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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended January 27, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from __________ to__________
Commission file number 1-10218
COLLINS & AIKMAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3489233
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
701 MCCULLOUGH DRIVE
CHARLOTTE, NORTH CAROLINA 28262
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (704) 547-8500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $93,793,944 as of April 16, 1996.
As of April 16, 1996, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 69,073,963 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Proxy Statement for 1996 Annual Meeting of Stockholders to be filed
within 120 days of January 27, 1996 - Items 10, 11, 12 and 13.*
* Only the portion of this document expressly described in the items listed are
incorporated by reference herein.
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COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT INDEX
Item 1. Business, page 1.
Item 2. Properties, page 6.
Item 3. Legal Proceedings, page 6.
Item 4. Submission of Matters to a Vote of Security Holders, page 9.
Executive Officers of the Registrant, page 9.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters, page 11.
Item 6. Selected Financial Data, page 12.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, page 13.
Item 8. Financial Statements and Supplementary Data, page 29.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure, page 29.
Item 10. Directors and Executive Officers of the Registrant, page 30.
Item 11. Executive Compensation, page 30.
Item 12. Security Ownership of Certain Beneficial Owners and Management,
page 30.
Item 13. Certain Relationships and Related Transactions, page 30.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K,
page 31.
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PART I
ITEM 1. BUSINESS
Collins & Aikman Corporation (the "Company") is a major supplier of
interior textile and plastic trim products to the North American automotive
industry, with leading positions in five major product lines. The Company is
also a leading manufacturer of residential upholstery as well as a major
provider of contract carpet products in the United States. The Company's
operations are organized into two segments: Automotive Products and Interior
Furnishings. For certain financial information regarding the Company's business
segments, see Note 22 to Consolidated Financial Statements and "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
On April 9, 1996, the Company announced a plan to spin off the Company's
Imperial Wallcoverings subsidiary ("Wallcoverings") to the stockholders of the
Company. The Company has accounted for the financial results and net assets of
Wallcoverings as a discontinued operation. Accordingly, previously reported
financial results for all periods have been restated to reflect Wallcoverings as
a discontinued operation.
With respect to competitive information, references to the Company as "a
leader", "a leading" or "one of the leading" manufacturers in a 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 product category mean that the Company has the
largest product share based on dollar sales volume in that product category.
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.
AUTOMOTIVE PRODUCTS
GENERAL
The Company is a leading designer and manufacturer of automotive
products with 1995 net sales in this segment of $906.9 million. Automotive
Products supplies six major automotive products--automotive seat fabric
("bodycloth"), molded floor carpets, accessory floor mats, luggage compartment
trim, convertible top systems and plastic-based interior systems. Automotive
Products has supplied textile-based products to the automotive industry for over
60 years. In January 1996, the Company acquired Manchester Plastics, a
manufacturer of automotive door panels, headrests, floor console systems and
instrument panel components. The acquisition of Manchester Plastics adds a broad
range of molded plastic components to the Company's textile-based automotive
interior trim products and increases the Company's content per North American
vehicle build.
The Company's sales are dependent on certain significant customers. In
1995, 1994 and 1993 direct and indirect sales to each of General Motors
Corporation and Chrysler Corporation accounted for 10% or more of the Company's
net sales. In 1995 and 1994 direct and indirect sales to Ford Motor Company
accounted for 10% or more of the Company's net sales.
Automotive industry demand historically has been influenced by both
cyclical factors and long-term growth trends in the driving age population and
real per capita income.
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. For
the last three years, U.S. light vehicle sales have averaged 14.6 million units.
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PRODUCTS
Automotive Products manufactures six principal automotive products:
automotive seat fabric, molded floor carpets, accessory floor mats, luggage
compartment trim, convertible top systems and plastic-based interior systems.
Automotive Products also produces a variety of other automotive and
nonautomotive products.
AUTOMOTIVE SEAT FABRIC. Automotive Products manufactures a wide variety
of bodycloth, including flat-wovens, velvets and knits. Automotive Products also
laminates foam to bodycloth. In 1995, 1994 and 1993, Automotive Products had net
sales of bodycloth of $327.5 million, $340.3 million and $221.2 million,
respectively.
MOLDED FLOOR CARPETS. Molded floor carpets include polyethylene,
barrier-backed and molded urethane underlay carpet. 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
increases in unit selling prices. In 1995, 1994 and 1993 net sales of molded
floor carpets were $231.8 million, $213.2 million, and $181.1 million,
respectively.
ACCESSORY FLOOR MATS. Automotive Products produces carpeted automotive
accessory floor mats for both North American produced vehicles and imported
vehicles.
LUGGAGE COMPARTMENT TRIM. Luggage compartment trim includes one-piece
molded trunk systems and assemblies, wheelhouse covers and center pan mats,
seatbacks, tireboard covers and other trunk trim products.
CONVERTIBLE TOP SYSTEMS. Automotive Products designs and manufactures
convertible top systems through its Dura Convertible Systems subsidiary
("Dura"). In October 1993, Dura began shipping its "Top-in-a-Box" system, in
which it designs and manufactures all aspects of a convertible top, including
the framework, trim set, backlight and power actuating system.
MOLDED PLASTIC INTERIOR SYSTEMS. In January 1996, the Company acquired
Manchester Plastics, a manufacturer of automotive door panels, headrests, floor
console systems and instrument panel components. The acquisition of Manchester
Plastics adds a broad range of molded plastic components to the Company's
textile-based automotive interior trim products.
OTHER. Automotive Products also produces a variety of other auto
products, including carpet die cuts for automotive interior trim applications,
convertible power actuating units, headliner fabric, and carpet roll goods for
export and domestic consumption. In addition, the Company manufactures small
volumes of certain other products, such as residential floor mats, casket
liners, necktie liners and sliver knits, for various commercial and industrial
markets.
COMPETITION
The automotive supply business is highly competitive. The Company has
competitors in respect of each of its automotive products, some of which may
have substantially greater financial and other resources than the Company. The
Company's competitors in molded plastic components include subsidiaries of
certain U.S. automotive and light vehicle manufacturers.
The Company principally competes for new business at the design stage of
new models and upon the redesign of existing models. The Company is vulnerable
to a decrease in demand for the models that generate the most sales for the
Company, a failure to obtain purchase orders for new or redesigned models and
pricing pressure from the major automotive companies.
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FACILITIES
Automotive Products has 45 manufacturing, warehouse and other facilities
located in the U.S., Canada, Mexico and Austria aggregating approximately 6.9
million square feet. The majority of these facilities are located in North
Carolina, Ohio and Michigan and in Ontario and Quebec, Canada. Approximately 90%
of the total square footage of these facilities is owned and the remainder is
leased. Many facilities are strategically located to provide just-in-time
("JIT") inventory delivery to the Company's customers. Capacity at any plant
depends, among other things, on the product being produced, the processes and
equipment used and tooling. This varies periodically, depending on demand and
shifts in production between plants. The Company currently estimates that its
Automotive Products plants generally operate at between 50% and 100% of
capacity. During the second half of 1994 the Company experienced capacity
constraints with respect to certain automotive seat fabrics due to the
unanticipated popularity of certain vehicles for which the Company supplies seat
fabric. To meet customer expectations, the Company utilized outside weaving and
redeployed certain manufacturing capacity from its Decorative Fabrics velvet
furniture products. The Company terminated commission weaving during the second
quarter of 1995. Except for the foregoing constraints, which the Company
believes were short term, the Company's capacity utilization in this segment is
generally in line with its past experience in similar economic situations, and
the Company believes that its facilities are sufficient to meet existing needs.
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 1995, the Interior
Furnishings segment had net sales of $384.5 million.
DECORATIVE FABRICS
GENERAL. Interior Furnishings' Decorative Fabrics group is a leading
designer and manufacturer of upholstery fabrics in the U.S. The Decorative
Fabrics group had 1995 net sales of $262.4 million. This group's primary
division, Mastercraft, is the leading manufacturer of flat-woven upholstery
fabrics and had 1995 net sales of $240.9 million. Management believes that
Mastercraft has substantially more jacquard looms and styling capacity dedicated
to upholstery fabrics, and offers more patterns (approximately 13,000) 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. In order to accommodate anticipated growth, the
Company in 1993 initiated a loom modernization program, which was completed in
fiscal 1995. The program was targeted toward creating a state of the art
production facility with 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.
The three primary types of upholstery fabric are flat-wovens, velvets and
prints. Flat-woven fabrics are made in two major styles: jacquard, which is
produced on high-speed computerized looms capable of weaving 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. Shifts in consumer taste can also
affect demand for upholstery fabric.
PRODUCTS. Decorative Fabrics' two operating divisions are Mastercraft and
Cavel. Mastercraft and Cavel design and manufacture jacquards, velvets and other
woven fabrics for
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the furniture, interior design, commercial, recreational vehicle and
industrial markets. During 1994, the Company sold the Greeff and Warner product
lines through which it had designed and distributed high-end fabrics.
Decorative Fabrics had net sales of flat-woven products in 1995, 1994 and
1993 of $240.9 million, $262.8 million and $268.9 million, respectively.
Decorative Fabrics' other sales were primarily velvet products
manufactured by the Cavel division.
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 material and finished goods inventory required
and minimizes product returns.
MARKETING AND SALES. Fabrics are sold domestically by 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.
COMPETITION. The U.S. upholstery fabrics market is highly competitive.
The Company has numerous competitors in respect of each of its decorative
fabrics products, some of which have substantially greater financial and other
resources than the Company. Manufacturers compete on the basis of design,
quality, price and customer service. In addition, upholstery fabrics are in
competition with other furniture covers such as leather goods.
FACILITIES. Mastercraft operates four weaving plants and one finishing
plant in North Carolina aggregating 1.0 million square feet, of which 89% is
owned and the remainder leased. Cavel shares manufacturing capacity with
Automotive Products at three plants in Roxboro, North Carolina. During the last
three years, the Company's capacity utilization in the Mastercraft division of
the Decorative Fabrics group has consistently averaged nearly 100%. The Company
believes that, after taking into account Mastercraft's recently completed
capital investment plan, its existing facilities are sufficient to meet the
Decorative Fabrics group's anticipated growth requirements.
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 1995 Floorcoverings had net sales of
$122.2 million. Its principal products are six-foot wide rolls and modular
carpet tiles for sale principally 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 increased its sales.
During 1994, Floorcoverings initiated Source OneSM, a turn-key,
full-service supply and installation program, to sell its products directly to
end users on a national basis.
Approximately 46% of Floorcoverings' 1995 net sales were to institutional
customers such as government, healthcare and education facilities. The balance
of Floorcoverings' sales in 1995 were to corporate offices, stores and export
markets. Management believes that these
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are stable growth sectors.
PRODUCTS. Floorcoverings' key competitive advantage in its principal
products, six-foot wide rolls and modular carpet tiles, is its patented
Powerbond RS(R) adhesive technology, which has 12 years of patent protection
remaining. Because the Powerbond RS(R) system does not use wet adhesives, 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. In addition to reducing installation
downtime for customers, management believes Floorcoverings' product exhibits
demonstrably superior durability and cleaning characteristics ideally suited for
high-traffic areas such as airline terminals, schools and governmental agencies.
COMPETITION. The commercial carpet industry is highly competitive. The
Company has numerous competitors, some of which have substantially greater
financial and other resources than the Company and some of which have
substantial sales in the commodity segments of the industry, segments in which
Floorcoverings does not compete. Floorcoverings' products have demanding
specifications and generally cannot be manufactured using the equipment that
currently supplies most of the industry's commodity products.
FACILITIES. Floorcoverings owns and operates four facilities in Dalton,
Georgia aggregating approximately 630,000 square feet. The Company currently
estimates that Floorcoverings' plants operate at between 55% and 95% of
capacity, depending on the production process involved. The Company has approved
an investment of approximately $3.5 million to expand Floorcoverings' capacity
in order to meet its expected continuing growth needs. With this new
manufacturing capacity expected to be in place in 1996, the Company anticipates
that its Floorcoverings facilities will be adequate for its projected needs.
RECENT DEVELOPMENTS
On April 9, 1996, the Company announced a plan to spin off Wallcoverings
to the stockholders of the Company in the form of a stock dividend. The spin-off
is subject to, among other things, the consent of the Company's lenders and
final approval of the Company's Board of Directors. The Company anticipates
completing the spin-off in the summer of 1996. Wallcoverings is a leading
manufacturer and distributor of wallpaper for the residential and commercial
sectors of the wallcoverings market. Wallcoverings had 1995 net sales of $205.3
million. The Company has accounted for the financial results and net assets of
Wallcoverings as a discontinued operation.
RAW MATERIALS
Raw materials and other supplies used in the Company's continuing
operations are normally available from a variety of competing suppliers. With
respect to most materials, the loss of a single or even a few suppliers would
not have a material adverse effect on the Company. For a discussion of
increasing raw material price trends, see "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and
Capital Resources".
ENVIRONMENTAL MATTERS
See "ITEM 3. LEGAL PROCEEDINGS - Environmental Proceedings" and "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Environmental Matters".
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EMPLOYEES
As of January 27, 1996, the Company's continuing operations employed
approximately 11,700 persons on a full-time or full-time equivalent basis.
Approximately 2,900 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.
ITEM 2. PROPERTIES
For information concerning the principal physical properties of the
Company and its various operating divisions, see "ITEM 1. BUSINESS".
ITEM 3. LEGAL PROCEEDINGS
Except as described below, the Company and its subsidiaries are not a
party to any material pending legal proceedings, other than ordinary routine
litigation incidental to their businesses.
ENVIRONMENTAL PROCEEDINGS
DOUGLAS, MICHIGAN. On January 4, 1991, a complaint was filed in the
Circuit Court for Allegan County, Michigan, captioned HAWORTH, INC. V. WICKES
MANUFACTURING COMPANY (the "Haworth action"), in which Haworth, Inc. ("Haworth")
alleges that predecessors of Wickes Manufacturing Company ("Wickes
Manufacturing"), an indirect wholly owned subsidiary of the Company, released
environmental contaminants on property, now owned by Haworth, located in the
Village of Douglas, Michigan. On June 28, 1993, the Court entered an order
granting Wickes Manufacturing's motion for summary disposition dismissing all of
Haworth's claims against Wickes Manufacturing, and on April 21, 1995, the Court
of Appeals for the State of Michigan affirmed the order. The summary disposition
order has become final, and Wickes Manufacturing is proceeding with its
counterclaims against Haworth. On October 22, 1993, Haworth filed a complaint in
the United States District Court for the Western District of Michigan, captioned
HAWORTH, INC. V. WICKES MANUFACTURING COMPANY AND PARAMOUNT COMMUNICATIONS, INC.
(the "Second HAWORTH action"). In the Second HAWORTH action, Haworth alleges
federal claims with respect to Wickes Manufacturing and federal and state law
claims with respect to Paramount Communications, Inc. that are factually similar
to the state law claims alleged in the HAWORTH action, and Haworth seeks a
declaratory judgment that Wickes Manufacturing and Paramount Communications,
Inc. are liable for the alleged contamination at the site, an order requiring
Wickes Manufacturing and Paramount Communications, Inc. to implement response
actions at the site, and damages, interest and costs, all in unspecified
amounts. Wickes Manufacturing and Paramount Communications, Inc. have filed a
motion for summary judgment to dismiss all of Haworth's claims in the Second
HAWORTH action and are waiting for the court to schedule a hearing on the
motion. The Michigan Department of Natural Resources, by letter dated December
20, 1989, notified Wickes Manufacturing pursuant to the Michigan Environmental
Response Act that Wickes Manufacturing is potentially responsible for
undertaking investigation and response actions to address contamination at the
site involved in the HAWORTH action and its possible effect on the water supply
of the Village of Douglas.
OTHER ENVIRONMENTAL MATTERS. The Company is legally or contractually
responsible or alleged to be responsible for the investigation and remediation
of contamination, or has received notices that it is a potentially responsible
party (a "PRP"), at various other sites. These sites include, among others, the
following: a site formerly operated by Stamina Mills, Inc., a former subsidiary
of a former indirect subsidiary of the Company, in North Smithfield, Rhode
Island; a site adjacent to a facility formerly operated by Wickes
Manufacturing's former Bohn Heat Transfer division located at Beardstown,
Illinois; a site
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formerly owned and operated by Wickes Manufacturing's alleged former Daybrook
Ottawa division located at Bowling Green, Ohio; a site owned and formerly
operated by a Company subsidiary located at Elmira, California; the
Reliable Equipment Superfund Site located at Grand Rapids, Michigan; the
Butterworth Landfill Superfund Site located at Grand Rapids, Michigan; a site
owned and formerly operated by Wickes Manufacturing's former Mechanical
Components division located at Mancelona, Michigan; the former Albert Van Luit
plant site owned by a Company subsidiary located at North Hollywood, California;
the Hartley & Hartley landfill site located at Kawkawlin, Michigan; the
Stringfellow Superfund Site located at Riverside County, California; and certain
sites associated with the former Wickes Engineering business. In addition to the
environmental sites and proceedings listed above, the Company is and has been a
party or PRP at other sites and involved in other proceedings from time to time.
In the last three fiscal years, the Company has paid approximately $7.6 million
in the aggregate in connection with its various environmental sites. The
majority of such costs have been incurred in connection with the North
Smithfield, Rhode Island; Elmira, California; and North Hollywood, California
sites.
In estimating the total future 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 United States 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 theory 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
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 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. The Company records its best estimate when it
believes it is probable that an environmental liability has been incurred and
the amount of loss can be reasonably estimated. The Company also considers
estimates of certain reasonably possible environmental liabilities in
determining the aggregate amount of environmental reserves. As of January 27,
1996, the Company has established reserves of approximately $38.9 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.
The Company is seeking insurance coverage for a portion of the defense
costs and liability it has incurred and may incur in connection with the
environmental proceedings described above. Coverage issues have not been
resolved. While the Company has received some payments from certain insurance
carriers, there can be no assurance that additional payments will be received.
LITIGATION PROCEEDINGS
PREFERRED STOCK REDEMPTION LITIGATION. On August 2, 1991, a Fifth
Consolidated Amended Complaint was filed in IN RE IVAN F. BOESKY SECURITIES
LITIGATION (the "Boesky action"), a multi-district litigation pending for
pre-trial purposes in the United States District Court for the Southern District
of New York. In essence, the complaint is an
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amalgam of claims against a variety of defendants including Collins & Aikman
Group, Inc. ("Group"), a predecessor to the Company's Collins & Aikman
Products Co. subsidiary ("C&A Products"), alleging, among other things, a
conspiracy to manipulate the price of Group's common stock in 1986 for the
purpose of triggering a redemption of certain outstanding preferred
stock of Group. On May 1, 1995 plaintiffs and C&A Products
agreed to the principal terms of a settlement whereby plaintiffs would release
all claims relating to the litigation against Group and the individual
Group-related defendants in exchange for payment by C&A Products of $4.25
million. The settlement is subject to approval of the court. On May 12, 1995,
C&A Products paid $4.25 million into an escrow account with the court pursuant
to the terms of the settlement. The settlement was within previously established
accruals.
POF ARBITRATION. On or about May 26, 1992, Advanced Development &
Engineering Centre ("ADEC"), a division of an indirect subsidiary of Group,
filed a request for arbitration with the International Chamber of Commerce
seeking a resolution of ADEC's dispute with the Pakistan Ordnance Factories
Board ("POF") concerning ADEC's installation of a munitions facility in Pakistan
for a purchase price of $26.5 million. ADEC alleges that POF violated the
contract, among other things, by refusing to permit completion of a production
run, which would have entitled ADEC to receive $2.65 million, the remaining
unpaid portion of the purchase price under the contract. On August 6, 1992, POF
filed a reply and counterclaim alleging that as a result of ADEC's alleged
breach of the contract, POF's entire investment in the munitions facility was a
loss. POF claims damages in excess of $30 million.
In the opinion of the Company's management based on the facts presently
known to it, the ultimate outcome of any of these legal proceedings will not
have a material adverse effect on the Company's consolidated financial condition
or future results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
(Pursuant to Instruction G(3) of the General Instructions to Form 10-K, the
following information is included herein as an unnumbered item in lieu of being
included in the Company's definitive Proxy Statement).
The following is a list of the names and ages (as of April 16, 1996) of all the
executive officers of the Company and a description of all positions and offices
with the Company held by each such person and each such person's principal
occupations and employment during the past five years. All executive officers
hold office at the pleasure of the Company's Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
---------- ------ --------------
<S> <C> <C>
David A. Stockman 49 Co-Chairman of the Board
Randall J. Weisenburger 37 Co-Chairman of the Board
Thomas E. Hannah 57 Chief Executive Officer
William J. Brucchieri 53 President of Imperial Wallcoverings
Dennis E. Hiller 41 President of Automotive Carpet Division
John D. Moose 59 President of Automotive Fabrics Division
Harry F. Schoen III 60 President of Mastercraft Division
Elizabeth R. Philipp 39 Executive Vice President, General Counsel and Secretary
J. Michael Stepp 51 Executive Vice President and Chief Financial Officer
</TABLE>
DAVID A. STOCKMAN has been a director of the Company since October 1988 and
Co-Chairman of the Board of the Company since July 1993. Mr. Stockman has been a
General Partner of Blackstone Group Holdings L.P. ("Blackstone Group"), which is
under common control with Blackstone Capital Partners L.P., a principal
stockholder of the Company ("Blackstone Partners"), since 1988. Mr. Stockman is
also a director of LaSalle Re Holdings Ltd. and UCAR International Inc.
RANDALL J. WEISENBURGER has been a director of the Company since August
1989 and Co-Chairman of the Board since June 1995. Mr. Weisenburger was Vice
Chairman of the Company from April 1994 to June 1995, Deputy Chairman of the
Company from July 1992 to April 1994 and Vice President from August 1989 to July
1992. Mr. Weisenburger has been Managing Director of Wasserstein Perella & Co.,
Inc. ("WP & Co."), an affiliate of Wasserstein Perella Partners, L.P., a
principal stockholder of the Company ("WP Partners"), since December 1993. Mr.
Weisenburger was a Director of WP & Co. from December 1992 to December 1993 and
a Vice President of WP & Co. from December 1989 to December 1992. Mr.
Weisenburger is also Chairman of the Yardley Lentheric Group.
9
<PAGE>
THOMAS E. HANNAH has been a director of the Company and Chief Executive
Officer of the Company since July 1994. Mr. Hannah was President and Chief
Executive Officer of Collins & Aikman Textile and Wallcoverings Group, a
division of a wholly owned subsidiary of the Company, from November 1991 until
July 1994 and was named an executive officer of the Company for purposes hereof
in April 1993. Mr. Hannah was President and Chief Executive Officer of the
Collins & Aikman Textile Group from February 1989 to November 1991 and President
of Milliken & Company's Finished Apparel Division prior to that.
WILLIAM J. BRUCCHIERI has been President of Imperial Wallcoverings since
February 1993 and was named an executive officer of the Company for purposes
hereof in April 1994. Mr. Brucchieri was Executive Vice President of Imperial
from March 1992 to January 1993 and Executive Vice President of the Mastercraft
division from January 1990 to February 1992. Mr. Brucchieri was 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.
DENNIS E. HILLER has been President of the Automotive Carpet division since
November 1994. Mr. Hiller was President of The Akro Corporation, an indirect
subsidiary of the Company, from 1992 until November 1994 and Manager, Fabricated
Products for the Company prior to that. Mr. Hiller was named an executive
officer of the Company for purposes hereof in April 1996.
JOHN D. MOOSE has been President of the Automotive Fabrics division since
October 1994 and was President of the North American Auto Group from June 1989
until October 1994. Mr. Moose was named an executive officer of the Company for
purposes hereof in April 1994. Mr. Moose joined a wholly owned subsidiary of the
Company in 1960.
HARRY F. SCHOEN III has been President of the Mastercraft division since
January 1993 and was named an executive officer of the Company for purposes
hereof in April 1994. Mr. Schoen was Executive Vice President and Chief
Operating Officer of the Mastercraft division from April 1992 to December 1992.
Mr. Schoen was General Manager of Milliken & Company's Greige Fine Goods Group
prior to that.
ELIZABETH R. PHILIPP has been Executive Vice President, General Counsel and
Secretary of the Company since April 1994. Ms. Philipp was Vice President,
General Counsel and Secretary of the Company from April 1993 to April 1994 and
Vice President and General Counsel from September 1990 to April 1993.
J. MICHAEL STEPP has been Executive Vice President and Chief Financial
Officer since April 1995. Mr. Stepp was Executive Vice President, Chief
Financial Officer of Purolator Products Company from December 1992 to January
1995. Prior to that, Mr. Stepp was President of American Corporate Finance
Group, Inc.
10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been traded on the New York Stock Exchange
under the symbol "CKC" since July 7, 1994. At April 16, 1996, there were 144
holders of record. The following table lists the high and low sales prices for
the common stock for the full quarterly periods since trading commenced.
FISCAL 1995 FISCAL 1994
-------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------ -----
First Quarter 8-3/8 7-1/2 - -
Second Quarter 9 6-3/8 10-9/16 10
Third Quarter 9-1/4 7-1/2 10-7/8 8-5/8
Fourth Quarter 8-3/8 6-1/8 9-1/4 7-7/8
No dividend or other distribution with respect to the Common Stock has
been paid by the Company since its incorporation in 1988. Any payment of future
dividends and the amounts thereof will be dependent upon the Company's earnings,
financial requirements and other factors deemed relevant by the Company's Board
of Directors. The Company currently does not intend to pay any cash dividends in
the foreseeable future; rather, the Company intends to retain earnings to
provide for the operation and expansion of its business. On April 9, 1996, the
Company announced a plan to spin off its Wallcoverings subsidiary to the
stockholders of the Company in the form of a stock dividend. The spin-off is
subject to, among other things, the consent of the Company's lenders and final
approval of the Company's Board of Directors. The Company anticipates completing
the spin-off in the summer of 1996. See "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Recent
Developments". Certain restrictive covenants contained in the agreements
governing the Company s credit facilities limit the Company's ability to make
dividend and other payments. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital
Resources" and Note 17 to the Consolidated Financial Statements.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
January 27, January 28, January 29, January 30, January 25,
1996 1995 1994 1993 (1) 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales. . . . . . . . . . . . . . . . . . . . . . . $1,291,466 $1,319,379 $1,085,068 $1,035,605 $ 947,098
Gross margin . . . . . . . . . . . . . . . . . . . . . 279,108 302,179 234,978 220,924 192,468
Selling, general and administrative expenses . . . . . 131,010 136,378 134,490 152,330 132,422
Management equity plan expense . . . . . . . . . . . . - - 26,736 - -
Goodwill amortization and write-off. . . . . . . . . . 270 - 102,120 2,851 2,851
Operating income (loss). . . . . . . . . . . . . . . . 147,828 165,801 (28,368) 65,743 57,195
Interest expense, net (2). . . . . . . . . . . . . . . 47,938 75,006 110,962 110,420 107,237
Loss on sale of receivables. . . . . . . . . . . . . . 8,688 7,616 - - -
Income (loss) from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . . . . 91,202 80,921 (143,863) (49,191) (54,557)
Income tax expense (benefit) . . . . . . . . . . . . . (138,520) 11,015 10,494 (4,702) 9,842
Income (loss) from continuing operations . . . . . . . 229,722 69,906 (154,357) (44,489) (64,399)
Income (loss) from discontinued operations, including
disposals . . . . . . . . . . . . . . . . . . . . . (23,281) 5,840 (123,307) (219,169) (25,302)
Income (loss) before extraordinary items . . . . . . . 206,441 75,746 (277,664) (263,658) (89,701)
Net income (loss). . . . . . . . . . . . . . . . . . . 206,441 (30,782) (277,664) (263,658) (133,810)
Income (loss) from continuing operations per primary
and fully diluted common share. . . . . . . . . . . 3.23 (.50) (6.54) (2.32) (2.94)
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . . . . $1,050,007 $ 640,318 $ 880,797 $1,096,689 $1,253,915
Long-term debt, including current portion. . . . . . . 765,022 565,102 921,751 979,920 938,810
Redeemable preferred stock . . . . . . . . . . . . . . - - 122,368 98,602 79,754
Common stockholders' deficit . . . . . . . . . . . . . (227,852) (412,622) (702,220) (421,460) (130,921)
OTHER DATA (FROM CONTINUING OPERATIONS):
Capital expenditures . . . . . . . . . . . . . . . . . $ 77,946 $ 79,063 $ 41,172 $ 35,163 $ 33,835
Depreciation and leasehold amortization. . . . . . . . 37,341 38,590 36,642 39,769 38,122
</TABLE>
(1) 1992 was a 53-week year.
(2) Excludes amounts related to discontinued operations as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
January 27, January 28, January 29, January 30, January 25,
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Wallcoverings. . . . . . . . . . . . . . . . . . $ 666 $ 677 $ 329 $ 447 $ 737
Operations discontinued prior to fiscal 1995 . . - - 18,871 23,010 25,062
----------- ----------- ----------- ----------- ----------
$ 666 $ 677 $ 19,200 $ 23,457 $ 25,799
=========== =========== =========== =========== ==========
</TABLE>
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RECENT DEVELOPMENTS
On April 9, 1996, the Company announced a plan to spin off Wallcoverings
to the Company's stockholders in the form of a stock dividend. The Company
expects the spin-off to occur in the summer of 1996. The spin-off is subject to,
among other things, the approval of the Company's lenders and final approval of
the Company's Board of Directors. The Company has accounted for the financial
results and net assets of Wallcoverings as a discontinued operation.
Accordingly, previously reported financial results for all periods discussed
have been restated to reflect Wallcoverings as a discontinued operation. See
Note 15 to the Consolidated Financial Statements for information regarding
discontinued operations.
During March 1996, the Company experienced a decline in sales relating to
the United Auto Workers strike against General Motors. The Company estimates
that the impact of the General Motors strike on the Company's sales in the first
fiscal quarter of 1996 will be approximately $17 million. The strike was settled
on March 22, 1996 and the Company does not expect any adverse effects from the
strike on the Company's 1996 second quarter results.
MANCHESTER PLASTICS ACQUISITION
On January 3, 1996, the Company completed the acquisition of Manchester
Plastics for a purchase price of approximately $184.0 million, which includes
approximately $40.4 million of debt extinguished in connection with the
acquisition. The acquisition, related fees and expenses and estimated Manchester
Plastics working capital requirements were financed by borrowings of $197
million under a term loan facility. See "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and
Capital Resources".
Manchester Plastics is a designer and manufacturer of high quality
plastic-based automotive door panels, headrests, floor console systems and
instrument panel components used in the interior of automobiles, light trucks,
sport utility vehicles and minivans. It serves the North American automakers
from seven manufacturing plants in the United States and Canada. Prior to its
acquisition, Manchester Plastics had annual net sales for 1995, 1994, and 1993
of $193.7 million, $169.3 million and $148.3 million, respectively.
The Manchester Plastics product line adds a broad range of molded plastic
products to the Company's extensive textile-based automotive trim products. The
Company believes that U.S. automotive and light vehicle manufacturers ("U.S.
OEMs") and, to a lesser extent, foreign-owned North American automotive
manufacturers ("Transplants", and, together with U.S. OEMs, "OEMs") are moving
toward integrated contracts, where one supplier will manage the manufacture
and/or assembly of a major vehicle system. The acquisition of Manchester
Plastics positions the Company to offer to its OEM customers enhanced design and
engineering services and a more fully integrated interior system.
The Company has accounted for the acquisition as a purchase, and it is
therefore included in fiscal 1995 results for a period of approximately three
and one half weeks. The purchase price and related expenses exceeded the fair
value of the net assets acquired by approximately $155 million. The resulting
goodwill is being amortized on a straight line basis over 40 years. See Notes 3
and 5 to the Consolidated Financial Statements for further discussion and pro
forma information.
INITIAL PUBLIC OFFERING AND RECAPITALIZATION
On July 13, 1994, the Company completed an initial public offering (the
"Offering") of shares of Common Stock. In connection with the Offering, the
Company effected a recapitalization (the "Recapitalization") which reduced the
Company's indebtedness, lowered
13
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
interest expense and provided liquidity for operations and other general
corporate purposes. After the Offering and Recapitalization, approximately 70.5
million shares of Common Stock were outstanding. Since that time, the Company
has repurchased approximately 1.5 million shares of Common Stock.
GENERAL
The Company's continuing business segments consist of Automotive Products,
which supplies interior textile and plastic trim products to the North American
automotive industry, and Interior Furnishings, which manufactures residential
upholstery and contract carpet products in the United States. The Company's net
sales in fiscal 1995 were $1,291.5 million, with approximately $906.9 million
(70.2%) in Automotive Products, and $384.5 million (29.8%) in Interior
Furnishings, compared to $1,319.4 million in fiscal 1994 with approximately
$904.9 million (68.6%) in Automotive Products, and $414.5 million (31.4%) in
Interior Furnishings. 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. Capitalized terms that are used in this discussion and not
defined herein have the meanings assigned to such terms in the Notes to
Consolidated Financial Statements.
The Company intends to pursue a growth-oriented strategy, with increasing
emphasis on transforming the Company into a full-service interior systems
supplier to the automotive markets on a global basis. In addition to expanding
through internal growth, the Company intends to pursue growth through
acquisitions, including acquisitions of other automotive product companies and
product lines. The Company intends to consider the incurrence of additional
indebtedness and other capital market transactions to finance its planned
expansion.
The industries in which the Company competes are cyclical. Automotive
Products is influenced by the level of North American vehicle production.
Interior Furnishings is directly influenced by the level of retail furniture
sales, which in turn is primarily influenced by the level of residential,
institutional and commercial construction and renovation and by consumer
confidence.
14
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
RESULTS OF OPERATIONS
<TABLE>
<CAPTION> Automotive Products Interior Furnishings
Fiscal Year Ended Fiscal Year Ended
January 27, January 28, January 29, January 27, January 28, January 29,
1996 1995 1994 1996 1995 1994
---------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 906.9 $ 904.9 $ 677.9 $ 384.5 $ 414.5 $ 407.2
Cost of goods sold 743.6 730.1 555.4 268.8 287.1 294.7
Gross margin 163.3 174.8 122.5 115.7 127.4 112.5
Selling, general and administrative expenses 63.6 51.5 54.9 67.3 70.0 68.0
Goodwill amortization and write-off .3 - 69.9 - - 32.3
Segment operating income (loss) (1) $ 99.4 $ 123.3 $ (2.3) $ 48.4 $ 57.4 $ 12.2
Gross margin percentages 18.0% 19.3% 18.1% 30.1% 30.7% 27.6%
Operating margin percentages 11.0% 13.6% (.3)% 12.6% 13.8% 3.0%
</TABLE>
(1) Excludes $0, $14.9 million and $38.3 million of unallocated corporate
expense in 1995, 1994 and 1993, respectively.
1995 COMPARED TO 1994
A discussion of the results of operations for each of the Company's operating
segments follows:
AUTOMOTIVE PRODUCTS
NET SALES: Automotive Products' net sales increased 0.2% to $906.9 million in
1995, up $2.0 million over 1994. Increased sales in three of the Company's five
high volume products (molded carpet, luggage compartment trim and accessory
mats), as well as the addition of Manchester Plastics on January 3, 1996, were
substantially offset by a decrease in sales of convertible top systems and
automotive bodycloth. The North American automobile and light truck build
declined 1.3% in 1995 from 1994.
Automotive bodycloth sales decreased 3.8% to $327.5 million in 1995, down
$12.8 million from 1994. The decline in sales was primarily due to a 8.2%
decrease in unit shipments, which was partially mitigated by an 4.9% increase in
average selling price due primarily to a shift in product mix. The unit shipment
decline resulted from reduced automotive build in certain high content platforms
which the Company supplies. The overall decrease in automotive bodycloth for the
year was principally related to decreased sales to the Chrysler minivan
platforms, the Ford Thunderbird, Windstar, Ranger and F-Series Truck and the
Chevrolet Caprice and S-10 Truck. These decreases were partially offset by
increased sales to the
15
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
Chevrolet C/K Truck, Cavalier and Blazer, the Toyota Avalon and Pickup
Truck, the Ford Contour and Escort, the Mercury Sable and the Chrysler Concorde.
Molded floor carpet sales increased 8.7% to $231.8 million, up $18.6 million
over 1994. The increase in sales was due to a 3.0% increase in unit shipments
and a 5.6% increase in average selling price. The increase in average selling
price is partially attributable to a shift in OEM production to higher content
vehicles, such as the Chevrolet C/K truck line and the Ford Explorer. For the
year, the overall increase in molded carpet sales was principally related to
increased sales to the Chrysler Cirrus/Stratus, T300 Truck and Caravan minivan,
the Ford Explorer and the Chevrolet C/K Truck. These increases were partially
offset by decreased sales to the Chrysler Voyager minivan, the Ford Mustang and
Probe, the Cadillac DeVille and the Toyota Camry.
Luggage compartment trim sales increased 15.8% to $52.4 million, up $7.2 million
over 1994. The increase in sales was primarily due to an 7.1% increase in unit
shipments and a 8.1% increase in average selling price. The increase in unit
shipments and average selling price reflects the OEMs' continued move to
finished luggage compartments. For the year, the overall increase in luggage
compartment trim sales was principally related to increased sales to the Ford
Explorer, the Chrysler Cirrus/Stratus and the Honda Civic. These increases were
partially offset by decreased sales to the Nissan Sentra, the Chrysler Neon and
the Pontiac Bonneville.
Accessory mat sales increased 7.4% to $80.3 million, up $5.5 million over 1994.
The increase in sales was primarily due to increased unit volume. For the year
the overall increase in accessory mat sales was principally related to increased
sales to the Ford Explorer, the Chrysler Cirrus/Stratus, the Toyota Avalon and
the Honda Civic. These increases were partially offset by decreased sales to the
Ford Mustang, Probe and Thunderbird, the Mazda 626, and the Mercury Cougar.
Convertible top systems sales decreased 27.5% to $58.2 million, down $22.0
million from 1994. The net decrease in sales resulted from a 46.2% decline in
OEM production of the Ford Mustang convertible and the scheduled discontinuance
of the Chrysler LeBaron convertible, which were partially offset by the
introduction of the new Chrysler Sebring convertible in the latter part of
October and the new Alfa Romeo Spider convertible, which began volume production
in February 1995.
These factors resulted in the Company's average revenue per North
American-produced vehicle of approximately $54 for 1995 compared to
approximately $53 for 1994.
GROSS MARGIN: For 1995, gross margin was 18.0% of sales, down from 19.3% in
1994. The decrease in gross margin was attributable primarily to the decline in
convertible top system sales, which carry higher contribution margins than the
segment's average. In addition, gross margin was impacted by certain
manufacturing inefficiencies, commission weaving costs incurred due to capacity
constraints in the production of automotive bodycloth during the first half of
1995 and charges totaling $2.4 million related to a plant closing and the
write-off of certain assets.
The Company terminated commission weaving during the second quarter of 1995.
Manufacturing inefficiencies which impacted the first and second quarters
resulted from the in-house startup of fabric lines which had previously been
woven outside on a commission basis.
16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
Manufacturing inefficiencies also resulted to a lesser extent from the
reengineering of fabric lines to meet customers' specifications. For the year,
the impact of raw material price increases was offset by the segment's cost
improvement programs and to a lesser extent by price increases to customers.
During the fourth quarter of 1995, Automotive Products incurred charges of $2.4
million related to the anticipated closure of a molded carpet plant in Clinton,
Oklahoma, the write-down of spinning equipment previously utilized in the
production of molded carpet for Chrysler in Canada and the decision to
discontinue the Company's automotive aftermarket accessory mat product line. The
closure of the Clinton facility, which impacted 93 employees, and the write-down
of the Canadian molded carpet equipment, resulted from changes in the supply
requirements of certain of the Company's OEM customers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Automotive Products' selling,
general and administrative expenses increased 23.5% to $63.6 million in 1995, up
$12.1 million over 1994. The increase is attributable to higher styling and
product development costs, the expansion of existing businesses into Mexico and
Austria, the acquisition of Manchester Plastics in January 1996, the allocation
of previously unallocated corporate costs and increased expenses resulting from
divisional reorganizations. Selling, general and administrative expenses as a
percentage of sales increased to 7.0% in 1995 from 5.7% in 1994.
INTERIOR FURNISHINGS
NET SALES: Interior Furnishings' net sales decreased 7.2% to $384.5 million
in 1995, down $30.0 million from 1994.
In Decorative Fabrics, sales decreased 14.4% to $262.4 million, down $44.1
million from 1994. This decline was due to overall softness in the home
furnishings market which the Company's Mastercraft division serves, the sale of
the Warner and Greeff product lines in 1994, and a 29.1% decline in velvet
furniture products. The Mastercraft division sales decline reflects a 6.2%
decrease in unit volume and the impact of a shift in the average selling price
due to increased sales of the division's lower priced Advantage product line. In
1994 the Warner and Greeff product lines generated $13.5 million in sales. The
sales decline in furniture velvets is attributable to lost customers resulting
from the Company's redeployment of manufacturing capacity from velvet furniture
products to automotive seat fabrics in 1994.
In 1995, Floorcoverings' sales increased 13.1% to $122.2 million, up $14.1
million over 1994. This increase is largely attributable to a 15.0% increase in
unit shipments, primarily in six-foot roll sales to all market segments. The
Company attributes the Floorcoverings sales growth to its strategy of increasing
its penetration of market segments through more focused coverage of those
segments and the addition of new sales personnel in 1995.
GROSS MARGIN: Interior Furnishings' gross margin declined to 30.1% of sales in
1995 from 30.7% in 1994. The decrease reflects the overall reduction in
decorative fabric volume and the impact of raw material price increases. These
factors were partially offset by improvements in manufacturing efficiencies in
the Decorative Fabrics group resulting from Mastercraft's loom modernization
program which was completed in 1995, as well as improved sales volume in
Floorcoverings.
17
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Interior Furnishings' selling,
general and administrative expenses decreased 3.8% to $67.3 million in 1995,
down $2.7 million from 1994. The net decrease is primarily due to the sale of
the Warner and Greeff product lines offset by planned increases in expenses
related to sales growth in Floorcoverings and the allocation of previously
unallocated corporate expenses. The Warner and Greeff product lines incurred
$5.9 million in selling, general and administrative expenses in 1994. Selling,
general and administrative expenses as a percentage of sales increased to 17.5%
in 1995 from 16.9% in 1994.
TOTAL COMPANY
NET SALES: Net sales decreased 2.1% to $1,291.5 million in 1995, down $27.9
million from 1994. The overall net sales decrease reflects decreases in the
Interior Furnishings segment offset by a slight increase in the Company's
Automotive Products segment as discussed above.
GROSS MARGIN: Gross margin decreased to $279.1 million in 1995 or 21.6%of sales,
down from $302.2 million or 22.9% of sales in 1994. The decrease in the gross
margin in 1995 relates primarily to decreased volume in Automotive Products'
convertible top systems business and in Interior Furnishings' Decorative
Fabrics business. Additionally, gross margin was negatively impacted by charges
related to a plant closing and write-down of certain assets as well as raw
material price increases and certain manufacturing inefficiencies in Automotive
Products' bodycloth business during the first half of 1995. The decrease was
partially offset by increased volume in the Floorcoverings business and
increased unit volume and average selling prices in Automotive Products' molded
carpet business.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses of $131.0 million in 1995 were $5.4 million lower than
in 1994. The decrease resulted primarily from a reduction in certain advisory
fees and the sale of the Warner and Greeff product lines in 1994 partially
offset by increased product development, the acquisition of Manchester Plastics
and increased general and administrative costs due to expansion in Mexico and
Austria. Selling, general and administrative expenses as a percentage of sales
decreased to 10.1% in 1995 from 10.3% in 1994.
INTEREST EXPENSE: Interest expense, allocated to continuing operations, net of
interest income of $1.6 million in 1995 and $6.4 million in 1994, decreased to
$47.9 million in 1995 from $75.0 million in 1994. In 1995, interest expense,
including amounts allocated to discontinued operations and excluding interest
income, decreased to $50.2 million from $82.1 million in 1994. The overall
decrease in interest expense was due to the Recapitalization, which reduced the
amount of overall outstanding indebtedness and replaced higher fixed rate
indebtedness with variable rate borrowings.
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 $8.7 million was incurred in 1995 compared to a
loss of $7.6 million in 1994. Of the $7.6 million loss recorded in 1994, $1.3
million related to one time fees and expenses related to the Bridge Receivables
Facility.
INCOME TAXES: In 1995, the Company recognized a $138.5 million tax benefit
compared with a $11.0 million provision in 1994. In 1995, the benefit
principally resulted from a reduction
18
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
of valuation allowances against the Company's Federal net operating loss
carryforwards and other deferred tax assets, offset by $11.3 million in current
foreign, state, franchise and Federal alternative minimum taxes. In 1994, income
taxes consisted of foreign, state and franchise taxes and, to a small extent,
Federal alternative minimum tax.
DISCONTINUED OPERATIONS: The Company's loss from discontinued operations was
$23.3 million in 1995 compared with income of $5.8 million in 1994. In 1995 and
1994 discontinued operations consisted of the Company's Wallcoverings
subsidiary, which was discontinued on April 8, 1996. The loss in 1995 resulted
from charges for a write-down of inventory, the consolidation of all
distribution activities to a new state of the art distribution center under
construction in Knoxville, Tennessee, the closure of Wallcoverings' Hammond,
Indiana facility and the reengineering of its production processes.
EXTRAORDINARY LOSS ON THE EXTINGUISHMENT OF DEBT: During 1994, the Company, as
part of the Recapitalization, recognized a loss on the extinguishment of debt of
$106.5 million, consisting 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 a net income of
$206.4 million in 1995 compared to a net loss of $30.8 million in 1994.
1994 COMPARED TO 1993
A discussion of the results of operations for each of the Company's operating
segments follows:
AUTOMOTIVE PRODUCTS
NET SALES: Automotive Products' net sales increased 33.5% to approximately
$904.9 million in 1994, up $227.0 million over 1993. The increase is
attributable to increased sales volume, which reflects the impact of a 10.6%
increase in North American automobile and light truck build in 1994 from 1993.
Of the net sales increase, 53% related to automotive bodycloth, 20% related to
convertible top and topstack products and 16% related to molded floor carpet.
The remainder related to other automotive products.
The bodycloth increase was primarily due to the Company's jacquard velvets
product line, currently utilized in such high volume models as the General
Motors C/K Truck line, and to other new placements including the Chevrolet Monte
Carlo, the Ford Contour/Mystique, Windstar and F-Series Trucks and the Chrysler
Cirrus/Stratus. Existing product placements which experienced significant
overall increases in volume over 1993 were the Pontiac Grand Am and Bonneville
and the Chrysler Minivans.
The molded floor carpet increase was due to a 17% increase in unit shipments
principally related to increased production of high volume models including
Cadillac DeVille, Oldsmobile Aurora, Chevrolet C/K Truck line, Chrysler
Minivans, Ford Mustang, Toyota Camry, and the Dodge T-300 and Dakota Trucks.
The convertible top and topstack increase resulted from Ford's full production
of the Mustang convertible and increased volume of the Chrysler LeBaron
convertible.
19
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COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
These factors resulted in the Company's average revenue per North
American-produced vehicle of approximately $53 for 1994 compared to
approximately $43 for 1993.
GROSS MARGIN: For 1994, gross margin was 19.3%, up from 18.1% in 1993. During
the third and fourth quarters, the Company incurred premium freight and
commission weaving costs related to capacity constraints for certain automotive
seat fabrics. The premium freight and commission weaving costs offset the
improvements in gross margin which resulted from spreading fixed costs over
higher production volume and from continued benefits of reducing costs of
non-conforming products. The Company terminated commission weaving during the
second quarter of 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Automotive Products' selling,
general and administrative expenses decreased 6.3% or $3.5 million in 1994 as
compared to 1993. The reduction is attributable to lower styling and product
development costs in the segment's automotive carpet product line and reduced
administrative expenses resulting from reductions in administrative head count
and changes in postretirement plan provisions. Selling, general and
administrative expenses as a percentage of sales decreased to 5.7% in 1994 from
8.1% in 1993.
INTERIOR FURNISHINGS
NET SALES: Interior Furnishings' net sales increased 1.8% to $414.5 million in
1994, up $7.3 million over 1993. In Decorative Fabrics, sales declined $7.2
million to $306.5 million. This decline was primarily due to the Company's
redeployment of manufacturing capacity from certain Decorative Fabrics velvet
furniture products to automotive seat fabrics and to softness in the Mastercraft
product line commencing in the third quarter, which was partially offset by
increased sales in the contract fabric lines. Management believes that the sales
decline experienced by Mastercraft in the second half of 1994 primarily reflects
increased competition from lower priced fabrics. In 1994, Floorcoverings' net
sales increased $14.4 million over 1993. This increase is largely attributable
to a 16.3% increase in volume, primarily in six-foot roll sales to the education
and corporate markets and in sales in the southern United States.
GROSS MARGIN: Interior Furnishings' gross margin rose to 30.7% of sales in 1994
from 27.6% in 1993. The increase reflects improvements in manufacturing
efficiencies in the Decorative Fabrics group resulting from Mastercraft's loom
modernization and cost improvement programs, as well as improved sales volumes
and product mix in Floorcoverings.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Interior Furnishings' selling,
general and administrative expenses increased 2.9% or $2.0 million in 1994 from
1993. The increase is primarily due to increased selling expenses related to
sales volume increases in Floorcoverings as well as a planned expansion of that
group's sales staff. Selling, general and administrative expenses as a
percentage of sales increased to 16.9% in 1994 from 16.7% in 1993.
TOTAL COMPANY
NET SALES: Net sales increased 21.6% to $1,319.4 million in 1994, up $234.3
million over 1993. The overall net sales increase reflects increases in the
Company's Automotive Products and Interior Furnishings segments.
20
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
GROSS MARGIN: Gross margin increased to $302.2 million in 1994 or 22.9% of
sales, up from $235.0 million or 21.7% of sales in 1993. The increase in the
gross margin in 1994 relates primarily to increased volume in the Company's
Automotive Products segment, which resulted in lower fixed costs per unit, and
manufacturing efficiencies in the Interior Furnishings segment, offset by
premium freight and commission weaving charges in the Automotive Products
segment.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses of $136.4 million in 1994 were $1.9 million higher than
in 1993. The increase resulted from higher unallocated corporate expenses of
$3.4 million and increased selling, general and administrative expenses at
Interior Furnishings of $2.0 million, offset partially by a $3.5 million
reduction of selling, general and administrative expenses at Automotive
Products. In 1994, unallocated corporate expenses of $14.9 million were $3.4
million higher than 1993 expenses. The increase in unallocated corporate
expenses relates to fees for services performed by affiliates of Blackstone
Partners and of WP Partners in connection with the Company's evaluation of
refinancing and strategic alternatives and certain other advisory services.
Selling, general and administrative expenses as a percentage of sales decreased
to 10.3% in 1994 from 12.4% in 1993.
MANAGEMENT EQUITY PLAN: In 1993, the Company incurred a one-time charge of $26.7
million related to the Company's 1993 Employee Stock Plan.
GOODWILL WRITE-OFF AND AMORTIZATION: During the third quarter ended October 30,
1993, the Company wrote off its remaining goodwill of $129.9 million of which
$100.0 million related to continuing operations. The write-off was based on
management's assessment of the Company's financial condition given the Company's
capital structure at that time. Although management of the Company, based on the
facts known to it at October 30, 1993, was expecting both cyclical and long-term
improvement in the results of operations, an analysis suggested that, given the
Company's capital structure at that time, a deterioration of the financial
condition of the Company had occurred and cumulative future net income would not
be sufficient to recover the Company's remaining goodwill balance at October 30,
1993.
Goodwill amortization related to continuing operations was $2.1 million in 1993.
No goodwill amortization was recorded in 1994 as a result of the write-off of
goodwill at October 30, 1993.
INTEREST EXPENSE: Interest expense allocated to continuing operations, net of
interest income of $6.4 million in 1994 and $4.4 million in 1993, decreased to
$75.0 million in 1994 from $111.0 million in 1993. In 1994, interest expense,
including amounts allocated to discontinued operations and excluding interest
income, decreased to $82.1 million from $135.1 million in 1993. The overall
decrease in interest expense was principally due to the Recapitalization, which
reduced the amount of outstanding indebtedness and replaced higher fixed rate
indebtedness with variable rate borrowings. No interest was allocated to
discontinued operations in 1994.
LOSS ON THE SALE OF RECEIVABLES: On July 13, 1994, the Company, as part of the
Recapitalization, sold through Carcorp, Inc., its wholly-owned,
bankruptcy-remote subsidiary ("Carcorp"), an undivided senior interest in a pool
of accounts receivable to Chemical Bank (the "Bridge Receivables Facility"). In
connection with the receivables sale, a loss of $7.6 million was incurred in
1994. Of this loss, $1.3 million related to fees and expenses
21
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
associated with the sale and $6.3 million related to discounts on the
receivables sold.
INCOME TAXES: In 1994, the provision for income taxes was $11.0 million
compared with $10.5 million in 1993. In 1994 and 1993 income tax expense
consisted of foreign, state and franchise taxes.
DISCONTINUED OPERATIONS: The Company's income from discontinued operations was
$5.8 million in 1994 million compared with a loss of $123.3 million in 1993. In
1994, income from discontinued operations consisted of the Company's
Wallcoverings subsidiary, which was discontinued effective April 8, 1996. The
Company's loss from discontinued operations in 1993 was principally related to
an operating loss in the Company's Wallcoverings subsidiary, and the accrual of
additional reserves (i) for the significant reduction in estimated proceeds from
disposition and other costs in connection with the sale or disposition of
inventory, real estate and other assets of the Company's Builders Emporium
division, (ii) to provide for employee severance and other costs and (iii) to
realize a previously unrecognized loss as a result of the decision to retain
Dura Convertible Systems. The 1993 loss was partially offset by a $28.1 million
gain on the sale of Kayser-Roth Corporation.
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. This second quarter 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 a net loss of $30.8
million in 1994 compared to a net loss of $277.7 million in 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents totaling
$1.0 million and $3.3 million at January 27, 1996 and January 28, 1995,
respectively. The Company had a total of $54.2 million of borrowing availability
under its credit arrangements as of January 27, 1996. The total was comprised of
$46.9 million under the Revolving Facility, $1.8 million under the Receivables
Facility and approximately $5.5 million under a bank demand line of credit in
Canada.
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 facility in Canada),
of which $461.8 million was outstanding at January 27, 1996, with a term of
eight years, (ii) the Revolving Facility, having an aggregate principal amount
of up to $150 million with a term of seven years (the Term Loan Facilities and
Revolving Facility, together, the "Facilities") and (iii) the Bridge Receivables
Facility, which was terminated and replaced with the Receivables Facility (as
hereinafter defined). 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, amortization and other non-cash charges) 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
22
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
except to the extent necessary to allow the Company to pay taxes, ordinary
expenses, permitted dividends on the Common Stock and for permitted 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 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"). The certificates
represent the right to receive payments generated by the receivables held by the
Trust.
In connection with the proposed spin-off of Wallcoverings,
Wallcoverings will be terminated as a seller of receivables under the
Receivables Facility. Receivables sold by Wallcoverings prior to such
termination will remain in the Trust. The Company anticipates that the Trust
will be required to redeem term certificates having a face value of
approximately $20 million as the Trust collects the Wallcoverings receivables.
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 January 27, 1996
approximately $19.8 million was available under the variable funding
certificates, of which $18.0 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
January 27, 1996, cash collateral of $8.7 million was required to be retained in
the Trust. Additionally, the Trust held $15.7 million of cash collections to be
distributed upon the determination of eligibility at January 27, 1996. This
amount has been recorded as a receivable from 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, modifications of the terms of receivables, and 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.
On December 22, 1995, the Company entered into an additional credit
facility (the "Term Loan B Facility") to finance the January 1996 purchase of
Manchester Plastics as discussed
23
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
above. The Term Loan B Facility consists of a term loan in the principal
amount of $197 million, all of which was outstanding at January 27, 1996.
In conjunction with the Term Loan B Facility, the restrictive covenants
of the Facilities were amended, among other things, to permit the purchase
of Manchester Plastics and the related financing. The restrictive
covenants contained in the Term Loan B Facility are identical to those in the
Facilities.
During the year ended January 27, 1996, the Company sold and leased
back $32.7 million of machinery and equipment utilized in the Automotive
Products and Interior Furnishings segments under a master lease agreement. At
January 27, 1996, the Company had $20.0 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 made lease payments of
approximately $6.3 million in 1995 for machinery and equipment sold and leased
back under this master lease. The Company expects lease payments under this
master lease to be approximately $8.2 million in 1996.
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of January 27, 1996, the Company had
approximately $47.9 million in outstanding capital expenditure commitments.
During 1995, capital expenditures for continuing operations aggregated
approximately $77.9 million as compared to $79.1 million in 1994. 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 investments for continuing operations in 1996 will aggregate
approximately $60 million to $70 million, a portion of which may be financed
through leasing.
The Company estimates that Wallcoverings will experience net cash
requirements for working capital and capital expenditures, principally in
connection with Wallcoverings' reengineering program, of approximately $15
million, prior to the spin-off. Additionally, the Company currently expects to
expend approximately $35 million to make a cash investment in Wallcoverings for
future working capital and capital expenditure requirements and to fund
Wallcoverings' receivables which were previously sold to Carcorp. Amounts
actually required for these purposes could differ from expected amounts due to,
among other things, changes in Wallcoverings' operating results and the
availability of outside financing for Wallcoverings.
As discussed previously, on January 3, 1996, C&A Products acquired
Manchester Plastics for approximately $184.0 million, which includes
approximately $40.4 million of debt that was extinguished in connection with the
acquisition. The acquisition, related fees and expenses, and estimated
Manchester Plastics working capital requirements were financed by borrowings of
$197 million under a term loan facility as discussed above.
The Company's principal sources of funds are cash generated from
continuing operations, borrowings under the Revolving Facility and the sale of
receivables under the Receivables Facility. Net cash provided by the operating
activities of the Company's continuing operations was $106.0 million for the
year ended January 27, 1996. Additionally, the Company generated $32.8 million
of cash in the sale/leaseback transactions discussed above.
The Company's principal uses of funds for the next several years will
be to fund interest and principal payments on its indebtedness, net working
capital increases, capital expenditures and potential acquisitions. At January
27, 1996, the Company had total outstanding indebtedness of $768.1 million
(excluding approximately $28.1 million of outstanding letters of credit and $.7
million of indebtedness of the discontinued
24
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
Wallcovering segment) at an average interest rate of 7.6% per annum. Of the
total outstanding indebtedness, $733.8 million relates to the Term Loan
Facilities, the Term Loan B Facility and the Revolving Facility.
In connection with the Company's 1995 stock repurchase program, the
Company and its lenders entered into an amendment to the Facilities effective
May 30, 1995 that permits the Company to spend up to $12 million annually to
repurchase its shares. During the year ended January 27, 1996, the Company spent
an aggregate of $11.7 million to repurchase its shares. The Company's Board of
Directors authorized the expenditure of up to $12 million in 1996 to repurchase
its shares. The Company believes it has sufficient liquidity to effect the stock
repurchase program.
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, at January 27, 1996 the "ABR Margin" was .75% and the "LIBOR Margin"
was 1.75%. Indebtedness under the Term Loan B Facility bears interest at a per
annum rate equal to the Company's choice of (i) Chemical Bank's Alternate Base
Rate (as described above) plus a margin of 1.25% or (ii) LIBOR of one, two,
three or six months, as selected by the Company, plus a margin of 2.25%. The
weighted average rate of interest on the Facilities and the Term Loan B Facility
at January 27, 1996 was 7.7%. The weighted average interest rate on the sold
interests under the Receivables Facility at January 27, 1996 was 6.1%. 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 1995 and 1994 was $45.8 million and
$77.9 million ($16.0 million of which was paid in connection with the
Recapitalization), respectively.
Due to the variable interest rates under the Facilities, the Term Loan
B Facility and the Receivables Facility, the Company is sensitive to increases
in interest rates. Accordingly, during September 1994, the Company 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 had 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 January 27, 1996, a .5% increase in LIBOR (5.5% at January 27, 1996) would
impact interest costs by approximately $3.7 million annually on the Facilities
and the Term Loan B Facility and $.6 million annually on the Receivables
Facility. In April 1996, the Company limited its exposure through April 2, 1998
on $80 million of notional principal amount utilizing zero cost collars with
4.75% floors and a weighted average cap of 7.86%.
The current maturities of long-term debt primarily consist of the
current portion of the Term Loan Facilities and the Term Loan B Facility, vendor
financing, industrial revenue bonds and other miscellaneous debt. Repayments of
indebtedness under the Facilities commenced in the third fiscal quarter of 1995.
Repayments of indebtedness under the Term Loan B Facility commence in the first
quarter of 1996. The maturities of long-term debt of
25
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
the Company's continuing operations during 1996 and for 1997, 1998, 1999
and 2000 are $51.5 million, $72.2 million, $92.9 million, $104.8 million and
$111.5 million, respectively. In addition, the Term Loan Facilities and the Term
Loan B Facility 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 1995, price trends for many materials continued to increase. The
Company anticipates that price increases in 1996 in its primary raw materials,
some of which have already been announced, could increase the cost of purchased
raw materials by approximately $20 million 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 value engineering/value
analysis and cost improvement programs and by continued reductions in the cost
of nonconformance.
During the fourth quarter of 1995, the Company recorded charges of
$26.1 million, which are primarily non-cash and for discontinued operations, to
provide for facility consolidations, employee severance costs, elimination of
excess manufacturing capacity and inventory write-downs related to distribution
inefficiencies and excess quantities in certain product lines. Of these charges,
$23.7 million relates to the Company's discontinued Wallcoverings business. The
Company expects to incur cash costs of approximately $5.2 million relating to
the charges.
The Company currently operates four facilities in Mexico to supply
automotive products to Mexican subsidiaries of U.S. based automobile
manufacturers. The Company believes that, based on the size of its Mexican
operations, fluctuations in the Mexican peso will not have a material impact on
the Company's financial position or results of 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
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 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, excluding Wallcoverings, will be
approximately $23 million in 1996. 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 cash needs relating to discontinued operations can
be provided by operating activities from continuing operations and by borrowings
under existing bank credit facilities.
TAX MATTERS
In fiscal 1993 and prior years, the Company incurred significant
financial reporting and tax losses principally as a result of a capital
structure that contained a substantial amount of high interest rate debt. In
addition, losses were incurred as the Company exited businesses which it did not
consider to be consistent with its long-term strategy. Although
26
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
substantial net deferred tax assets were generated during these periods, a
valuation allowance was established because in management's assessment the
historical operating trends made it uncertain whether the net deferred tax
assets would be realized.
During July 1994, the Company completed the Offering and
Recapitalization, which reduced the Company's indebtedness, lowered interest
expense and provided liquidity for operations and other general corporate
purposes. As a result of the Recapitalization, the Company's annual financing
costs were reduced from $115 million in fiscal 1993 to $57 million in fiscal
1995. In fiscal 1994, the Company reported taxable income and had net income
before an extraordinary loss on the Recapitalization for financial reporting
purposes; however, management determined, largely because of the Company's prior
losses, that it remained uncertain whether the net deferred tax assets would be
realized.
In fiscal 1995, the Company's continuing business segments generated
substantial operating income, consistent with historical trends, that, when
combined with the post-Recapitalization capital structure, resulted in income
for both tax and financial reporting purposes. The spin-off of the
Wallcoverings segment that was announced in April 1996 further
clarified management's assessment of the Company's likely future performance.
Management considered these factors as well as the future outlook for its
continuing businesses in concluding that it is more likely than not that net
deferred tax assets of $156.8 million at January 27, 1996 will be realized.
While continued operating performance at current levels is sufficient to realize
these assets, the Company's ability to generate future taxable income is
dependent on numerous factors, including general economic conditions, the state
of the automotive and interior furnishings industries and other factors beyond
management's control. Therefore, there can be no assurance that the Company will
meet its expectation of future taxable income.
The valuation allowance at January 27, 1996 provides for certain
deferred tax assets that in management's assessment will not be realized due to
tax limitations on the use of such amounts or that relate to tax attributes that
are subject to uncertainty due to the long-term nature of their realization.
At January 27, 1996, the Company had outstanding net operating loss
carryforwards ("NOLs") of approximately $286.5 million for Federal income tax
purposes, which excludes $9 million related to the Company's discontinued
Wallcoverings business. Substantially all of these NOLs expire over the period
from 2000 to 2008. The Company also has unused Federal tax credits of
approximately $15.6 million, $6.9 million of which expire during the period 1996
to 2003. The Company estimates that it will generate tax deductions of
approximately $40.2 million in connection with the ultimate disposition of
assets and liabilities of its discontinued businesses during the period 1996 to
1998, which were previously accrued for financial reporting purposes. The
Company anticipates that utilization of these NOLs, tax credits and deductions
will result in the payment of minimal Federal income taxes until these NOLs and
tax credits are exhausted.
Approximately $79.8 million of the Company's NOLs and $6.9 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. The Company believes that a substantial
portion of these tax benefits will be realized in the future. Future sales of
common stock by the Company or its principal shareholders, or changes in the
composition of its principal shareholders, could constitute a "change in
27
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
control" that would result in annual limitations on the Company's use of its
NOLs and unused tax credits. Management cannot predict whether such a "change in
control" will occur. If such a "change in 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.
The Company previously reported that its Federal income tax returns for
the period 1988 through 1991 were under examination and that the IRS had
proposed adjustments that could have resulted in the loss of a material amount
of the NOLs otherwise available to the Company in future years. During 1995 the
IRS withdrew substantially all of the proposed adjustments. The Company agreed
to pay tax and interest of $1.4 million and its NOLs were reduced by $6.1
million.
The California Franchise Tax Board has challenged the treatment of the
sale of certain foreign subsidiaries during 1987 and has issued a notice of tax
assessment, which the Company received in November 1995, for approximately $11.8
million. The Company disputes the assessment and has filed a protest with the
Franchise Tax Board. If the Franchise Tax Board were to maintain its position
and such position were to be upheld in litigation, the Company would also become
liable for the payment of interest which is currently estimated to be $13.9
million. In the opinion of management, the final determination of any additional
tax and interest liability will not have a material adverse effect on the
Company's consolidated financial condition or results of operations.
ENVIRONMENTAL MATTERS
The Company is subject to 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 United States 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 theory of joint and several liability, the Company could be
liable for the full costs of
28
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONCLUDED)
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 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 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 January 27, 1996, including sites relating to the
acquisition of Manchester Plastics and 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 16 sites where the Company is participating in the investigation or
remediation of the site, either directly or through financial contribution, and
10 additional sites where the Company is alleged to be responsible for costs of
investigation or remediation. As of January 27, 1996, the Company's estimate of
its liability for these 26 sites, which exclude sites related to Wallcoverings,
is approximately $31.3 million. As of January 27, 1996, the Company has
established reserves of approximately $38.9 million for the estimated future
costs related to all its known environmental sites, excluding sites related to
Wallcoverings. 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements of Collins & Aikman
Corporation and subsidiaries included herein and listed on the Index to
Financial Statements set forth in Item 14 (a) of this Form 10-K report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
29
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 401 of Regulation S-K regarding
executive officers is set forth in Part I hereof under the caption "Executive
Officers of the Registrant" and the information required by Item 401 of
Regulation S-K regarding directors is incorporated herein by reference to that
portion of the Registrant's definitive Proxy Statement to be used in connection
with its 1996 Annual Meeting of Stockholders, which will be filed in final form
with the Commission not later than 120 days after January 27, 1996 (the "Proxy
Statement"), captioned "Election of Directors--Information as to Nominees and
Other Directors". Disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the Company's knowledge, in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to that portion of the Proxy Statement captioned "Executive
Compensation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to those portions of the Proxy Statement captioned "Voting Securities
and Principal Stockholders" and "Election of Directors--Information as to
Nominees and Other Directors".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to that portion of the Proxy Statement captioned "Compensation
Committee Interlocks and Insider Participation".
30
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS:
PAGE
NUMBER
Report of Independent Public Accountants..................................F-1
Consolidated Statements of Operations for the fiscal years ended
January 27, 1996, January 28, 1995 and January 29, 1994.................F-2
Consolidated Balance Sheets at January 27, 1996 and January 28, 1995......F-3
Consolidated Statements of Cash Flows for the fiscal years ended
January 27, 1996, January 28, 1995 and January 29, 1994.................F-4
Consolidated Statements of Common Stockholders' Deficit for the fiscal
years ended January 27, 1996, January 28, 1995 and January 29, 1994.....F-5
Notes to Consolidated Financial Statements................................F-6
(a) (2) FINANCIAL SCHEDULES:
The following financial statement schedules of Collins & Aikman
Corporation for the fiscal years ended January 27, 1996, January 28, 1995 and
January 29, 1994 are filed as part of this Report and should be read in
conjunction with the Consolidated Financial Statements of Collins & Aikman
Corporation.
PAGE
NUMBER
Report of Independent Public Accountants on Schedules................. S-1
Schedule I-Condensed Financial Information of the Registrant.......... S-2
Schedule II-Valuation and Qualifying Accounts ........................ S-5
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are omitted because they
are not required, are inapplicable, or the information is included in the
Consolidated Financial Statements or Notes thereto.
(a) (3) 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.
31
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <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. is hereby incorporated by reference
to Exhibit 2.2 of Collins & Aikman Corporation's Report on Form
10-Q for the fiscal quarter ended October 28, 1995.
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.
3.3 - Certificate of Elimination of Cumulative Exchangeable Redeemable
Preferred Stock of Collins & Aikman Corporation is hereby
incorporated by reference to Exhibit 3.3 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended
October 28, 1995.
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.
4.2 - Credit Agreement dated as of June 22, 1994 between Collins
& Aikman Products Co. (formerly Collins & Aikman Corporation), 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.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
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.
4.6 - Fourth Amendment dated as of December 8, 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.
4.7 - Fifth Amendment, dated as of April 5, 1996, 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.
4.8 - Credit Agreement, dated as of December 22, 1995, among Collins &
Aikman Products Co., Collins & Aikman Corporation, the financial
institutions named therein, and Chemical Bank, as administrative
agent, is hereby incorporated by reference to Exhibit 4 of Collins &
Aikman Corporation's Current Report on Form 8-K dated January 18,
1996
4.9 - First Amendment, dated as of April 5, 1996, to the Credit Agreement,
dated as of December 22, 1995, among Collins & Aikman Products Co.,
Collins & Aikman Corporation, the financial institutions party
thereto, and Chemical Bank, as administrative agent.
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 - Amended and Restated Stockholders Agreement dated as of June 29,
1994 among the Company, Collins & Aikman Group, Inc., Blackstone
Capital Partners L.P. and Wasserstein Perella Partners, L.P. is
hereby incorporated by reference to Exhibit 10.1 of Collins &
Aikman Corporation's Report on Form 10-K for the fiscal year ended
January 28, 1995.
10.2 - 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.'s Report on
Form 10-K for the fiscal year ended January 26, 1991.*
</TABLE>
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14 (c) of this report.
33
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.3 - 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 is 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.*
10.4 - First Amendment to Employment Agreement dated as of February 24,
1994 between Collins & Aikman Corporation and an executive officer
is hereby incorporated by reference to Exhibit 10.7 of Collins &
Aikman Holdings Corporation's Registration Statement on Form S-2
(Registration No. 33-53179) filed April 19, 1994.*
10.5 - Letter Agreement dated as of May 16, 1991 between Collins &
Aikman Corporation and an executive officer is hereby incorporated
by reference to Exhibit 10.14 of Collins & Aikman Holdings
Corporation's Registration Statement on Form S-2 (Registration No.
33-53179) filed April 19, 1994.*
10.6 - Letter Agreement dated as of June 30, 1995 between Collins &
Aikman Corporation and an executive officer.*
10.7 - Lease, executed as of the 1st day of June 1987, between Dura
Corporation and Dura Acquisition Corp. is hereby incorporated by
reference to Exhibit 10.24 of Amendment No. 5 to Collins & Aikman
Holdings Corporation's Registration Statement on Form S-2
(Registration No. 33-53179) filed July 6, 1994.
10.8 - Collins & Aikman Corporation 1995 Executive Incentive Compensation
Plan is hereby incorporated by reference to Exhibit 10.1 of
Collins & Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended July 29, 1995.*
10.9 - Collins & Aikman Corporation Supplemental Retirement Income Plan
is hereby incorporated by reference to Exhibit 10.23 of Amendment
No. 5 to Collins & Aikman Holdings Corporation's Registration
Statement on Form S-2 (Registration No. 33-53179) filed July 6,
1994.*
10.10 - 1993 Employee Stock Option Plan, as amended, is hereby
incorporated by reference to Exhibit 10.13 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended
April 29, 1995.*
10.11 - 1994 Employee Stock Option Plan is hereby incorporated by
reference to Exhibit 10.14 of Collins & Aikman Corporation's
Report on Form 10-Q for the fiscal quarter ended April 29, 1995.*
10.12 - 1994 Directors Stock Option Plan is hereby incorporated by
reference to Exhibit 10.15 of Collins & Aikman Corporation's
Report on Form 10-K for the fiscal year ended January 28, 1995.*
</TABLE>
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14 (c) of this report.
34
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.13 - Amended and Restated Receivables Sale Agreement dated as of March
30, 1995 among Collins & Aikman Products Co., Ack-Ti-Lining, Inc.,
WCA Canada Inc., Imperial Wallcoverings, Inc., The Akro
Corporation, Dura Convertible Systems Inc., each of the other
subsidiaries of Collins & Aikman Products Co. from time to time
parties thereto and Carcorp, Inc. is hereby incorporated by
reference to Exhibit 10.18 of Collins & Aikman Corporation's
Report on Form 10-K to the fiscal year ended January 28, 1995.
10.14 - Servicing Agreement, dated as of March 30, 1995, among Carcorp,
Inc., Collins & Aikman Products Co., as Master Servicer, each of
the subsidiaries of Collins & Aikman Products Co. from time to
time parties thereto and Chemical Bank, as Trustee is hereby
incorporated by reference to Exhibit 10.19 of Collins & Aikman
Corporation's Report on Form 10-K to the fiscal year ended January
28, 1995.
10.15 - Pooling Agreement, dated as of March 30, 1995, among Carcorp,
Inc., Collins & Aikman Products Co., as Master Servicer and
Chemical Bank, as Trustee is hereby incorporated by reference to
Exhibit 10.20 of Collins & Aikman Corporation's Report on Form
10-K to the fiscal year ended January 28, 1995.
10.16 - Series 1995-1 Supplement, dated as of March 30, 1995, among
Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer
and Chemical Bank, as Trustee is hereby incorporated by reference
to Exhibit 10.21 of Collins & Aikman Corporation's Report on Form
10-K to the fiscal year ended January 28, 1995.
10.17 - Series 1995-2 Supplement, dated as of March 30, 1995, among
Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer,
the Initial Purchasers parties thereto, Societe Generale, as Agent
for the Purchasers and Chemical Bank, as Trustee is hereby
incorporated by reference to Exhibit 10.22 of Collins & Aikman
Corporation's Report on Form 10-K to the fiscal year ended January
28, 1995.
10.18 - 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.
10.19 - Amendment No.2, dated October 25, 1995, among Carcorp, Inc., as
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 is
hereby incorporated by reference to Exhibit 10.2 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal quarter
ended October 28, 1995.
10.20 - Amendment No.1, dated February 29, 1996, to the Series 1995-1
Supplement, dated as of March 30, 1995, among Carcorp, Inc.,
Collins & Aikman Products Co., as Master Servicer, and Chemical
Bank, as Trustee.
</TABLE>
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14 (c) of this report.
35
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.21 - Amendment No.1, dated February 29, 1996, to the Series 1995-2
Supplement, dated as of March 30, 1995, among Carcorp, Inc.,
Collins & Aikman Products Co., as Master Servicer, Societe
Generale, as agent and Chemical Bank, as Trustee.
10.22 - Master Equipment Lease Agreement dated as of September 30, 1994,
between NationsBanc Leasing Corporation of North Carolina and
Collins & Aikman Products Co. Is hereby incorporated by reference
to Exhibit 10.27 of Collins & Aikman Corporation's Report on Form
10-Q for the fiscal quarter ended October 29, 1994.
10.23 - Employment Agreement dated as of April 6, 1995 between Collins &
Aikman Products Co. and an executive officer is hereby
incorporated by reference to Exhibit 10.24 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended
January 28, 1995.*
10.24 - Excess Benefit Plan of Collins & Aikman Corporation is hereby
incorporated by reference to Exhibit 10.25 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended
January 28, 1995.*
11 - Computation of Earnings Per Share.
21 - List of subsidiaries of Collins & Aikman Corporation.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule.
99 - Voting Agreement between Blackstone Capital Partners L.P. and
Wasserstein Perella Partners, L.P. is hereby incorporated by
reference to Exhibit 99 of Amendment No.4 to Collins & Aikman
Holdings Corporation's Registration Statement on Form S-2
(Registration No. 33-53179) filed June 27, 1994.
</TABLE>
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14 (c) of this report.
(b) REPORTS ON FORM 8-K.
During the last quarter of the fiscal year for which this report on Form
10-K was filed, the Company filed a report on Form 8-K dated January 18, 1996,
reporting under Item 2 thereof the acquisition on January 3, 1996 by the Company
of Larizza Industries, Inc., whose sole operating unit is Manchester Plastics.
In connection with this filing, the Company filed under Item 7 of Form 8-K the
following financial statements:
Independent Auditors' Report dated February 9, 1995.
Consolidated Balance Sheets of Larizza Industries, Inc. and Subsidiaries as
of December 31, 1994 and December 31, 1993 (Audited)
Consolidated Statements of Operations of Larizza Industries, Inc. and
Subsidiaries for the years ended December 31, 1994, 1993 and 1992 (Audited).
Consolidated Statements of Shareholders' Equity (Deficit) of Larizza
Industries, Inc. and December 31, 1994, 1993 and 1992 (Audited).
36
<PAGE>
Consolidated Statements of Cash Flows of Larizza Industries, Inc. and
Subsidiaries for the years ended December 31, 1994, 1993 and 1992 (Audited).
Notes to Consolidated Financial Statements of Larizza Industries, Inc. -
December 31, 1994, 1993 and 1992.
Consolidated Condensed Balance Sheet of Larizza Industries, Inc. and
Subsidiaries - September 30, 1995 (Unaudited).
Consolidated Condensed Statements of Operations of Larizza Industries, Inc.
and Subsidiaries - Three Months and Nine Months Ended September 30, 1995 and
1994 (Unaudited).
Consolidated Condensed Statements of Cash Flows of Larizza Industries, Inc.
and Subsidiaries - Nine Months Ended September 30, 1995 and 1994 (Unaudited).
Notes to Consolidated Condensed Financial Statements - September 30, 1995.
Unaudited Pro Forma Consolidated Statement of Operations for the fiscal
year ended January 28, 1995.
Unaudited Pro Forma Consolidated Statement of Operations for the Nine
Months ending October 28, 1995.
Unaudited Pro Forma Consolidated Balance Sheet at October 28, 1995.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 19th day of
April, 1996.
COLLINS & AIKMAN CORPORATION
By: /s/ David A. Stockman By: /s/ Randall J. Weisenburger
DAVID A. STOCKMAN RANDALL J. WEISENBURGER
CO-CHAIRMAN OF THE BOARD OF DIRECTORS CO-CHAIRMAN OF THE BOARD OF DIRECTORS
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
-------------- ---------------- ---------
<S> <C> <C>
/s/ David A. Stockman Co-Chairman of the April 19, 1996
- ----------------------------
DAVID A. STOCKMAN Board of Directors
/s/ Randall J. Weisenburger Co-Chairman of the April 19, 1996
- ----------------------------
RANDALL J. WEISENBURGER Board of Directors
/s/ Thomas E. Hannah Director and Chief Executive Officer April 19, 1996
- ----------------------------
THOMAS E. HANNAH (Principal Executive Officer)
/s/ J. Michael Stepp Executive Vice President and Chief Financial April 19, 1996
- ----------------------------
J. MICHAEL STEPP Officer (Principal Financial and Accounting
Officer)
/s/ Robert C. Clark Director April 19, 1996
- ----------------------------
ROBERT C. CLARK
/s/ George L. Majoros, Jr. Director April 19, 1996
- ----------------------------
GEORGE L. MAJOROS, JR.
/s/ James J. Mossman Director April 19, 1996
- ----------------------------
JAMES J. MOSSMAN
/s/ Warren B. Rudman Director April 19, 1996
- ----------------------------
WARREN B. RUDMAN
/s/ Stephen A. Schwarzman Director April 19, 1996
- ----------------------------
STEPHEN A. SCHWARZMAN
/s/ W. Townsend Ziebold, Jr. Director April 19, 1996
- ----------------------------
W. TOWNSEND ZIEBOLD, JR.
38
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Collins & Aikman Corporation:
We have audited the accompanying consolidated balance sheets of
Collins & Aikman Corporation (a Delaware Corporation) and subsidiaries
as of January 27, 1996 and January 28, 1995, and the related
consolidated statements of operations, cash flows, and common
stockholders' deficit for each of the three fiscal years in the period
ended January 27, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Collins & Aikman Corporation and subsidiaries as of January 27, 1996
and January 28, 1995, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended January 27,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
April 10, 1996.
F-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
January 27, January 28, January 29,
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
Net sales............................................................ $1,291,466 $ 1,319,379 $ 1,085,068
----------- ------------ -----------
Cost of goods sold................................................... 1,012,358 1,017,200 850,090
Selling, general and administrative expenses......................... 131,010 136,378 134,490
Management equity plan expense....................................... - - 26,736
Goodwill amortization and write-off.................................. 270 - 102,120
----------- ------------ -----------
1,143,638 1,153,578 1,113,436
----------- ------------ -----------
Operating income (loss).............................................. 147,828 165,801 (28,368)
Interest expense, net of interest income of
$1,587, $6,404, and $4,434......................................... 47,938 75,006 110,962
Loss on sale of receivables.......................................... 8,688 7,616 -
Dividends on preferred stock of subsidiary........................... - 2,258 4,533
----------- ------------ -----------
Income (loss) from continuing operations
before income taxes................................................ 91,202 80,921 (143,863)
Income tax expense (benefit)......................................... (138,520) 11,015 10,494
----------- ------------ -----------
Income (loss) from continuing operations............................. 229,722 69,906 (154,357)
Discontinued operations:
Income (loss) from operations, net of income
tax expense (benefit) of $(595), $522 and
$1,367........................................................... (23,281) 5,840 (23,743)
Loss on disposals, net of income tax benefit
of $0, $0, and $344.............................................. - - (99,564)
----------- ------------ ------------
Income (loss) before extraordinary loss.............................. 206,441 75,746 (277,664)
Extraordinary loss, net of income taxes of $0........................ - (106,528) -
----------- ------------ ------------
Net income (loss).................................................... $ 206,441 $ (30,782) $ (277,664)
=========== ============ ============
Dividends and accretion on preferred stock........................... - (14,408) (23,723)
----------- ------------ ------------
Excess of redemption cost over book value of
preferred stock.................................................... - (82,022) -
----------- ------------ ------------
Income (loss) applicable to common
stockholders....................................................... $ 206,441 $ (127,212) $ (301,387)
=========== ============ ============
Net income (loss) per primary and fully diluted common share:
Continuing operations............................................ $ 3.23 $ (.50) $ (6.54)
Discontinued operations.......................................... (.33) .11 (4.52)
Extraordinary item............................................... - (2.01) -
----------- ------------ ------------
Net income (loss)................................................ $ 2.90 $ (2.40) $ (11.06)
=========== ============ ============
Average common shares outstanding:
Primary.......................................................... 71,194 52,905 27,260
=========== ============ ============
Fully diluted.................................................... 71,234 52,905 27,260
=========== ============ ============
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
January 27, January 28,
1996 1995
----------- ----------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................................... $ 977 $ 3,317
Accounts and notes receivable, net of allowances
of $4,302 and $6,390 .................................................... 128,595 91,559
Inventories................................................................. 147,774 136,301
Net assets of discontinued operations....................................... 79,401 75,623
Other....................................................................... 74,158 33,453
----------- ----------
Total current assets..................................................... 430,905 340,253
Property, plant and equipment, net........................................... 286,033 252,891
Deferred tax assets.......................................................... 124,395 -
Goodwill, net................................................................ 159,347 -
Other assets................................................................. 49,327 47,174
----------- ----------
$1,050,007 $ 640,318
=========== ==========
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable............................................................... $ 2,101 $ 1,723
Current maturities of long-term debt........................................ 51,508 17,819
Accounts payable............................................................ 117,059 86,642
Accrued expenses............................................................ 97,883 131,768
----------- ----------
Total current liabilities................................................ 268,551 237,952
Long-term debt............................................................... 713,514 547,283
Deferred income taxes........................................................ - 462
Other, including postretirement benefit obligation........................... 295,794 267,243
Commitments and contingencies................................................ - -
Common Stockholders' Deficit:
Common stock (150,000 shares authorized, 70,521
shares issued and 69,074 shares outstanding at
January 27, 1996 and 70,521 shares issued and
outstanding at January 28, 1995)......................................... 705 705
Other paid-in capital....................................................... 585,469 586,281
Accumulated deficit......................................................... (770,139) (976,549)
Foreign currency translation adjustments.................................... (23,719) (13,655)
Pension equity adjustment................................................... (9,090) (9,404)
Treasury stock, at cost (1,447 shares)...................................... (11,078) -
----------- -----------
Total common stockholders' deficit....................................... (227,852) (412,622)
----------- -----------
$1,050,007 $ 640,318
=========== ==========
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-3
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
January 27, January 28, January 29,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations............................... $ 229,722 $ 69,906 $ (154,357)
Adjustments to derive cash flow from continuing
operating activities:
Deferred income tax benefit........................................... (149,822) (105) (3,128)
Depreciation and leasehold amortization............................... 37,341 38,590 36,642
Goodwill amortization and write-off................................... 270 - 102,120
Management equity plan expense........................................ - - 26,736
Amortization of other assets and liabilities.......................... 5,995 5,277 13,029
(Increase) decrease in accounts and notes
receivable......................................................... 2,535 (35,544) (33,480)
Increase in inventories............................................... (1,837) (12,731) (6,912)
Increase (decrease) in interest and dividends
payable............................................................ 1,353 (14,479) (4,860)
Increase in accounts payable.......................................... 6,365 14,837 9,786
Other, net............................................................ (25,964) (21,991) 15,998
----------- ----------- ----------
Net cash provided by continuing operating
activities....................................................... 105,958 43,760 1,574
----------- ----------- ----------
Cash provided by (used in) Wallcoverings
discontinued operations............................................... (2,990) 6,796 21,049
Cash used in other discontinued operations............................. (22,886) (30,974) (67,417)
----------- ----------- -----------
Net cash used by discontinued operations.............................. (25,876) (24,178) (46,368)
----------- ----------- -----------
INVESTING ACTIVITIES
Additions to property, plant and equipment............................. (93,698) (84,423) (56,278)
Sales of property, plant and equipment................................. 2,733 805 22,710
Proceeds from sale-leaseback arrangements.............................. 32,818 30,365 -
Acquisition of businesses, net of cash acquired........................ (190,338) - -
Net proceeds from disposition of discontinued
operations............................................................ - 68,861 148,743
Other, net............................................................. (5,507) 1,915 44,271
----------- ----------- ----------
Net cash provided by (used in) investing
activities....................................................... (253,992) 17,523 159,446
----------- ----------- ----------
FINANCING ACTIVITIES
Issuance of common stock............................................... - 232,436 -
Issuance of long-term debt............................................. 213,658 675,234 76,135
Proceeds from (reduction of) participating
interests in accounts receivable, net of
redemptions........................................................... (17,000) 145,000 -
Redemption of preferred stock.......................................... - (219,110) -
Repayment and defeasance of long-term debt............................. (18,979) (884,908) (139,940)
Net borrowings (repayments) on revolving credit
facilities, excluding the Recapitalization............................ 5,000 (60,000) (40,000)
Net borrowings (repayments) on notes payable........................... 214 (2,066) (5,899)
Purchases of treasury stock............................................ (11,736) - -
Proceeds from exercise of stock options................................ 382 - -
Other, net............................................................. 31 (1,747) (7,263)
----------- ----------- -----------
Net cash provided by (used in) financing
activities....................................................... 171,570 (115,161) (116,967)
----------- ----------- -----------
Decrease in cash and cash equivalents.................................. (2,340) (78,056) (2,315)
Cash and cash equivalents at beginning of year......................... 3,317 81,373 83,688
----------- ----------- -----------
Cash and cash equivalents at end of year............................... $ 977 $ 3,317 $ 81,373
=========== =========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-4
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
(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 30, 1993 $ 282 $133,581 $ (547,950) $ (4,870) $ (2,503) $ - $(421,460)
----- -------- ----------- ----------- ---------- --------- ----------
1993 management equity plan
expense................................... - 26,736 - - - - 26,736
Net loss .................................. - - (277,664) - - - (277,664)
Redeemable preferred stock
dividends................................. - - (22,107) - - - (22,107)
Accretion of redeemable preferred stock.... - - (1,616) - - - (1,616)
Foreign currency translation
adjustments............................... - - - (865) - - (865)
Pension equity adjustment.................. - - - - (5,244) - (5,244)
------ ------- -------- ------ ------- ------ ---------
Balance at January 29, 1994 282 160,317 (849,337) (5,735) (7,747) - (702,220)
------ ------- -------- ------ ------- ------ ---------
Issuance of shares through the
Recapitalization.......................... 423 426,759 - - - - 427,182
Compensation expense adjustment............ - (795) - - - - (795)
Net loss................................... - - (30,782) - - - (30,782)
Redeemable preferred stock
dividends................................. - - (12,380) - - - (12,380)
Accretion of redeemable preferred stock.... - - (2,028) - - - (2,028)
Excess of redemption cost over book
value of redeemable preferred stock....... - - (82,022) - - - (82,022)
Foreign currency translation
adjustments............................... - - - (7,920) - - (7,920)
Pension equity adjustment.................. - - - - (1,657) - (1,657)
------ --------- ----------- ----------- ---------- --------- ----------
Balance at January 28, 1995 705 586,281 (976,549) (13,655) (9,404) - (412,622)
------ --------- ----------- ----------- ---------- --------- ----------
Compensation expense adjustment............ - (567) - - - - (567)
Net income................................. - - 206,441 - - - 206,441
Purchase of treasury stock
(1,542 shares)............................ - - - - - (11,736) (11,736)
Exercise of stock options
(95 shares)............................... - (245) (31) - - 658 382
Foreign currency translation
adjustments............................... - - - (10,064) - - (10,064)
Pension equity adjustment.................. - - - - 314 - 314
------ --------- ----------- ----------- ---------- --------- ---------
Balance at January 27, 1996 $ 705 $585,469 $ (770,139) $ (23,719) $ (9,090) $(11,078) $(227,852)
====== ========= =========== =========== ========== ========= ==========
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-5
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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 and a recapitalization (the "Recapitalization") (described below),
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 January
27, 1996, Blackstone Partners and WP Partners and their respective affiliates
collectively own approximately 78% of the common stock of the Company.
The Company conducts all of its operating activities through its
wholly-owned C&A Products subsidiary.
2. Summary of Significant Accounting Policies:
Basis of Presentation - The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant intercompany
items have been eliminated in consolidation. Certain prior year items have been
reclassified to conform with the fiscal 1995 presentation and are primarily
related to the Wallcoverings segment being reclassified as a discontinued
operation. See Note 15.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Fiscal Year - The fiscal year of the Company ends on the last Saturday
of January. Fiscal 1995, fiscal 1994 and fiscal 1993 were 52-week years which
ended on January 27, 1996, January 28, 1995 and January 29, 1994, respectively.
Earnings (Loss) 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. Net losses have been adjusted by dividends and accretion
requirements on preferred stock and
F-6
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the excess of redemption cost over book value of preferred stock to compute the
losses applicable to common stockholders.
Foreign Currency Translation - Foreign currency accounts are translated
in accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation" ("SFAS No. 52"). SFAS No. 52 generally provides that the
assets and liabilities of foreign operations be translated at the current
exchange rates as of the end of the accounting period and that revenues and
expenses be translated using average exchange rates. The resulting translation
adjustments arising from foreign currency translations are accumulated as a
separate component of common stockholders' deficit. Translation adjustments
during fiscal 1995, 1994 and 1993 were ($10.1) million, ($7.9) million, and
($.9) million, respectively.
Cash and Cash Equivalents - Cash and cash equivalents include all cash
balances and highly liquid investments with an original maturity of three months
or less.
Inventories - Inventories are valued at the lower of cost or market, but
not in excess of net realizable value. Cost is determined on the first-in,
first-out basis.
Insurance Deposits - Other current assets as of January 27, 1996 and
January 28, 1995 included $.5 million and $14.4 million, respectively, which
were on deposit with an Insurer to cover the self-insured portion of the
Company's workers' compensation, automotive and general liabilities. During
fiscal 1995, the Company replaced certain of these deposits with letters of
credit of approximately $12.5 million. The Company's reserves for these claims
were determined based upon actuarial analyses and aggregated $23.6 million and
$26.5 million at January 27, 1996 and January 28, 1995, respectively. Of these
reserves, $6.0 million and $16.1 million, respectively, were classified in
current liabilities.
Property, Plant and Equipment - Property, plant and equipment are stated
at cost. Provisions for depreciation are primarily computed on a straight-line
basis over the estimated useful lives of the assets, presently ranging from 3 to
40 years. Leasehold improvements are amortized over the lesser of the lease term
or the estimated useful lives of the improvements.
Long Lived Assets - In the fourth quarter of fiscal 1995, the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS No. 121"). SFAS No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable, and that
certain long-lived assets and identifiable intangibles to be disposed of be
reported at the lower of carrying amount or fair value less cost to sell. The
adoption of SFAS No. 121 did not have a material impact on the Company's
consolidated results of operations.
Goodwill - Goodwill, representing the excess of purchase price over the
fair value of net assets of the acquired entities, is being amortized on a
straight-line basis over the period of forty years. Amortization of goodwill
applicable to continuing operations for
F-7
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
fiscal years 1995 and 1993 was $.3 million and $2.1 million, respectively.
Accumulated amortization at January 27, 1996 was $.3 million. The carrying value
of goodwill will be reviewed periodically based on the nondiscounted cash flows
and pretax income of the entities acquired over the remaining amortization
periods. Should this review indicate that the goodwill balance will not be
recoverable, the Company's carrying value of the goodwill will be reduced. At
January 27, 1996, the Company believes the goodwill of $159.3 million was not
impaired. See Notes 3 and 7.
Environmental - The Company records its best estimate when it believes
it is probable that an environmental liability has been incurred and the amount
of loss can be reasonably estimated. The Company also considers estimates of
certain reasonably possible environmental liabilities in determining the
aggregate amount of environmental reserves. Accruals for environmental
liabilities are generally included in the consolidated balance sheet as other
noncurrent liabilities at undiscounted amounts and exclude claims for recoveries
from insurance or other third parties. Accruals for insurance or other third
party recoveries for environmental liabilities are recorded when it is probable
that the claim will be realized.
Newly Issued Accounting Standards - In October 1995, Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") was issued. SFAS No. 123 is effective for fiscal
years beginning after December 15, 1995. SFAS No. 123 encourages companies to
adopt the fair value method for compensation expense recognition related to
employee stock options. Existing accounting requirements of Accounting
Principles Board Opinion No. 25 use the intrinsic value method in determining
compensation expense which represents the excess of the market price of the
stock over the exercise price on the measurement date. If the Company elects to
remain under the existing accounting rules for stock options, it will be
required to provide pro forma disclosures of what net income and earnings per
share would have been had the Company adopted the new fair value method for
recognition purposes. The Company has not determined the method which it will
adopt under SFAS No. 123 and has not determined the impact on its consolidated
financial position or results of operations.
3. Acquisitions:
During fiscal 1995, the Company acquired the entities described below,
which were accounted for by the purchase method of accounting. The results of
operations of the acquired companies are included in the Company's consolidated
statement of operations for the periods in which they were owned by the Company.
On January 3, 1996, the Company completed the acquisition of Manchester
Plastics for a purchase price of approximately $184.0 million, including $40.4
million of debt extinguished in connection with the acquisition. The
acquisition, related fees and expenses and estimated Manchester Plastics'
working capital requirements were financed with the proceeds from a $197 million
term loan facility. Manchester Plastics is a designer and manufacturer of high
quality plastic-based automotive door panels, headrests, floor console systems
and instrument panel components used in the interior of automobiles, light
trucks, sport utility vehicles and minivans. It serves the North American
automakers from seven manufacturing plants in the United States and Canada. The
excess of the purchase price over the estimated fair value of the tangible and
identifiable intangible net assets acquired is being amortized over a period of
forty years on a straight line basis.
F-8
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In November 1995, the Company acquired certain assets of Amco
Manufacturing Corporation and its Mexican affiliate Omca, Inc. (collectively
"Amco") for approximately $7 million. The assets acquired are used in the
manufacture and design of convertible tops and related parts for the automotive
manufacturers in the United States and Mexico as well as the automotive
aftermarket. The excess of the purchase price over the estimated fair value of
the tangible and identifiable intangible net assets acquired is being amortized
over a period of forty years on a straight line basis.
In determining the amortization period of goodwill assigned to these
automotive industry acquisitions, management assessed the impact of these
acquisitions on the Company's ability to strategically position itself with the
long term trends in the design and manufacturing of automotive products. These
trends highlight the increased use of plastic components and U.S. OEMs' movement
to fewer suppliers and to suppliers with engineering and design capabilities.
The Company anticipates the reduction in the supply chain will result in
integration whereby the complete interior of an automobile will be co-designed
and developed with a single supplier who will manufacture and deliver required
components. The Company anticipates these capabilities will be essential to its
long term strategic positioning as a key supplier within the automotive industry
and with its OEM customers.
4. Recapitalization:
On July 13, 1994, the Company completed an initial public offering (the
"Offering") of 15,000,000 shares of its common stock. The Offering provided net
proceeds to the Company of $145.4 million. In addition, the Company sold to its
principal stockholders, Blackstone Partners and WP Partners, and their
respective affiliates an additional 8,810,000 shares for $87 million. These
proceeds were combined with $720 million of proceeds from new credit facilities
and existing cash to redeem all outstanding shares of preferred stock issued by
the Company and Group as well as virtually all their outstanding indebtedness.
In a noncash transaction, approximately 18,500,000 shares were issued by the
Company in exchange for outstanding indebtedness in an amount of $194.7 million.
5. Pro Forma Information:
Set forth below are unaudited pro forma consolidated results assuming
(i) the Offering and Recapitalization had occurred as of the beginning of each
of the 1994 and 1993 fiscal years and (ii) the fiscal 1995 acquisitions of
Manchester Plastics and Amco had occurred as of the beginning of each of the
1995 and 1994 fiscal years (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales........................................ $1,473,529 $1,496,476 $1,085,068
Operating income (loss).......................... 152,116 188,923 (25,368)
Interest expense, net............................ 62,838 51,398 25,253
Loss on the sale of receivables.................. 8,688 9,805 7,195
Income (loss) from continuing operations......... 218,862 112,671 (67,830)
Income (loss) from continuing operations
per common share......................... 3.07 1.56 (.97)
Average shares outstanding....................... 71,194 72,166 69,617
</TABLE>
F-9
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The pro forma information excludes discontinued operations and the
extraordinary loss since the pro forma adjustments did not impact the
discontinued operations or extraordinary loss. Additionally, the computation of
pro forma data excludes all interest and other charges related to the preferred
stock and indebtedness redeemed as part of the Offering and Recapitalization.
6. 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 agreements are included in other
assets. Under these agreements, the Company has limited its exposure on notional
principal amounts as follows (in thousands):
Protection Period Notional Principal Amount Average LIBOR Strike Price
----------------- ------------------------- --------------------------
October 1994 thru
October 1995 $ 300,000 6.92%
October 1995 thru
October 1996 $ 250,000 7.50%
Amortization of these agreements amounted to $.7 million and $.1
million, respectively, during fiscal 1995 and 1994. Information regarding the
fair value of these agreements is included in Note 20.
7. Goodwill:
Fiscal 1995 Acquisitions
Goodwill shown in the consolidated balance sheet at January 27, 1996
relates to: 1) the Company's fiscal 1995 acquisition of Manchester Plastics and
2) the Company's fiscal 1995 acquisition of Amco.
Pre-1995 Goodwill
At October 30, 1993, before giving effect to the write-off described
below, the Company's continuing operations had $100.0 million of goodwill which
arose as a result of the acquisition of Group in December 1988. The substantial
losses of Builders Emporium home improvement chain ("Builders Emporium") and the
inability to sell Builders Emporium as an ongoing entity left the Company with
materially higher leverage and interest costs than previously anticipated. The
inability of the Company to sell its Dura Convertible Systems division ("Dura")
at an acceptable price along with the sale of Kayser-Roth Corporation
("Kayser-Roth") at a price and on terms that were worse than management's prior
expectations of value were additional adverse factors. Prior to the end of the
third quarter of fiscal
F-10
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1993, management explored debt recapitalization alternatives and the possibility
of raising new equity capital. The indications from the financial community at
that time were that a debt recapitalization was not likely to significantly
reduce the Company's interest burden and that raising new equity capital to
deleverage the Company was not feasible at that time. Although management of the
Company, based on the facts known to it at October 30, 1993, was expecting both
cyclical and long-term improvement in the results of operations, an analysis
indicated that, given the Company's capital structure, a deterioration of the
financial condition of the Company had occurred. As a result, the Company
forecasted its operating results forward 35 years, which approximated the
remaining amortization period of the Company's goodwill at October 30, 1993, to
determine whether cumulative net income would be sufficient to recover the
goodwill. At October 30, 1993, management believed that the projected future
results were the most likely scenario given the Company's capital structure at
that time. In spite of the fact that the results reflected in the forecasts
showed improvement over the historical results achieved during the past few
years, the result was a cumulative net loss. Accordingly, the Company's
continuing operations wrote off its remaining goodwill balance of $100.0 million
during the third quarter ended October 30, 1993.
8. Inventories:
Inventory balances are summarized below (in thousands):
January 27, January 28,
1996 1995
----------- ----------
Raw materials................... $ 80,827 $ 74,871
Work in process................. 24,140 22,112
Finished goods.................. 42,807 39,318
----------- ----------
$ 147,774 $ 136,301
=========== ==========
9. Property, Plant and Equipment, Net:
Property, plant and equipment, net, are summarized below (in
thousands):
January 27, January 28,
1996 1995
----------- -----------
Land and improvements................... $ 21,349 $ 21,238
Buildings............................... 117,442 91,855
Machinery and equipment................. 346,001 315,130
Leasehold improvements.................. 2,426 833
Construction in progress................ 21,199 27,668
----------- ----------
508,417 456,724
Less accumulated depreciation and
amortization.................. (222,384) (203,833)
----------- ----------
$ 286,033 $ 252,891
=========== ==========
F-11
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Depreciation and leasehold amortization of property, plant and
equipment applicable to continuing operations was $37.3 million, $38.6 million,
and $36.6 million for fiscal 1995, 1994 and 1993, respectively.
10. Accrued Expenses:
Accrued expenses are summarized below (in thousands):
January 27, January 28,
1996 1995
----------- -----------
Payroll and employee benefits.......... $ 33,530 $ 36,639
Interest............................... 7,239 5,886
Insurance.............................. 14,633 22,859
Other.................................. 42,481 66,384
----------- ----------
$ 97,883 $ 131,768
=========== ==========
11. Long-Term Debt:
Long-term debt is summarized below (in thousands):
January 27, January 28,
1996 1995
----------- -----------
Revolving Facility..................... $ 75,000 $ 70,000
Term Loan Facilities .................. 461,806 475,000
Term Loan B Facility................... 197,000 -
Other.................................. 31,216 20,102
----------- ----------
Total debt............................. 765,022 565,102
Less current maturities................ (51,508) (17,819)
----------- -----------
$ 713,514 $ 547,283
=========== ===========
As part of the Recapitalization on July 13, 1994, the Company's C&A
Products subsidiary entered into the new credit facilities aggregating $775
million, which together with proceeds from the Offering and available cash, were
used to effect a defeasance and redemption or repayment of virtually all
outstanding indebtedness of the Company.
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) 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 (the Term Loan
F-12
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Facility and Revolving Facility, together, the "Facilities") and (iii) the
Bridge Receivables Facility, which was terminated and replaced with the
Receivables Facility (See Note 12). The Facilities contain restrictive covenants
including maintenance of EBITDA (i.e. earnings before interest, taxes,
depreciation, amortization and other non-cash charges) and interest coverage
ratios, leverage and liquidity tests and various other restrictive covenants
which are typical for such facilities. See Note 17.
On December 22, 1995, the Company entered into an additional credit
facility (the "Term Loan B Facility") to finance the January 1996 purchase of
Manchester Plastics, as discussed previously. The Term Loan B Facility consists
of a term loan with a principal amount of $197 million all of which was
outstanding at January 27, 1996. In conjunction with the Term Loan B Facility,
the restrictive covenants of the Facilities were amended to facilitate the
purchase of Manchester Plastics. The restrictive covenants of the Term Loan B
Facility are identical to those of the Facilities.
The Company's obligations under the Facilities and the Term Loan B
Facility are secured by a pledge of the stock of C&A Products and its
significant subsidiaries.
Indebtedness under the Facilities bears interest at a per annum rate
equal to the Company's choice of (i) Chemical Bank's ("Chemical'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 (the "ABR 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 (the "LIBOR Margin") ranging
from 1% to 1.75%. Indebtedness under the Term Loan B Facility bears interest at
a per annum rate equal to the Company's choice of (i) Chemical'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 of 1.25% or (ii) the offered rates for LIBOR of one, two, three or six
months, as selected by the Company, plus a margin of 2.25%. Pursuant to the
terms of the Facilities, at January 27, 1996 the ABR Margin is .75% and the
LIBOR Margin is 1.75%. The weighted average rate of interest on the balances
outstanding under the Facilities and the Term Loan B Facility at January 27,
1996 was 7.7%.
The Company had a total of $54.2 million of borrowing availability
under its credit arrangements as of January 27, 1996. The total is comprised of
approximately $46.9 million under the Revolving Facility, approximately $1.8
million under the Receivables Facility and approximately $5.5 million under a
bank demand line of credit in Canada. At January 27, 1996, the Company had
approximately $28.1 million outstanding in letters of credit.
The current maturities of long-term debt primarily consist of the
current portion of the Term Loan Facilities, Term Loan B Facility, vendor
financing, industrial revenue bonds and other miscellaneous debt. Repayments of
indebtedness under the Facilities commenced in the third quarter of fiscal 1995.
Repayments of indebtedness under the Term Loan B Facility commence in the first
quarter of fiscal 1996. In addition, the Facilities and the Term Loan B Facility
provide for mandatory prepayments with certain excess cash flows of the Company
and net cash proceeds of certain asset sales or other dispositions by the
Company, certain sale-leaseback transactions and certain issuances of debt
obligations.
F-13
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At January 27, 1996, the scheduled annual maturities of long-term debt
are as follows (in thousands):
Fiscal Year Ending
-----------------
January 1997......................................... $ 51,508
January 1998......................................... 72,244
January 1999......................................... 92,876
January 2000......................................... 104,845
January 2001......................................... 111,545
Later Years.......................................... 332,004
---------
$ 765,022
=========
The Company has filed a shelf registration statement providing for
issuance of up to $400 million of debt securities. The issuance of debt
securities under the registration statement would require amendment to the
Company's credit facilities.
As part of the Recapitalization, the Company defeased or redeemed the
following face value of indebtedness (in thousands):
Credit facility...................................... $ 122,581
Debentures due 2005.................................. 138,694
Senior subordinated debentures due 2001.............. 347,414
Subordinated notes due 1995.......................... 137,359
Subordinated debentures due 1997..................... 24,500
Subordinated PIK bridge notes due 1996............... 9,712
Subordinated PIK bridge notes due 1996 exchanged
for common stock............................... 194,745
Other................................................ 8,094
---------
$ 983,099
=========
The redemption of this indebtedness resulted in a loss of $106.5
million consisting of premiums paid of $9.6 million, unamortized debt discounts
and deferred debt expenses of $79.7 million and $11.8 million, respectively, and
post defeasance interest of $5.4 million.
Total interest paid by the Company on all indebtedness was $45.8
million, $77.9 million, and $101.5 million for fiscal 1995, 1994 and 1993,
respectively.
12. Receivables Facility:
In connection with the Recapitalization, on July 13, 1994, C&A Products
and certain of its subsidiaries (the "Sellers") transferred approximately $190.0
million of customer trade receivables to Carcorp, Inc. ("Carcorp"), a
wholly-owned, bankruptcy remote subsidiary of C&A Products which, in turn, on
July 13, 1994, sold an undivided senior interest in the receivables pool for
$136.8 million to Chemical pursuant to a Receivables Transfer and
F-14
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Servicing Agreement with Chemical, as administrative agent (the "Bridge
Receivables Facility").
On March 31, 1995, C&A Products repaid and terminated the Bridge
Receivables Facility and entered, through the trust formed by 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 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 January 27, 1996
approximately $19.8 million was available under the variable funding
certificates, of which $18.0 million was utilized.
In connection with the receivables sales, a loss of $8.7 million and
$7.6 million was incurred in fiscal 1995 and 1994, respectively. Of the fiscal
1994 loss, $1.3 million related to initial fees and expenses associated with the
sales and $6.3 million related to discounts on the receivables sold.
As of January 27, 1996, Carcorp's total receivables pool was $198.9
million net of reserves for doubtful accounts. As of January 27, 1996, the
holders of term certificates and variable funding certificates collectively had
invested $128 million to purchase an 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.
13. Lease Commitments:
The Company is lessee under various long-term operating leases for land
and buildings for periods up to forty years. The majority of these leases
contain renewal provisions. In addition, the Company leases transportation,
operating and administrative equipment for periods ranging from one to ten
years.
On September 30, 1994, the Company entered into a master equipment
lease agreement. Pursuant to that agreement, during fiscal 1995 and 1994 the
Company sold and leased back equipment utilized in its Automotive Products and
Interior Furnishings segments. During fiscal 1995 and 1994, the aggregate net
book values of the equipment totaling $32.7 million and $29.8 million,
respectively, were removed from the balance sheet and the gains realized on the
sales totaling approximately $.1 million and $.6 million, respectively, were
deferred and are being recognized as adjustments to rent expense over the lease
terms. The Company made lease payments of approximately $6.3 million and $4.0
million for fiscal 1995 and 1994, respectively. The Company has a purchase
option on the equipment at the end of the lease
F-15
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
term based on the fair market value of the equipment and has additional options
to cause the sale of some or all of the equipment or to purchase some or all of
the equipment at prices determined under the agreement. The Company has
classified the leases as operating. The Company may sell and lease back
additional equipment in the future under the same master lease agreement,
subject to lessors' approval.
At January 27, 1996, future minimum lease payments under operating
leases for continuing operations are as follows (in thousands):
Fiscal Year Ending
------------------
January 1997................................... $ 20,006
January 1998................................... 18,753
January 1999................................... 17,587
January 2000................................... 17,099
January 2001................................... 16,955
Later years.................................... 41,016
---------
$ 131,416
=========
Rental expense of continuing operations under operating leases was
$16.3 million, $13.1 million, and $11.6 million for fiscal 1995, 1994 and 1993,
respectively. Obligations under capital leases are not significant.
F-16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
14. Employee Benefit Plans:
Defined Benefit Plans
Subsidiaries of the Company have defined benefit pension plans covering
substantially all employees who meet eligibility requirements. Plan benefits are
generally based on years of service and employees' compensation during their
years of employment. Funding of retirement costs for these plans complies with
the minimum funding requirements specified by the Employee Retirement Income
Security Act. Assets of the pension plans are held in a master trust which
invests primarily in equity and fixed income securities.
The net periodic pension cost of continuing operations for fiscal 1995,
1994 and 1993 includes the following components (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
January 27, January 28, January 29,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost........................................... $ 4,645 $ 4,698 $ 4,490
Interest cost on projected benefit obligation and
service cost......................................... 7,776 6,659 6,049
Actual loss (gain) on assets........................... (10,706) 1,036 (5,099)
Net amortization and deferral.......................... 4,926 (6,491) (1,412)
---------- ----------- -----------
Net periodic pension cost.............................. $ 6,641 $ 5,902 $ 4,028
========== =========== ===========
</TABLE>
F-17
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets, excluding
Wallcoverings, at January 27, 1996 and January 28, 1995 (in thousands):
<TABLE>
<CAPTION>
January 27, 1996 January 28, 1995
------------------------ --------------------
Plans for Which Plans for Which
------------------------ ---------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.......................$ (22,462) $ (81,694) $ (18,785) $ (70,968)
=========== =========== =========== ===========
Accumulated benefit obligation..................$ (23,043) $ (88,308) $ (19,383) $ (76,203)
=========== =========== =========== ===========
Projected benefit obligation....................$ (24,552) $ (92,430) $ (20,561) $ (79,472)
Plan assets at fair value........................... 27,013 66,903 22,500 55,139
----------- ----------- ----------- ----------
Projected benefit obligation less
than (in excess of) plan assets................... 2,461 (25,527) 1,939 (24,333)
Unrecognized net loss............................... 15 15,402 795 15,992
Prior service amounts not yet
recognized in net periodic
pension cost...................................... 942 (4,555) 1,040 (5,249)
Adjustment required to recognize
minimum liability................................. - (9,261) - (9,040)
----------- ----------- ----------- -----------
Pension asset (liability)
recognized in the consolidated
balance sheets....................................$ 3,418 $ (23,941) $ 3,774 $ (22,630)
=========== =========== =========== ===========
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% and 8.5% at January 27, 1996 and January
28, 1995, respectively. The expected rate of increase in future compensation
levels is 5.5% and the expected long-term rate of return on plan assets was 9%
in fiscal 1995 and 1994. The provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions" ("SFAS No. 87") require
companies with any plans that have an unfunded accumulated benefit obligation to
recognize an additional minimum pension liability, an offsetting intangible
pension asset and, in certain situations, a contra-equity balance. In accordance
with the provisions of SFAS No. 87, the consolidated balance sheets at January
27, 1996 and January 28, 1995 include an intangible pension asset of $.2 million
and $.1 million; an additional minimum pension liability of $9.3 million and
$9.0 million; and a contra-equity balance of $9.1 million and $9.4
million, respectively.
F-18
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Defined Contribution Plans
Subsidiaries of the Company sponsor defined contribution plans covering
employees who meet eligibility requirements. Subsidiary contributions are based
on formulas or are at the Company's discretion as specified in the plan
documents. Contributions related to continuing operations were $4.6 million,
$4.2 million and $4.7 million for fiscal 1995, 1994 and 1993, respectively.
Postretirement Benefit Plans
Subsidiaries of the Company have provided postretirement life and health
coverage for certain retirees under plans currently in effect. Many of the
subsidiaries' domestic employees may be eligible for coverage if they reach
retirement age while still employed by the Company.
The net periodic postretirement benefit cost of continuing operations,
determined on the accrual basis, includes the following components (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
January 27, January 28, January 29,
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Service cost......................... $ 1,005 $ 1,237 $ 1,735
Interest cost on accumulated
postretirement benefit
obligation................... 2,692 2,677 3,666
Net amortization..................... (1,809) (1,532) (200)
----------- ----------- -----------
Net periodic postretirement
benefit cost $ 1,888 $ 2,382 $ 5,201
=========== =========== ==========
</TABLE>
The following table sets forth the amount of accumulated postretirement
benefit obligation included in the Company's consolidated balance sheets,
excluding Wallcoverings, (in thousands):
January 27, January 28,
1996 1995
----------- ----------
Retirees..................................... $ 36,341 $ 34,291
Fully eligible active plan participants...... 12,269 10,123
Other active plan participants............... 13,651 11,102
Unrecognized prior service gain from
plan amendments...................... 20,717 22,766
Unrecognized net gain........................ 9,031 16,059
----------- ----------
Accumulated postretirement
benefit obligation................... $ 92,009 $ 94,341
=========== ==========
F-19
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% and 8.5% at January 27, 1996 and
January 28, 1995, respectively. The Company does not fund its postretirement
benefit plans.
For measurement purposes, an 11% and 12% annual rate of increase in the
per capita cost of covered health care benefits was assumed for fiscal 1996 and
1995, respectively; the rate was assumed to decrease 1 percentage point per year
to 6% and remain at that level thereafter. The health care cost trend rate
assumption has an impact on the amounts reported; however, the Company's
obligation is limited by certain amended provisions of the various plans, as
further described below. To illustrate, increasing the assumed health care cost
trend rates by 1 percentage point in each year would increase the accumulated
postretirement benefit obligation as of January 27, 1996 by $1.3 million and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $.2 million.
Effective April 1, 1994, the Company amended the postretirement benefit
plan which covers substantially all of the eligible current and retired
employees of the Company's continuing operations. Pursuant to the amendment, the
Company's obligation for future inflation of health care costs will be limited
to 6% per year through March 31, 1998. Subsequent to March 1998, the Company's
portion of coverage costs will not be adjusted for inflation in health care
costs.
15. Discontinued Operations:
On April 9, 1996, the Company announced a plan to spin off its Imperial
Wallcoverings subsidiary ("Wallcoverings") to the stockholders of the Company in
the form of a stock dividend. The spin-off requires, among other things, the
consent of the Company's lenders and the final approval of the Company's Board
of Directors. The Company expects the spin-off to occur in the summer of 1996.
The Company has accounted for the financial results and net assets of
Wallcoverings as a discontinued operation. Accordingly, previously reported
financial results for all periods presented have been restated to reflect
Wallcoverings as a discontinued operation.
Wallcoverings incurred a $23.3 million loss in fiscal 1995, income of
$5.8 million in fiscal 1994 and a loss of $19.0 million in fiscal 1993. Included
in the fiscal 1995 loss were $9.9 million in charges related to the
consolidation of distribution activities, and the closure of the segment's
Hammond, Indiana facility. See Note 16 for further discussion on facility
closings. Additionally, $3.0 million in charges related to the impairment of
assets and $10.8 million related to a write-down of inventory were incurred in
fiscal 1995. Included in the fiscal 1993 loss was a $29.9 million write-off of
Wallcoverings goodwill at October 30, 1993. For further discussion of the
analysis that resulted in this write-off see Note 7.
As of the end of fiscal 1992, the Company reclassified its Builders
Emporium home improvement retail chain and its Engineering Group as discontinued
operations. The Company recorded a loss on a disposal of discontinued operations
of $168.0 million in the fourth quarter of fiscal 1992 principally to provide
for the expected loss on sale of Builders Emporium. In March 1993, the
Engineering Group was sold for approximately $51 million. As of the end of the
second quarter of fiscal 1993, the Company determined that it would be
F-20
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
unable to sell Builders Emporium as an ongoing entity. The Company recorded an
additional loss on disposal of discontinued operations of $125.5 million
principally to (i) provide additional reserves for the significant reduction in
estimated proceeds from disposition and other costs in connection with the sale
or disposition of Builders Emporium's inventory, real estate and other assets,
(ii) provide for employee severance and other costs and (iii) realize a
previously unrecognized loss as a result of the decision to retain Dura.
Builders Emporium's inventory was sold during the third and fourth quarters of
fiscal 1993 and all accounts receivable and accounts payable balances were
settled as of January 28, 1995. Remaining assets and liabilities of Builders
Emporium at January 27, 1996 relate primarily to 6 owned and 3 leased real
estate properties and self-insured workers compensation liabilities, which
continue to be liquidated.
Kayser-Roth was reclassified as a discontinued operation at the end of
the third fiscal quarter ended October 30, 1993 and was sold on January 28, 1994
for a total price of approximately $170 million, subject to a post-closing
purchase price adjustment of $5.1 million which was paid to the purchaser of
Kayser-Roth on September 1, 1994. In connection with the sale, the Company
received a 90 day $70 million senior unsecured bridge note from the purchaser
which was collected with accrued interest on April 27, 1994. The gain on
disposal of $28.1 million in the fourth quarter of fiscal 1993 related to the
sale of Kayser-Roth.
Net sales of discontinued operations in fiscal 1995, 1994, and 1993
aggregated approximately $205.3 million, $216.6 million, and $1,010.5 million,
respectively. Subsequent to their respective reclassifications as discontinued
operations, sales of Builders Emporium aggregated approximately $410.0 million
and sales of Kayser-Roth aggregated approximately $95.0 million. Net interest
expense of discontinued operations including amounts attributable to
discontinued operations was $.7 million, $.7 million and $19.2 million in fiscal
1995, 1994 and 1993, respectively. Interest expense of $13.1 million during
fiscal 1993 has been allocated to discontinued operations based upon the ratio
of net book value of discontinued operations (including reserves for loss on
disposal) to consolidated invested capital. Interest expense incurred by
Builders Emporium and Kayser-Roth subsequent to their reclassification as
discontinued operations aggregated $2.2 million. Such amounts were charged to
discontinued operations reserves.
In connection with certain discontinued operations, the Company has
future minimum lease payments and future sublease rental receipts at January 27,
1996 as follows (in thousands):
Minimum Lease Sublease Rental
Fiscal Year Ending Payments Receipts
- ----------------------------- ------------- ---------------
January 1997...................... $ 14,057 $ 4,967
January 1998...................... 9,854 2,661
January 1999...................... 6,777 1,868
January 2000...................... 4,981 1,564
January 2001...................... 2,721 839
Later years....................... 5,210 115
---------- ---------
$ 43,600 $ 12,014
========== =========
F-21
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
16. Facility Closing Costs:
In the fourth quarter of fiscal 1995, the Company in its Automotive
Products segment provided for the cost to exit one manufacturing facility
affecting approximately 90 employees. Additionally, the Company provided for the
cost to exit one manufacturing and three distribution centers in its
discontinued Wallcoverings segment. The Wallcoverings closings affected
approximately 200 employees. The components of the reserves for these facility
closings, which are expected to be completed during fiscal 1996, are as follows
(in thousands):
<TABLE>
<CAPTION>
Write-Down of Property,
Plant and Equipment to Remaining Reserve
Original Reserve Net Realization Value January 27, 1996
------------------------ ----------------------- ------------------------
Continuing Discontinued Continuing Discontinued Continuing Discontinued
Operations Operations Operations Operations Operations Operations
---------- ------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Anticipated losses associated with the
disposal of property, plant and
equipment................................ $ 385 $ 5,721 $ (385) $ (5,721) $ - $ -
Anticipated expenditures to close and
dispose of idled facilities.............. 513 2,766 - - 513 2,766
Anticipated severance benefits.............. 406 1,410 - - 406 1,410
---------- ------------ ---------- ------------ ----------- -----------
$ 1,304 $ 9,897 $ (385) $ (5,721) $ 919 $ 4,176
========== ============ ========== ============ =========== ===========
</TABLE>
17. Common Stock and Preferred Stock:
At January 29, 1994, 1,000 shares of $1.00 par value common stock were
authorized, issued and outstanding. The Company's Certificate of Incorporation
was amended on April 27, 1994 to authorize 150,000,000 shares of common stock,
to reduce the par value of the common stock from $1.00 to $.01 per share and to
authorize a 35,035 for 1 stock split of all outstanding shares of common stock.
The stock split was effective April 27, 1994. 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 and the stock split.
In connection with the 1989 merger of a wholly owned subsidiary of the
Company into Group, approximately 4,250,000 shares of 15 1/2% Cumulative
Exchangeable Redeemable Preferred Stock ("Merger Preferred Stock"), par value
$.01 (authorized 16,000,000 shares), were issued. At January 29, 1994,
approximately 6,268,000 shares were outstanding. Dividends payable in additional
shares accrued during fiscal 1994 and 1993, including accretion for the
difference between redemption value and fair value at date of issuance,
aggregated approximately $14.4 million and $23.7 million, respectively. All of
the shares of Merger Preferred Stock were redeemed in connection with the
Recapitalization.
At January 29, 1994, 30,000,000 shares of $.10 par value preferred stock
of Group were authorized and approximately 1,806,000 shares of $2.50 Convertible
Preferred Stock, Series
F-22
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A of Group ("Series A Preferred Stock") were outstanding. Each share of Series A
Preferred Stock of Group had an annual dividend of $2.50 per share. All of the
Series A Preferred Stock of Group was redeemed in connection with the
Recapitalization.
The Company has not declared or paid cash dividends on its common stock
since its incorporation. The Facilities and the Term Loan B Facility limit any
dividends paid to a maximum of $12 million per fiscal year unless the principal
amount of the Term Loan Facilities is reduced to less than $350 million and
certain other conditions are satisfied (in which case the Facilities limit
dividends paid in any year to a maximum of 25% of net income for the prior
fiscal year).
18. Stock Option Plans:
Effective on January 28, 1994, the Company adopted the 1993 Employee
Stock Option Plan ("1993 Plan") for certain key employees. The 1993 Plan was
created primarily for the special purpose of rewarding key employees for the
appreciation earned through prior service under the Company's previous equity
share plan that was terminated on October 29, 1993. The 1993 Plan authorizes the
issuance of 3,119,466 shares of common stock. Effective on January 28, 1994, the
Company granted options to acquire 3,119,466 shares of the common stock. The
majority of these options vested 40% in June 1995 with the remaining shares
vesting in June 1996. In connection with the adoption of this plan, the Company
recorded a charge of $26.7 million for management equity plan expense in fiscal
1993.
In addition, effective in April 1994, the 1994 Employee Stock Option
Plan ("1994 Plan") was adopted as a successor to the 1993 Plan to facilitate
awards to certain key employees and to consultants. The 1994 Plan authorizes the
issuance of up to 2,980,534 shares of common stock and provides that no options
may be granted after 10 years from the effective date of this plan. Options
vest, in each case, as specified by the Company's compensation committee,
generally over three years after issuance. At January 27, 1996, options
representing 2,516,152 shares of common stock were available for grants.
Effective on February 23, 1995, the Company adopted the 1994 Director's
Stock Option Plan ("the Director's Plan") which provides for the issuance of a
maximum of 600,000 options to acquire common stock to nonmanagement directors
and directors not affiliated with a major stockholder. As of January 27, 1996,
30,000 options had been granted.
F-23
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At January 27, 1996, 1,251,887 of the outstanding options were
exercisable. Upon a change of control, as defined, all of the above options
become fully vested and exercisable.
Stock option activity under the plans is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
January 27, 1996 January 28, 1995
----------------------- --------------------
Number Price Number Price
of Per of Per
Shares Share Shares Share
------- ------ -------- --------
<S> <C> <C> <C> <C>
Outstanding beginning
of year..................................... 3,096,802 $3.99 - $10.50 3,119,466 $3.99 - $ 8.26
Awarded........................................ 431,500 7.00 - 8.88 186,634 4.43 - 10.50
Cancelled...................................... (135,003) 3.99 - 8.75 (209,298) 3.99 - 8.26
Exercised...................................... (95,263) 3.99 - -
---------- ----------
Outstanding at end of year..................... 3,298,036 3.99 - 10.50 3,096,802 3.99 - 10.50
========== ==========
</TABLE>
19. Income Taxes:
Deferred income taxes are provided for the temporary differences between
the financial reporting and tax basis of the Company's assets and liabilities.
The components of the net deferred tax asset (liability) as of January 27, 1996
and January 28, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
January 27, January 28,
1996 1995
----------- ----------
<S> <C> <C>
Deferred tax assets:
Employee benefits, including postretirement benefits.............. $ 64,485 $ 66,371
Net operating loss carryforwards.................................. 101,984 132,408
Investment tax credit carryforwards............................... 6,900 10,700
Alternative minimum tax credits................................... 8,700 6,700
Other liabilities and reserves.................................... 79,206 96,222
Valuation allowance............................................... (51,573) (261,323)
----------- -----------
Total deferred tax assets................................... 209,702 51,078
Deferred tax liabilities:
Property, plant and equipment..................................... (45,300) (51,540)
Undistributed earnings of foreign subsidiaries.................... (7,600) -
----------- -----------
Total deferred tax liabilities.............................. (52,900) (51,540)
----------- -----------
Net deferred tax asset (liability)...................................... $ 156,802 $ (462)
=========== ===========
</TABLE>
F-24
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The above amounts have been classified in the consolidated balance sheet
as follows (in thousands):
January 27, January 28,
1996 1995
----------- -----------
Deferred tax assets and (liabilities):
Current, included in other
current assets............... $ 32,407 $ -
Noncurrent......................... 124,395 (462)
----------- -----------
$ 156,802 $ (462)
=========== ===========
In fiscal 1993 and prior years, the Company incurred significant
financial reporting and tax losses principally as a result of a capital
structure that contained a substantial amount of high interest rate debt. In
addition, losses were incurred as the Company exited businesses which it did not
consider to be consistent with its long-term strategy. Although substantial net
deferred tax assets were generated during these periods, a valuation allowance
was established because in management's assessment the historical operating
trends made it uncertain whether the net deferred tax assets would be realized.
During July 1994, the Company completed the Offering and
Recapitalization, which reduced the Company's indebtedness, lowered interest
expense and provided liquidity for operations and other general corporate
purposes. As a result of the Recapitalization, the Company's annual financing
costs were reduced from $115 million in fiscal 1993 to $57 million in fiscal
1995. In fiscal 1994, the Company reported taxable income and had net income
before an extraordinary loss on the Recapitalization for financial reporting
purposes; however, management determined, largely because of the Company's prior
losses, that it remained uncertain whether the net deferred tax assets would be
realized.
In fiscal 1995, the Company's continuing business segments generated
substantial operating income, consistent with historical trends, that, when
combined with the post-Recapitalization capital structure, resulted in income
for both tax and financial reporting purposes. The spin-off of the Wallcoverings
segment that was announced in April 1996 further clarified management's
assessment of the Company's future performance. Management considered these
factors as well as the future outlook for its continuing businesses in
concluding that it is more likely than not that net deferred tax assets of
$156.8 million at January 27, 1996 will be realized. While continued operating
performance at current levels is sufficient to realize these assets, the
Company's ability to generate future taxable income is dependent on numerous
factors, including general economic conditions, the state of the automotive and
interior furnishings industries and other factors beyond management's control.
Therefore, there can be no assurance that the Company will meet its expectation
of future taxable income.
The valuation allowance at January 27, 1996 provides for certain
deferred tax assets that in management's assessment will not be realized due to
tax limitations on the use of such amounts or that relate to tax attributes that
are subject to uncertainty due to the long-term nature of their realization.
Deferred income taxes and withholding taxes have been provided on
earnings of the Company's foreign subsidiaries to the extent it is anticipated
that the earnings will be
F-25
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
remitted in the future as dividends. Deferred income taxes and withholding taxes
have not been provided on the remaining undistributed earnings of foreign
subsidiaries as such amounts are deemed to be permanently reinvested. The
cumulative undistributed earnings on which the Company has not provided deferred
income taxes and withholding taxes are not significant.
The provisions for income taxes applicable to continuing operations for
fiscal 1995, 1994 and 1993 are summarized as follows (in thousands):
Fiscal Year Ended
January 27, January 28, January 29,
1996 1995 1994
----------- ----------- ----------
Current
Federal........ $ 1,730 $ 150 $ -
State.......... 3,332 4,576 5,821
Foreign........ 6,240 6,394 7,801
----------- ----------- ----------
11,302 11,120 13,622
----------- ----------- ----------
Deferred
Federal........ (140,705) - -
State.......... (9,050) 162 (16)
Foreign........ (67) (267) (3,112)
----------- ----------- -----------
(149,822) (105) (3,128)
----------- ----------- -----------
Income tax expense
(benefit).... $ (138,520) $ 11,015 $ 10,494
=========== =========== ==========
Domestic and foreign components of income (loss) from continuing
operations before income taxes are summarized as follows (in thousands):
Fiscal Year Ended
January 27, January 28, January 29,
1996 1995 1994
----------- ----------- ----------
Domestic......... $ 77,439 $ 61,962 $ (146,258)
Foreign.......... 13,763 18,959 2,395
----------- ----------- ----------
$ 91,202 $ 80,921 $ (143,863)
=========== =========== ===========
F-26
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation between income taxes computed at the statutory Federal
rate of 35% and the provisions for income taxes applicable to continuing
operations is as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
January 27, January 28, January 29,
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Amount at statutory Federal rate........$ 31,921 $ 28,324 $ (50,352)
State income taxes, net of Federal
income tax benefit............... 2,325 3,080 4,963
Foreign tax more (less) than Federal
tax at statutory rate............ 1,356 (509) 3,851
Foreign dividend income................. 800 21,965 -
Amortization and write-off of goodwill.. 95 - 35,742
Other................................... 1,250 2,898 (4,658)
Change in valuation allowance........... (176,267) (44,743) 20,948
----------- ----------- ----------
Income tax expense (benefit) ...........$ (138,520) $ 11,015 $ 10,494
=========== =========== ==========
</TABLE>
During fiscal 1995, the valuation allowance decreased $209.8 million
from fiscal 1994. This decrease resulted primarily from the recognition of
certain deferred tax assets discussed above as well as the utilization of
deferred tax assets by continuing operations. An additional reduction of $33.5
million related primarily to changes in reserves for discontinued operations and
certain other adjustments. During fiscal 1994, the valuation allowance decreased
$26.0 million from fiscal 1993. The net decrease resulted from the utilization
of $44.7 million for continuing operations offset by $18.7 million in additions
related primarily to the deferral of the net benefits arising from the loss on
redemption of indebtedness and other miscellaneous adjustments.
F-27
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At January 27, 1996, the Company had the following tax attributes
carryforwards available for Federal income tax purposes (in thousands):
<TABLE>
<CAPTION>
Expiration
Amount Dates
----------- ------------
<S> <C> <C>
Net operating losses - regular tax
Preacquisition, subject to limitations.......... $ 79,800 1996-2010
Postacquisition, unrestricted................... 206,700 2006-2008
---------
$286,500
=========
Net operating losses - alternative minimum tax
Preacquisition, subject to limitations.......... $ 52,900 1996-2010
Postacquisition, unrestricted................... 153,600 2006-2008
---------
$206,500
=========
Investment tax and other credits
Preacquisition, subject to limitations.......... $ 6,900 1996-2003
=========
Alternative minimum tax credits................. $ 8,700 No limit
=========
</TABLE>
The above amounts exclude $9 million of NOLs attributable to the
discontinued Wallcoverings segment. In addition, approximately $30 million of
future net Federal and state tax deductions have been excluded in determining
the Company's net deferred tax assets. After the spin-off occurs, these
Wallcoverings' deferred tax assets, which total $14.7 million of future tax
benefits, will no longer be available to the Company. Because of the
uncertainties regarding Wallcoverings' future performance, a valuation allowance
offsetting this amount has been maintained. Accordingly, these net deferred tax
assets had no impact on the net assets or operating results of discontinued
operations presented in the accompanying consolidated financial statements.
Approximately $79.8 million of the Company's NOLs and $6.9 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. The Company believes that a substantial
portion of these tax benefits will be realized in the future. Future sales of
common stock by the Company or its principal stockholders, or changes in the
composition of its principal stockholders, could constitute a "change in
control" that would result in annual limitations on the Company's use of its
NOLs and unused tax credits. Management cannot predict whether such a "change in
control" will occur. If such a "change in 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.
The Company previously reported that its Federal income tax returns for
the period 1988 through 1991 were under examination and that the IRS had
proposed adjustments that could have resulted in the loss of a material amount
of the NOLs otherwise available to the Company in future years. During 1995, the
IRS withdrew substantially all of the proposed adjustments. The Company agreed
to pay tax and interest of $1.4 million and to reduce its NOLs by $6.1 million.
F-28
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The California Franchise Tax Board has challenged the treatment of the
sale of certain foreign subsidiaries during 1987 and has issued a notice of tax
assessment, which the Company received in November 1995, for approximately $11.8
million. The Company disputes the assessment and has filed a protest with the
Franchise Tax Board. If the Franchise Tax Board were to maintain its position
and such position were to be upheld in litigation, the Company would also become
liable for the payment of interest which is currently estimated to be $13.9
million. In the opinion of management, the final determination of any additional
tax and interest liability will not have a material adverse effect on the
Company's consolidated financial condition or results of operations.
Income taxes paid, net of refunds, were $13.5 million, $5.1 million, and
$3.3 million for fiscal 1995, 1994 and 1993, respectively.
20. Disclosures About Fair Value of Financial Instruments:
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate fair value:
Cash and Cash Equivalents - The carrying amount approximates fair value
because of the short maturity of these instruments.
Long-Term Investments - Fair value approximates carrying value.
Interest Rate Protection Agreements - The fair value of interest rate
cap and corridor agreements is based on quoted market prices as if the
agreements were entered into on the measurement date.
Long-Term Debt - The fair value of the long-term debt of the Company
approximates the carrying value.
The estimated fair values of the Company's continuing operations'
financial instruments are summarized as follows (in thousands):
<TABLE>
<CAPTION>
January 27, 1996 January 28, 1995
--------------------- -------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Long-term investments...........$ 3,646 $ 3,646 $ 4,030 $ 4,030
Interest rate protection
agreements.............. 680 - 1,405 1,567
Long-term debt..................765,022 765,022 565,102 565,102
</TABLE>
21. 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.
F-29
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the fourth quarter of fiscal 1995, the Company incurred $2.5
million in fees and expenses for services performed by Blackstone Partners and
WP Partners in connection with the acquisition of Manchester Plastics in January
1996.
During the first quarter of fiscal 1994, the Company incurred expenses
of $2.5 million in fees and expenses 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 fiscal 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 first quarter of fiscal 1994.
In connection with the Company's discontinued operations, the Company
incurred fees to affiliates of Blackstone Partners and WP Partners for services
related to divestitures aggregating $4.3 million during fiscal 1993. These
fiscal 1993 amounts related principally to divestiture fees on the sales of
Kayser-Roth and the Engineering Group, and advisory services in connection with
the sale of Builders Emporium's inventory, real estate and other assets. Fees
incurred during the first quarter of fiscal 1994 included $.1 million to an
affiliate of Blackstone Partners for advisory services in connection with the
sale of Builders Emporium's inventory, real estate and other assets.
In September 1993, an affiliate of Blackstone Partners negotiated with a
real estate consultant to receive 20% of the incentive fees payable to the
consultant by the Company in connection with the resolution of lease liabilities
of Builders Emporium. Such affiliate received approximately $.5 million in fees
during fiscal 1994 pursuant to this arrangement.
22. Information About Segments of the Company's Operations:
The Company's continuing business segments consist of Automotive
Products, which supplies interior trim products to the North American automotive
industry; and Interior Furnishings, which manufactures residential upholstery
and commercial floorcoverings in the United States. The Wallcoverings segment,
which produces residential and commercial wallpaper in North America, has been
classified as a discontinued operation and, accordingly, all prior year segment
information has been restated.
The Company performs periodic credit evaluations of its customers'
financial condition and, although the Company does not generally require
collateral, it does require cash payments in advance when the assessment of
credit risk associated with a customer is substantially higher than normal.
Receivables generally are due within 45 days, and credit losses have
consistently been within management's expectations and are provided for in the
consolidated financial statements.
Direct and indirect sales to significant customers in excess of ten
percent of consolidated net sales from continuing operations are as follows:
1995 1994 1993
-------- -------- ------
General Motors Corporation........... 23.3% 21.3% 19.4%
Ford Motor Company................... 11.6% 14.1% N/A
Chrysler Corporation................. 12.7% 12.0% 12.0%
F-30
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Information about the Company's business segments for fiscal 1995, 1994
and 1993 follows (in thousands):
<TABLE>
<CAPTION>
Automotive Interior Corporate
Products Furnishings Items Consolidated
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Fiscal 1995
Net sales.............................. $ 906,945 $ 384,521 $ - $ 1,291,466
Operating income (a)................... 99,383 48,445 - 147,828
Depreciation and amortization (c)...... 27,684 11,757 4,165 43,606
Identifiable assets (e)................ 529,541 136,449 384,017 1,050,007
Capital expenditures (f)............... 51,457 24,389 17,852 93,698
Automotive Interior Corporate
Products Furnishings Items Consolidated
---------- ----------- ---------- --------------
Fiscal 1994
Net sales............................... $ 904,855 $ 414,524 $ - $1,319,379
Operating income (loss) (a)............. 123,318 57,421 (14,938) 165,801
Depreciation and amortization (c)....... 25,279 12,247 6,341 43,867
Identifiable assets (e)................. 273,010 131,851 235,457 640,318
Capital expenditures (f)................ 55,834 22,173 6,416 84,423
Automotive Interior Corporate
Products Furnishings Items Consolidated
---------- ----------- ---------- --------------
Fiscal 1993
Net sales............................... $ 677,867 $ 407,201 $ - $ 1,085,068
Operating income (loss) (a) (b) (d)..... (2,261) 12,175 (38,282) (28,368)
Depreciation and amortization (c)....... 25,873 12,521 13,414 51,808
Identifiable assets (e)................. 379,637 226,417 274,743 880,797
Capital expenditures (f)................ 29,208 11,768 15,302 56,278
</TABLE>
F-31
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Information about the Company's operations in different geographic
areas for fiscal 1995, 1994 and 1993 follows (in thousands):
<TABLE>
<CAPTION>
United Other Corporate
States Canada Mexico Countries Items Consolidated
--------- --------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1995
Net sales............................ $ 1,148,957 $ 123,958 $ 14,466 $ 4,085 $ - $ 1,291,466
Operating income (loss) (a).......... 127,208 20,426 (5) 199 - 147,828
Depreciation and amortization (c).... 35,290 2,795 1,190 166 4,165 43,606
Identifiable assets (e).............. 382,397 245,943 24,579 13,071 384,017 1,050,007
Capital expenditures (f)............. 61,959 5,055 1,739 7,093 17,852 93,698
United Other Corporate
States Canada Mexico Countries Items Consolidated
--------- --------- -------- ----------- ---------- -------------
Fiscal 1994
Net sales............................ $1,192,899 $ 107,845 $ 3,955 $ 14,680 $ - $ 1,319,379
Operating income (loss) (a).......... 160,596 20,406 - (263) (14,938) 165,801
Depreciation and amortization (c).... 34,191 2,537 479 319 6,341 43,867
Identifiable assets (e).............. 348,377 40,084 13,471 2,929 235,457 640,318
Capital expenditures (f)............. 66,075 4,498 5,907 1,527 6,416 84,423
United Other Corporate
States Canada Mexico Countries Items Consolidated
--------- --------- -------- ----------- ---------- -------------
Fiscal 1993
Net sales............................ $ 987,462 $ 94,761 $ 888 $ 1,957 $ - $ 1,085,068
Operating income (loss) (a) (b) (d).. 7,826 2,431 - (343) (38,282) (28,368)
Depreciation and amortization (c).... 35,602 2,755 27 10 13,414 51,808
Identifiable assets (e).............. 529,548 54,010 7,119 15,377 274,743 880,797
Capital expenditures (f)............. 33,232 1,992 5,511 241 15,302 56,278
</TABLE>
(a) Operating income (loss) is determined by deducting all operating
expenses, including goodwill write-off and other costs, from revenues.
Operating expenses do not include interest expense.
(b) The segment operating income in fiscal 1993 includes the write-off of
goodwill of $100.0 million; $68.4 million of which is included in the
$2.3 million operating loss of the Automotive Products segment and $31.6
million of which is included in the $12.2 million operating income of
the Interior Furnishings segment.
(c) Depreciation and amortization includes the amortization of other assets
and liabilities, and excludes depreciation and amortization for
discontinued operations of $13.9 million, $5.3 million and $22.6 million
in fiscal 1995, 1994 and 1993, respectively.
(d) Corporate items in fiscal 1993 include $26.7 million of management equity
plan expense.
(e) Corporate items includes Carcorp's $70.9 million and $83.5 million
interest in the total receivables pool of $198.9 million and $228.5
million, net of allowances for doubtful accounts, at January 27, 1996
and January 28, 1995, respectively. Also included are the net assets of
discontinued operations for fiscal 1995, 1994 and 1993 of $79.4 million,
$75.6 million and $98.3 million, respectively.
F-32
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(f) Corporate items include capital expenditures for discontinued operations
in fiscal 1995, 1994 and 1993 of $15.8 million, $5.4 million and $15.1
million, respectively.
Intersegment sales between geographic areas are not material. For fiscal
years 1995, 1994 and 1993, export sales from the United States to foreign
countries were $131.2 million, $122.9 million and $89.9 million, respectively.
23. Commitments and Contingencies:
Environmental
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 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 theory 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 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
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. The Company
records its best estimate when it believes it is probable that an environmental
liability has been incurred and the amount of loss can be reasonably estimated.
The Company also considers estimates of certain reasonably possible
environmental liabilities in determining the aggregate amount of environmental
reserves. In its assessment the Company makes its best estimate of the liability
based upon information available to the Company at that time, including the
professional judgment of the Company's environmental experts, outside
environmental specialists and other experts. As of January 27, 1996, including
sites relating to the acquisition of Manchester Plastics and 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 16 sites where the Company is participating in the
investigation or remediation of the site either directly or through financial
contribution, and 10 additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. As of January 27, 1996,
the Company's estimate of its liability for these 26 sites, which exclude sites
related to Wallcoverings, is approximately $31.3 million. As of January 27,
1996, the Company has established reserves of approximately $38.9 million for
the estimated future costs related to all its known environmental sites,
excluding sites related to Wallcoverings. 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.
F-33
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company is subject to 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 certain other damages 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.
Litigation
During 1991, a Fifth Consolidated Amended Complaint was filed in In re
Ivan F. Boesky Securities Litigation, involving numerous claims against a
variety of defendants including Group, among other things, alleging a conspiracy
to manipulate the price of Group's common stock in 1986 for the purpose of
triggering a redemption of certain outstanding preferred stock of Group.
Plaintiffs and C&A Products have agreed to the principal terms of a settlement
whereby plaintiffs would release all claims relating to the litigation against
Group and the individual Group-related defendants in exchange for payment by C&A
Products of $4.25 million. The settlement is subject to approval of the court.
In May 1995, C&A Products paid $4.25 million into an escrow account with the
court pursuant to the terms of the settlement. The settlement was within
previously established accruals. In 1992, Advanced Development & Engineering
Centre ("ADEC"), a division of an indirect subsidiary of the Company, filed
arbitration demands against the Pakistan Ordnance Factories Board ("POF")
concerning ADEC's installation of a munitions facility for POF. POF filed
arbitration counterclaims alleging that ADEC's alleged breach of contract caused
POF to lose its entire investment in the munitions facility.
The Company and its subsidiaries also have other lawsuits and claims
pending against them and have certain guarantees outstanding which were made in
the ordinary course of business.
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 adverse effect on the Company's
consolidated financial condition or results of operations.
Other Commitments
The majority of Builders Emporium's leased properties have been
assigned to third parties. In addition, Group has assigned leases in connection
with the divestiture of Kayser-Roth, the Engineering Group and other divested
businesses. Although Group has obtained releases from the lessors of certain
properties, C&A Products, as successor by merger to Group, 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 adverse effect on the Company's consolidated financial
condition or future results of operations.
24. Quarterly Financial Data (Unaudited):
(in thousands, except for per share data)
On April 8, 1996, the Company's Board of Directors approved a plan to
spin-off the Company's Wallcoverings business segment and accordingly,
previously reported quarterly financial data has been restated for fiscal 1995
and 1994. See Note 15 and Management's Discussion and Analysis of Financial
Condition and Results of Operations for additional information.
F-34
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Fiscal 1995
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Net sales as previously reported.................. $ 392,129 $352,847 $380,855 $370,929
Less discontinued operations...................... 57,239 50,985 52,219 44,851
--------- --------- -------- --------
Net sales as restated............................. $ 334,890 $301,862 $328,636 $326,078
========= ========= ========= =========
Gross margin as previously
reported....................................... $ 93,698 $ 81,177 $ 87,343 $ 81,833
Less discontinued operations...................... 20,115 16,203 16,299 12,326
--------- --------- -------- --------
Gross margin as restated.......................... $ 73,583 $ 64,974 $ 71,044 $ 69,507
========= ========= ========= =========
Income from continuing operations
as previously reported (a)..................... $ 28,901 $ 15,445 $ 20,640 $141,455
Less discontinued operations (b).................. 4,134 (113) (697) (26,605)
--------- --------- -------- --------
Income from continuing
operations as restated.......................... $ 24,767 $ 15,558 $ 21,337 $168,060
========= ========= ========= =========
Net income ....................................... $ 28,901 $ 15,445 $ 20,640 $141,455
========= ========= ========= =========
Primary and fully diluted
earnings per share.......................... $ .40 $ .22 $ .29 $ 2.01
========= ========= ========= =========
Common stock prices
High........................................ $ 8-3/8 $ 9 $ 9-1/4 $ 8-3/8
Low............................................ $ 7-1/2 $ 6-3/8 $ 7-1/2 $ 6-1/8
</TABLE>
F-35
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
Fiscal 1994
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales as previously reported.................. $ 390,446 $ 359,749 $ 403,722 $382,085
Less discontinued operations...................... 60,326 50,107 55,723 50,467
--------- -------- --------- ---------
Net sales as restated............................. $ 330,120 $ 309,642 $ 347,999 $331,618
========= ========= ========= =========
Gross margin as previously
reported........................................ $ 100,954 $ 87,357 $ 92,976 $ 89,846
Less discontinued operations....................... 20,925 14,756 18,075 15,198
--------- -------- --------- ---------
Gross margin as restated........................... $ 80,029 $ 72,601 $ 74,901 $ 74,648
========= ========= ========= =========
Income from continuing
operations as previously
reported....................................... $ 12,754 $ 7,323 $ 30,966 $ 24,703
Less discontinued operations....................... 4,768 720 2,144 (1,792)
--------- -------- -------- -------
Income from continuing
operations as restated.......................... $ 7,986 $ 6,603 $ 28,822 $ 26,495
========= ========= ========= =========
Net income (loss) (c).............................. $ 12,754 $ (99,205) $ 30,966 $ 24,703
========= ========= ========= =========
Primary and fully diluted earnings
(loss) per share.................................. $ .19 $ (4.99) $ .43 $ .34
========= ========= ========= =========
Common stock prices
High........................................... - $10-9/16 $ 10-7/8 $ 9-1/4
Low............................................ - $ 10 $ 8-5/8 $ 7-7/8
</TABLE>
(a) Income from continuing operations in the fourth quarter of fiscal 1995
includes a reduction in the valuation allowance against net deferred
tax assets as discussed in Note 19.
(b) Net loss from discontinued operations in the fourth quarter of fiscal
1995 includes $9.9 million in charges related to the consolidation of
Wallcoverings' distribution activities and the closure of its Hammond,
Indiana facility, $3.0 million in charges related to the impairment of
assets and $10.8 million related to a write-down of inventory.
(c) Net loss in the second quarter of fiscal 1994 includes an extraordinary
loss of $106.5 million related to the Recapitalization.
The Company's operations are not subject to significant seasonal
influences.
F-36
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
25. Significant Subsidiary:
The Company conducts all of its operating activities through its
wholly-owned subsidiary C&A Products. The following represents summarized
consolidated financial information of C&A Products and its subsidiaries for the
fiscal years ending (in thousands):
<TABLE>
<CAPTION>
January 27, January 28, January 29,
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Current assets................................. $ 429,662 $ 339,378 $ 579,814
Noncurrent assets.............................. 619,102 300,047 296,673
Current liabilities............................ 268,516 237,952 231,200
Noncurrent liabilities......................... 1,006,726 812,406 1,025,746
Redeemable stock............................... - - 132
Net sales...................................... 1,291,466 1,319,379 1,085,068
Gross margin................................... 279,108 302,179 234,978
Income (loss) from continuing operations....... 230,400 85,062 (125,142)
Income (loss) before extraordinary item........ 207,119 90,902 (248,449)
Net income (loss).............................. 207,119 (15,626) (248,449)
</TABLE>
Separate financial statements of C&A Products are not presented because
they would not be material to the holders of any debt securities of C&A Products
that may be issued, there being no material differences between the financial
statements of C&A Products and the Company.
F-37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Collins & Aikman Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements of Collins & Aikman Corporation
and subsidiaries included in this Form 10-K, and have issued our report thereon
dated April 10, 1996. Our audits were made for the purpose of forming an opinion
on those statements taken as a whole. The schedules listed in Item 14 of this
Form 10-K are the responsibility of the Company's management and are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
April 10, 1996.
S-1
<PAGE>
<TABLE>
<CAPTION>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
JANUARY 27, JANUARY 28,
ASSETS 1996 1995
----------- ----------
<S> <C> <C>
Current Assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 977 $ 875
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 -
----------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . 1,243 875
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 18
----------- ----------
$ 1,243 $ 893
=========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35 $ -
Share of accumulated losses in excess of investments in subsidiaries . . . . 226,478 410,933
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . 2,582 2,582
Commitments and contingencies (Note 1)
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 705 705
Other stockholder's equity . . . . . . . . . . . . . . . . . . . . . . . . . (228,557) (413,327)
----------- -----------
Total stockholder's equity. . . . . . . . . . . . . . . . . . . . . (227,852) (412,622)
----------- -----------
$ 1,243 $ 893
=========== ===========
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
FISCAL YEAR ENDED
JANUARY 27, JANUARY 28, JANUARY 29,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,023) $ (349) $ (71)
Interest income (expense) . . . . . . . . . . . . . . . . . . . . . . 345 (12,549) (25,079)
----------- ----------- -----------
Loss from operations before income taxes and equity in loss of
subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . (678) (12,898) (25,150)
Income tax benefit. . . . . . . . . . . . . . . . . . . . . . . . . . - - 468
Equity in income (loss) of subsidiaries . . . . . . . . . . . . . . . 207,119 (17,884) (252,982)
----------- ----------- -----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 206,441 $ (30,782) $ (277,664)
============ =========== ===========
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED
JANUARY 27, JANUARY 28, JANUARY 29,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash used in operating activities. . . . . . . . . . . . . . . $ (544) $ (405) $ (537)
----------- ----------- ----------
INVESTING ACTIVITIES
Investment in subsidiary . . . . . . . . . . . . . . . . . . . . . - (52,351) -
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,309 -
----------- ----------- ----------
Net cash used in investing activities. . . . . . . . . . . . . . . - (51,042) -
----------- ----------- ----------
FINANCING ACTIVITIES
Issuances of common stock. . . . . . . . . . . . . . . . . . . . . - 232,436 -
Redemption of preferred stock. . . . . . . . . . . . . . . . . . . - (173,367) -
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . - (9,757) -
Purchases of treasury stock. . . . . . . . . . . . . . . . . . . . (11,736) - -
Proceeds from exercise of stock options. . . . . . . . . . . . . . 382 - -
Dividends received from subsidiary . . . . . . . . . . . . . . . . 12,000 - -
----------- ----------- ----------
Net cash provided by financing activities. . . . . . . . . . . . . 646 49,312 -
----------- ----------- ----------
Net increase (decrease) in cash. . . . . . . . . . . . . . . . . . 102 (2,135) (537)
Cash and cash equivalents at beginning of year . . . . . . . . . . 875 3,010 3,547
----------- ----------- ----------
Cash and cash equivalents at end of year . . . . . . . . . . . . . $ 977 $ 875 $ 3,010
=========== =========== ==========
</TABLE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. PRESENTATION:
These condensed financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and note disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to those rules and regulations, although the Company
believes that the disclosures made are adequate to make the information
presented not misleading. For disclosures regarding redeemable preferred stock
and commitments and contingencies, see Notes 17 and 23, respectively, to
Consolidated Financial Statements.
2. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR ADDITIONAL DISCLOSURES.
S-4
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (A)
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JANUARY 27, 1996, JANUARY 28, 1995 AND JANUARY 29, 1994
(IN THOUSANDS)
CHARGE
BALANCE AT TO COSTS CHARGED BALANCE AT
BEGINNING AND TO OTHER ADDITIONS/ END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (DEDUCTIONS) YEAR
-------------- -------------- ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED
JANUARY 27, 1996
Allowance for doubtful
accounts $ 6,390 $ 693 $ 118 (b) $ (2,899) (c) $ 4,302
========== ========= ========== ========== ==========
FISCAL YEAR ENDED
JANUARY 28, 1995
Allowance for doubtful
accounts $ 3,996 $ 506 $ (165) (b) $ 2,053 (c) $ 6,390
=========== ========= ========== ========== ==========
FISCAL YEAR ENDED
JANUARY 29, 1994
Allowance for doubtful
accounts $ 4,128 $ 792 $ 199 (b) $ (1,123) (c) $ 3,996
=========== ========= ========== ========== ==========
</TABLE>
(a) The fiscal years ended January 28, 1995 and January 29, 1994 have been
restated to exclude amounts related to discontinued operations.
(b) Reclassifications and collection of accounts previously written off.
(c) Reclassifications and uncollectible amounts written off.
S-5
<PAGE>
EXHIBIT 3.2
BY-LAWS
(as amended through June 21, 1994)
OF
COLLINS & AIKMAN CORPORATION
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of Collins
and Aikman Corporation (the "Corporation") shall be in the City of Dover, County
of Kent, State of Delaware and the registered agent shall be The Prentice-Hall
Corporation System, Inc., or such other office or agent as the Board of
Directors shall from time to time select.
SECTION 2. Other Offices. The Corporation may also have
offices at such other places both within and without the State of Delaware as
the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meeting. Meetings of the stockholders
shall be held at such time and place, either within or without the State of
Delaware, as shall be designated from time to time by the Board of Directors.
SECTION 2. Annual Meetings. The annual meeting of stockholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors, at which meetings the stockholders shall elect,
in accordance with Section 1 and Section 2 of Article III of these By-laws, by a
plurality vote those Directors belonging to the class or classes of directors to
be elected at such meeting, and transact such other business as may properly be
brought before the meeting.
SECTION 3. Special Meetings. Unless otherwise prescribed by
law or by the Restated Certificate of Incorporation (the "Certificate of
Incorporation"), special meetings of stockholders may be called only by the
Chairman or a Co-Chairman of the Board, if there be one, or pursuant to a
resolution adopted by a majority of the entire Board of Directors. Business
transacted at all special meetings shall be confined to the matters specified in
the notice of the meeting.
<PAGE>
2
SECTION 4. Notice of Meetings. Except as otherwise provided by
law, written notice of each meeting of the stockholders, whether annual or
special, shall be given, either by personal delivery or by mail, not less than
10 nor more than 60 days before the date of the meeting to each stockholder of
record entitled to notice of the meeting. If mailed, such notice shall be deemed
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation. Each such notice shall state the place, date and hour of the
meeting, and the purpose or purposes for which the meeting is called. Notice of
any meeting of stockholders shall not be required to be given to any stockholder
who shall attend such meeting in person or by proxy without protesting, prior to
or at the commencement of the meeting, the lack of proper notice to such
stockholder, or who shall in writing waive notice thereof. Notice of adjournment
of a meeting of stockholders need not be given if the time and place to which it
is adjourned are announced at such meeting, unless the adjournment is for more
than 30 days or, after adjournment, a new record date is fixed for the adjourned
meeting.
SECTION 5. Quorum. Except as otherwise provided by law or by
the Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be presented or represented.
At such adjourned meeting at which a quorum shall be presented or represented,
any business may be transacted which might have been transacted at the meeting
as originally noticed. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder entitled to vote at
the meeting.
SECTION 6. Voting. Unless otherwise provided by law or by the
Certificate of Incorporation, each stockholder of record of Common Stock shall
be entitled at each meeting of stockholders to one vote for each share of such
stock, in each case, registered in such stockholder's name on the books of the
Corporation (1) on the date fixed pursuant to Section 5 of Article V of these
By-laws as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting; or (2) if no such record date
<PAGE>
3
shall have been so fixed, then at the close of business on the day next
preceding the day on which notice of such meeting is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. At each meeting of the stockholders, all corporate actions to
be taken by vote of the stockholders (except as otherwise required by law and
except as otherwise provided in the Certificate of Incorporation or these
By-laws) shall be authorized by a majority of the votes cast affirmatively or
negatively by the stockholders entitled to vote thereon who are present in
person or represented by proxy, and where a separate vote by class is required,
a majority of the votes cast affirmatively or negatively by the stockholders of
such class who are present in person or represented by proxy shall be the act of
such class. Unless required by law or determined by the Chairman of the meeting
to be advisable, the vote on any matter, including the election of directors,
need not be by written ballot. In the case of a vote by written ballot, each
ballot shall be signed by the stockholder voting, or by such stockholder's
proxy, and shall state the number of shares voted.
SECTION 7. List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 8. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 7 of this Article II or the books
of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 9. Notice of Business. No business may be transacted
at an annual meeting of stockholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors (or any duly authorized
<PAGE>
4
committee thereof), (b) otherwise properly brought before the annual meeting by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the annual meeting by any
stockholder of the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section 9 of this Article II and
on the record date for the determination of stockholders entitled to vote at
such annual meeting and (ii) who complies with the notice procedures set forth
in this Section 9.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 90 days nor more than 120 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date, notice by
the stockholder in order to be timely must be so received not later than the
close of the business on the tenth day following the day on which such notice of
the date of the annual meeting was mailed or public disclosure of the date of
the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business proposed to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder, (iv)
a description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (v) a representation that such stockholder
intends to appear in person or by proxy at the annual meeting to bring such
business before the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 9 of this Article II; provided,
however,
<PAGE>
5
that, once business has been properly brought before the annual meeting in
accordance with such procedures, nothing in this Section 9 of this Article II
shall be deemed to preclude discussion by any stockholder of any such business.
If the Chairman of an annual meeting determines that business was not properly
brought before the annual meeting in accordance with the foregoing procedures,
the Chairman shall declare to the meeting that the business was not properly
brought before the meeting and such business shall not be transacted or
discussed.
ARTICLE III
Directors
SECTION 1. Number of Directors. The business and affairs of
the Corporation shall be managed by or under the direction of a Board of
Directors consisting of a number of directors, divided into such classes and
subject to such other provisions as are set forth in the Certificate of
Incorporation. Except as otherwise provided in the Certificate of Incorporation,
the exact number of directors shall be fixed from time to time by the Board of
Directors.
SECTION 2. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Corporation, except as may be otherwise provided in
the Certificate of Incorporation of the Corporation. Nominations of persons for
election to the Board of Directors may be made at any annual meeting of
stockholders or at any special meeting of stockholders called for the purpose of
electing directors, (a) by or at the direction of the Nominating Committee of
the Board of Directors or (b) by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
this Section 2 of this Article III and on the record date for the determination
of stockholders entitled to vote at such meeting and (ii) who complies with the
notice procedures set forth in this Section 2 of this Article III.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation (a) in the case of an annual meeting, not less than 90 days nor more
than 120 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders;
<PAGE>
6
provided, however, that in the event that the annual meeting is called for a
date that is not within 30 days before or after such anniversary date, notice by
the stockholder in order to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the annual meeting was mailed or public disclosure of the date of the
annual meeting was made, whichever first occurs; and (b) in the case of a
special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth day following the day on which
public disclosure of the date of the special meeting was made.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice
and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.
Subject to Section 4 of this Article III, no person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 2 of this Article III.
If the Chairman of the meeting determines that a nomination
<PAGE>
7
was not made in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
SECTION 3. Removal of Directors. Directors of the Corporation
may be removed only as provided in Paragraph (f) of Article FIFTH of the
Certificate of Incorporation.
SECTION 4. Vacancies and Newly Created Directorships. Any
newly created directorship resulting from an increase in the number of directors
or any other vacancy occurring in the Board of Directors may be filled by a
majority vote of the Nominating Committee, except as may be otherwise provided
in the Certificate of Incorporation of the Corporation. Any director of any
class elected to fill a vacancy resulting from an increase in the number of
directors in such class shall hold office for a term that shall coincide with
the remaining term of that class. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall have the same
remaining term as that of the director's predecessor.
SECTION 5. Duties and Powers. The business of the Corporation
shall be managed by or under the direction of the Board of Directors, except as
may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 6. Meetings. The Board of Directors of the Corporation
may hold meetings, both regular and special, either within or without the State
of Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be determined by
the Board of Directors. Special meetings of the Board of Directors may be called
by the Chairman or any Co-Chairman, if there be one, the Chief Executive
Officer, the President or any two directors. Notice thereof stating the place,
date and hour of the meeting shall be given to each director either by mail not
less than 48 hours before the date of the meeting, by telephone, electronic
facsimile or telegram on 24 hours' notice, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in the
circumstances, provided that notice need not be given to any director who shall,
either before or after the meeting, submit a signed waiver of such notice or who
shall attend such meeting without protesting, prior to or at its commencement,
the lack of notice to such director.
SECTION 7. Quorum. Except as may be otherwise specifically
provided by law, the Certificate of Incorporation or these By-laws, at all
meetings of the Board
<PAGE>
8
of Directors, one-half of the entire Board of Directors shall constitute a
quorum for the transaction of business, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
SECTION 8. Actions of Board. Unless otherwise provided by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 9. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-laws, members
of the Board of Directors of the Corporation, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors or
such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 9 shall
constitute presence in person at such meeting.
SECTION 10. Committees. The Board of Directors may, by
resolution passed by a majority of the entire Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to the
extent allowed by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation.
<PAGE>
9
Each committee shall keep regular minutes and report to the Board of Directors
when required.
SECTION 11. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 12. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorized the contract or transaction, or solely because the vote or votes of
such person or persons are counted for such purpose if (i) the material facts as
to the relationship or interest of such person or persons and as to the contract
or transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to the relationship or interest of such
persons or persons and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
SECTION 13. Meaning of "entire Board of Directors". As used in
this Article III and in these Bylaws generally, the term "entire Board of
Directors" means the total number of directors which the Corporation would have
if there were no vacancies.
<PAGE>
10
SECTION 14. Chairman and Co-Chairman of the Board of
Directors. The Board of Directors may appoint one of its members as Chairman and
one or more of its members as Co-Chairmen of the Board of Directors. The
Chairman or a Co-Chairman of the Board of Directors, if there be one, shall
preside at all meetings of the stockholders and of the Board of Directors and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or as provided in these By-laws or as otherwise may
normally be incident to such office.
SECTION 15. Vice Chairman. The Board of Directors may also
appoint one or more of its members as Vice Chairman of the Board of Directors,
who shall preside at all meetings of the stockholders and of the Board of
Directors in the absence of the Chairman or Co-Chairman, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or as provided in these By-laws or as otherwise may normally be
incident to such office (including, without limitation, the power and authority
to exercise the authority of the Chairman or the Co-Chairmen in the absence or
disability of such person or persons).
ARTICLE IV
Officers
SECTION 1. General. The officers of the Corporation shall be a
Chief Executive Officer, a Secretary and a Treasurer. The officers of the
Corporation may also include, at the discretion of the Board of Directors, a
Chief Financial Officer and one or more business unit Presidents, Vice
Presidents (including, without limitation, Assistant, Executive and Senior),
Vice Chairmen, Assistant Secretaries, Assistant Treasurers and other officers.
The officers of the Corporation shall be chosen by the Board of Directors,
except that the Board may from time to time authorize any officer to appoint and
remove any other officer or agent and to prescribe such person's authority and
duties. Any number of offices may be held by the same person, unless otherwise
prohibited by law, the Certificate of Incorporation or these By-laws. The
officers of the Corporation need not be stockholders of the Corporation nor need
such officers be directors of the Corporation.
SECTION 2. Election. Each Officer shall hold office for the
term for which elected or appointed by the Board of Directors and shall exercise
such powers and perform such duties as are provided in these By-laws or as shall
be determined from time to time by the Board of Directors; and all officers of
the Corporation shall hold
<PAGE>
11
office until their successors are chosen and qualified, or until their earlier
death, resignation or removal. Any officer may be removed, either with or
without cause, by the Board of Directors, at any regular or special meeting
thereof, or by any officer upon whom such power of removal may be conferred by
the Board of Directors, except that an officer chosen by the Board of Directors
may be removed only by the Board of Directors. A vacancy occurring in any office
of the Corporation shall be filled in the manner prescribed in these By-laws for
regular appointments to such office. The salaries and other compensation of all
officers of the Corporation shall be fixed by the Board of Directors.
SECTION 3. Voting Securities Owned by the Corporation. Powers
of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities owned by the Corporation may be executed in
the name of and on behalf of the Corporation by the Chief Executive Officer, the
President or any Vice President and any such officer may, in the name of and on
behalf of the Corporation, take all such action as any such officer may deem
advisable to vote in person or by proxy at any meeting of security holders of
any corporation in which the Corporation may own securities and at any such
meeting shall possess and may exercise any and all rights and powers incident to
the ownership of such securities and which, as the owner thereof, the
Corporation might have exercised and possessed if present. The Board of
Directors may, by resolution, from time to time confer like powers upon any
other person or persons.
SECTION 4. Chief Executive Officer. The chief executive
officer shall be the Chief Executive Officer of the Corporation and shall have
the powers and perform the duties incident to that position. Subject to the
Board of Directors, the Chief Executive Officer shall be in general and active
charge of the entire business and affairs of the Corporation, and shall be its
chief policy-making officer. The Chief Executive Officer shall see to it that
all orders and resolutions of the Board of Directors are carried into effect.
The Chief Executive Officer shall execute all bonds, mortgages, contracts and
other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these By-laws, the Board of Directors or
the Chief Executive Officer. In the absence or disability of the Chairman of the
Board of Directors or any Co-Chairman or Vice Chairman, or if there be none, the
Chief Executive Officer shall preside at all meetings of the stockholders and
the Board of Directors. The Chief Executive Officer shall also perform such
other duties and
<PAGE>
12
may exercise such other powers as from time to time may be assigned to the Chief
Executive Officer by these By-laws or by the Board of Directors.
SECTION 5. President. The President shall perform such duties
and exercise such powers as are incident to that position, and shall perform
such other duties and exercise such other powers as may from time to time be
prescribed by the Board of Directors.
SECTION 6. Vice Presidents. At the request of the Chief
Executive Officer or in the absence of the Chief Executive Officer or in the
event of the inability or refusal to act of the Chief Executive Officer (and if
there be no Chairman or Co-Chairman or any Vice Chairman of the Board of
Directors), the Vice President or the Vice Presidents, if there is more than one
(in the order designated by the Board of Directors) shall perform the duties of
the Chief Executive Officer, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the Chief Executive Officer. Each
Vice President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman or
Co-Chairman or any Vice Chairman of the Board of Directors and no Vice
President, the Board of Directors shall designate the officer of the Corporation
who, in the absence of the Chief Executive Officer or in the event of the
inability or refusal of the Chief Executive Officer to act, shall perform the
duties of the Chief Executive Officer, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the Chief Executive
Officer.
SECTION 7. Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
Chief Executive Officer, under whose supervision the Secretary shall be. If the
Secretary shall be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the Board of Directors, and
if there be no Assistant Secretary, then either the Board of Directors or the
Chief Executive Officer may choose another officer to cause such notice to be
given. The Secretary shall have custody of the seal of the Corporation and the
Secretary or any Assistant Secretary, if there be one, shall have authority to
affix the same to any instrument requiring it and when so affixed,
<PAGE>
13
it may be attested by the signature of the Secretary or by the signature of any
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the Corporation and to attest the
affixing by his or her signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
SECTION 8. Chief Financial Officer. The Chief Financial
Officer shall be the principal officer of the Corporation having responsibility
for financial matters and shall perform such duties as may be assigned to him by
the Board of Directors or the Chairman or any Co-Chairman.
SECTION 9. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all the Treasurer's transactions as Treasurer and of the financial
condition of the Corporation.
SECTION 10. Assistant Secretaries. Except as may be otherwise
provided in these By-laws, Assistant Secretaries, if there be any, shall perform
such duties and have such powers as from time to time may be assigned to them by
the Board of Directors, the Chief Executive Officer, the President, any Vice
Chairman, if there be one, or the Secretary, and in the absence of the Secretary
or in the event of the disability of the Secretary or refusal of the Secretary
to act, shall perform the duties of the Secretary, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
Secretary.
SECTION 11. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time to
time may be assigned to them by the Board of Directors, the Chief Executive
Officer, any Vice President, if there be one, or the Treasurer, and in the
absence of the Treasurer or in the event of the disability of the Treasurer or
refusal of the Treasurer to act, shall perform the duties of the Treasurer, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Treasurer. If required by the Board of Directors, an
Assistant Treasurer shall give the
<PAGE>
14
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of such office and for the restoration to the Corporation, in case of
such Assistant Treasurer's death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in the possession or under the control of such Assistant Treasurer
belonging to the Corporation.
SECTION 12. Other Officers. Such other officers as the Board
of Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
Stock
SECTION 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the Co-Chairman of
the Board of Directors, the Chief Executive Officer or a Vice President and (ii)
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares in the Corporation
owned by such holder.
SECTION 2. Signatures. Any or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
SECTION 3. Lost Certificates. The Board of Directors may
direct a new certificate to be issued in place of any certificate theretofore
issued by the Corporation alleged to have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issue of a new
certificate, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate, or the legal representative of such person, to advertise
the same in such
<PAGE>
15
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
SECTION 4. Transfers. Stock of the Corporation shall be
transferable in the manner prescribed by law and in these By-laws. Transfers of
stock shall be made on the books of the Corporation only by the person named in
the certificate or by the person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be canceled before a
new certificate shall be issued.
SECTION 5. Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which shall not be more than 60 days nor less than 10
days before the date of such meeting, nor more than 60 days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. Beneficial Owners. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise required
by law.
ARTICLE VI
Notices
SECTION 1. Notices. Whenever written notice is required by
law, the Certificate of Incorporation or these By-laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at
<PAGE>
16
the address of such person as it appears on the records of the corporation, with
postage thereon prepaid, and such notice shall be deemed to be given at the time
when the same shall be deposited in the United States mail. Written notice may
also be given personally or by electronic facsimile, telegram, telex, cable or
overnight courier.
SECTION 2. Waivers of Notice. Whenever any notice is required
by law, the Certificate of Incorporation or these By-laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
ARTICLE VII
General Provisions
SECTION 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
SECTION 2. Disbursements. All checks or demands for money and
notes of the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
SECTION 3. Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
SECTION 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
<PAGE>
17
Indemnification of Directors and Officers
SECTION 1. Right to Indemnification. Each person who was or is
made a party or is threatened to be made a party to or is otherwise involved in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or an officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section 3 of this
ARTICLE VIII with respect to proceedings to enforce rights to indemnification,
the Corporation shall indemnify any such indemnitee in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceedings (or part thereof) was authorized by the Board of Directors of the
Corporation.
SECTION 2. Right to Advancement of Expenses. The right to
indemnification conferred in Section 1 of this ARTICLE VIII shall include the
right to be paid by the Corporation the expenses (including attorneys' fees)
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled
<PAGE>
18
to be indemnified for such expenses under this Section 2 or otherwise. The
rights to indemnification and to the advancement of expenses conferred in
Sections 1 and 2 of this ARTICLE VIII shall be contract rights and such rights
shall continue as to an indemnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the indemnitee's heirs,
executors and administrators.
SECTION 3. Right of Indemnitee to Bring Suit. If a claim under
Section 1 or 2 of this ARTICLE VIII is not paid in full by the Corporation
within sixty (60) days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty (20) days, the indemnitee may
at any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the indemnitee shall be entitled to be paid also
the expense of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in a
suit brought by the indemnitee to enforce a right to an advancement of expenses)
it shall be a defense that, and (ii) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
ARTICLE VIII or otherwise shall be on the Corporation.
<PAGE>
19
SECTION 4. Non-Exclusivity of Rights. The rights to
indemnification and to the advancement of expenses conferred in this ARTICLE
VIII shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, the Corporation's Certificate of
Incorporation, By-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 5. Insurance. The Corporation may maintain insurance,
at its expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 6. Indemnification of Employees and Agents of the
Corporation. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
ARTICLE IX
Amendments
Except as otherwise provided in the Certificate of
Incorporation, these By-laws may be altered, amended or repealed, in whole or in
part, or new By-laws may be adopted (i) upon a vote of a majority of the entire
Board of Directors or (ii) by the affirmative vote of the holders of a majority
of the combined voting power of the then outstanding shares of stock of all
classes and series of stock the holders of which are entitled to vote generally
in the election of directors, voting together as a single class.
<PAGE>
Exhibit 4.6
FOURTH AMENDMENT dated as of December 8, 1995 (this
"Amendment") to the CREDIT AGREEMENT dated as of June 22, 1994 and as amended
and in effect immediately prior to the date hereof (the "Credit Agreement")
among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"),
WCA CANADA INC., a Canadian corporation (the "Canadian Borrower"), COLLINS &
AIKMAN CORPORATION, a Delaware corporation ("Holdings"), the financial
institutions party thereto (the "Lenders"), and CHEMICAL BANK, as administrative
agent (the "Administrative Agent").
A. The Borrower, the Canadian Borrower, Holdings, the Lenders
and the Administrative Agent desire to amend the Credit Agreement in certain
respects as hereinafter set forth.
B. Capitalized terms used but not defined herein shall have
the meanings assigned to them in the Credit Agreement.
Accordingly, the Borrower, the Canadian Borrower, Holdings,
the Lenders and the Administrative Agent hereby agree as follows:
SECTION 1. Amendment of Credit Agreement. The Credit Agreement
is hereby amended, effective as of the Effective Date (as hereinafter defined),
as follows:
(a) Section 1.01 is amended by inserting immediately following
the word "person" where it appears in clause (ii) of the definition of "Net
Income" the parenthetical "(other than any person acquired in connection with a
Permitted Business Acquisition solely for the purpose of calculating the
Leverage Ratio under Section 6.16)".
(b) Section 1.01 is amended by adding at the end of the first
sentence of the definition of "Permitted Business Acquisitions" the following
proviso:
"; provided that, in the case of the Larizza Acquisition,
Holdings shall be deemed to be in compliance with the
covenants contained in Sections 6.14, 6.16 and 6.17 for the
purposes of this definition only if, on a pro forma basis
recomputed as at the last day of the most recently ended
fiscal quarter of Holdings, (x) the Interest Coverage Ratio is
greater than 3.25 to 1.00, (y) the Leverage Ratio is equal to
or less than 3.50 to 1.00 and (z) the Current Ratio is greater
than or equal to 1.25:1.00."
(c) Section 1.01 is amended by adding, in appropriate
alphabetical order, the following definition:
"'Larizza Acquisition' shall mean the acquisition of Larizza
Industries, Inc. by the Borrower pursuant to a Merger
Agreement dated as of September 26, 1995."
<PAGE>
2
(d) Section 5.09 is amended by inserting in clause (i) of the
second sentence thereof after the words "Unrestricted Subsidiary" in the
parenthetical the words "or of a foreign subsidiary".
(e) Subsection 6.01(d) is amended by (1) deleting the word
"and" appearing at the end of clause (iv) and substituting therefor a comma, (2)
adding the word "and" before the semicolon at the end of clause (v) and (3)
adding a new clause (vi) thereto, reading as follows:
"(vi) Manchester Plastics, Ltd. to any Domestic Restricted
Subsidiary in an aggregate principal amount not to exceed
$35,000,000, evidenced by one or more Intercompany Notes
pledged to the Collateral Agent under the Pledge Agreement."
(f) Section 6.14 is amended by deleting said Section in
its entirety and substituting in lieu thereof the following:
"SECTION 6.14. Interest Coverage Ratio. In the case
of Holdings, permit the Interest Coverage Ratio for any period
of four consecutive fiscal quarters to be less than the ratio
set forth below opposite the period which includes the last
day of such period of consecutive fiscal quarters:
Period: Amount:
May 1, 1995 - January 31, 1996 3.25 to 1.00
February 1, 1996 - January 31, 1997 3.50 to 1.00
February 1, 1997- April 30, 1997 3.75 to 1.00
May 1, 1997 - January 31, 1998 4.25 to 1.00
Thereafter 4.75 to 1.00"
(g) Section 6.16 is amended by deleting said Section in its
entirety and substituting in lieu thereof the following:
<PAGE>
3
"SECTION 6.16. Leverage Ratio. In the case of
Holdings, permit the Leverage Ratio as of the last day of any
fiscal quarter occurring during any period set forth below to
be greater than the ratio set forth below for such period:
Quarter Ending: Ratio:
January 31, 1996 3.75 to 1.00
April 30, 1996 3.50 to 1.00
July 31, 1996 3.50 to 1.00
October 31, 1996 3.25 to 1.00
January 31, 1997 3.00 to 1.00
February 1, 1997 - January 31, 1998 2.75 to 1.00
February 1, 1998 - January 31, 1999 2.50 to 1.00
Thereafter 2.25 to 1.00"
SECTION 2. Effectiveness. This Amendment will become
effective on the date (the "Effective Date") on which the following conditions
have been satisfied: (a) the Administrative Agent shall have received
counterparts of this Amendment which, when taken together, bear the signatures
of the Borrower, the Canadian Borrower, Holdings, the Administrative Agent and
the Required Lenders, (b) on and as of the Effective Date and after giving
effect to this Amendment, no Default or Event of Default shall have occurred and
be continuing, (c) the representations and warranties made by Holdings, the
Borrower and the Canadian Borrower in the Credit Agreement shall be true and
correct in all material respects on and as of the Effective Date as if made on
such date, except where such representations and warranties expressly relate to
an earlier date in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date, (d) the
Administrative Agent shall have received a certificate of a Responsible Officer
of the Borrower, dated the Effective Date, certifying the matters referred to in
clauses (b) and (c) above and (e) the Administrative Agent shall have received
the fee required pursuant to Section 3 of this Amendment.
SECTION 3. Amendment Fee. The Borrower shall pay to the
Administrative Agent for the ratable benefit of the Lenders executing and
delivering this Amendment a fee in an amount equal to 1/8 of 1% of the aggregate
amount of Delayed Draw Terms Loans, Canadian Term Loans, Term Loans and
Revolving Credit Commitments outstanding on the Effective Date.
SECTION 4. Applicable Law. This Amendment shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 5. Counterparts. This Amendment may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute but one instrument.
<PAGE>
4
SECTION 6. Agreement. Except as expressly amended hereby, the
Credit Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof.
SECTION 7. Expenses. The Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation of this Amendment, including, but not limited to, the reasonable
fees and disbursements of counsel for the Administrative Agent.
SECTION 8. Headings. The headings of this Amendment are for
the purposes of reference only and shall not limit or otherwise affect the
meanings hereof.
<PAGE>
5
IN WITNESS WHEREOF, the Borrower, the Canadian Borrower,
Holdings, the Lenders signatory hereto and the Administrative Agent have caused
this Amendment to be duly executed by their duly authorized officers, all as of
the dates first above written.
COLLINS & AIKMAN PRODUCTS CO.
By:/s/ J. Michael Stepp
Title: Senior Vice President
COLLINS & AIKMAN CORPORATION
By:/s/ J. Michael Stepp
Title: Senior Vice President
COLLINS & AIKMAN CANADA INC.
(Formerly known as WCA CANADA INC.)
By:/s/ Ronald T. Lindsay
Title: Vice President
CHEMICAL BANK, as a Lender and
as Administrative Agent
By:/s/ Rosemary Bradley
Title: Vice President
BANK OF AMERICA ILLINOIS
By:/s/
Title:
<PAGE>
6
NATIONSBANK, N.A.
By:/s/ J. Timothy Martin
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By:/s/ Daniel T. Rencricce
Title: Vice President
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:/s/ Robert Ivosevich
Title: Authorized Signature
THE INDUSTRIAL BANK OF JAPAN, LTD.
By:/s/ Junri Oda
Title: Sen. Vice Pres. & Sen. Manager
THE LONG-TERM CREDIT BANK OF
JAPAN LTD.
By:/s/ Jay Shankar
Title: Vice President
THE TORONTO-DOMINION BANK
By:/s/ Debbie A. Greene
Title: MGR. CR. ADMIN.
THE FIRST NATIONAL BANK OF BOSTON
By:/s/ William C. Purinton
Title: Vice President
<PAGE>
7
BANK OF SCOTLAND
By:/s/ Annie Chin Tat
Title: Assistant Vice President
THE BANK OF TOKYO TRUST COMPANY
By:/s/ Joseph P. Devoe
Title: Vice President
BANQUE PARIBAS
By:/s/ Stephen Eisenstein
Title: Vice President
By:/s/ Gary A. Binning
Title: Vice President
BRANCH BANKING AND TRUST COMPANY
By:/s/ Thatcher L. Townsend III
Title: Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE
By:/s/ Roger Colden
Title: Authorized Signatory
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:/s/ Sean Mounier
Title: First Vice President
By:/s/ Marcus Edward
Title: Vice President
<PAGE>
8
THE NIPPON CREDIT BANK, LTD.
By:/s/ Clifford Abramsky
Title: Vice President & Manager
SOCIETE GENERALE
By:/s/ Ralph Saheb
Title: Vice President
SOCIETY NATIONAL BANK
By:/s/ Sharon F. Weinstein
Title: V.P. & Manager
THE TRAVELERS INSURANCE COMPANY
By:/s/ Craig H. Farnsworth
Title: 2nd Vice President
THE TRAVELERS INDEMNITY COMPANY
By:/s/ Craig H. Farnsworth
Title: 2nd Vice President
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
By:/s/ Joanne M. Starnes
Title: Senior Vice President
WELLS FARGO BANK
By:/s/ Christine C. Rotter
Title: Vice President
<PAGE>
9
VAN KAMPEN AMERICA CAPITAL PRIME
RATE INCOME TRUST
By:/s/ Jeffrey W. Maillet
Title: Sr. Vice Pres. - Portfolio Mgr.
ARAB BANKING CORPORATION
By:/s/ Louise Bilbro
Title: Vice President
BANK OF IRELAND
By:/s/ John Cusack
Title: Assistant Treasurer
THE BANK OF NEW YORK
By:/s/ H.S. Griffith
Title: Senior Vice President
CREDITANSTALT CORPORATE FINANCE,
INC.
By:/s/ Robert M. Biringer
Title: SVP
By:/s/ Craig Stamm
Title: Sr. Associate
CRESTAR BANK
By:/s/ C. Gray Key
Title: Vice President
<PAGE>
10
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:/s/ David Silander
Title: Vice President
FUJI BANK
By:/s/ Katsunori Nozawa
Title: Vice President & Manager
GIROCREDIT BANK
By:/s/ John P. Redding
Title: Vice President
MIDLAND BANK
By:/s/ Gina Sidorsky
Title: Director
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:/s/ Hachiro Hosoda
Title: Senior Vice President
NATIONAL CITY BANK
By:/s/ Ted Parker
Title: Vice President
NBD BANK
By:/s/ James D. Heinz
Title: Vice President
<PAGE>
11
THE SUMITOMO TRUST & BANKING CO.,
LTD.
By:/s/ Suraj Bhatia
Title: Senior Vice President
UNITED STATES NATIONAL BANK OF
OREGON
By:/s/ Stephen Mitchell
Title: Vice President
THE YASUDA TRUST & BANKING CO.,
LTD.
By:/s/ Makoto Tagawa
Title: Deputy General Manager
CRESCENT/MACH 1 PARTNERS, L.P.
By TCW Asset Management Company
its Investment Manager
By:/s/ Justin Driscoll
Title: Vice President
ALEXANDER HAMILTON LIFE
INSURANCE CO.
By:/s/
Title:
<PAGE>
12
KEYPORT LIFE INSURANCE CO.
By:/s/ Stephen M. Alfieri
Title: Managing Director
SAKURA BANK
By:/s/ Hiroyasu Imanishi
Title: V.P. & Senior Manager
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
By: Chancellor Senior Secured Management, Inc.
as Portfolio Advisor
By:/s/ Stephen M. Alfieri
Title: Managing Director
<PAGE>
Exhibit 4.7
FIFTH AMENDMENT dated as of April 5, 1996 (this "Amendment")
to the CREDIT AGREEMENT dated as of June 22, 1994 and as amended and in effect
immediately prior to the date hereof (the "Credit Agreement") among COLLINS &
AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN
CANADA INC. (f/k/a WCA Canada Inc.), a Canadian corporation (the "Canadian
Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware corporation ("Holdings"),
the financial institutions party thereto (the "Lenders"), and CHEMICAL BANK, as
administrative agent (the "Administrative Agent").
A. The Borrower, the Canadian Borrower, Holdings, the Lenders
and the Administrative Agent desire to amend the Credit Agreement in certain
respects as hereinafter set forth.
B. Capitalized terms used but not defined herein shall have
the meanings assigned to them in the Credit Agreement.
Accordingly, the Borrower, the Canadian Borrower, Holdings,
the Lenders and the Administrative Agent hereby agree as follows:
SECTION 1. Amendment of Credit Agreement. The Credit Agreement
is hereby amended effective as of the Effective Date (as hereinafter defined) as
follows:
(a) Subsection 6.14 is amended by deleting the line "February
1, 1996 -January 31, 1997 3.50 to 1.00" in the table appearing in such
subsection and substituting therefor the following two lines:
February 1, 1996 - April 30, 1996 3.25 to 1.00
May 1, 1996 - January 31, 1997 3.50 to 1.00
(b) Subsection 6.16 is amended by deleting the ratio "3.50 to
1. 00" appearing opposite the date "April 30, 1996" in the table in such
subsection and substituting therefor the ratio "3.95 to 1.00"
SECTION 2. Effectiveness. This Amendment will become
effective on the date, which may not be later than April 30, 1996 (the
"Effective Date"), on which the following conditions have been satisfied: (i)
the Administrative Agent shall have received counterparts of this Amendment
which, when taken together, bear the signatures of the Borrower, the Canadian
Borrower, Holdings, the Administrative Agent and the Required Lenders, (ii) on
and as of the Effective Date and after giving effect to this Amendment, no
Default or Event of Default shall have occurred and be continuing, (iii) the
representations and warranties made by Holdings, the Borrower and the Canadian
Borrower in the Credit Agreement shall be true and correct in all material
respects on and as of the Effective Date as if made on such date, except where
such representations and warranties expressly relate to an earlier date in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date and (iv) the Administrative Agent
shall have received a certificate of a Responsible Officer of the Borrower,
dated the Effective Date, certifying the matters referred to in clauses (ii) and
(iii) above.
<PAGE>
2
SECTION 3. Applicable Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 4. Counterparts. This Amendment may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute but one instrument.
SECTION 5. Agreement. Except as expressly amended hereby, the
Credit Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof.
SECTION 6. Expenses. The Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation of this Amendment, including, but not limited to, the reasonable
fees and disbursements of counsel for the Administrative Agent.
SECTION 7. Headings. The headings of this Amendment are for
the purposes of reference only and shall not limit or otherwise affect the
meanings hereof.
<PAGE>
3
IN WITNESS WHEREOF, the Borrower, the Canadian Borrower,
Holdings, the Lenders signatory hereto and the Administrative Agent have caused
this Amendment to be duly executed by their duly authorized officers, all as of
the dates first above written.
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive VP & CFO
COLLINS & AIKMAN CORPORATION
By:/s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive VP & CFO
COLLINS & AIKMAN CANADA INC.
(Formerly known as WCA CANADA INC.)
By:/s/ Ronald T. Lindsay
Name: Ronald T. Lindsay
Title: Vice President
CHEMICAL BANK, as a Lender and
as Administrative Agent
By:/s/ Rosemary Bradley
Name: Rosemary Bradley
Title: Vice President
NATIONSBANK, N.A.
By:____________________________
Name:
Title:
<PAGE>
4
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By:/s/ Linda A. Carper
Name: Linda A. Carper
Title: Managing Director
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:____________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LTD.
By:____________________________
Name:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN LTD.
By:/s/ Jay Shankar
Name: Jay Shankar
Title: Vice President
THE TORONTO-DOMINION BANK
By:_____________________________
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ William C. Purinton
Name: William C. Purinton
Title: Vice President
<PAGE>
5
BANK OF SCOTLAND
By:/s/ Catherine M. Oniffrey
Name: Catherine M. Oniffrey
Title: Vice President
THE BANK OF TOKYO TRUST COMPANY
By:_____________________________
Name:
Title:
BANQUE PARIBAS
By:/s/ Stephen L. Eisenstein
Name: Stephen L. Eisenstein
Title: Vice President
By:/s/ Douglas R. Gouchoe
Name: Douglas R. Gouchoe
Title: Vice President
BRANCH BANKING AND TRUST COMPANY
By:_____________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE
By: /s/ Roger Colden
Name: Roger Colden
Title: Authorized Signatory
<PAGE>
6
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:/s/ Sean Mounier
Name: Sean Mounier
Title: First Vice President
By:/s/ Marcus Edward
Name: Marcus Edward
Title: Vice President
THE NIPPON CREDIT BANK, LTD.
By:/s/ Clifford Abramsky
Name: Clifford Abramsky
Title: VP - Manager
SOCIETE GENERALE
By:/s/ Ralph Saheb
Name: Ralph Saheb
Title: Vice President
SOCIETY NATIONAL BANK
By:/s/ Sharon F. Weinstein
Name: Sharon F. Weinstein
Title: Vice President
THE TRAVELERS INSURANCE COMPANY
By:_____________________________
Name:
Title:
THE TRAVELERS INDEMNITY COMPANY
By:_____________________________
Name:
Title:
<PAGE>
7
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
By:/s/ Sarah T. Warren
Name: Sarah T. Warren
Title: Vice President
WELLS FARGO BANK
By:/s/ Kathleen J. Harrison
Name: Kathleen J. Harrison
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By:/s/ Jeffrey W. Maillet
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres. - Portfolio Mgr.
ARAB BANKING CORPORATION
By: /s/ Louise Bilbro
Name: Louise Bilbro
Title: Vice President
BANK OF IRELAND
By:/s/ John G. Cusack
Name: John G. Cusack
Title: Assistant Treasurer
THE BANK OF NEW YORK
By:______________________________
Name:
Title:
<PAGE>
8
CREDITANSTALT CORPORATE FINANCE,
INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
CRESTAR BANK
By:______________________________
Name:
Title:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:______________________________
Name:
Title:
FUJI BANK
By:_____________________________
Name:
Title:
GIROCREDIT BANK
By: /s/ John Redding/Richard Stone
Name: John Redding/Richard Stone
Title:
<PAGE>
9
MIDLAND BANK
By:______________________________
Name:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:/s/ Patricia Loret de Mola
Name: Patricia Loret de Mola
Title: Senior Vice President
NATIONAL CITY BANK
By:/s/ Lisa B. Lisi
Name: Lisa B. Lisi
Title: Account Officer
NBD BANK
By:/s/ Russell H. Liebetrau, Jr.
Name: Russell H. Liebetrau, Jr.
Title: Vice President
THE SUMITOMO TRUST & BANKING CO.,
LTD.
By:______________________________
Name:
Title:
UNITED STATES NATIONAL BANK OF
OREGON
By:/s/ Stephen Mitchell
Name: Stephen Mitchell
Title: Vice President
<PAGE>
10
THE YASUDA TRUST & BANKING CO.,
LTD.
By:_____________________________
Name:
Title:
CRESCENT/MACH 1 PARTNERS, L.P.
By TCW Asset Management Company
its Investment Manager
By:_____________________________
Name:
Title:
ALEXANDER HAMILTON LIFE
INSURANCE CO.
By:_____________________________
Name:
Title:
KEYPORT LIFE INSURANCE CO.
By:______________________________
Name:
Title:
SAKURA BANK
By:______________________________
Name:
Title:
<PAGE>
11
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS
By:_____________________________
Name:
Title:
DRESDNER BANK, A.G. CHICAGO AND
GRAND CAYMAN BRANCHES
By:/s/ E. R. Holder
Name: E. R. Holder
Title: Vice President
By:/s/ Brian Brodeur
Name: Brian Brodeur
Title: Vice President
<PAGE>
Exhibit 4.9
FIRST AMENDMENT dated as of April 5, 1996 (this "Amendment")
to the CREDIT AGREEMENT dated as of December 22, 1995 and as amended and in
effect immediately prior to the date hereof (the "Credit Agreement") among
COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS
& AIKMAN CORPORATION, a Delaware corporation ("Holdings"), the financial
institutions party thereto (the "Lenders"), and CHEMICAL BANK, as administrative
agent (the "Administrative Agent").
A. The Borrower, Holdings, the Lenders and the Administrative
Agent desire to amend the Credit Agreement in certain respects as hereinafter
set forth.
B. Capitalized terms used but not defined herein shall have
the meanings assigned to them in the Credit Agreement.
Accordingly, the Borrower, Holdings, the Lenders and the
Administrative Agent hereby agree as follows:
SECTION 1. Amendment of Credit Agreement. The Credit Agreement
is hereby amended effective as of the Effective Date (as hereinafter defined) as
follows:
(a) Subsection 6.14 is amended by deleting the line "February
1, 1996 -January 31, 1997 3.50 to 1.00" in the table appearing in such
subsection and substituting therefor the following two lines:
February 1, 1996 - April 30, 1996 3.25 to 1.00
May 1, 1996 - January 31, 1997 3.50 to 1.00
(b) Subsection 6.16 is amended by deleting the ratio "3.50 to
1. 00" appearing opposite the date "April 30, 1996" in the table in such
subsection and substituting therefor the ratio "3.95 to 1.00"
SECTION 2. Effectiveness. This Amendment will become
effective on the date, which may not be later than April 30, 1996 (the
"Effective Date"), on which the following conditions have been satisfied: (i)
the Administrative Agent shall have received counterparts of this Amendment
which, when taken together, bear the signatures of the Borrower, Holdings, the
Administrative Agent and the Required Lenders, (ii) on and as of the Effective
Date and after giving effect to this Amendment, no Default or Event of Default
shall have occurred and be continuing, (iii) the representations and warranties
made by Holdings and the Borrower in the Credit Agreement shall be true and
correct in all material respects on and as of the Effective Date as if made on
such date, except where such representations and warranties expressly relate to
an earlier date in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date and (iv) the
Administrative Agent shall have received a certificate of a Responsible Officer
of the Borrower, dated the Effective Date, certifying the matters referred to in
clauses (ii) and (iii) above.
<PAGE>
2
SECTION 3. Applicable Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 4. Counterparts. This Amendment may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute but one instrument.
SECTION 5. Agreement. Except as expressly amended hereby, the
Credit Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof.
SECTION 6. Expenses. The Borrower shall pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation of this Amendment, including, but not limited to, the reasonable
fees and disbursements of counsel for the Administrative Agent.
SECTION 7. Headings. The headings of this Amendment are for
the purposes of reference only and shall not limit or otherwise affect the
meanings hereof.
<PAGE>
3
IN WITNESS WHEREOF, the Borrower, Holdings, the Lenders
signatory hereto and the Administrative Agent have caused this Amendment to be
duly executed by their duly authorized officers, all as of the dates first above
written.
COLLINS & AIKMAN PRODUCTS CO.
By:/s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive VP & CFO
COLLINS & AIKMAN CORPORATION
By:/s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Exeuctive VP & CFO
CHEMICAL BANK, as a Lender and
as Administrative Agent
By:/s/ Rosemary Bradley
Name: Rosemary Bradley
Title: Vice President
NEW YORK LIFE INSURANCE COMPANY
By:____________________________
Name:
Title:
CHL HIGH YIELD LOAN PORTFOLIO
By:/s/ Richard W. Stewart
Name: Richard W. Stewart
Title: Vice President
<PAGE>
4
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: /s/ John W. Fraser
Name:
Title:
MERRILL LYNCH
PRIME RATE PORTFOLIO
BY MERRILL LYNCH ASSET
MANAGEMENT, LP AS ADVISOR
By: /s/ John W. Fraser
Name:
Title:
SENIOR HIGH INCOME PORTFOLIO, INC.
By: /s/ John W. Fraser
Name:
Title:
SENIOR HIGH INCOME PORTFOLIO II, INC.
By: /s/ John W. Fraser
Name:
Title:
SENIOR STRATEGIC INCOME FUND, INC.
By: /s/ John W. Fraser
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By:/s/ Jeffrey W. Maillet
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres. - Porfolio Mgr.
<PAGE>
5
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
By:____________________________
Name:
Title:
AERIES FINANCE, LTD.
By:____________________________
Name:
Title:
STRATA FUNDING LIMITED
By:____________________________
Name:
Title:
CERES FINANCE, LTD.
By:____________________________
Name:
Title:
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
By: Chancellor Senior Secured Management,
Inc., as Portfolio Advisor
By:
Name: Jeffrey S. Garner
Title: Vice President
SENIOR DEBT PORTFOLIO
By:____________________________
Name:
Title:
INDOSUEZ CAPITAL FUNDING II
<PAGE>
6
By:____________________________
Name:
Title:
<PAGE>
Exhibit 10.6
June 30, 1995
Mr. John D. Moose
306 Southerland Court
Durham, North Carolina 27712
Dear John:
This is to confirm my previous discussions with you relating to your
employment with Collins & Aikman Products Co. In the event your employment is
terminated by the company without cause prior to or on June 30, 1996, then the
company will be obligated to pay severance to you in an amount equal to your
base salary then in effect for the period remaining between the date of
termination and June 30, 1997. In the event your employment is terminated by the
company without cause after June 30, 1996 while you are a member of the
company's Operating Committee, then the company will be obligated to pay
severance to you in accordance with company policy and practices regarding
involuntary termination of employment of a member of the Operating Committee.
Such amount will be paid either in a lump sum or on a periodic basis in
accordance with normal pay practice, as determined by the Compensation Board. If
the company terminates your employment for cause, you will receive your unpaid
base salary accrued to the date on which your employment terminates. For
purposes of this letter, "cause" means (1) fraud or misappropriation with
respect to the business of the company or an affiliate of the company or
intentional material damage to the property or business of the company or an
affiliate of the company, (2) willful failure by you to perform your duties and
responsibilities and to carry out your authority, (3) willful malfeasance or
misfeasance or breach of fiduciary duties or representations to the company or
its stockholders or affiliates, (4) willful failure to act in accordance with
any specific lawful instructions of a majority of the Board of Directors of the
company, or (5) you are convicted of a felony. Of course, if you voluntarily
terminate your employment at any time, the company's obligation to you is the
same as if the termination were for cause.
This letter does not alter your existing "change in control"
arrangement with the company; however, the severance obligations contained
herein are not payable in the event that the "change in control" payment under
that arrangement is made. This letter does not create an employment contract or
affect the right of the company to terminate your employment at any time without
notice.
Sincerely,
/s/Thomas E. Hannah
Thomas E. Hannah
TEH/jj
<PAGE>
Exhibit 10.20
AMENDMENT NO. 1
TO
SERIES 1995-1 SUPPLEMENT
AMENDMENT NO. 1, dated February 29, 1996, 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 Series 1995-1 Supplement,
dated as of March 30, 1995 (the "Series 1 Supplement"), among the Company, the
Master Servicer and the Trustee, to that certain Pooling Agreement, dated as of
March 30, 1995, as amended by Amendment No. 1 dated September 5, 1995 and
Amendment No. 2 dated October 25, 1995 (the "Pooling Agreement"), among the
Company, the Master Servicer and the Trustee.
WHEREAS, the Company, the Master Servicer and the Trustee
entered into the Pooling 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 1 Supplement; 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, Section 10.1(b) of the Pooling Agreement and Section
8.5 of the Series 1 Supplement permit the Series 1 Supplement to be amended from
time to time pursuant to the provisions set forth in the Pooling Agreement; and
WHEREAS, each Holder of a Term Certificate has consented to
the changes being effected pursuant to this Amendment No. 1; and
WHEREAS, the parties hereto wish to amend the Series 1
Supplement 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 Pooling Agreement or the Series
1 Supplement, as the case may be.
2. (a) Section 1.1 of the Series 1 Supplement is
hereby amended by inserting in their proper alphabetical order
the following new definitions:
"Obligor Overconcentration Percentage" shall mean, with
respect to each Eligible Obligor (other than a Primary Auto Obligor)
whose Eligible Receivables on the last Business Day of the Series 1
Revolving Period have an aggregate Principal Amount in excess of the
related Obligor Limit, the percentage equivalent of a fraction,
determined on the last Business Day of the Series 1 Revolving Period,
the numerator of which is the excess of (i) the aggregate Principal
Amount of all Eligible Receivables of such Eligible Obligor in the
Trust over (ii) the Obligor Limit for such Eligible Obligor, and the
denominator of which is the aggregate Principal Amount of all Eligible
Receivables of such Eligible Obligor in the Trust.
"Series 1 Escrow Account" shall have the meaning assigned in
subsection 3A.2(a).
"Series 1 Overconcentration Amount" shall mean, with respect
to each Business Day during the Series 1 Amortization Period (including
Distribution Dates), for each Eligible Obligor (other than a Primary
Auto Obligor), whose Eligible Receivables on the last Business Day of
the Series 1 Revolving Period have an aggregate Principal Amount in
excess of the related Obligor Limit, the product of the amount of funds
deposited into the Series 1 Collection Subaccount on such day with
respect to Eligible Receivables of such Eligible Obligor and the
Obligor Overconcentration Percentage for such Eligible Obligor.
"Uncommitted Primary Auto Receivables Amount" shall mean, with
respect to each Business Day during the Series 1 Amortization Period
(including Distribution Dates), the product of the amount of funds
deposited into the Series 1 Collection Subaccount on such day with
respect to Eligible Primary Auto Receivables and the Uncommitted
Primary Auto Receivables Percentage.
-2-
<PAGE>
"Uncommitted Primary Auto Receivables Percentage" shall mean
the percentage equivalent of a fraction, determined on the last
Business Day of the Series 1 Revolving Period, the numerator of which
is the excess of (a) the Aggregate Series 2 Receivables Amount over (b)
the Series 2 Allocated Receivables Amount and the denominator of which
is the excess of (x) the aggregate Principal Amount of the Eligible
Primary Auto Receivables over (y) the Series 2 Allocated Receivables
Amount. For purposes of determining the Uncommitted Primary Auto
Receivables Percentage, no effect shall be given to any Additional
Series 2 Receivables.
(b) Section 2.2 of the Series 1 Supplement is hereby
amended by adding a new paragraph (d) to read as follows:
"Notwithstanding the foregoing, except as otherwise provided
in Section 3A.3(f), neither the Series 1 Certificateholders'
Interest nor the Subordinated Interest shall include the right
to receive amounts on deposit in the Series 1 Escrow Account."
(c) Section 3A.2 of the Series 1 Supplement is hereby
amended by adding two new sentences at the end of paragraph (a)
to read in their entirety as follows:
"In addition, upon the commencement of the Series 1
Amortization Period, the Trustee shall cause to be established
and maintained in the name of the Trustee, on behalf of the
Trust (A) for the benefit of the Class A Certificateholders,
(B) for the benefit, subject to the prior interest of the
Class A Certificateholders, of the Class B Certificateholders
and (C) for the benefit, subject to the prior interest of the
Term Certificateholders, of the holder of the Exchangeable
Company Certificate, an account (the "Series 1 Escrow
Account"). The Trustee shall possess all right, title and
interest in all funds from time to time on deposit in, and all
Eligible Investments credited to, the Series 1 Escrow Account
and in all proceeds thereof."
(d) Section 3A.3 of the Series 1 Supplement is hereby
amended as follows:
(i) by amending clause (iii) of paragraph (c) to read
in its entirety as follows:
"(iii) On each Business Day during the Series 1
Amortization Period (including Distribution Dates), funds
deposited in the Series 1 Principal Collection Sub-subaccount
and the Series 1 Escrow Account shall
-3-
<PAGE>
be invested in Eligible Investments that mature on or prior to
the next Determination Date and shall be applied on the next
Distribution Date in accordance with subsections 3A.6(c),
3A.6(f) or 3A.6(g), as applicable. No amounts on deposit in
the Series 1 Principal Collection Sub-subaccount or the Series
1 Escrow Account shall be distributed by the Trustee to the
Company during the Series 1 Amortization Period."
(ii) by adding new paragraphs (e), (f) and (g) to read
in their entirety as follows:
"(e) Notwithstanding any other provisions of the
Agreement or this Supplement to the contrary, on each Business
Day during the Series 1 Amortization Period (including
Distribution Dates), the Trustee shall transfer from the
Series 1 Collection Subaccount to the Series 1 Escrow Account
the amount specified in the Daily Report as having been
deposited in the Series 1 Collection Subaccount since the
preceding Business Day in respect of (i) Ineligible
Receivables, (ii) any Series 1 Overconcentration Amounts and
(iii) any Uncommitted Primary Auto Receivables Amount.
(f) If the Term Certificates Invested Amount is not
paid in full on any Distribution Date following the date on
which the Aggregate Series 1 Receivables Amount is reduced to
zero, the Trustee shall transfer funds on each such
Distribution Date from the Series 1 Escrow Account in the
following order of priority:
(i) to the extent there are insufficient
funds in the Series 1 Accrued Interest Sub-subaccount
to pay Class A Monthly Interest and Class B Monthly
Interest on such Distribution Date, to the Series 1
Accrued Interest Sub-subaccount (which amount shall
be used to pay such shortfall in interest on such
Distribution Date), the lesser of (x) the sum of
Class A Monthly Interest and Class B Monthly Interest
for such Distribution Date minus the amount on
deposit in the Series 1 Accrued Interest
Sub-subaccount on such Distribution Date and (y) the
amount on deposit in the Series 1 Escrow Account;
(ii) to the Series 1 Principal Collection
Sub-subaccount (which amount shall be used to pay the
Series 1 Monthly Principal Payment on such
Distribution Date), the lesser of (x) the Term
Certificates Invested Amount minus the amount on
deposit in the Series 1 Principal Collection
Sub-subaccount on such Distribution Date and (y) the
-4-
<PAGE>
amount on deposit in the Series 1 Escrow Account;
and
(iii) if, following the payment of all of
the amounts set forth in clauses (i) and (ii) above,
there are insufficient funds in the Series 1 Accrued
Interest Sub-subaccount to pay any Class A Additional
Interest and/or Class B Additional Interest then
owing, to the Series 1 Accrued Interest
Sub-subaccount (which amount shall be used to pay any
such Class A Additional Interest and/or Class B
Additional Interest on such Distribution Date), the
lesser of (x) the sum of any such Class A Additional
Interest and/or Class B Additional Interest minus the
amount on deposit in the Series 1 Accrued Interest
Sub-subaccount on such Distribution Date after
payment of Class A Monthly Interest and Class B
Monthly Interest for such Distribution Date and (y)
the amount on deposit in the Series 1 Escrow Account.
(g) On the Distribution Date on which the Term
Certificates Invested Amount is paid in full (regardless of
whether the Aggregate Series 1 Receivables Amount has been
reduced to zero), any amounts on deposit in the Series 1
Escrow Account shall be distributed to the holder of the
Exchangeable Company Certificate."; and
(iii) by relettering paragraph (e) to be paragraph (h).
(e) Exhibit E to the Series 1 Supplement is hereby amended by
deleting such Exhibit E in its entirety and substituting in lieu thereof a new
Exhibit E in the form set forth on Annex A attached hereto.
3. Except as otherwise set forth herein, the Series 1
Supplement shall continue in full force and effect in accordance with its terms.
4. This Amendment No. 1 to the Series 1 Supplement 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.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 to the Series 1 Supplement as of the day and year first above
written.
CARCORP, INC., as Company
By:
Name: Monte L. Miller
Title: President
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer
By:
Name: J. Michael Stepp
Title: Executive Vice President and
Chief Financial Officer
CHEMICAL BANK, not in its individual
capacity but solely as Trustee
By:
Name: Charles E. Dooley
Title: Vice President
-6-
<PAGE>
Exhibit 10.21
AMENDMENT NO. 1
TO
SERIES 1995-2 SUPPLEMENT
AMENDMENT NO. 1, dated February 29, 1996, among Carcorp, Inc.,
a Delaware corporation (the "Company"), Collins & Aikman Products Co., a
Delaware corporation, as master servicer (the "Master Servicer"), Societe
Generale, as agent (the "Agent"),and Chemical Bank, as trustee (the "Trustee"),
to that certain Series 1995-2 Supplement, dated as of March 30, 1995 (the
"Series 2 Supplement"), among the Company, the Master Servicer, the Agent and
the Trustee, to that certain Pooling Agreement, dated as of March 30, 1995, as
amended by Amendment No. 1 dated September 5, 1995 and Amendment No. 2 dated
October 25, 1995 (the "Pooling Agreement"), among the Company, the Master
Servicer and the Trustee.
WHEREAS, the Company, the Master Servicer and the Trustee
entered into the Pooling 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 2 Certificates have been issued pursuant
to the Series 2 Supplement; and
WHEREAS, the Series 1 Certificates have been issued pursuant
to the Series 1995-1 Supplement, dated as of March 30, 1995, among the Company,
the Master Servicer and the Trustee; and
WHEREAS, Section 10.1(b) of the Pooling Agreement and Section
11.7 of the Series 2 Supplement permit the Series 2 Supplement to be amended
from time to time pursuant to the provisions set forth in the Pooling Agreement
and the Series 2 Supplement; and
WHEREAS, the Holder of all the VFC Certificates is consenting
to the changes being effected pursuant to this Amendment No. 1; and
WHEREAS, the parties hereto wish to amend the Series 2
Supplement 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 Pooling Agreement or the Series
2 Supplement, as the case may be.
2. (a) Section 1.1 of the Series 2 Supplement is
hereby amended as follows:
(i) by inserting in its proper alphabetical order
the following new definition:
"Series 2 Escrow Account" shall have the meaning assigned in
subsection 3A.2(a).
(ii) by replacing the percentage "25%" appearing
in clause (b) of the definition of "Aggregate Series 2 Receivables Amount" with
the percentage "40%".
(b) Section 2.2 of the Series 2 Supplement is hereby
amended by adding a new paragraph (e) to read as follows:
"Notwithstanding the foregoing, except as otherwise provided
in Section 3A.3(e), neither the VFC Certificateholders'
Interest nor the VFC Subordinated Interest shall include the
right to receive amounts on deposit in the Series 2 Escrow
Account."
(c) Section 3A.2 of the Series 2 Supplement is hereby
amended by adding two new sentences at the end of paragraph (a)
to read in their entirety as follows:
"In addition, upon the commencement of the VFC
Amortization Period, the Trustee shall cause to be established
and maintained in the name of the Trustee, on behalf of the
Trust for the benefit of the Purchasers and for the benefit,
subject to the prior interest of the Purchasers, of the holder
of the Exchangeable Company Certificate, an account (the
"Series 2 Escrow Account"). The Trustee shall possess all
right, title and interest in all funds from time to time on
deposit in, and all Eligible Investments credited to, the
Series 2 Escrow Account and in all proceeds thereof."
(d) Section 3A.3 of the Series 2 Supplement is hereby
amended as follows:
-2-
<PAGE>
(i) by amending clause (iii) of paragraph (b) to read
in its entirety as follows:
"(iii) On each Business Day during the VFC
Amortization Period (including Distribution Dates), funds
deposited in the Series 2 Principal Collection Sub-subaccount
(including, without limitation, funds transferred pursuant to
clause (b)(ii) above) and the Series 2 Escrow Account shall be
invested in Eligible Investments that mature on or prior to
the next Determination Date and shall be applied on the next
Distribution Date in accordance with subsections 3A.6(c),
3A.6(e) or 3A.6(f), as applicable. No amounts on deposit in
the Series 2 Principal Collection Sub-subaccount or the Series
2 Escrow Account shall be distributed by the Trustee to the
Company or the holder of the VFC Subordinated Certificate
during a VFC Amortization Period."; and
(ii) by adding new paragraphs (d), (e) and (f) to read
in their entirety as follows:
"(d) Notwithstanding any other provisions of the
Agreement or this Supplement to the contrary, on each Business
Day during a VFC Amortization Period (including Distribution
Dates), the Trustee shall transfer from the Series 2
Collection Subaccount to the Series 2 Escrow Account the
amount specified in the Daily Report as having been deposited
in the Series 2 Collection Subaccount since the preceding
Business Day in respect of Ineligible Receivables.
(e) If the VFC Invested Amount is not paid in full on
any Distribution Date following the date on which the
Aggregate Series 2 Receivables Amount is reduced to zero, the
Trustee shall transfer funds on each such Distribution Date
from the Series 2 Escrow Account in the following order of
priority:
(i) to the extent there are insufficient
funds in the Series 2 Accrued Interest Sub-subaccount
to pay Series 2 Monthly Interest on such Distribution
Date, to the Series 2 Accrued Interest Sub-subaccount
(which amount shall be used to pay such shortfall in
interest on such Distribution Date), the lesser of
(x) the sum of Series 2 Monthly Interest for such
Distribution Date minus the amount on deposit in the
Series 2 Accrued Interest Sub-subaccount on such
Distribution Date and (y) the amount on deposit in
the Series 2 Escrow Account;
-3-
<PAGE>
(ii) to the Series 2 Principal Collection
Sub-subaccount (which amount shall be used to pay the
Series 2 Monthly Principal Payment on such
Distribution Date), the lesser of (x) the VFC
Invested Amount minus the amount on deposit in the
Series 2 Principal Collection Sub-subaccount on such
Distribution Date and (y) the amount on deposit in
the Series 2 Escrow Account; and
(iii) if, following the payment of all of
the amounts set forth in clauses (i) and (ii) above,
there are insufficient funds in the Series 2 Accrued
Interest Sub-subaccount to pay any Additional
Interest then owing, to the Series 2 Accrued Interest
Sub-subaccount (which amount shall be used to pay any
such Additional Interest on such Distribution Date),
the lesser of (x) any such Additional Interest minus
the amount on deposit in the Series 2 Accrued
Interest Sub-subaccount on such Distribution Date
after payment of Series 2 Monthly Interest for such
Distribution Date and (y) the amount on deposit in
the Series 2 Escrow Account.
(f) On the Distribution Date on which the VFC
Invested Amount is paid in full (regardless of whether the
Aggregate Series 2 Receivables Amount has been reduced to
zero), any amounts on deposit in the Series 2 Escrow Account
shall be distributed to the holder of the Exchangeable Company
Certificate.".
(e) Exhibit E to the Series 2 Supplement is hereby amended by
deleting such Exhibit E in its entirety and substituting in lieu thereof a new
Exhibit E in the form set forth on Annex A attached hereto.
3. Except as otherwise set forth herein, the Series 2
Supplement shall continue in full force and effect in accordance with its terms.
4. This Amendment No. 1 to the Series 2 Supplement 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.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 to the Series 2 Supplement 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 and as the
Holder of all the VFC Certificates
By:/s/ Martin J. Finan
Name: Martin J. Finan
Title:
-5-
<PAGE>
Exhibit 11
Collins & Aikman Corporation
Computation of Earnings Per Share
In thousands, except per share data
(Unaudited)
<TABLE>
<CAPTION>
Fiscal Year Ended
January 27, January 28, January 29,
1996 1995 1994
----------- ----------- --------
<S> <C> <C> <C>
Average shares outstanding during the period............................ 70,015 51,338 28,164
----------- ----------- ----------
Incremental shares under stock options computed under the treasury stock
method using the average market price of issuer's
stock during the periods............................................. 1,179 1,567 (904)
----------- ----------- -----------
Total shares for primary EPS...................................... 71,194 52,905 27,260
----------- ----------- ----------
Additional shares under stock options computed
under the treasury stock method using the
ending price of issuer's stock....................................... 40 - -
----------- ----------- ----------
Total shares for fully diluted EPS................................ 71,234 52,905 27,260
=========== =========== ==========
Income (loss) applicable to common shareholders:
Continuing operations (1)............................................ $ 229,722 $ (26,524) $ (178,080)
Discontinued operations ............................................. (23,281) 5,840 (123,307)
Extraordinary item................................................... - (106,528) -
----------- ----------- ----------
Net income (loss)................................................. $ 206,441 $ (127,212) $ (301,387)
=========== =========== ===========
Income (loss) per common share:
Continuing operations................................................ $ 3.23 $ (.50) $ (6.53)
Discontinued operations.............................................. (.33) .11 (4.53)
Extraordinary item................................................... - (2.01) -
----------- ----------- ----------
Net income (loss).................................................... $ 2.90 $ (2.40) $ (11.06)
=========== =========== ===========
</TABLE>
Notes:
(1) Loss from continuing operations has been adjusted for dividends and
accretion requirements on redeemable preferred stock of $14,408 and
$23,723 for the fiscal years ended January 28, 1995 and January 29,
1994, respectively. In addition, loss from continuing operations for
the fiscal year ended January 28, 1995 has been adjusted for the loss
on redemption of preferred stock of $82,022.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF COLLINS & AIKMAN CORPORATION
<TABLE>
<CAPTION>
Company Jurisdiction
<S> <C>
Collins & Aikman Products Co. Delaware
Ackerman Associates, Inc. New York
Ack-Ti-Lining, Inc. New York
The Akro Corporation Delaware
Builders Emporium Payroll Services, Inc. Delaware
Carcorp, Inc. Delaware
Cepco, Incorporated Delaware
Collins & Aikman Automotive International, Inc. Delaware
Collins & Aikman Floor Coverings, Inc. Delaware
Collins & Aikman de Mexico, S.A. de C.V.1 Mexico
Collins & Aikman Holdings, S.A. de C.V.2 Mexico
Amco de Mexico, S.A. de C.V.2 Mexico
Collins & Aikman Holdings Canada Inc. Canada
Collins & Aikman Canada Inc. Canada
Imperial Wallcoverings (Canada), Inc.3 Canada
Collins & Aikman International Corporation Delaware
Collins & Aikman Products GmbH Austria
Collins & Aikman United Kingdom Limited4 United Kingdom
Imperial Wallcoverings, Limited United Kingdom
Dura Convertible Systems, Inc. Delaware
Amco Convertible Fabrics, Inc. Delaware
Dura Convertible Systems de Mexico, S.A. de C.V.5 Mexico
Gamble Development Company Minnesota
Grefab, Inc. New York
Hopkins Realty Company Minnesota
Imperial Wallcoverings, Inc. Delaware
Marketing Service, Inc. Delaware
Manchester Plastics, Inc. Delaware
Hughes Plastics, Incorporated Michigan
Manchester Plastics, Ltd. Canada
Ole's, Inc. California
Ole's Nevada, Inc. Nevada
Simmons Universal Corporation Delaware
</TABLE>
- --------
1 1% owned by the Akro Corporation
2 One share owned by Habinus Trading Company
3 24% owned by Imperial Wallcoverings, Inc.
4 One share owned by Collins & Aikman Products Co. and
Ronald T. Lindsay, as joint owners
5 One share owned by Collins & Aikman Products Co.
<PAGE>
SUBSIDIARIES OF COLLINS & AIKMAN CORPORATION
Wickes Asset Management, Inc. Delaware
Wickes Manufacturing Company Delaware
Wickes ELCO Corporation Delaware
Wickes Manufacturing Services Company, Inc. Delaware
Wickes Products, Inc. Delaware
Wickes Realty, Inc. Delaware
Wickes Venture Capital, Inc. Delaware
Sequoia Pacific Development Company Delaware
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into the Company's
previously filed Registration Statements File No. 33-53321, No. 33-53323 and No.
33-60997.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
April 18, 1996.
<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 twelve months ended January 27, 1996 and such is
qualified in its entirety by reference to such Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-27-1996
<PERIOD-END> JAN-27-1996
<CASH> 977
<SECURITIES> 0
<RECEIVABLES> 132,897
<ALLOWANCES> 4,302
<INVENTORY> 147,774
<CURRENT-ASSETS> 430,905
<PP&E> 508,417
<DEPRECIATION> 222,384
<TOTAL-ASSETS> 1,050,007
<CURRENT-LIABILITIES> 268,551
<BONDS> 713,514
0
0
<COMMON> 705
<OTHER-SE> (228,557)
<TOTAL-LIABILITY-AND-EQUITY> 1,050,007
<SALES> 1,291,466
<TOTAL-REVENUES> 1,291,466
<CGS> 1,012,358
<TOTAL-COSTS> 1,012,358
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 693
<INTEREST-EXPENSE> 47,938
<INCOME-PRETAX> 91,202
<INCOME-TAX> (138,520)
<INCOME-CONTINUING> 229,722
<DISCONTINUED> (23,281)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 206,441
<EPS-PRIMARY> 2.90
<EPS-DILUTED> 2.90
</TABLE>
