereby
incorporated by reference to Exhibit 10.10 of Collins & Aikman Holdings Corporation's
Report on Form 10-K for the fiscal year ended January 30, 1993.
10.12 1993 Employee Stock Option Plan.
10.13 1994 Employee Stock Option Plan.
10.14 Letter Agreements dated as of May 16, 1991 between Collins & Aikman Corporation and
certain executive officers.
10.15 Employment Agreement dated as of February 1, 1992 between Collins & Aikman Corporation and
an executive officer.
10.16 Employment Agreement dated as of April 27, 1992 between Collins & Aikman Corporation and
an executive officer.
10.17 Employment Agreement dated as of March 1, 1993 between Imperial Wallcoverings, Inc. and an
executive officer.
10.18 Employment Agreement dated as of October 1, 1993 between Collins & Aikman Corporation and
an executive officer.
10.19 Warrant Agreement dated as of January 8, 1994 by and between Collins & Aikman Group, Inc.
and Legwear Acquisition corporation is hereby incorporated by reference to Exhibit 10.20
of Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended
January 29, 1994.
10.20 Acquisition Agreement dated as of November 22, 1993 as amended and restated as of January
28, 1994, among Collins & Aikman Group, Inc., Kayser-Roth Corporation and Legwear
Acquisition Corporation is hereby incorporated by reference to Exhibit 2.1 of Collins &
Aikman Holdings Corporation's Current Report on Form 8-K dated February 10, 1994.
*10. Stockholders Agreement
+11. Computation of Earnings Per Share.
21. Subsidiaries.
*23.1 Consent of Cravath, Swaine & Moore is contained in Exhibit 5.
+23.2 Consent of Arthur Andersen & Co.
24. Power of attorney (contained in the signature section of this Registration Statement).
</TABLE>
- ---------------
+ Filed herewith.
* To be filed by amendment.
E-2
JDRP Draft of 6/1/94
--------------------
Collins & Aikman Corporation
Common Stock
(par value $0.01 per share)
Underwriting Agreement
(U.S. Version)
June , 1994
--
Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Wasserstein Perella Securities, Inc.
The Nikko Securities Co.
International, Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Dear Sirs:
Collins & Aikman Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 16,000,000 shares of Common Stock, par value $0.01 per share
("Stock"), of the Company, and the entities named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters 4,000,000 shares of Stock and, at the
election of the Underwriters, up to 3,000,000 additional shares of Stock. The
aggregate of 16,000,000 shares to be sold by the Company and 4,000,000 shares
of Stock to be sold by the Selling Stockholders are herein collectively called
the "Firm Shares" and the aggregate of 3,000,000 additional shares to be sold
by the Selling Stockholders is herein called the "Optional Shares". The Firm
Shares and the Optional Shares which the Underwriters elect to purchase
pursuant to Section 2 hereof are herein collectively called the "Shares".
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of 5,750,000 shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International, Merrill
Lynch International Limited, Wasserstein Perella Securities, Inc. and Nikko
Europe Plc and are acting as lead managers. Anything herein or therein to the
contrary notwithstanding, the respective closings under this Agreement and the
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International Underwriting Agreement are hereby expressly made conditional on
one another. The Underwriters hereunder and the International Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Stock between the two
syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one
relating to the Shares hereunder and the other relating to the International
Shares. The latter form of prospectus will be identical to the former except
for certain substitute pages as included in the registration statement and
amendments thereto as mentioned below. Except as used in Sections 2, 3, 4, 9
and 11 herein, and except as the context may otherwise require, references
hereinafter to the Shares shall include all the shares of Stock which may be
sold pursuant to either this Agreement or the International Underwriting
Agreement, and references herein to any prospectus whether in preliminary or
final form, and whether as amended or supplemented, shall include both the
U.S. and the international versions thereof.
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement in respect of the Firm Shares and the
Optional Shares has been filed with the Securities and Exchange Commission
(the "Commission"); such registration statement and any post-effective
amendment thereto, each in the form heretofore delivered to you, and,
excluding exhibits thereto but including all documents incorporated by
reference in the prospectus contained therein, to you for each of the
other Underwriters, have been declared effective by the Commission in such
form; no other document with respect to such registration statement or
document incorporated by reference therein has heretofore been filed with
the Commission; and no stop order suspending the effectiveness of such
registration statement has been issued and no proceeding for that purpose
has been initiated or threatened by the Commission (any preliminary
prospectus included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Securities Act of 1933, as amended (the "Act"), is
hereinafter called a "Preliminary Prospectus"; the various parts of such
registration statement, including all exhibits thereto and including
(i) the information contained in the form of final prospectus filed with
the Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be
part of the registration statement at the time it was declared effective
and (ii) the documents incorporated by reference in the prospectus
contained in the registration statement at the time such part of the
registration statement became effective, each as amended at the time such
part of the registration statement became effective, are hereinafter
collectively called the "Registration Statement"; such final prospectus,
in the form first filed pursuant to Rule 424(b) under the Act, is
hereinafter called the "Prospectus"; and any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item
12 of Form S-2 under the Act, as of the date of such Preliminary
Prospectus or Prospectus, as the case may be);
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
you expressly for use therein;
(iii) The documents incorporated by reference in the Prospectus,
when they were filed with the Commission, conformed in all material
respects to the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the
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Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading;
(iv) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the
Company by an Underwriter through you expressly for use therein;
(v) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus; and, since the respective dates
as of which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management, financial
position, stockholders' equity, results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(vi) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries;
(vii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it
owns or leases properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction; and
each subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(viii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable; and all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable. Except for certain
preferred shares which will be redeemed prior to the sale of Stock
contemplated hereby, all such shares of capital stock of each subsidiary
of the Company are owned beneficially and of record by the Company or one
of its subsidiaries, free and clear of all liens, encumbrances, equities
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or claims (other than such of the foregoing as arise under the Credit
Agreements);
(ix) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein and therein, will be duly and
validly issued and fully paid and non-assessable and will conform to the
description of the Stock contained in the Prospectus;
(x) The issue and sale of the Shares to be sold by the Company
hereunder and under the International Underwriting Agreement and the
compliance by the Company with all of the provisions of this Agreement and
the International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, except for such conflicts,
breaches or violations which, individually or in the aggregate, would not
have a material adverse effect on the general affairs, management,
financial position, business prospects, stockholders' equity or results of
operations of the Company and its subsidiaries (a "Material Adverse
Effect"), nor will such action result in any violation of the provisions
of the Certificate of Incorporation or By-Laws of the Company or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale of
the Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters and the
International Underwriters;
(xi) Neither the Company nor any of its subsidiaries is in violation
of its charter or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, loan agreement or note or any material contract,
lease or other instrument to which it is a party or by which it or any of
them or their properties may be bound;
(xii) The statements made in the Prospectus under the caption
"Description of Capital Stock" insofar as they purport to constitute a
summary of the terms of the Stock, under the caption "Certain United
States Tax Consequences to Non-United States Holders," and under the
captions "The New Credit Facilities" and "Underwriting", insofar as they
describe the provisions of the matters therein described, are accurate and
fair summaries;
(xiii) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a Material Adverse Effect; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(xiv) The Credit Agreement, dated as of the date of this Agreement,
among the Company and the banks party thereto (the "Credit Agreement") has
been duly authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable in
accordance with its terms, subject, as to enforcement, to applicable
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
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equitable principles; and immediately prior to or simultaneously with the
First Time of Delivery the Company will consummate the borrowing of not
less than $ million of borrowings pursuant to the Credit Agreement (the
---
"Term Borrowings") and effect the other transactions described under the
caption "Use of Proceeds and Consolidation" in the Prospectus;
(xv) The transactions described under the caption "Use of Proceeds
and Consolidation" in the Prospectus (the "Transactions"), including,
without limitation, the merger of Collins & Aikman Holdings II Corporation
("Holdings II") with and into the Company (the "Holdings II Merger") and
the merger of Collins & Aikman Group, Inc. ("Group") with and into Collins
& Aikman Corporation (the "Group Merger", and collectively with the
Holdings II Merger, the "Consolidation"), have been duly authorized, will
be consummated simultaneously with the First Time of Delivery and,
assuming the consummation of the sale of the Firm Shares pursuant to this
Agreement and the International Underwriting Agreement, the consummation
of the Term Borrowings and the application of the net proceeds of the
foregoing as described under the caption "Use of Proceeds and
Consolidation" in the Prospectus, the consummation of the Transactions
will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject,
except for such conflicts, breaches or violations which, individually or
in the aggregate, would not have a Material Adverse Effect, nor will such
action result in any violation of the provisions of the respective
Certificate of Incorporation or By-laws of the Company, or any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the consummation of the Transactions,
except for the filing of certificates of merger in accordance with
Delaware law;
(xvi) The Company and its subsidiaries have filed all federal or
state income or franchise tax returns required to be filed and have paid
all taxes shown thereon as due (except taxes being contested in good faith
as to which adequate provisions have been made to the extent required by
generally accepted accounting principles ("GAAP")), and there is no
material tax deficiency which has been or might reasonably be expected to
be asserted against the Company or any of its subsidiaries (except such of
the foregoing as have been adequately provided for on the books of the
Company and its subsidiaries);
(xvii) Neither the Company, any of its subsidiaries, any predecessor
of any of the foregoing nor, to the knowledge of the Company, any entity
as to which any of the foregoing has any indemnity or similar obligation
has authorized or conducted or has knowledge of the generation,
transportation, storage, use, treatment, disposal or release of any
hazardous substance, hazardous waste, hazardous material, hazardous
constituent, toxic substance, pollutant, contaminant, petroleum product
(including crude oil or any fraction thereof), natural gas, liquefied gas
or synthetic gas defined or regulated under any environmental law
(collectively, "Hazardous Materials") on, in or under any real property
leased, owned, used, operated or by any means controlled by the Company or
any subsidiary (the "Real Property") which, in the case of any of the
foregoing, is required to be disclosed (directly or by incorporation by
reference) in the Prospectus, or in any of the Company's filings required
under the Exchange Act, and which is not so disclosed in accordance with
such requirements; the Real Property and the Company's, each subsidiary's
and, to the knowledge of the Company, each such other entity's, as the
case may be, operations are in compliance in all material respects with
all federal, state and local laws, ordinances, rules and regulations
relating to health, safety and the environment (collectively,
"Environmental Laws"), and the Company, each subsidiary and, to the
knowledge of the Company, each such other entity has all licenses, permits
and authorizations required to be had under any Environmental Law, and is
and has operated in compliance therewith, except for such of the foregoing
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as, individually or in the aggregate, would not have a Material Adverse
Effect; except as described in the Prospectus, neither the Company, any of
its subsidiaries nor, to the knowledge of the Company, any such other
entity has received any written or oral notice from any governmental
entity or third party, and there is no pending or, to the best knowledge
of the Company or any subsidiary, threatened, and, to the knowledge of the
Company or any subsidiary there are no circumstances with respect to the
Real Property or the operations of the Company or its subsidiaries that
could reasonably be anticipated to form the basis of, any claim,
litigation or any administrative agency proceeding that: (1) alleges a
violation of any Environmental Laws by the Company or any subsidiary, (2)
alleges the Company, any subsidiary or any predecessor of any of the
foregoing nor any entity as to which any of the foregoing has any
indemnity or similar obligation is a liable party under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C.
Sec.Sec. 9601, et seq. or any state superfund law, (3) alleges possible
contamination of the environment by the Company or any subsidiary, or (4)
alleges possible contamination of the Real Property, except for such of
the foregoing as, individually or in the aggregate, would not have a
Material Adverse Effect;
(xviii) No labor dispute with the employees of, or representatives
of employees of, the Company or any of its subsidiaries exists or, to the
knowledge of the Company or any of its subsidiaries, is imminent, and the
Company is not aware of any existing or reasonably foreseeable labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors which, in any such case, might be expected to
result in any Material Adverse Effect;
(xix) The Company and its subsidiaries each owns or possesses, or
can acquire on reasonable terms, the patents, patent rights, licenses,
inventions, copyrights, know how (including trade secrets and other
unpatented and unpatentable proprietary or confidential information,
systems or procedures), trade marks, service marks and trade names
presently employed by it in connection with the business now operated by
them, and neither the Company nor any subsidiary has received any notice
of infringement of or conflict with asserted rights of others with respect
to any of the foregoing which, individually or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in any
Material Adverse Effect;
(xx) There are no transactions with affiliates, as defined in Rule
405 under the Act, which are required to be disclosed in a Prospectus that
are not fairly disclosed therein;
(xxi) The Company is not and, after giving effect to the offering
and sale of the Shares, will not be an open-end investment company, unit
investment trust or face-amount certificate company that is or is required
to be registered under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and neither the Company nor any affiliated
entity is directly or indirectly controlled by or acting on behalf of any
person that is such a company or trust;
(xxii) The Shares have been approved for listing on the New York
Stock Exchange (the "Exchange"), subject only to official notice of
issuance, under the symbol "CKC";
(xxiii) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075 of Florida Statutes (Chapter
92-198, Laws of Florida); and
(xxiv) Arthur Andersen & Co., who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(b) Holdings II represents and warrants to, and agrees with, each of the
Underwriters that:
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(i) Holdings II has, and immediately prior to the effective time of
the Holdings II Merger will have, good and valid title to all of the
presently issued and outstanding shares of stock of Holdings, free and
clear of all liens, encumbrances, equities or claims; and, upon the
effective time of the Holdings II Merger, good and valid title to such
shares of Stock, free and clear of all liens, encumbrances, equities or
claims, will be held by the Selling Stockholders and other former security
holders of Holdings II; and
(ii) The Holdings II Merger has been duly authorized, and the
consummation thereof will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Holdings II or any of its subsidiaries is
a party or by which Holdings II or any of its subsidiaries is bound or to
which any of the property or assets of Holdings II or any of its
subsidiaries is subject, nor will such action result in any violation of
the provisions of the respective Certificates of Incorporation or By-laws
of Holdings II or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over Holdings II
or any of its subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or with
any such court or governmental agency or body is required for the
consummation of the Holdings II Merger, except for the filing of
certificates of merger in accordance with Delaware law.
(c) Each of the Selling Stockholders severally represents and warrants
to, and agrees with, each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary for
the execution and delivery by such Selling Stockholder of this Agreement
and the International Underwriting Agreement and the Power of Attorney
(the "Power of Attorney") and the Custody Agreement (the "Custody
Agreement") hereinafter referred to, and for the sale and delivery of the
Shares to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement, have been obtained; and such Selling
Stockholder has full right, power and authority to enter into this
Agreement, the International Underwriting Agreement, the Power of Attorney
and the Custody Agreement and to sell, assign, transfer and deliver the
Shares to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement;
(ii) The sale of the Shares to be sold by such Selling Stockholder
hereunder and the compliance by such Selling Stockholder with all of the
provisions of this Agreement, the International Underwriting Agreement,
the Power of Attorney and the Custody Agreement and the consummation of
the transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any statute, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder is
bound, or to which any of the property or assets of such Selling
Stockholder is subject, nor will such action result in any violation of
the provisions of the Certificate of Incorporation or By-Laws of such
Selling Stockholder if such Selling Stockholder is a corporation, or the
Articles of Partnership of such Selling Stockholder, if such Selling
Stockholder is a partnership or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over such Selling Stockholder or the property of such Selling Stockholder;
(iii) Immediately following the effective time of the Holdings II
Merger, such Selling Stockholder will have, and immediately prior to each
Time of Delivery (as defined in Section 4 hereof) such Selling Stockholder
will have, good and valid title to the Shares to be sold by such Selling
Stockholder hereunder or under the International Underwriting Agreement,
free and clear of all liens, encumbrances, equities or claims; and, upon
delivery of such Shares and payment therefor pursuant hereto and thereto,
good and valid title to such Shares, free and clear of all liens,
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encumbrances, equities or claims, will pass to the several Underwriters or
the International Underwriters, as the case may be;
(iv) During the period beginning from the date hereof and continuing
to and including the date 180 calendar days after the date of the
Prospectus, such Selling Stockholder will not offer, sell, contract to
sell or otherwise dispose of, except as provided hereunder or under the
International Underwriting Agreement, any securities of the Company that
are substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for or that represent
the right to receive the Shares or any such substantially similar
securities (other than pursuant to employee stock option plans existing
on, or upon the conversion or exchange of convertible or exchangeable
securities outstanding as of, the date of this Agreement) without your
prior written consent; provided, however, that The Prudential Insurance
Company of America and Pruco Life Insurance Company may sell such
securities in privately negotiated non-broker transactions during such 180
day period to transferees who agree in writing to comply with the above
restriction for the remainder of such 180 day period;
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares; and
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such Preliminary Prospectus
and the Registration Statement did, and the Prospectus and any further
amendments or supplements to the Registration Statement and the Prospectus
will, when they become effective or are filed with the Commission, as the
case may be, not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
In order to document the Underwriters' compliance with the reporting and
withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982
with respect to the transactions herein contemplated, each of the Selling
Stockholders agrees to deliver to you prior to or at the First Time of Delivery
(as hereinafter defined) a properly completed and executed United States
Treasury Department Form W-9 (or other applicable form or statement specified
by Treasury Department regulations in lieu thereof).
Each of the Selling Stockholders represents and warrants that certificates
in negotiable form representing not less than such number of the issued and
outstanding shares of the common stock of Holdings II as will be converted into
3,750,000 shares of Stock in accordance with the terms and upon the effective
time of the Holdings II Merger, have been placed in custody under a Custody
Agreement, in the form heretofore furnished to you, duly executed and delivered
by such Selling Stockholder to the custodian named therein (the "Custodian"),
and that such Selling Stockholder has duly executed and delivered a Power of
Attorney, in the form heretofore furnished to you, appointing the persons
indicated in Schedule II hereto, and each of them, as such Selling
Stockholder's attorneys-in-fact (the "Attorneys-in-Fact") with authority to
execute and deliver this Agreement on behalf of such Selling Stockholder, to
determine the purchase price to be paid by the Underwriters to the Selling
Stockholders as provided in Section 2 hereof, to authorize the delivery of the
Shares to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement and otherwise to act on behalf of such
Selling Stockholder in connection with the transactions contemplated by this
Agreement, the International Underwriting Agreement and the Custody Agreement.
Each of the Selling Stockholders specifically agrees that the Shares
represented by the certificates held in custody for such Selling Stockholder
under the Custody Agreement are subject to the interests of the Underwriters
hereunder and the International Underwriters under the International
Underwriting Agreement, and that the arrangements made by such Selling
Stockholder for such custody, and the appointment by such Selling Stockholder
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of the Attorneys-in-Fact by the Power of Attorney, are to that extent
irrevocable. Each of the Selling Stockholders specifically agrees that the
obligations of the Selling Stockholders hereunder shall not be terminated by
operation of law, whether by the death or incapacity of any individual Selling
Stockholder or, in the case of an estate or trust, by the death or incapacity
of any executor or trustee or the termination of such estate or trust, or in
the case of a partnership or corporation, by the dissolution of such
partnership or corporation or by the occurrence of any other event. If any
individual Selling Stockholder or any such executor or trustee should die or
become incapacitated, or if any such estate or trust should be terminated, or
if any such partnership or corporation should be dissolved, or if any other
such event should occur, before the delivery of the Shares hereunder,
certificates representing the Shares shall be delivered by or on behalf of the
Selling Stockholders in accordance with the terms and conditions of this
Agreement, the International Underwriting Agreement and of the Custody
Agreements, and actions taken by the Attorneys-in-Fact pursuant to the Powers
of Attorney shall be as valid as if such death, incapacity, termination,
dissolution or other event had not occurred, regardless of whether or not the
Custodian, the Attorneys-in-Fact, or any of them, shall have received notice of
such death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agrees, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $ , the number of Firm Shares set
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forth opposite the name of such Underwriter in Schedule I hereto (the number of
Firm Shares (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying the aggregate number of Shares to be sold by the
Company and the Selling Stockholders as set forth opposite their respective
names in Schedule II hereto by a fraction, the numerator of which is the
aggregate number of Firm Shares to be purchased by such Underwriter as set
forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the aggregate number of Firm Shares to be purchased by
all the Underwriters from the Company and all the Selling Stockholders
hereunder and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Shares as provided below, each of
the Selling Stockholders agrees, severally and not jointly, to sell to each of
the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from each of the Selling Stockholders, at the purchase
price per share set forth in clause (a) of this Section 2, that portion of the
number of Optional Shares as to which such election shall have been exercised
(to be adjusted by you so as to eliminate fractional shares) determined by
multiplying such number of Optional Shares by a fraction the numerator of which
is the maximum number of Optional Shares which such Underwriter is entitled to
purchase as set forth opposite the name of such Underwriter in Schedule I
hereto and the denominator of which is the maximum number of the Optional
Shares which all of the Underwriters are entitled to purchase hereunder.
The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 3,000,000 Optional Shares, at the purchase
price per share set forth in the immediately preceding paragraph, for the sole
purpose of covering overallotments in the sale of the Firm Shares. Any such
election to purchase Optional Shares shall be made in proportion to the maximum
number of Optional Shares to be sold by each Selling Stockholder as set forth
in Schedule II hereto. Any such election to purchase Optional Shares may be
exercised by written notice from you to the Attorneys-in-Fact, given within a
period of 30 calendar days after the date of this Agreement and setting forth
the aggregate number of Optional Shares to be purchased and the date on which
such Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Attorneys-in-Fact otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
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4. Certificates in definitive form for the Shares to be purchased by each
Underwriter hereunder, and in such denominations and registered in such names
as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders, shall be delivered by or on
behalf of the Company and the Selling Stockholders to you for the account of
such Underwriter, against payment by such Underwriter or on its behalf of the
purchase price therefor by certified or official bank check or checks, payable
to the order of the Company and the Custodian as their interests may appear, in
New York Clearing House funds, all at the offices of Jones, Day, Reavis &
Pogue, 599 Lexington Avenue, New York, New York 10022, or at such other place
as shall be agreed upon by the Company, and you. The time and date of such
delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New
York City time, on , 1994 or such other time and date as you and
---------------
the Company may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York City time, on the date specified by you in the
written notice given by you of the Underwriters' election to purchase such
Optional Shares, or such other time and date as you, the Company and the
Selling Stockholders may agree upon in writing. Such time and date for
delivery of the Firm Shares is herein called the "First Time of Delivery".
Such time and date for delivery of the Optional Shares, if not the First Time
of Delivery, is herein called the "Second Time of Delivery", and each such time
and date for delivery is herein called a "Time of Delivery". Such certificates
will be made available for checking and packaging at least twenty-four hours
prior to each Time of Delivery at the office of Goldman, Sachs & Co., 85 Broad
Street, New York, New York 10004.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus which
shall be disapproved by you promptly after reasonable notice thereof; to advise
you, promptly after it receives notice thereof, of the time when the
Registration Statement, or any amendment thereto, has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has
been filed and to furnish you copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use its best
efforts to obtain its withdrawal;
(b) Promptly from time to time to take such action as you may reasonably
request to qualify the Shares for offering and sale under the securities laws
of such jurisdictions as you may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such jurisdictions for
as long as may be necessary to complete the distribution of the Shares,
provided that in connection therewith the Company shall not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus in such
quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of
nine months after the time of issue of the Prospectus in connection with the
offering or sale of the Shares and if at such time any events shall have
occurred as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall be necessary
during such same period to amend or supplement the Prospectus in order to
comply with the Act, to notify you and upon your request to prepare and furnish
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without charge to each Underwriter and to any dealer in securities as many
copies as you may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such statement or omission
or effect such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time nine
months or more after the time of issue of the Prospectus, upon your request but
at the expense of such Underwriter, to prepare and deliver to such Underwriter
as many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;
(d) To make generally available to its security holders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Act), an earnings statement of the Company and its subsidiaries (which need
not be audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including at the option of the
Company Rule 158 under the Act);
(e) During the period beginning from the date hereof and continuing to
and including the date 180 calendar days after the date of the Prospectus, not
to offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder or under the International Underwriting Agreement, any securities of
the Company that are substantially similar to the Shares, including but not
limited to any securities that are convertible into or exchangeable for or that
represent the right to receive the Shares or any such substantially similar
securities (other than pursuant to employee stock option plans existing on, or
upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement) without your prior written
consent;
(f) To furnish to its stockholders as soon as practicable after the end
of each fiscal year an annual report (including a balance sheet and statements
of income, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants) and, as
soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the effective date
of the Registration Statement), consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed and (ii)
such additional information concerning the business and financial condition of
the Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the Shares
pursuant to this Agreement and the International Underwriting Agreement in the
manner specified in the Prospectus under the caption "Use of Proceeds and the
Consolidation"; and
(i) To use its best efforts to list, subject to notice of issuance, the
Shares on the Exchange.
6. The Company and each of the Selling Stockholders, jointly and
severally, covenant and agree with one another and with the several
Underwriters that (a) the Company will pay or cause to be paid the following:
(i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Shares under the Act and
all other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International
Underwriting Agreement, the Agreement between Syndicates, the Selling
Agreements, the Blue Sky Memorandum and any other documents in connection with
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the offering, purchase, sale and delivery of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the fees
and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey; (iv) the filing fees
incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; (v) the cost
of preparing stock certificates; (vi) the cost and charges of any transfer
agent or registrar; and (vii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section and (b) such Selling Stockholder will pay or cause
to be paid all costs and expenses incident to the performance of such Selling
Stockholder's obligations hereunder which are not otherwise specifically
provided for in this Section, including (i) any fees and expenses of counsel
for such Selling Stockholder and (ii) all expenses and taxes incident to the
sale and delivery of the Shares to be sold by such Selling Stockholder to the
Underwriters hereunder. In connection with clause (b)(ii) of the preceding
sentence, Goldman, Sachs & Co. agrees to pay New York State stock transfer tax,
and each Selling Stockholder agrees to reimburse Goldman, Sachs & Co. for
associated carrying costs if such tax payment is not rebated on the day of
payment and for any portion of such tax payment not rebated. It is understood,
however, that the Company shall bear, and the Selling Stockholders shall not be
required to pay or to reimburse the Company for, the cost of any other matters
not directly relating to the sale and purchase of the Shares pursuant to this
Agreement, and that, except as provided in this Section, Section 8 and Section
11 hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes on resale of any of
the Shares by them and any advertising expenses connected with any offers they
may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission; and all
requests for additional information on the part of the Commission shall have
been complied with to your reasonable satisfaction;
(b) Jones, Day, Reavis & Pogue, counsel for the Underwriters, shall
have furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to the matters covered in paragraphs (i), (ii), (iii), (v) and
(vi) of subsection (c) below, as well as such other related matters as you may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(c) Cravath, Swaine & Moore, counsel for the Company, shall have
furnished to you their written opinion, dated such Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform to the
description of the Stock contained under the caption "Description of
the Capital Stock -- Common Stock" in the Prospectus;
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<PAGE>
(iii) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company;
(iv) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters and
the International Underwriters;
(v) The statements made in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute
summaries of the terms of the Stock, under the caption "Certain
United States Tax Consequences to Non-United States Holders", insofar
as they purport to describe the material tax consequences of an
investment in Common Stock, and under the captions "The New Credit
Facilities" and "Underwriting", insofar as they describe the
provisions of the documents therein described, fairly summarize the
matters therein described;
(vi) Although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those covered by
their opinion in subsection (v) of this Section 7(c), they have no
reason to believe that the Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) do not comply as to form in all material
respects with the requirements of the Act and the rules and
regulations thereunder (including, without limitation, requirements
thereunder relating to the filing of any amendment to the
Registration Statement); and they have no reason to believe that, as
of its effective date, the Registration Statement or any further
amendment thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules therein,
as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading or
that, as of such Time of Delivery, either the Registration Statement
or the Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading;
(vii) The Consolidation has been duly and validly effected in
accordance with the General Corporation Law of the State of Delaware;
and
(viii) The Credit Agreement has been duly authorized, executed
and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
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relating to or affecting the enforceability of creditors rights
generally and to general equitable principles.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States;
(d) Elizabeth R. Philipp, General Counsel of the Company, shall have
furnished to you her written opinion, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with corporate power and authority to own its
properties and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares being delivered at such Time of
Delivery) have been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform to the
description of the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or disability
by reason of failure to be so qualified in any such jurisdiction
(such counsel being entitled to rely in respect of the opinion in
this clause upon opinions of local counsel; provided that such
counsel shall state that she believes that such local counsel is
qualified to render an opinion of the nature of the opinions on which
she has relied);
(iv) Each material subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation; and all
of the issued shares of capital stock of each such subsidiary have
been duly and validly authorized and issued, are fully paid and
non-assessable and are owned beneficially and of record by the
Company or one of its subsidiaries, free and clear of all liens,
encumbrances, equities or claims other than those arising under the
Credit Agreements (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel; provided
that such counsel shall state that she believes that such local
counsel is qualified to render an opinion of the nature of the
opinions on which she has relied);
(v) To such counsel's knowledge and other than as set forth in
the Prospectus, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its subsidiaries is
the subject which such counsel has reasonable cause to believe would
individually or in the aggregate have a material adverse effect on
the consolidated financial position, stockholder's equity or results
of operations of the Company and its subsidiaries; and, to the best
of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(vi) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company;
(vii) The issue and sale of the Shares being delivered at such
Time of Delivery to be sold by the Company and the compliance by the
Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such
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counsel to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its
subsidiaries is subject, which would have a Material Adverse Effect;
nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-Laws of the Company or any statute
or any order, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their properties;
(viii) Neither the Company nor any of its significant
subsidiaries is in violation of its charter or in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, loan
agreement or note or material contract, lease or other instrument
known to such counsel to which it is a party or by which it or any of
them or their properties may be bound;
(ix) The statements made in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute
summaries of the terms of the Stock, under the caption "Certain
United States Tax Consequences to Non-United States Holders" and
under the captions "The New Credit Facilities" and "Underwriting",
insofar as they describe the provisions of the documents therein
described, fairly summarize the matters therein described;
(x) The documents incorporated by reference in the Prospectus
(other than the financial statements and related schedules therein,
as to which such counsel need express no opinion), when they were
filed with the Commission, complied as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder; and she has no reason to
believe that any of such documents, when such documents were so
filed, contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made
when such documents were so filed, not misleading; and
(xi) Although she does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except for those covered by
her opinion in subsection (xi) of this Section 7(d), she has no
reason to believe that the Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules therein, as to which such counsel
need express no opinion) does not comply as to form in all material
respects with the requirements of the Act and the rules and
regulations thereunder (including, without limitation, requirements
thereunder relating to the filing of any amendment to the
Registration Statement); and she has no reason to believe that, as of
its effective date, the Registration Statement or any further
amendment thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules therein,
as to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading or
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that, as of such Time of Delivery, either the Registration Statement
or the Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to which such
counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading, and she does not know of any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or required to be incorporated by reference
into the Prospectus or required to be described in the Registration
Statement or the Prospectus which are not filed or incorporated by
reference or described as required.
In rendering such opinion, such counsel may state that she expresses no
opinion as to the laws of any jurisdiction outside the United States, and, in
respect of certain matters of fact, she may rely upon certificates of officers
of the Company or its subsidiaries;
(e) Cravath, Swaine & Moore, special counsel for the Selling
Stockholders, shall have furnished to you their written opinion, with respect
to Blackstone Capital Partners L.P. and Wasserstein Perella Partners, L.P., and
any of their respective affiliates that is a Selling Stockholder, dated such
Time of Delivery, in form and substance satisfactory to you, to the effect
that:
(i) A Power of Attorney and a Custody Agreement have been duly
executed and delivered by each of the Selling Stockholders and
constitute valid and binding agreements of such Selling Stockholder
in accordance with their terms;
(ii) This Agreement and the International Underwriting
Agreement have been duly executed and delivered by or on behalf of
such Selling Stockholder; and the sale of the Shares to be sold by
such Selling Stockholder hereunder and thereunder and the compliance
by such Selling Stockholder with all of the provisions of this
Agreement and the International Underwriting Agreement and the Power
of Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with
or result in a breach or violation of any terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which such Selling Stockholder is a party or by which such Selling
Stockholder is bound, or to which any of the property or assets of
such Selling Stockholder is subject, nor will such action result in
any violation of the provisions of the Certificate of Incorporation
or By-Laws of such Selling Stockholder if such Selling Stockholder is
a corporation or the Articles of Partnership of such Selling
Stockholder if such Selling Stockholder is a partnership or any
order, statute, rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over such Selling
Stockholder or the property of such Selling Stockholder;
(iii) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of
the transactions contemplated by this Agreement and the International
Underwriting Agreement in connection with the Shares to be sold by
such Selling Stockholder hereunder or thereunder, except such as have
been obtained under the Act and such as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of such Shares by the Underwriters or the International
Underwriters;
(iv) Immediately prior to such Time of Delivery such Selling
Stockholder had good and valid title to the Shares to be sold at such
Time of Delivery by such Selling Stockholder under this Agreement and
the International Underwriting Agreement, free and clear of all
liens, encumbrances, equities or claims, and full right, power and
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authority to sell, assign, transfer and deliver the Shares to be sold
by such Selling Stockholder hereunder and thereunder; and
(v) Good and valid title to such Shares, free and clear of all
liens, encumbrances, equities or claims, has been transferred to each
of the several Underwriters or International Underwriters, as the
case may be, who have purchased such Shares in good faith and without
notice of any such lien, encumbrance, equity or claim or any other
adverse claim within the meaning of the Uniform Commercial Code.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States and in
rendering the opinion in subparagraph (iv) such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of and liens, encumbrances, equities or claims on the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate;
(f) At 10:00 a.m., New York City time, on the effective date of the
Registration Statement and the effective date of the most recently filed
post-effective amendment to the Registration Statement and also at each Time of
Delivery, Arthur Andersen & Co. shall have furnished to you a letter or
letters, dated the respective date of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto;
(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
in Clause (i) or (ii), is in your judgment so material and adverse as to make
it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the terms
and in the manner contemplated in the Prospectus;
(h) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's existing or proposed debt securities or
preferred stock by any "nationally recognized statistical rating organization,"
as that term is defined by the Commission for purposes of Rule 436(g)(2) under
the Act and (ii) no such organization shall have publicly announced that it has
under surveillance or review, with possible negative implications, its rating
of any of the Company's debt securities or preferred stock;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the Exchange; (ii) a suspension or material limitation in trading
in the securities of the Company or any of its subsidiaries on the American
Stock Exchange; (iii) a general moratorium on commercial banking activities in
New York declared by either Federal or New York State authorities; or (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war if the effect
of any such event specified in this Clause (iv) in your judgment makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the terms
and in the manner contemplated in the Prospectus;
(j) The Shares to be sold by the Company and the Selling Stockholders
at such Time of Delivery shall have been duly listed, subject to notice of
issuance, on the Exchange;
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<PAGE>
(k) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each stockholder of the Company, other
than the Selling Stockholders, to the effect set forth in Subsection 1(c)(iv)
hereof in a form satisfactory to you;
(l) The Consolidation shall have been effected as described in the
Prospectus;
(m) There shall not have occurred or be continuing any default or
breach under the Credit Agreement and immediately prior to the First Time of
Delivery (A) there shall be no non-compliance or failure to satisfy any
condition to borrowing under the Credit Agreement other than the sale of the
Shares hereunder and (B) the Company shall have consummated the Term Borrowings
and effected the other transactions referenced under the caption "Use of
Proceeds and Consolidation" in the Prospectus; and
(n) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of officers
of the Company and of the Selling Stockholders, respectively, satisfactory to
you as to the accuracy of the representations and warranties of the Company and
the Selling Stockholders, respectively, herein at and as of such Time of
Delivery, as to the performance by the Company and the Selling Stockholders of
all of their respective obligations hereunder to be performed at or prior to
such Time of Delivery, and as to such other matters as you may reasonably
request, and the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and (f) of this
Section, and as to such other matters as you may reasonably request.
8. (a) The Company and each of the Selling Stockholders, jointly and
severally, will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and any Selling Stockholder shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through you expressly for use
therein; and provided, further, that the liability of any Selling Stockholder
pursuant to this subsection (a) shall not exceed the product of the number of
Shares (including any Optional Shares) sold by such Selling Stockholder and the
initial public offering price of the Shares as set forth in the Prospectus.
(b) Each Underwriter will indemnify and hold harmless the Company and
each Selling Stockholder against any losses, claims, damages or liabilities to
which the Company or such Selling Stockholder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through you expressly for use
therein; and will reimburse the Company and each Selling Stockholder for any
legal or other expenses reasonably incurred by the Company or such Selling
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<PAGE>
Stockholder in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (which shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a),
(b) or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Shares purchased under this Agreement,
in each case as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omis-
sion. The Company, each of the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Act) shall be
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<PAGE>
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Selling Stockholders under
this Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled
(but shall not have an obligation) to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Company and the Selling Stockholders that
you have so arranged for the purchase of such Shares, or the Company and the
Selling Stockholders notify you that they have so arranged for the purchase of
such Shares, you or the Company and the Selling Stockholders shall have the
right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person
had originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of Shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this
Agreement (or, with respect to the Second Time of Delivery, the obligations of
the Underwriters to purchase and of the Selling Stockholders to sell the
Optional Shares) shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or the Selling Stockholders,
except for the expenses to be borne by the Company and the Selling Stockholders
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
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<PAGE>
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company, or any of the Selling Stockholders, or any
officer or director or controlling person of the Company, or any controlling
person of any Selling Stockholder, and shall survive delivery of and payment
for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof; but, if for any other reason any Shares are not delivered by or on
behalf of the Company and the Selling Stockholders as provided herein, the
Company and each of the Selling Stockholders pro rata (based on the number of
Shares to be sold by the Company and such Selling Stockholder hereunder) will
reimburse the Underwriters through you for all out-of-pocket expenses approved
in writing by you, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company and the Selling
Stockholders shall then be under no further liability to any Underwriter in
respect of the Shares not so delivered except as provided in Section 6 and
Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder hereunder,
you and the Company shall be entitled to act and rely upon any statement,
request, notice or agreement on behalf of such Selling Stockholder made or
given by any or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to you as the representatives in care of Goldman,
Sachs & Co., at 85 Broad Street, New York, N.Y. 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to the Company or the address of the Company
set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(c) hereof
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire or
telex constituting such Questionnaire, which address will be supplied to the
Company or the Selling Stockholders by you upon request. Any such statements,
requests, notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Sections 8 and 10 hereof, the officers and directors of the
Company and each person who controls the Company, any Selling Stockholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
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<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us eight counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters
(U.S. Version), the form of which shall be submitted to the Company and the
Selling Stockholders for examination upon request, but without warranty on your
part as to the authority of the signers thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Collins & Aikman Corporation
By:
--------------------------------------------
Name:
Title:
Collins & Aikman Holdings II Corporation
By:
--------------------------------------------
Name:
Title:
Blackstone Capital Partners L.P.
By:
--------------------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of the
foregoing Selling Stockholder named in Schedule
II to this Agreement.
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<PAGE>
Wasserstein Perella Partners, L.P.
By:
--------------------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of the
foregoing Selling Stockholder named in Schedule
II to this Agreement.
Accepted as of the date hereof
at New York, New York:
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Wasserstein Perella Securities, Inc.
The Nikko Securities Co.
International, Inc.
By: ________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
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<PAGE>
SCHEDULE I
Number of
Total Number Optional
Total Number of of Firm Shares Shares to be
Firm Shares to to be Purchased if
be Purchased Purchased from Maximum
from the the Selling Option
-------- -------
Underwriter Company Stockholders Exercised
----------- ------- ------------ ---------
Goldman, Sachs & Co. . .
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated . . . . .
Wasserstein Perella
Securities, Inc. . . . .
The Nikko Securities Co.
International, Inc. .
Total . . . . . . . 16,000,000 4,000,000 3,000,000
========== ========= =========
<PAGE>
SCHEDULE II
Number of
Total Number Optional
of Firm Shares to be
Shares Purchased if
to be Sold Maximum
from the Option
Underwriter Company Exercised
----------- ------- ---------
The Company . . . . . . . . .
The Selling Stockholders:
Blackstone Capital
Partners L.P.(1) . . .
Wasserstein Perella
Partners, L.P.(1) . . .
Total . . . . . . .
============= ==============
(1) The Selling Stockholders are represented by Cravath, Swaine, & Moore,
Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, and have
appointed the following persons, and each of them, as the Attorneys-in-Fact for
the Selling Stockholders.
Selling Stockholders Attorneys-in-Fact
-------------------- -----------------
Blackstone Capital Partners L.P.
-----------------
Wasserstein, Perella Partners, L.P.
-----------------
<PAGE>
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements, any supplementary
financial information and schedules and pro forma financial information
examined by them and included or incorporated by reference in the
Registration Statement or the Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act or the
Exchange Act, as applicable, and the related rules and regulations
thereunder; and they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the consolidated interim financial statements, selected financial data,
pro forma financial information and condensed financial statements derived
from audited financial statements of the Company for the periods specified
in such letter, as indicated in their reports thereon, copies of which
have been furnished to the representatives of the Underwriters (the
"Representatives");
(iii) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Prospectus
and included or incorporated by reference in Item 6 of the Company's
Annual Report on Form 10-K for the most recent fiscal year agrees with the
corresponding amounts in the audited consolidated financial statements for
such five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(iv) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included or incorporated by reference
in the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as are customarily made or carried out by
such firm in connection with public offerings and sales of equity
securities (such inquiries and procedures to be specified in such letter),
nothing came to their attention that caused them to believe that:
(A) the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included or incorporated by reference in the Company's Quarterly
Reports on Form 10-Q incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act as it applies to Form
10-Q and the related published rules and regulations thereunder or
are not in conformity with generally accepted accounting principles
applied on a basis substantially consistent with the basis for the
audited consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included or
incorporated by reference in the Company's Annual Report on Form 10-K
for the most recent fiscal year;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with
the basis for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
<PAGE>
(C) the unaudited financial statements which were not included
in the Prospectus but from which were derived the unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included or incorporated by reference in the
Company's Annual Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of
those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights which were outstanding on the
date of the latest balance sheet included or incorporated by
reference in the Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any decreases
in consolidated net current assets or net assets or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred
or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus to
the specified date referred to in Clause (E), there were any
decreases in consolidated net revenues or operating profit or the
total or per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with the
comparable period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in each
case for increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(v) In addition to the examination referred to in their reports
included or incorporated by reference in the Prospectus and the limited
procedure, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (iv) above, they have carried out
certain specified procedures, not constituting an examination in
accordance with generally accepted auditing standards, with respect to
certain amounts, percentages and financial information specified by the
Representatives which are derived from the general accounting records of
the Company and its subsidiaries which appear in the Prospectus and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.
JDRP Draft of 6/1/94
--------------------
Collins & Aikman Corporation
Common Stock
(par value $.01 per share)
Underwriting Agreement
(International Version)
June __, 1994
Goldman Sachs International,
Merrill Lynch International Limited
Wasserstein Perella Securities, Inc.
Nikko Europe Plc
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International
8-10 New Fetter Lane,
London EC4A 1DB, England
Dear Sirs:
Collins & Aikman Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an
aggregate of 4,000,000 shares, par value $.01 per share ("Stock"), of the
Company, and the stockholders of the Company named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of 1,000,000 shares and, at
the election of the Underwriters, up to 750,000 additional shares of Stock.
The aggregate of 5,000,000 shares to be sold by the Company and the Selling
Stockholders is herein called the "Firm Shares" and the aggregate of 750,000
additional shares to be sold by the Selling Stockholders is herein called the
"Optional Shares". The Firm Shares and the Optional Shares which the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement, a copy of
which is attached hereto (the "U.S. Underwriting Agreement"), providing for the
sale by the Company and the Selling Stockholders of up to a total of 23,000,000
shares of Stock (the "U.S. Shares"), including the over allotment option
thereunder, through arrangements with certain underwriters in the United States
(the "U.S. Underwriters"), for whom Goldman, Sachs & Co., Merrill Lynch & Co.,
Wasserstein Perella Securities, Inc. and The Nikko Securities Co.
International, Inc. are acting as representatives. Anything herein or therein
to the contrary notwithstanding, the respective closings under this Agreement
and the U.S. Underwriting Agreement are hereby expressly made conditional on
one another. The Underwriters hereunder and the U.S. Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between the Syndicates") which
provides, among other things, for the transfer of shares of Stock between the
two syndicates and for consultation by the Lead Managers hereunder with
Goldman, Sachs & Co. prior to exercising the rights of the Underwriters under
Section 7 hereof. Two forms of prospectus are to be used in connection with
the offering and sale of shares of Stock contemplated by the foregoing, one
relating to the Shares hereunder and the other relating to the U.S. Shares.
The latter form of prospectus will be identical to the former except for
certain substitute pages as included in the registration statement and
amendments thereto as mentioned below. Except as used in Sections 2, 3, 4, 9
and 11 herein, and except as the context may otherwise require, references
<PAGE>
hereinafter to the Shares shall include all the shares of Stock which may be
sold pursuant to either this Agreement or the U.S. Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.
In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters
or to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied mutatis mutandis as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company, Collins & Aikman Holdings II Corporation, a Delaware
corporation ("Holdings II") and each of the several Selling Stockholders hereby
make to the Underwriters the same respective representations, warranties and
agreements as are set forth in Section 1 of the U.S. Underwriting Agreement,
which Section is incorporated herein by this reference.
2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $ , the number of Firm Shares (to be
--------
adjusted by you so as to eliminate fractional shares) as set forth opposite the
name of such Underwriter in Schedule I hereto and (b) in the event and to the
extent that the Underwriters shall exercise the election to purchase Optional
Shares as provided below, each of the Selling Stockholders agrees, severally
and not jointly, to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from each of the
Selling Stockholders, at the purchase price per share set forth in clause (a)
of this Section 2, that portion of the number of Optional Shares as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractional shares) determined by multiplying such number of Optional
Shares by a fraction the numerator of which is the maximum number of Optional
Shares which such Underwriter is entitled to purchase as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of the Optional Shares which all of the Underwriters are
entitled to purchase hereunder.
The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 750,000 Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering overallotments in the sale of the Firm Shares. Any such election to
purchase Optional Shares shall be made in proportion to the maximum number of
Optional Shares to be sold by each Selling Stockholder as set forth in Schedule
II hereto. Any such election to purchase Optional Shares may be exercised only
by written notice from you to the Attorneys-in-Fact, given within a period of
30 calendar days after the date of this Agreement and setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
2
<PAGE>
unless you and the Attorneys-in-Fact otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to
and with the Company and the Selling Stockholders the representations and
agreements of such Underwriter as a member of the selling group contained in
Sections 3(d) and 3(e) of the form of Selling Agreement.
4. Certificates in definitive form for the Shares to be purchased by each
Underwriter hereunder, and in such denominations and registered in such names
as GSI may request upon at least forty-eight hours' prior notice to the Company
and the Selling Stockholders, shall be delivered by or on behalf of the Company
and the Selling Stockholders to you for the account of such Underwriter,
against payment by such Underwriter or on its behalf of the purchase price
therefor by certified or official bank check or checks, payable to the order of
the Company and the Custodian, as their interests may appear, in New York
Clearing House funds, all at the offices of Jones, Day, Reavis & Pogue, 599
Lexington Avenue, New York, New York 10022, or at such other place as shall be
agreed upon by the Company and you. The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on , 1994 or such other time and date as you, the
--------------------
Company and the Selling Stockholders may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York City time, on the date
specified by you in the written notice given by you of the Underwriters'
election to purchase such Optional Shares, or at such other time and date as
you, the Company and the Selling Stockholders may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery", such time and date for delivery of the Optional Shares, if not
the First Time of Delivery, is herein called the "Second Time of Delivery",
and each such time and date for delivery is herein called a "Time of Delivery."
Such certificates will be made available for checking and packaging at least
twenty four hours prior to each Time of Delivery at the office of Goldman,
Sachs & Co., 85 Broad Street, New York, New York 10004.
5. The Company hereby makes with the Underwriters the same agreements as
are set forth in Section 5 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
6. The Company, each of the Selling Stockholders, and the Underwriters
hereby agree with respect to certain expenses on the same terms as are set
forth in Section 6 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
7. Subject to the provisions of the Agreement between, the obligations of
the Underwriters hereunder shall be subject, in their discretion, at each Time
of Delivery to the condition that all representations and warranties and other
statements of the Company and the Selling Stockholders herein are, at and as of
such Time of Delivery, true and correct, the condition that the Company and the
Selling Stockholders shall have performed all of their respective obligations
hereunder theretofore to be performed, and additional conditions identical to
those set forth in Section 7 of the U.S. Underwriting Agreement, which Section
is incorporated herein by this reference.
8. (a) The Company and each of the Selling Stockholders, jointly and
severally, will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and the Selling Stockholders
3
<PAGE>
shall not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through GSI expressly
for use therein; and provided, further, that the liability of the Selling
Stockholders pursuant to this subsection (a) shall not exceed the product of
the number of Shares (including any Optional Shares) sold by such Selling
Stockholders and the initial public offering price of the Shares as set forth
in the Prospectus.
(b) Each Underwriter will indemnify and hold harmless the Company and
each Selling Stockholder against any losses, claims, damages or liabilities to
which the Company or such Selling Stockholder may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through GSI expressly for use
therein; and will reimburse the Company and each Selling Stockholder for any
legal or other expenses reasonably incurred by the Company or such Selling
Stockholder in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.
(d) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a),
(b) or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
4
<PAGE>
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Shares purchased under this Agreement,
in each case as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Company, each of the Selling Stockholders and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Selling Stockholders under
this Section 8 shall be in addition to any liability which the Company and the
respective Selling Stockholders may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company (including any person
who, with his consent, is named in the Registration Statement as about to
become a director of the Company) and to each person, if any, who controls the
Company or any Selling Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In
the event that, within the respective prescribed periods, you notify the
Company and the Selling Stockholders that you have so arranged for the purchase
of such Shares, or the Company and the Selling Stockholders notify you that
they have so arranged for the purchase of such Shares, you or the Company and
the Selling Stockholders shall have the right to postpone such Time of Delivery
for a period of not more than seven days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees to file
promptly any amendments to the Registration Statement or the Prospectus which
in your opinion may thereby be made necessary. The term "Underwriter" as used
in this Agreement shall include any person substituted under this Section with
like effect as if such person had originally been a party to this Agreement
with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
5
<PAGE>
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of
Delivery, then the Company and the Selling Stockholders shall have the right to
require each non-defaulting Underwriter to purchase the number of shares which
such Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this
Agreement (or, with respect to the Second Time of Delivery, the obligation of
the Underwriters to purchase and of the Selling Stockholders to sell the
Optional Shares) shall thereupon terminate, without liability on the part of
any non-defaulting Underwriter or the Company or the Selling Stockholders,
except for the expenses to be borne by the Company and the Selling Stockholders
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company or any of the Selling Stockholders, or any
officer or director or controlling person of the Company or any controlling
person of any Selling Stockholders, and shall survive delivery of and payment
for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof; but, if for any other reason, any Shares are not delivered by or on
behalf of the Company and the Selling Stockholders as provided herein, the
Company and each of the Selling Stockholders pro rata (based on the number of
Shares to be sold by the Company and such Selling Stockholder hereunder) will
reimburse the Underwriters through GSI for all out-of-pocket expenses approved
in writing by GSI, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company and the Selling
Stockholders shall then be under no further liability to any Underwriter in
respect of the Shares not so delivered except as provided in Section 6 and
Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives of the
Underwriters; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to the Underwriters in care of GSI, 5 Old Bailey,
London EC4M 7AH, England, Attention: Syndicate Department, Telex No. 887962,
facsimile transmission No. (01) 489-2989; if to any Selling Stockholder shall
be delivered or sent by mail, telex or facsimile transmission to counsel for
such Selling Stockholder at its address set forth in Schedule II hereto; and if
to the Company shall be delivered or sent by mail, telex or facsimile
6
<PAGE>
transmission to the address of the Company set forth in the Registration
Statement, Attention: Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 8(d) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire,
which address will be supplied to the Company or the Selling Stockholders by
GSI upon request. Any such statements, requests, notices or agreements shall
take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholders and, to the
extent provided in Section 8 and Section 10 hereof, the officers and directors
of the Company and each person who controls the Company, any Selling
Stockholder or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of
the Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, United States of America.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
7
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us eight counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters
(International Version), the form of which shall be furnished to the Company
and the Selling Stockholders for examination upon request, but without warranty
on your part as to the authority of the signers thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Stockholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
Collins & Aikman Corporation
By:
---------------------------------------
Name:
Title:
Collins & Aikman Holdings II Corporation
By:
---------------------------------------
Name:
Title:
Blackstone Capital Partners L.P.
By:
---------------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of the foregoing
Selling Stockholder named in Schedule II to this
Agreement.
Wasserstein Perella Partners, L.P.
By:
----------------------------------------
Name:
Title:
As Attorney-in-Fact acting on behalf of the foregoing
Selling Stockholder named in Schedule II to this
Agreement.
8
<PAGE>
Accepted as of the date hereof at
New York, New York:
Goldman Sachs International
Merrill Lynch International Limited
Wasserstein Perella Securities, Inc.
Nikko Europe Plc
By: Goldman Sachs International
By:
------------------------------------
(Attorney-in-fact)
On behalf of each of the Underwriters
9
<PAGE>
SCHEDULE I
Number of
Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised
----------- --------------- ---------
Goldman Sachs International
Merrill Lynch International Limited
Wasserstein Perella Securities, Inc.
Nikko Europe Plc
[Names of other Underwriters]
-------- -------
Total
======== =======
10
<PAGE>
SCHEDULE II
Number of
Optional
Shares to be
Total Purchased if
Number of Maximum
Firm Shares Option
Underwriter to be Sold Exercised
----------- ---------- ---------
The Company . . . . . . . . . . . .
The Selling Stockholders:
Blackstone Capital Partners
L.P.(1) . . . . . . . . . .
Wasserstein Perella Partners,
L.P.(1) . . . . . . . . . . .
Total . . . . . . . . . .
============ =============
=== ==
(1) The Selling Stockholders are represented by Cravath, Swaine, & Moore,
Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, and have
appointed the following persons, and each of them, as the Attorneys-in-Fact for
the Selling Stockholders.
Selling Stockholders Attorneys-in-Fact
-------------------- -----------------
Blackstone Capital Partners L.P.
------------------------
Wasserstein, Perella Partners, L.P.
------------------------
11
EXHIBIT 11
COLLINS & AIKMAN HOLDINGS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE> <CAPTION>
FISCAL YEAR ENDED
----------------------------------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Shares outstanding.................................................... 35,035 35,035 35,035
------------ ------------ ------------
------------ ------------ ------------
Shares issued upon exercise of options
1993 Plan........................................................... 3,036 3,036 3,036
1994 Plan........................................................... 170 170 170
------------ ------------ ------------
3,206 3,206 3,206
------------ ------------ ------------
------------ ------------ ------------
Proceeds from exercise of options
1993 Plan........................................................... $ 13,875 $ 13,875 $ 13,875
1994 Plan........................................................... 937 937 937
------------ ------------ ------------
14,812 14,812 14,812
------------ ------------ ------------
Applicable compensation expense:
1993 Plan........................................................... 26,736 26,736 26,736
1994 Plan........................................................... 1,608 1,608 1,608
------------ ------------ ------------
28,344 28,344 28,344
------------ ------------ ------------
Amount available to buy back shares................................... $ 43,156 $ 43,156 $ 43,156
------------ ------------ ------------
------------ ------------ ------------
Average per share price............................................. $ 15.50 $ 15.50 $ 15.50
------------ ------------ ------------
------------ ------------ ------------
Shares repurchased under Treasury Stock Method...................... (2,784) (2,784) (2,784)
------------ ------------ ------------
Increase in total shares.............................................. 422 422 422
------------ ------------ ------------
Total shares for EPS............................................. 35,457 35,457 35,457
------------ ------------ ------------
------------ ------------ ------------
Loss Applicable to Common Shareholders
Continuing operations(1)............................................ $ (197,048) $ (64,189) $ (89,143)
Discontinued operations............................................. (104,339) (218,317) (16,365)
Extraordinary items................................................. -- -- (1,793)
Cumulative effect of accounting change.............................. -- -- (42,316)
------------ ------------ ------------
Net Loss......................................................... $ (301,387) $ (282,506) $ (149,617)
------------ ------------ ------------
------------ ------------ ------------
Loss Per Common Share
Continuing operations............................................... $ (5.56) $ (1.81) $ (2.52)
Discontinued operations............................................. (2.94) (6.16) (.46)
Extraordinary item.................................................. -- -- (0.5)
Cumulative effect of accounting change.............................. -- -- (1.19)
------------ ------------ ------------
Net Loss......................................................... $ (8.50) $ (7.97) $ (4.22)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- ---------------
Notes:
(1) Loss from continuing operations has been adjusted for dividends and
accretion requirements on redeemable preferred stock of $23,723, $18,848 and
$15,807 for fiscal years 1993, 1992 and 1991 respectively.
(2) Primary and fully diluted earnings per share are the same in each year since
the same average share price ($15.50) is applicable to both calculations in
each year.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN & CO.
Charlotte, North Carolina,
June 1, 1994.
