SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended October 28, 1995
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-10218
COLLINS & AIKMAN CORPORATION
A Delaware Corporation (IRS Employer Identification
No. 13-3489233)
701 McCullough Drive
Charlotte, North Carolina 28262
Telephone (704) 547-8500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
As of December 5, 1995, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 69,416 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales......................................................... $ 380,855 $ 403,722 $1,125,831 $1,153,917
----------- ----------- ----------- ----------
Cost of goods sold................................................ 293,512 310,746 863,613 872,630
Selling, general and administrative
expenses...................................................... 49,773 46,391 145,773 149,454
----------- ----------- ----------- ----------
343,285 357,137 1,009,386 1,022,084
----------- ----------- ----------- ----------
Operating income.................................................. 37,570 46,585 116,445 131,833
Interest expense, net............................................. 12,049 10,178 35,753 64,793
Loss on sale of receivables....................................... 2,281 2,466 6,918 5,176
Dividends on preferred stock of subsidiary........................ - - - 2,258
----------- ----------- ----------- ----------
Income from continuing operations before
income taxes.................................................. 23,240 33,941 73,774 59,606
Income taxes...................................................... 2,600 2,975 8,788 8,563
----------- ----------- ----------- ----------
Income from continuing operations before
extraordinary loss............................................ 20,640 30,966 64,986 51,043
Extraordinary loss, net of income taxes .......................... - - - (106,528)
----------- ----------- ----------- -----------
Net income (loss)................................................. $ 20,640 $ 30,966 $ 64,986 $ (55,485)
=========== =========== =========== ===========
Dividends and accretion on preferred stock........................ - - - (14,408)
Excess of redemption cost over book value of
preferred stock............................................... - - - (82,022)
----------- ----------- ----------- -----------
Income (loss) applicable to common
stockholders.................................................. $ 20,640 $ 30,966 $ 64,986 $ (151,915)
=========== =========== =========== ===========
Net income (loss) per primary and fully diluted common share:
Continuing operations..................................... $ .29 $ .43 $ .91 $ (.97)
Extraordinary item........................................ - - - (2.29)
----------- ----------- ----------- -----------
Net income (loss)......................................... $ .29 $ .43 $ .91 $ (3.26)
=========== =========== =========== ===========
Average common shares outstanding:
Primary....................................................... 71,125 72,109 71,467 46,577
=========== =========== =========== ===========
Fully diluted................................................. 71,125 72,109 71,520 46,577
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
I-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
October 28, January 28,
1995 1995
----------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................................... $ 4,588 $ 3,317
Accounts and notes receivable, net................................................. 111,140 92,082
Inventories........................................................................ 201,885 196,096
Other.............................................................................. 23,142 38,184
----------- ----------
Total current assets............................................................ 340,755 329,679
Property, plant and equipment, at cost less accumulated
depreciation and amortization of $292,084 and $269,808............................. 302,083 287,559
Other assets........................................................................... 62,621 63,833
----------- ----------
$ 705,459 $ 681,071
=========== ==========
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable...................................................................... $ 168 $ 1,723
Current maturities of long-term debt............................................... 43,188 18,114
Accounts payable................................................................... 78,925 97,726
Accrued expenses................................................................... 114,989 144,566
----------- ----------
Total current liabilities....................................................... 237,270 262,129
Long-term debt......................................................................... 550,275 547,963
Deferred income taxes.................................................................. 1,457 1,377
Other, including postretirement benefit obligation..................................... 272,957 282,224
Commitments and contingencies..........................................................
Common stock (150,000 shares authorized, 70,521 shares issued and outstanding at
January 28, 1995 and 70,521 shares issued and 69,658 shares outstanding at
October 28, 1995).................................................................. 705 705
Other paid-in capital.................................................................. 585,653 586,281
Accumulated deficit.................................................................... (911,596) (976,549)
Foreign currency translation adjustments............................................... (14,768) (13,655)
Pension equity adjustment.............................................................. (9,404) (9,404)
Treasury stock, at cost (863 shares)................................................... (7,090) -
----------- -----------
Total common stockholders' deficit.............................................. (356,500) (412,622)
----------- -----------
$ 705,459 $ 681,071
=========== ===========
</TABLE>
See accompanying notes.
I-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations................................. $ 20,640 $ 30,966 $ 64,986 $ 51,043
Adjustments to derive cash flow from
continuing operating activities:
Gain on sale of property, plant and
equipment................................................. (1,005) - (1,005) -
Depreciation and leasehold amortization...................... 10,171 11,713 33,699 34,945
Amortization of other assets and
liabilities............................................... 3,242 449 9,498 4,829
Increase in accounts and notes receivable.................... (53,756) (44,292) (11,058) (31,363)
(Increase) decrease in inventories........................... 2,174 4,656 (5,789) (14,921)
Increase (decrease) in accounts payable...................... 2,457 13,081 (18,801) 121
Increase (decrease) in interest and
dividends payable......................................... (3,465) 3,045 (2,732) (14,958)
Other, net................................................... 6,911 1,964 (6,044) (4,007)
----------- ----------- ----------- -----------
Net cash provided by (used in)
continuing operating activities (12,631) 21,582 62,754 25,689
----------- ---------- ----------- ----------
Cash used in discontinued operations.............................. (1,536) (8,930) (20,382) (24,087)
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Additions to property, plant and equipment........................ (30,361) (21,402) (72,527) (55,533)
Sales of property, plant and equipment............................ 1,500 119 1,816 190
Proceeds from sale-leaseback arrangements......................... 7,769 22,557 25,414 22,557
Net proceeds from disposition of discontinued
operations...................................................... - (6,041) - 61,726
Other, net........................................................ (1,984) (3,418) (6,421) (3,487)
----------- ----------- ----------- -----------
Net cash provided by (used in)
investing activities................................... (23,076) (8,185) (51,718) 25,453
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Issuance of common stock.......................................... - - - 232,436
Issuance of long-term debt........................................ 6,664 841 11,020 671,719
Proceeds from (reduction of) participating
interests in accounts receivable, net of
redemptions..................................................... 20,000 25,000 (8,000) 150,000
Redemption of preferred stock..................................... - - - (219,110)
Repayment and defeasance of long-term debt........................ (8,525) (1,737) (11,356) (882,163)
Net borrowings (repayments) on revolving
credit facilities............................................... 12,558 (40,000) 27,558 (56,750)
Net borrowings (repayments) on notes payable...................... (770) 49 (1,555) (2,071)
Purchases of treasury stock....................................... (3,513) - (7,289) -
Proceeds from exercise of stock options........................... 70 - 113 -
Other, net........................................................ (3) 395 126 255
----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities................................... 26,481 (15,452) 10,617 (105,684)
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents..................................................... (10,762) (10,985) 1,271 (78,629)
Cash and cash equivalents at beginning of
period.......................................................... 15,350 13,729 3,317 81,373
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period........................ $ 4,588 $ 2,744 $ 4,588 $ 2,744
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
I-3
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT
(Unaudited)
A. Organization:
Collins & Aikman Corporation (the "Company") (formerly Collins & Aikman
Holdings Corporation) is a Delaware corporation. Prior to July 13, 1994, the
Company was a wholly-owned subsidiary of Collins & Aikman Holdings II
Corporation ("Holdings II"). In connection with an initial public offering of
common stock ("Common Stock") and a recapitalization (the "Recapitalization"),
Holdings II was merged into the Company. Concurrently, Collins & Aikman Group,
Inc., a wholly-owned subsidiary of the Company ("Group"), was merged into its
wholly-owned subsidiary, Collins & Aikman Corporation, which changed its name to
Collins & Aikman Products Co. ("C&A Products"). On July 7, 1994, the Company
changed its name from Collins & Aikman Holdings Corporation to Collins & Aikman
Corporation.
Prior to the Recapitalization, the Company was jointly owned by
Blackstone Capital Partners L.P. ("Blackstone Partners") and Wasserstein Perella
Partners, L.P. ("WP Partners") and their respective affiliates. As of October
28, 1995, Blackstone Partners and WP Partners and their respective affiliates
collectively own approximately 77% of the outstanding Common Stock.
The Company conducts all of its operating activities through its
wholly-owned C&A Products subsidiary.
B. Basis of Presentation:
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries. In the opinion of management, the accompanying
condensed consolidated financial statements reflect all adjustments (consisting
of only normal recurring adjustments) necessary for a fair presentation of
financial position and results of operations. Results of operations for interim
periods are not necessarily indicative of results for the full year.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Collins & Aikman Corporation Annual Report
on Form 10-K for the fiscal year ended January 28, 1995.
C. Interest Rate Protection Program:
The Company maintains a program designed to reduce its exposure to
changes in the cost of its variable rate borrowings by the use of interest rate
cap and corridor agreements. The strike price of these agreements exceeded the
current market levels at the time they were entered into and their cost is
included in interest expense ratably during the life of the agreements. Payments
to be received, if any, as a result of the agreements are accrued as a reduction
of interest expense. Unamortized costs of these arrangements are included in
other assets. Under these agreements, the Company has limited its exposure on
notional principal amounts as follows (in thousands):
<TABLE>
<CAPTION>
Protection Period Notional Principal Amount Average LIBOR Strike Price
<S> <C> <C>
Thru October 1995 $ 300,000 6.92%
October 1995 thru
October 1996 $ 250,000 7.50%
</TABLE>
I-4
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
Amortization of these agreements amounted to $.2 million and $.5 million during
the quarter and nine months ended October 28, 1995.
D. Sale-Leaseback Transactions:
During the nine months ended October 28, 1995, the Company sold and
leased back for a term of eight years equipment utilized in its Automotive
Products and Interior Furnishings segments pursuant to a master equipment lease
agreement. The aggregate net book value of the equipment sold and leased back
during the nine month period, $25.4 million, has been removed from the balance
sheet and any gains realized on the sales have been deferred and are being
recognized as an adjustment to rent expense over the lease terms.
E. Receivables Facility:
On March 31, 1995, C&A Products repaid and terminated the receivables
financing arrangement it entered into in connection with the Recapitalization
(the "Bridge Receivables Facility") and entered, through a trust (the "Trust")
formed by Carcorp, Inc., a wholly-owned, bankruptcy remote subsidiary of C&A
Products ("Carcorp"), into a new receivables facility (the "Receivables
Facility") comprised of (i) term certificates, which were issued on March 31,
1995, in an aggregate face amount of $110 million and have a term of five years
and (ii) variable funding certificates, which represent revolving commitments of
up to an aggregate of $75 million and have a term of five years. Carcorp
purchases on a revolving basis and transfers to the Trust virtually all trade
receivables generated by C&A Products and certain of its subsidiaries (the
"Sellers").
Availability under the variable funding certificates at any time
depends primarily on the amount of receivables generated by the Sellers from
sales to the auto industry, the rate of collection on those receivables and
other characteristics of those receivables that affect their eligibility (such
as bankruptcy or downgrading below investment grade of the obligor, delinquency
and excessive concentration). Based on these criteria, at October 28, 1995
approximately $41.5 million was available under the variable funding
certificates, of which $27.0 million was utilized.
The term certificates bear interest at an average rate equal to
one-month LIBOR plus .34% per annum. The variable funding certificates bear
interest, at Carcorp's option, at LIBOR plus .40% per annum or a prime rate.
As of October 28, 1995, the Trust's receivables pool was $224.0 million
net of allowances for doubtful accounts. As of October 28, 1995, the holders of
term certificates and variable funding certificates collectively possessed a
$137 million undivided senior interest (net of settlements in transit) in the
Trust's receivables pool and, accordingly, such receivables were not reflected
in the Company's accounts receivable balance as of that date. As of October 28,
1995, Carcorp owned a subordinated interest in the receivables pool.
I-5
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
F. Inventories:
Inventory balances are summarized as follows (in thousands):
<TABLE>
<CAPTION>
October 28, January 28,
1995 1995
----------- ----------
<S> <C> <C>
Raw materials.....................................................$ 78,378 $ 81,669
Work in process................................................... 28,121 24,149
Finished goods.................................................... 95,386 90,278
----------- ----------
$ 201,885 $ 196,096
=========== ==========
</TABLE>
G. Interest Expense, Net:
Interest expense for the quarters ended October 28, 1995 and October
29, 1994 is net of interest income of $.6 million and $.8 million, respectively.
Interest expense for the nine months ended October 28, 1995 and October 29, 1994
is net of interest income of $2.3 million and $5.7 million, respectively.
H. Related Party Transactions:
Pursuant to the Stockholders' Agreement among the Company, Group,
Blackstone Partners and WP Partners dated December 1988, the Company paid
Blackstone Partners and WP Partners, or their respective affiliates, operating,
management and advisory fees aggregating $5.0 million annually until the
agreement's amendment in July 1994.
Under the Amended and Restated Stockholders' Agreement among the
Company, C&A Products, Blackstone Partners and WP Partners, the Company pays
Blackstone Partners and WP Partners, or their respective affiliates, each an
annual monitoring fee of $1.0 million, which is payable quarterly and which
commenced in the quarter ended October 29, 1994.
During the first quarter of 1994, the Company incurred expenses of $2.5
million for services performed by affiliates of 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. The Company also incurred
during the first quarter of 1994 expenses of $2.75 million for services
performed by affiliates of WP Partners and $3.25 million for services performed
by affiliates of Blackstone Partners in connection with the Company's review of
refinancing and strategic alternatives as well as other advisory services; these
fees are included in "selling, general and administrative expenses" for the nine
month period ended October 29, 1994.
In connection with the Company's discontinued operations, the Company
incurred fees of $.1 million during the first quarter of 1994 to an affiliate of
Blackstone Partners for advisory services in connection with the sale of
inventory, real estate and other assets of Builders Emporium, a former division
of Group.
I-6
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
I. Information About Segments of the Company's Operations:
Information about the Company's segments for the third quarter and
first nine months of fiscal 1995 and 1994 follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Net Gross Operating Capital
October 28, 1995 Sales Margin Income (Loss) Expenditures
- --------------------------------------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Automotive Products.................... $ 230,761 $ 41,160 $ 25,496 $ 12,492
Interior Furnishings................... 97,875 29,884 13,104 7,799
Wallcoverings.......................... 52,219 16,299 (1,030) 9,856
----------- ------------ ------------ -----------
380,855 87,343 37,570 30,147
Corporate items........................ - - - 214
----------- ------------ ------------ -----------
$ 380,855 $ 87,343 $ 37,570 $ 30,361
=========== ============ ============ ===========
Quarter Ended Net Gross Operating Capital
October 29, 1994 Sales Margin Income (Loss) Expenditures
- --------------------------------------- ----------- ------------ ------------- ------------
Automotive Products.................... $ 245,970 $ 44,651 $ 31,642 $ 14,823
Interior Furnishings................... 102,029 30,250 13,740 4,796
Wallcoverings.......................... 55,723 18,075 2,243 1,476
----------- ------------ ------------- -----------
403,722 92,976 47,625 21,095
Corporate items........................ - - (1,040) 307
----------- ------------ ------------- -----------
$ 403,722 $ 92,976 $ 46,585 $ 21,402
=========== ============ ============= ===========
Nine Months Ended Net Gross Operating Capital
October 28, 1995 Sales Margin Income Expenditures
- --------------------------------------- ----------- ------------ ------------ ------------
Automotive Products.................... $ 679,249 $ 121,950 $ 75,742 $ 41,794
Interior Furnishings................... 286,139 87,651 37,079 17,205
Wallcoverings.......................... 160,443 52,617 3,624 12,676
----------- ------------ ------------ -----------
1,125,831 262,218 116,445 71,675
Corporate items........................ - - - 852
----------- ------------ ------------ -----------
$ 1,125,831 $ 262,218 $ 116,445 $ 72,527
=========== ============ ============ ===========
Nine Months Ended Net Gross Operating Capital
October 29, 1994 Sales Margin Income (Loss) Expenditures
- --------------------------------------- ----------- ------------ ------------- ------------
Automotive Products.................... $ 675,834 $ 133,711 $ 94,771 $ 38,133
Interior Furnishings................... 311,927 93,820 41,877 12,422
Wallcoverings.......................... 166,156 53,756 8,247 4,369
----------- ------------ ------------- -----------
1,153,917 281,287 144,895 54,924
Corporate items........................ - - (13,062) (a) 609
----------- ------------ ------------- -----------
$ 1,153,917 $ 281,287 $ 131,833 $ 55,533
=========== ============ ============= ===========
</TABLE>
(a) Corporate items for the nine months ended October 29, 1994 include $6.0
million related to services performed by affiliates of WP Partners and
of Blackstone Partners in connection with the Company's review of
refinancing and strategic alternatives as well as certain other
advisory services.
I-7
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
J. Commitments and Contingencies:
See "PART II - OTHER INFORMATION, Item 1. Legal Proceedings." The
ultimate outcome of the legal proceedings to which the Company is a party will
not, in the opinion of the Company's management based on the facts presently
known to it, have a material effect on the Company's consolidated financial
condition or results of operations.
See also "PART I - FINANCIAL INFORMATION, Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
C&A Products (or its predecessor, Group) has assigned leases related to
divested businesses. Although C&A Products has obtained releases from the
lessors of certain of these properties, C&A Products remains contingently liable
under most of the leases. C&A Products' future liability for these leases, in
management's opinion, based on the facts presently known to it, will not have a
material effect on the Company's consolidated financial condition or results of
operations.
K. Common Stockholders' Deficit:
Activity in common stockholders' deficit was as follows (in thousands):
<TABLE>
<CAPTION>
Foreign
Other Currency Pension
Common Paid-in Accumulated Translation Equity Treasury
Stock Capital Deficit Adjustments Adjustment Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 28, 1995............$ 705 $586,281 $(976,549) $ (13,655) $ (9,404) $ - $(412,622)
Compensation expense
adjustment.................. - (575) - - - - (575)
Purchase of treasury
stock (891 shares).......... - - - - - (7,290) (7,290)
Exercise of stock
options (28 shares)......... - (53) (33) - - 200 114
Net income..................... - - 64,986 - - - 64,986
Foreign currency
translation
adjustments................. - - - (1,113) - - (1,113)
------ --------- ----------- ----------- ---------- -------- ----------
Balance at
October 28, 1995............$ 705 $585,653 $(911,596) $ (14,768) $ (9,404) $(7,090) $(356,500)
====== ========= =========== =========== ========== ======== ==========
</TABLE>
L. Earnings Per Share:
Earnings (loss) per common share is based on the weighted average
number of shares of Common Stock outstanding during each period and the assumed
exercise of employee stock options less the number of treasury shares assumed to
be purchased from the proceeds, including applicable compensation expense. In
connection with the merger of Holdings II into the Company, the 35,035,000
shares of Common Stock of the Company outstanding prior to the Recapitalization
were canceled and approximately 28,164,000 shares of Common Stock were issued in
exchange for the common stock of Holdings II. All historical amounts and
earnings (loss) per share computations have been adjusted to reflect the merger.
For the nine months ended October 29, 1994, net income has been adjusted by
dividends and accretion requirements on preferred stock and the excess of
redemption cost over book value of preferred stock to compute the loss
applicable to common stockholders.
I-8
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Concluded)
(Unaudited)
M. Merger Agreement:
On September 26, 1995, C&A Products signed a definitive Agreement and
Plan of Merger (the "Merger Agreement") with Larizza Industries, Inc.
("Larizza"). Pursuant to the Merger Agreement, the Company will purchase all
Larizza's outstanding shares at $6.50 per share in cash, for a total purchase
price of approximately $144 million. In addition, the Company will extinguish
approximately $35 million of existing Larizza debt. The Company expects to
finance the acquisition through additional bank borrowings.
The Merger Agreement is subject to customary conditions. Larizza's
shareholders approved the Merger Agreement at a meeting held on December 1,
1995. The closing is expected to occur in early January 1996.
Manchester Plastics, a maker of automotive door panels, headrests,
floor console systems and instrument panel components, is the sole operating
unit of Larizza.
N. Subsequent Event:
The Company, as part of its effort to revitalize Wallcoverings, has
decided to close its Hammond, Indiana manufacturing facility on or about
February 2, 1996. The facility has a net book value of $6.7 million. In
connection with the closure, the Company expects to incur cash costs of
approximately $1.8 million, which relate primarily to severance and ongoing
facility costs through its disposal.
I-9
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RECENT DEVELOPMENTS
Merger Agreement
On September 26, 1995, C&A Products entered into the Merger Agreement
with Larizza pursuant to which the Company will purchase all Larizza's
outstanding shares at $6.50 per share in cash, for a total purchase price of
approximately $144 million. In addition, the Company will extinguish
approximately $35 million of existing Larizza debt. The Company expects to
finance the acquisition and related fees and expenses through approximately
$197 million of additional bank borrowings.
The Merger Agreement is subject to customary conditions. Larizza's
shareholders approved the Merger Agreement at a meeting held on December 1,
1995. The closing is expected to occur in early January 1996.
Manchester Plastics, a maker of automotive door panels, headrests,
floor console systems and instrument panel components, is the sole operating
unit of Larizza.
INITIAL PUBLIC OFFERING AND RECAPITALIZATION
During July 1994, the Company completed an initial public offering and
a Recapitalization. In connection with the Recapitalization, Holdings II,
formerly the sole common stockholder of the Company, was merged into the Company
and the Company changed its name to Collins & Aikman Corporation. Concurrently,
Group was merged into its wholly-owned subsidiary, Collins & Aikman Corporation,
which changed its name to Collins & Aikman Products Co.
GENERAL
The Company's continuing business segments consist of Automotive
Products, which supplies interior trim products to the North American automotive
industry; Interior Furnishings, which manufactures residential upholstery and
commercial floorcoverings for sale in the United States and for export; and
Wallcoverings, which produces residential and commercial wallpaper for sale in
North America. The Company's net sales in the third quarter of fiscal 1995 were
$380.9 million, with approximately $230.8 million (60.6%) in Automotive
Products, $97.9 million (25.7%) in Interior Furnishings, and $52.2 million
(13.7%) in Wallcoverings. 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.
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
influenced also by levels of construction and renovation and by trends in home
remodeling.
I-10
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
RESULTS OF OPERATIONS
Discussion of results of each of the Company's operating segments follows:
Automotive Products
<TABLE>
<CAPTION>
Quarter Ended
October 28, 1995 October 29, 1994
Amount Percent Amount Percent
(in thousands)
<S> <C> <C> <C> <C>
Net sales $230,761 100.0% $245,970 100.0%
Cost of goods sold 189,601 82.2 201,319 81.8
-------- ------- -------- ------
Gross margin 41,160 17.8 44,651 18.2
Selling, general & administrative
expenses 15,664 6.8 13,009 5.3
-------- ------- -------- ------
Operating income $ 25,496 11.0% $ 31,642 12.9%
======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
October 28, 1995 October 29, 1994
Amount Percent Amount Percent
(in thousands)
<S> <C> <C> <C> <C>
Net sales $679,249 100.0% $675,834 100.0%
Cost of goods sold 557,299 82.0 542,123 80.2
-------- ------- -------- ------
Gross margin 121,950 18.0 133,711 19.8
Selling, general & administrative
expenses 46,208 6.8 38,940 5.8
-------- ------- -------- ------
Operating income $ 75,742 11.2% $ 94,771 14.0%
======== ======= ======== ======
</TABLE>
Net Sales: Automotive Products' net sales decreased 6.2% to approximately $230.8
million in the third quarter of 1995, down $15.2 million from the comparable
1994 quarter. The decrease is primarily attributable to an 11% decline in the
overall North American vehicle build in the third quarter of 1995 compared to
the third quarter of 1994. The Company currently expects the North American
vehicle build for the year to be slightly below last year.
Automotive seat fabric net sales decreased 9.8% and a decline in the convertible
automotive build resulted in a 55.5% decrease in convertible top system sales
for the third quarter of 1995 compared to the prior year period. These decreases
were partially offset by an 8.7% increase in sales of molded floor carpet and
increased sales of accessory floor mats and luggage compartment trim.
The third quarter decrease in automotive seat fabric was principally related to
a decrease in sales related to the Chevrolet Caprice, Monte Carlo and S-10
truck, the Ford Mustang, Thunderbird, F Series truck and Windstar minivan, the
Chrysler Caravan and Voyager minivans
I-11
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
and the Nissan Sentra. These decreases were partially offset by increases in
sales related to the Chevrolet Camaro, C/K truck and Blazer/Tahoe, the Toyota
Avalon, the Pontiac Grand Prix and the Chrysler Concorde.
The third quarter increase in molded floor carpet principally related to an
increase in sales related to the Chevrolet Lumina and Monte Carlo, the Ford
Explorer, the Honda Accord, and the Chrysler Caravan, Cirrus/Stratus and T-300.
These increases were partially offset by decreases in sales related to the
Cutlass Supreme, the Cadillac Deville, the Ford Mustang and Probe and the
Chrysler Voyager minivan.
For the first nine months of 1995, Automotive Products' net sales of $679.2
million were $3.4 million higher than the comparable period in 1994. Automotive
Products' net sales changes were attributable primarily to increased sales in
four of the segment's five high volume products: automotive seat fabric, molded
floor carpets, accessory floor mats and luggage compartment trim. These
increased sales were partially offset by a decrease in sales of the fifth high
volume product, convertible top systems. During this period, there was a 5%
decline in the North American vehicle build compared to the prior year period.
The Company's average sales content per vehicle built in North America was $54
for the nine months ended October 28, 1995 compared to an average of $53 for the
fiscal 1994 year.
The automotive seat fabric increase for the nine months was due primarily to
increased production of the Company's jacquard velvets product line currently
utilized in such high volume models as the General Motors C/K Truck Line.
Additional product placements, which contributed to the overall increase in
bodycloth sales, were the Chevrolet Cavalier, Lumina and Suburban, the Ford
Contour/Mystique, the Chrysler Cirrus/Stratus, the Jeep Grand Cherokee, the
Toyota Avalon and Camry, and the GEO Prism. These increases were partially
offset by the decreases in sales related to the Chrysler Caravan and Voyager
minivans, the Ford F Series and Ranger trucks, Explorer, Thunderbird, and
Aerostar, Villager and Windstar minivans, the Nissan Sentra and the Cutlass
Supreme.
The molded floor carpet increase was due to a 6.3% increase in unit shipments
for the nine month period principally related to increased sales related to high
volume models, including the Chevrolet Lumina and Monte Carlo, the Cutlass
Supreme, the Chrysler Cirrus/Stratus and T-300, and the Ford Explorer. These
increases were offset by decreases in sales related to the Cadillac Deville, the
Ford Probe and Mustang, the Toyota Camry and the Chrysler Voyager minivan.
The decrease in sales of convertible top systems for the quarter and nine month
period resulted from reduced production of the Ford Mustang convertible and the
Chrysler LeBaron convertible partially offset by an increase in sales to Alfa
Romeo. Chrysler began production of the JX replacement for the LeBaron in the
latter part of October.
Gross Margin: Automotive Products' gross margin as a percentage of net sales
decreased to 17.8% in the third quarter of 1995 from 18.2% in the prior year
period. The decline is primarily attributable to reduced convertible top system
sales, which carry higher contribution margins than the segment's average, and
to certain raw material price increases. The impact of raw material price
increases was reduced by reengineering and cost improvement efforts, price
increases to customers and continued reductions in the cost of nonconformance.
For the first nine months of 1995 Automotive Products' gross margin as a
percentage of net sales decreased to 18.0% from 19.8% in the prior year period
due to manufacturing
I-12
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
inefficiencies in automotive seat fabric and the lower convertible top system
sales and raw material price increases discussed above. The manufacturing
inefficiencies that occurred during the first quarter and a portion of the
second quarter resulted from the startup of fabric lines previously produced
under the Company's commission weaving program as well as certain fabric lines
reengineered according to customers' specifications. The Company terminated
commission weaving during the second quarter of 1995.
Selling, General and Administrative Expenses: Automotive Products' selling,
general and administrative expenses increased 20.4% and 18.7% in the third
quarter and first nine months of 1995, respectively, over the comparable 1994
periods. The increases are primarily due to the allocation of previously
unallocated corporate expenses, costs incurred in divisional reorganizations
and, to a lesser extent, to increases in product development and selling
expenses and additional general and administrative expenses for the segment's
facilities in Mexico which began operations this year.
Interior Furnishings
<TABLE>
<CAPTION>
Quarter Ended
October 28, 1995 October 29, 1994
Amount Percent Amount Percent
(in thousands)
<S> <C> <C> <C> <C>
Net sales $ 97,875 100.0% $102,029 100.0%
Cost of goods sold 67,991 69.5 71,779 70.4
-------- ------- -------- ------
Gross margin 29,884 30.5 30,250 29.6
Selling, general & administrative
expenses 16,780 17.1 16,510 16.2
-------- ------- -------- ------
Operating income $ 13,104 13.4% $ 13,740 13.4%
======== ======= ======== ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
October 28, 1995 October 29, 1994
Amount Percent Amount Percent
(in thousands)
<S> <C> <C> <C> <C>
Net sales $286,139 100.0% $311,927 100.0%
Cost of goods sold 198,488 69.4 218,107 69.9
-------- ------- -------- ------
Gross margin 87,651 30.6 93,820 30.1
Selling, general & administrative
expenses 50,572 17.6 51,943 16.7
-------- ------- -------- ------
Operating income $ 37,079 13.0% $ 41,877 13.4%
======== ======= ======== ======
</TABLE>
Net Sales: Interior Furnishings' net sales for the third quarter and nine month
period were $97.9 million and $286.1 million compared with $102.0 million and
$311.9 million, respectively, in the prior year periods.
I-13
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
The Decorative Fabrics group net sales for the third quarter and nine month
period were $67.3 million and $195.2 million, down $6.1 million and $34.7
million, respectively, from the comparable prior year periods. Decorative
Fabrics' net sales decline resulted primarily from a softer retail market for
flatwoven upholstery fabrics, increased competition on lower priced goods and
reduced market share in furniture velvets due to the Company's redeployment of
manufacturing capacity to automotive fabrics to meet customer product demands
during the second half of 1994. The Company believes that the lower sales at the
Decorative Fabrics group's Mastercraft division during the first half of 1995
may also reflect, to a lesser extent, a shift in consumer tastes. Additionally,
the 1994 results included the Warner and Greeff product lines, which contributed
net sales of $2.9 million and $9.8 million, respectively, in the third quarter
and nine months ended October 29, 1994. The Warner and Greeff product lines were
sold in the fourth quarter of 1994.
The Floorcoverings group net sales for the third quarter and nine months were
$30.6 million and $90.9 million, up $2.0 million and $9.0 million, respectively,
from the comparable prior year periods. The Floorcoverings group net sales
increase is largely attributable to a 13.8% increase in unit shipments,
primarily in six foot roll sales to educational, healthcare, retail and export
customers.
Gross Margin: Interior Furnishings' gross margin of 30.5% of net sales for the
third quarter of 1995 increased from 29.6% in the prior year period. Lower
absorption of overhead costs in the Decorative Fabrics group, due to lower sales
volumes and raw material price increases, was offset by an increase in unit
shipments in the Floorcoverings group, whose products carry higher margins than
the segment's average, and by manufacturing efficiencies from the Mastercraft
loom modernization program.
For the first nine months of 1995 gross margin as a percentage of net sales
increased to 30.6% from 30.1% in the prior year period. The increase reflects
improvements from increased unit shipments in the higher margin Floorcoverings
group, manufacturing efficiencies from the Mastercraft loom modernization and
cost improvement programs. These improvements were partially offset by lower
overhead absorption in the Decorative Fabrics group as a result of lower sales
volumes and raw material price increases.
Selling, General and Administrative Expenses: Interior Furnishings' selling,
general and administrative expenses increased $.3 million or 1.6% in the third
quarter and decreased $1.4 million or 2.6% in the first nine months of 1995 from
the comparable 1994 periods. The third quarter increase related primarily to the
allocation to Interior Furnishings of previously unallocated corporate expenses
and an increase of $.6 million in selling, styling and development expenses in
the Floorcoverings group as a result of its increased sales. This increase was
offset by a reduction of selling, general and administrative expenses due to the
sale of the Warner and Greeff product lines in the fourth quarter of 1994. These
product lines incurred $1.3 million and $4.5 million of selling, general and
administrative expenses in the third quarter and first nine months of 1994,
respectively. The decrease for the nine month period related to the sale of the
Warner and Greeff product lines, offset by the allocation to Interior
Furnishings of previously unallocated corporate expenses and $1.9 million in
additional selling, styling and development expenses in the Floorcoverings group
as a result of its increased sales.
I-14
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
Wallcoverings
<TABLE>
<CAPTION>
Quarter Ended
October 28, 1995 October 29, 1994
Amount Percent Amount Percent
(in thousands)
<S> <C> <C> <C> <C>
Net sales $ 52,219 100.0% $ 55,723 100.0%
Cost of goods sold 35,920 68.8 37,648 67.6
-------- ------- -------- ------
Gross margin 16,299 31.2 18,075 32.4
Selling, general & administrative
expenses 17,329 33.2 15,832 28.4
-------- ------- -------- ------
Operating income (loss) $ (1,030) (2.0%) $ 2,243 4.0%
========= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
October 28, 1995 October 29, 1994
Amount Percent Amount Percent
(in thousands)
<S> <C> <C> <C> <C>
Net sales $160,443 100.0% $166,156 100.0%
Cost of goods sold 107,826 67.2 112,400 67.6
-------- ------- -------- ------
Gross margin 52,617 32.8 53,756 32.4
Selling, general & administrative
expenses 48,993 30.5 45,509 27.4
-------- ------- -------- ------
Operating income $ 3,624 2.3% $ 8,247 5.0%
======== ======= ======== ======
</TABLE>
Net Sales: Wallcoverings' net sales for the third quarter and nine month period
were $52.2 million and $160.4 million compared with $55.7 million and $166.2
million, respectively, in the prior year periods. The change from the prior year
periods reflected lower shipments to converter businesses, planned reductions in
sales to independent distributors, and in the third quarter, decreased sales to
independent retailers ("dealers"), partially offset by increased sales to chain
stores and commercial and international accounts and, during the first six
months, increased sales to dealers and price increases on certain product lines.
Gross Margin: For the third quarter and first nine months of 1995, gross margin
as a percentage of net sales decreased from 32.4% to 31.2% and increased from
32.4% to 32.8%, respectively, over the comparable prior year periods. The
decline in gross margin as a percentage of net sales for the third quarter
related primarily to reduced dealer sales, which carry higher margins, raw
material price increases, and under absorption of overhead due to a reduced
sales volume of internally produced wallpaper. In the nine month period, the
above factors were offset by price increases on certain product lines and
increased sales to dealers during the first six months of the year.
Selling, General and Administrative Expenses: Wallcoverings' selling, general
and administrative expenses increased $1.5 million and $3.5 million in the third
quarter and first nine months of 1995, respectively, over the prior year
periods. The increases are attributable primarily to increased promotional costs
and allocations to Wallcoverings of previously unallocated corporate expenses,
partially offset by a reduction in the number of sample books produced in 1995.
The reduction in sample books over the comparable prior year period reflects a
relatively high number of sample books in the prior year as the segment was
reestablishing its shelf space with dealers.
I-15
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
Company As A Whole
Net Sales: Net sales decreased 5.7% to $380.9 million in the third quarter of
1995, down $22.9 million from the third quarter of 1994. For the first nine
months of 1995, net sales of $1,125.8 million were $28.1 million lower than the
comparable period in 1994. The net sales declines are primarily due to a lower
overall North American automotive build than in 1994, a significant reduction in
convertible automotive build and softer retail environments for the Company's
residential furniture fabrics and wallpaper lines.
Gross Margin: Gross margin decreased to $87.3 million or 22.9% of net sales in
the third quarter of 1995, down from $93.0 million or 23.0% of net sales in the
third quarter of 1994. For the first nine months of 1995 gross margin decreased
to $262.2 million or 23.3% of net sales from $281.3 million or 24.4% of net
sales in 1994. The overall decrease in gross margin as a percentage of net sales
resulted primarily from manufacturing inefficiencies in automotive seat fabrics,
commission weaving costs incurred due to capacity constraints for certain
automotive fabrics and reduced convertible top system sales in the Automotive
Products segment, partially offset by manufacturing efficiencies and changes in
product mix in the Interior Furnishings segment and, for the nine month period,
a somewhat improved product mix in the Wallcoverings segment. To a lesser
extent, the decline in gross margin is attributable to raw material price
increases in all three segments, which have been partially offset by price
increases to customers, reengineering efforts and continued reductions in the
cost of nonconformance. The Company expects additional raw material price
increases in the remainder of fiscal 1995 and believes the impact can be
somewhat reduced by its reengineering and cost improvement efforts.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased in the third quarter of 1995 to $49.8 million,
$3.4 million higher than the comparable period in 1994. For the third quarter of
1995, the increase in selling, general and administrative expenses resulted from
increased promotional costs at Wallcoverings, additional selling, styling and
development costs at Floorcoverings, the addition of new Automotive Products
facilities in Mexico and increased product development and selling expenses in
the Automotive Products segment. These increases in selling, general and
administrative expenses were offset by a gain on the sale of a Company airplane
in the third quarter of 1995 and by the savings from the sale of the Warner and
Greeff product lines in the fourth quarter of 1994 and the reduction in the
number of sample books produced in 1995 at Wallcoverings. For the first nine
months of 1995, selling, general and administrative expenses decreased $3.7
million to $145.8 million. The improvement is primarily attributable to a
reduction of advisory fees, which were paid in the first quarter of 1994, and to
the sale of the Warner and Greeff product lines.
Interest Expense: Interest expense, net of interest income, increased from $10.2
million to $12.0 million in the third quarter of 1995 compared to the prior year
quarter. The increase was due to an increase in average outstanding indebtedness
of the Company and an increase in the Company's borrowing rates. For the first
nine months of 1995, interest expense, net of interest income, decreased to
$35.8 million from $64.8 million. The decrease in interest expense for the nine
month period was due to the Recapitalization, which reduced the Company's
average outstanding indebtedness and its borrowing rates.
I-16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
Loss on the Sale of Receivables: Beginning with the Recapitalization in July
1994, the Company has sold on a continuous basis, through its Carcorp
subsidiary, interests in a pool of accounts receivable. In connection with the
receivables sales, a loss of $2.3 million was incurred in the third quarter of
1995 compared to a loss of $2.5 million in the third quarter of 1994. For the
first nine months of 1995, the loss was $6.9 million compared to $5.2 million in
1994. Of the $5.2 million loss recorded in the first nine months of 1994, $1.3
million related to one time fees and expenses related to the Bridge Receivables
Facility. See Note E to Condensed Consolidated Financial Report.
Income Taxes: In the third quarter and nine months ended October 28, 1995, the
provision for income taxes was $2.6 million and $8.8 million compared with $3.0
million and $8.6 million, respectively, in the prior year periods. In the third
quarter and first nine months of 1995 income tax expense consisted of foreign,
state, franchise and federal alternative minimum taxes. In the comparable 1994
periods the Company did not incur any federal alternative minimum taxes.
Extraordinary Loss on the Extinguishment of Debt: On July 13, 1994, the Company
as part of the Recapitalization recognized a loss on the extinguishment of debt
of $106.5 million. The 1994 loss consisted of $9.6 million of premiums paid to
redeem indebtedness and $96.9 million of unamortized discounts, deferred
financing charges and defeasance costs.
Net Income: The combined effect of the foregoing resulted in net income of $20.6
million in the third quarter of 1995 compared to net income of $31.0 million in
the third quarter of 1994 and net income of $65.0 million for the first nine
months of 1995 compared to a net loss of $55.5 million in the first nine months
of 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents
totalling $4.6 million and $3.3 million at October 28, 1995 and January 28,
1995, respectively. The increase in the Company's cash balance is primarily due
to the Receivables Facility, which the Company entered into on March 31, 1995,
whereby collections of receivables are temporarily held until the determination
of availability. The Receivables Facility is further discussed below.
As part of the Recapitalization, in July 1994 the Company's C&A
Products subsidiary entered into new credit facilities. The new credit
facilities consist of (i) the Term Loan Facilities, comprised of term loans in
an initial aggregate principal amount of $475 million (including a $45 million
Canadian loan), of which $468.4 million was outstanding at October 28, 1995, and
having a term of eight years, (ii) the Revolving Facility, having an aggregate
principal amount of up to $150 million and a term of seven years and (iii) the
Bridge Receivables Facility, which was terminated and replaced with the
Receivables Facility (the Term Loan Facilities and Revolving Facility, together,
the "Facilities"). The Facilities, which are guaranteed by the Company and its
U.S. subsidiaries (subject to certain exceptions), contain restrictive covenants
including maintenance of EBITDA (i.e. earnings before interest, taxes,
depreciation and amortization) and interest coverage ratios, leverage and
liquidity tests and various other restrictive covenants which are typical for
such facilities. In addition, C&A Products is prohibited from paying dividends
or making other distributions to the Company except to the extent necessary to
allow the Company to pay taxes, ordinary expenses, permitted dividends on the
Common Stock and for permitted
I-17
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
repurchases of shares or options and to make permitted investments in finance,
foreign or acquired subsidiaries. The Company does not believe such prohibition
will have a material adverse impact on the Company because all the Company's
operations are conducted, and all the Company's debt obligations are issued, by
C&A Products and its subsidiaries.
On March 31, 1995, C&A Products repaid and terminated the Bridge
Receivables Facility and entered, through the Trust formed by C&A Products'
wholly-owned, bankruptcy remote subsidiary, Carcorp, the Receivables Facility
comprised of (i) term certificates, which were issued on March 31, 1995, in an
aggregate face amount of $110 million and have a term of five years and (ii)
variable funding certificates, which represent revolving commitments of up to an
aggregate of $75 million and have a term of five years. Carcorp purchases on a
revolving basis and transfers to the Trust virtually all trade receivables
generated by C&A Products and the Sellers. The certificates represent the right
to receive payments generated by the receivables held by the Trust.
Availability under the variable funding certificates at any time
depends primarily on the amount of receivables generated by the Sellers from
sales to the auto industry, the rate of collection on those receivables and
other characteristics of those receivables that affect their eligibility (such
as bankruptcy or downgrading below investment grade of the obligor, delinquency
and excessive concentration). Based on these criteria, at October 28, 1995
approximately $41.5 million was available under the variable funding
certificates, of which $27.0 million was utilized.
The proceeds received by Carcorp from collections on receivables, after
the payment of expenses and amounts due on the certificates, are used to
purchase new receivables from the Sellers. Collections on receivables are
required to remain in the Trust if at any time the Trust does not contain
sufficient eligible receivables to support the outstanding certificates. At
October 28, 1995, no cash collateral was required to be retained in the Trust.
The Receivables Facility contains certain other restrictions on Carcorp
(including maintenance of $25 million net worth) and on the Sellers (including
limitations on liens on receivables, on modifications of the terms of
receivables, and on changes in credit and collection practices) customary for
facilities of this type. The commitments under the Receivables Facility will
terminate prior to their term upon the occurrence of certain events, including
payment defaults, breach of covenants, bankruptcy, insufficient eligible
receivables to support the outstanding certificates, default by C&A Products in
servicing the receivables and, in the case of the variable funding certificates,
failure of the receivables to satisfy certain performance criteria.
During the nine months ended October 28, 1995, the Company sold and
leased back $25.4 million of machinery and equipment utilized in the Automotive
Products and Interior Furnishings segments under a master equipment lease
agreement. At October 28, 1995, the Company had $19.7 million of potential
availability under this master lease for future machinery and equipment
requirements of the Company, subject to the lessor's approval. The Company has
made lease payments of approximately $4.8 million in the first nine months of
1995 for machinery and equipment sold and leased back under this master lease.
The Company expects lease payments under this master lease of approximately $1.5
million in the remainder of 1995 and $7.4 million in 1996.
I-18
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of October 28, 1995, the Company had
approximately $46.2 million in outstanding capital expenditure commitments. The
Company currently anticipates that its capital expenditures in 1995 will
aggregate approximately $75 million. The Company may make additional capital
expenditures in 1995 of approximately $35 million (and enter into related
sale-leaseback arrangements) or it may obtain the equipment through existing and
new operating leases. The Company's capital expenditures in future years will
depend upon demand for the Company's products and changes in technology. The
Company currently anticipates that capital expenditures in fiscal 1996,
including sale-leaseback transactions, will aggregate approximately $90 million
to $100 million.
As discussed previously, on September 26, 1995, C&A Products entered
into the Merger Agreement with Larizza pursuant to which the Company will
purchase all Larizza's outstanding shares at $6.50 per share in cash, for a
total purchase price of approximately $144 million. In addition, the Company
will extinguish approximately $35 million of existing Larizza debt. The Company
expects to finance the acquisition and related fees and expenses through
approximately $197 million of additional bank borrowings.
The Company's principal sources of funds are cash generated from
continuing operating activities, borrowings under the Revolving Facility and the
sale of receivables under the Receivables Facility. Net cash used by the
operating activities of the Company's continuing operations was $12.6 million
for the quarter ended October 28, 1995, and net cash provided by operating
activities of the Company's continuing operations was $62.8 million for the nine
months ended October 28, 1995. The Company had a total of $49.1 million of
borrowing availability under its credit arrangements as of October 28, 1995. The
total was comprised of $29.9 million under the Revolving Facility, $14.5 million
under the Receivables Facility, and approximately $4.7 million under a bank
demand line of credit in Canada. The Company's principal uses of funds from
these sources in the next several years will be to fund interest and principal
payments on its indebtedness, net working capital increases and capital
expenditures. At October 28, 1995, the Company had total outstanding
indebtedness of $593.6 million (excluding approximately $28.1 million of
outstanding letters of credit) at an average interest rate of 7.6% per annum. Of
the total outstanding indebtedness, $560.4 million relates to the Facilities.
In connection with the Company's announced stock repurchase program,
the Company and its lenders entered into an amendment to the Facilities
effective May 30, 1995 that permits the Company currently to spend up to $12
million annually to repurchase its shares. The Company believes it has
sufficient liquidity under its existing credit arrangements to effect the
repurchase program. During the third quarter and first nine months of 1995 the
Company spent an aggregate of $3.5 million and $7.3 million, respectively, to
repurchase its shares.
Indebtedness under the Facilities bears interest at a per annum rate
equal to the Company's choice of (i) Chemical Bank's Alternate Base Rate (which
is the highest of Chemical's announced prime rate, the Federal Funds Rate plus
.5% and Chemical's base certificate of deposit rate plus 1%) plus a margin
ranging from 0% to .75% or (ii) the offered rates for Eurodollar deposits
("LIBOR") of one, two, three, six, nine or twelve months, as selected by the
Company, plus a margin ranging from 1% to 1.75%. Pursuant to the terms of the
Facilities, the Alternative Base Rate margin is currently .75% and the LIBOR
margin is currently 1.75%. The weighted average rate of interest on the
Facilities at
I-19
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
October 28, 1995 was 7.6%. The weighted average interest rate on the sold
interests under the Receivables Facility at October 28, 1995 was 6.6%. Under the
Receivables Facility, the term certificates bear interest at an average rate
equal to one-month LIBOR plus .34% per annum and the variable funding
certificates bear interest, at Carcorp's option, at LIBOR plus .40% per annum or
a prime rate. Cash interest paid during the quarters ended October 28, 1995 and
October 29, 1994 was $15.4 million and $15.3 million, respectively. Cash
interest paid during the first nine months of 1995 and 1994 aggregated
approximately $38.7 million and $66.2 million ($16 million of which was paid in
connection with the Recapitalization), respectively.
Due to the variable interest rates under the Facilities and the
Receivables Facility, the Company is sensitive to increases in interest rates.
Accordingly, the Company has entered into a program to reduce its exposure to
increases in interest rates through the use of interest rate cap and corridor
agreements. Under these agreements, the Company has limited its exposure through
October 17, 1995 on $300 million of notional principal amount at an average
LIBOR strike price of 6.92% and on $250 million of notional principal amount
from October 17, 1995 through October 17, 1996 at an average LIBOR strike price
of 7.50%. Based upon amounts outstanding at October 28, 1995, a .5% increase in
LIBOR (5.9% at October 28, 1995) would impact interest costs by approximately
$2.8 million annually on the Facilities and $.7 million annually on the
Receivables Facility.
The current maturities of long-term debt primarily consist of the
current portion of the Term Loan Facilities, vendor financing, industrial
revenue bonds and other miscellaneous debt. Repayments of indebtedness under the
Term Loan Facilities commenced in the third quarter of 1995. The maturities of
long-term debt of the Company during the remainder of fiscal 1995 and for 1996,
1997, 1998 and 1999 are $13.1 million, $42.9 million, $62.1 million, $78.0
million and $84.3 million, respectively. In addition, the Term Loan Facilities
provide for mandatory prepayments with certain excess cash flow of the Company,
net cash proceeds of certain asset sales or other dispositions by the Company,
net cash proceeds of certain sale-leaseback transactions and net cash proceeds
of certain issuances of debt obligations.
The Company is sensitive to price movements in its raw material supply
base. During the third quarter of 1995, price trends for many materials
continued to increase. The Company anticipates that announced price increases
during 1995 in its primary raw materials could increase the cost of purchased
materials by approximately $20 to $25 million on an annualized basis. While the
Company may not be able to pass on future raw material price increases to its
customers, it believes that a significant portion of the increased cost can be
offset by continued results of its reengineering efforts and by continued
reductions in the cost of nonconformance.
The Company, as part of its effort to revitalize Wallcoverings, has
decided to close its Hammond, Indiana manufacturing facility on or about
February 2, 1996. The facility has a net book value of $6.7 million. In
connection with the closure, the Company expects to incur cash costs of
approximately $1.8 million, which relate primarily to severance and ongoing
facility costs through its disposal.
The Company currently has two facilities in Mexico to supply automotive
products to Mexican subsidiaries of U.S. based automobile manufacturers, both of
which are operational. The Company believes that, based on the nature of its
Mexican operations, fluctuations in the Mexican peso will not have a material
impact on the Company's operations.
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
I-20
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
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
currently anticipates that the net cash requirements of its discontinued
operations will be approximately $31.8 million in 1995. The decrease from prior
estimates is primarily due to changes in the timing of the settlement of certain
obligations and other liabilities. 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 1995 and into 1996 by net cash provided by operating
activities from continuing operations and by borrowings under existing bank
credit facilities.
Tax Matters
At January 28, 1995, the Company had outstanding NOLs (net operating
loss carryforwards) of approximately $391 million for Federal income tax
purposes. These NOLs expire over the period from 1996 to 2009. The Company also
has unused Federal tax credits of approximately $17.8 million, $10.7 million of
which expire during 1995 to 2003. The Company estimates that it will generate
tax deductions of approximately $65.0 million in connection with the ultimate
disposition of assets and liabilities of its discontinued businesses during the
period 1995 to 1997, which were previously accrued for financial reporting
purposes. 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.
The Company previously reported that its Federal income tax returns for
the period 1988 through 1991 were under examination by the IRS and that the IRS
had proposed adjustments that could have resulted in the loss of a material
amount of the net operating losses otherwise available to the Company in future
years. During the third quarter ended October 28, 1995, the IRS withdrew
substantially all of the proposed adjustments.
Approximately $134.0 million of the Company's NOLs and $10.7 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. Because of the merger of Group and C&A
Products, such NOLs and credits may be used against the income and apportioned
tax liability of C&A Products, which the Company believes will have sufficient
taxable income and apportioned tax liability to fully use such NOLs and to use a
substantial portion of such tax credits. The Recapitalization did 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 its principal shareholders, or changes in the composition of the
principal shareholders, 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 would 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.
I-21
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Continued)
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 potentially responsible party
("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.
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 Environmental Protection Agency, 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 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. As of October 28, 1995, 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 12 sites where the Company is participating in the
investigation or remediation of the site, either directly or through financial
contribution, and 12 additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. As of October 28, 1995,
the Company's estimate of its liability for these 24 sites is approximately
$28.9 million. As of October 28, 1995, the Company has established reserves of
approximately $30.2 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
I-22
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations. (Concluded)
subsidiaries and their corporate predecessors.
For additional information regarding the foregoing, see "Part II -
Other Information, Item 1 - Legal Proceedings" elsewhere herein.
I-23
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material developments in legal proceedings involving
the Company or its subsidiaries since those reported in the Company's Annual
Report on Form 10-K for the fiscal year ended January 28, 1995 and in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 29,
1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Please note that in the following description of exhibits, the
title of any document entered into, or filing made, prior to July 7, 1994
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
Collins & Aikman Holdings Corporation, Collins & Aikman Group, Inc. or Wickes
Companies, Inc., if such documents and filings were made prior to July 7, 1994.
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C> <C>
2.1 - Agreement and Plan of Merger among Collins & Aikman Products Co., LRI Acquisition
Corp. and Larizza Industries, Inc., dated September 26, 1995, is hereby
incorporated by reference to Exhibit 1 of Collins & Aikman Products Co.'s
Schedule 13-D filed with the Securities and Exchange Commission on October 6, 1995.
2.2 - Amendment to Merger Agreement dated November 17, 1995 by and among Collins &
Aikman Products Co., LRI Acquisition Corporation and Larizza Industries, Inc.
2.3 - Stock Agreement, dated as of September 26, 1995, by and between Collins & Aikman
Products Co. and Ronald T. Larizza (individually and as trustee) is hereby
incorporated by reference to Exhibit 2 of Collins & Aikman Products Co.'s
Schedule 13-D filed with the Securities and Exchange Commission on October 6,
1995.
3.1 - Restated Certificate of Incorporation of Collins & Aikman Corporation is hereby
incorporated by reference to Exhibit 4.1 of Collins & Aikman Corporation's Report
on Form 10-Q for the fiscal quarter ended July 30, 1994.
3.2 - By-laws of Collins & Aikman Corporation, as amended, are hereby incorporated by
reference to Exhibit 4.2 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended July 30, 1994.
3.3 - Certificate of Elimination of Cumulative Exchangeable Redeemable Preferred Stock
of Collins & Aikman Corporation.
4.1 - Specimen Stock Certificate for the Common Stock is hereby incorporated by
reference to Exhibit 4.3 of Amendment No.3 to Collins & Aikman Holdings
Corporation's Registration Statement on Form S-2 (Registration No. 33-53179)
filed June 21, 1994.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C> <C>
4.2 - Credit Agreement dated as of June 22, 1994 between Collins & Aikman Products Co.
as Borrower, WCA Canada Inc. as Canadian Borrower, the Company as Guarantor, the
Lenders named therein, Continental Bank, N.A., and NationsBank, N.A. as Managing
Agents, and Chemical Bank as Administrative Agent is hereby incorporated by
reference to Exhibit 4.5 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended July 30, 1994.
4.3 - First Amendment dated as of January 30, 1995 to the Credit Agreement dated as of
June 22, 1994 among Collins & Aikman Products Co., WCA Canada Inc., Collins &
Aikman Corporation, the financial institutions party thereto and Chemical Bank,
as administrative agent is hereby incorporated by reference to Exhibit 4.4 of
Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended
January 28, 1995.
4.4 - Second Amendment dated as of May 22, 1995 to the Credit Agreement dated as of
June 22, 1994, as amended, among Collins & Aikman Products Co., WCA Canada Inc.,
Collins & Aikman Corporation, the financial institutions party thereto and
Chemical Bank, as administrative agent is hereby incorporated by reference to
Exhibit 4.6 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended April 29, 1995.
4.5 - Third Amendment dated as of August 24, 1995 to the Credit Agreement dated as of
June 22, 1994, as amended, among Collins & Aikman Products Co., WCA Canada Inc.,
Collins & Aikman Corporation, the financial institutions party thereto and
Chemical Bank, as administrative agent, is hereby incorporated by reference to
Exhibit 4.5 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended July 29, 1995.
Collins & Aikman Corporation agrees to furnish to the Commission upon request in
accordance with Item 601(b)(4)(iii)(A) of Regulation S-K copies of instruments
defining the rights of holders of long-term debt of Collins & Aikman Corporation
or any of its subsidiaries, which debt does not exceed 10% of the total assets of
Collins & Aikman Corporation and its subsidiaries on a consolidated basis.
10.1 - Amendment No.1, dated September 5, 1995, among Carcorp, Inc., as Company, Collins
& Aikman Products Co., as Master Servicer, and Chemical Bank, as Trustee, to the
Pooling Agreement, dated as of March 30, 1995, among the Company, the Master
Servicer and Trustee is hereby incorporated by reference to Exhibit 10.2 of
Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended
July 29, 1995.
10.2 - Amendment No. 2, dated October 25, 1995, among Carcorp, Inc., as Company, Collins
& Aikman Products Co., as Master Servicer, and Chemical Bank, as Trustee, to the
Pooling Agreement, dated as of March 30, 1995, among the Company, the Master
Servicer and the Trustee.
11. - Computation of Earnings Per Share.
27. - Financial Data Schedule.
(b) Reports on Form 8-K.
No current reports on Form 8-K were filed during the quarter
for which this report on Form 10-Q is filed.
</TABLE>
II-2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLLINS & AIKMAN CORPORATION
(Registrant)
Dated: December 8, 1995 By: /s/ J. MICHAEL STEPP
--------------------
J. Michael Stepp
Chief Financial Officer and\
Executive Vice President
(On behalf of the Registrant and as
Principal Financial Officer)
By: /s/ ANTHONY HARDWICK
--------------------
Anthony Hardwick
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
Exhibit 2.2
AMENDMENT TO MERGER AGREEMENT
This Amendment to Merger Agreement, dated November 17, 1995, is entered
into by and among Collins & Aikman Products Co., IRI Acquisition Corp., and
Larizza Industries, Inc.
RECITALS
1. The parties hereto are the parties to an Agreement and Plan of
Merger, dated September 26, 1995 (the "Merger Agreement").
2. The parties wish to amend the Merger Agreement as herein
provided.
NOW, THEREFORE, the parties hereto hereby amend the Merger
Agreement by substituting Schedules 1.1 (b) and 1.1 (c) hereto for Schedules 1.1
(b) 1.1 (c) to the Merger Agreement.
Dated as of the date first above written.
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President & Chief
Financial Officer
LRI ACQUISITION CORP.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President & Chief
Financial Officer
LARIZZA INDUSTRIES, INC.
By: /s/ Terence C. Seikel
Name: Terence C. Seikel
Title: Chief Financial Officer
<PAGE>
Exhibit 3.3
CERTIFICATE OF ELIMINATION
OF
CUMULATIVE EXCHANGEABLE REDEEMABLE
PREFERRED STOCK
OF
COLLINS & AIKMAN CORPORATION
Pursuant to Section 151(g) of the Delaware General
Corporation Law
Collins & Aikman Corporation (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify that:
FIRST: The Board of Directors of the Corporation duly adopted the
resolutions set forth below providing for the elimination from the Restated
Certificate of Incorporation of the Corporation of all matters set forth in the
Certificate of Designation of Rights, Preferences, Privileges and Restrictions
(the "Certificate of Designation") relating to the 15 1/2% Cumulative
Exchangeable Redeemable Preferred Stock, par value $.01 per share, of the
corporation (the "Cumulative Preferred Stock") filed with the Secretary of State
of the State of Delaware on April 12, 1989:
RESOLVED, that the Board of Directors hereby determines that
none of the authorized shares of the Cumulative Preferred
Stock are outstanding, and that none of the shares of
Cumulative Preferred Stock will be issued subject to the
Certificate of Designation; and
FURTHER RESOLVED, that the proper officers of the Corporation
be, and they hereby are, authorized and directed to make,
execute and file with the Secretary of State of the State of
Delaware a Certificate of Elimination containing these
resolutions for the purpose of eliminating from the
Corporation's Restated Certificate of Incorporation all
matters set forth in the Certificate of Designation.
SECOND: the Cumulative Preferred Stock is hereby eliminated
from the Restated Certificate of Incorporation of the Corporation.
IN WITNESS WHEREOF, the undersigned corporation has caused this
certificate to be executed by its duly authorized officer this 18th day of
September, 1995.
COLLINS & AIKMAN CORPORATION
By:/s/ John F. Grossbauer
Assistant Secretary
<PAGE>
Exhibit 10.2
AMENDMENT NO. 2
TO
POOLING AGREEMENT
AMENDMENT NO. 2, dated October 25, 1995, among Carcorp, Inc.,
a Delaware corporation (the "Company"), Collins & Aikman Products Co., a
Delaware corporation, as master servicer (the "Master Servicer"), and Chemical
Bank, as trustee (the "Trustee") to that certain Pooling Agreement, dated as of
March 30, 1995, as amended by Amendment No. 1 dated September 5, 1995 (the
"Agreement"), among the Company, the Master Servicer and the Trustee.
WHEREAS, the Company, the Master Servicer and the Trustee
entered into the Agreement providing for, among other things, (i) the creation
of a master trust to which the Company has and will transfer all of its right,
title and interest in, to and under the Receivables and the other Trust Assets
owned by the Company and (ii) the issuance by such master trust of one or more
Series of Investor Certificates, the Exchangeable Company Certificate and the
Subordinated Company Certificates representing interests in the Receivables and
such other Trust Assets; and
WHEREAS, the Series 1 Certificates have been issued pursuant
to the Series 1995-1 Supplement, dated as of March 30, 1995 (the "Series 1
Supplement"), among the Company, the Master Servicer and the Trustee; and
WHEREAS, the Series 2 Certificates have been issued pursuant
to the Series 1995-2 Supplement, dated as of March 30, 1995 (the "Series 2
Supplement"), among the Company, the Master Servicer, Societe Generale, as
Agent, and the Trustee; and
WHEREAS, Sections 10.1(a) and (b) of the Agreement permit the
Agreement to be amended from time to time pursuant to the provisions set forth
therein; and
WHEREAS, the Company, the Master Servicer and the Trustee
previously entered into Amendment No. 1 to the Pooling Agreement, dated as of
September 5, 1995, amending Section 2.7(j) and Section 2.8(h) of the Agreement;
and
WHEREAS, the parties hereto wish to further amend the
Agreement as set forth herein;
<PAGE>
NOW, THEREFORE, in consideration of the above premises, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed thereto in the Agreement, the Series 1
Supplement or the Series 2 Supplement, as the case may be.
2. The definition of "Primary Auto Obligors"
contained in Section 1.1 of the Agreement, is hereby amended in
its entirety to read as follows:
"Primary Auto Obligors" shall mean General Motors
Corporation, Chrysler Corporation, Ford Motor Company,
Honda Motor Co., Ltd., American Honda Motor Co. Inc.,
Toyota Motor Company, Toyota Tsusho Corp. and their
respective subsidiaries and Johnson Controls, Inc.
3. Except as otherwise set forth herein, the
Agreement shall continue in full force and effect in accordance
with its terms.
4. This Amendment No. 2 may be executed in one or
more counterparts and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be
deemed to be an original; such counterparts, together, shall
constitute one and the same agreement.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 2 to the Agreement as of the day and year first above written.
CARCORP, INC., as Company
By: /s/ Monte L. Miller
Name: Monte L. Miller
Title: President
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President
and Chief Financial Officer
CHEMICAL BANK, not in its individual
capacity but solely as Trustee
By: /s/ Charles E. Dooley
Name: Charles E. Dooley
Title: Vice President
AGREED TO AND ACCEPTED BY:
SOCIETE GENERALE, as Agent of the
VFC Certificateholders
By: /s/ Ralph Saheb
Name: Ralph Saheb
Title: Vice President
-3-
<PAGE>
Exhibit 11
Collins & Aikman Corporation
Computation of Earnings Per Share
In thousands, except per share data
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 28, October 29, October 28, October 29,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Average shares outstanding during
the period....................................... 69,817 70,521 70,237 44,943
----------- ----------- ----------- ----------
Incremental shares under stock options
computed under the treasury stock method
using the average market price of
issuer's stock during the period................. 1,308 1,588 1,230 1,634
----------- ----------- ----------- ----------
Total shares for primary EPS................... 71,125 72,109 71,467 46,577
Additional shares under stock
options computed under the
treasury stock method using the
ending price of issuer's stock................... - - 53 -
----------- ----------- ----------- ----------
Total shares for fully diluted
EPS......................................... 71,125 72,109 71,520 46,577
=========== =========== =========== ==========
Income (loss) applicable to common shareholders:
Continuing operations (1)...................... $ 20,640 $ 30,966 $ 64,986 $ (45,387)
Extraordinary item............................. - - - (106,528)
----------- ----------- ----------- -----------
Net income (loss).............................. $ 20,640 $ 30,966 $ 64,986 $ (151,915)
=========== =========== =========== ===========
Income (loss) per primary and fully diluted common share:
Continuing operations.......................... $ .29 $ .43 $ .91 $ (.97)
Extraordinary item............................. - - - (2.29)
----------- ----------- ----------- -----------
Net income (loss).............................. $ .29 $ .43 $ .91 $ (3.26)
=========== =========== =========== ===========
</TABLE>
Notes:
(1) Loss from continuing operations for the nine months ended October 29,
1994 has been adjusted for dividend and accretion requirements on
redeemable preferred stock of $14,408. In addition, loss from continuing
operations for the nine months ended October 29, 1994 has been adjusted
for the loss on redemption of preferred stock of $82,022.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 28, 1995 AND SUCH IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-27-1996
<PERIOD-END> OCT-28-1995
<CASH> 4,588
<SECURITIES> 0
<RECEIVABLES> 114,673
<ALLOWANCES> 3,533
<INVENTORY> 201,885
<CURRENT-ASSETS> 340,755
<PP&E> 594,167
<DEPRECIATION> 292,084
<TOTAL-ASSETS> 705,459
<CURRENT-LIABILITIES> 237,370
<BONDS> 550,275
<COMMON> 705
0
0
<OTHER-SE> (357,205)
<TOTAL-LIABILITY-AND-EQUITY> 705,459
<SALES> 1,125,831
<TOTAL-REVENUES> 1,125,831
<CGS> 863,613
<TOTAL-COSTS> 863,613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 414
<INTEREST-EXPENSE> 35,753
<INCOME-PRETAX> 73,774
<INCOME-TAX> 8,788
<INCOME-CONTINUING> 64,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,986
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
</TABLE>
