SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended June 28, 1997
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-10218
COLLINS & AIKMAN CORPORATION
A Delaware Corporation (IRS Employer Identification
No. 13-3489233)
701 McCullough Drive
Charlotte, North Carolina 28262
Telephone (704) 547-8500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____ .
As of August 11, 1997, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 66,067,073 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
JUNE 28, 1997 JUNE 22, 1996 June 28, 1997 June 22, 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales ......................................... $ 416,018 $ 302,831 $ 831,578 $ 560,508
--------- --------- --------- ---------
Cost of goods sold ................................ 343,829 242,455 689,144 453,545
Selling, general and administrative
expenses ....................................... 30,030 22,607 60,256 46,572
--------- --------- --------- ---------
373,859 265,062 749,400 500,117
--------- --------- --------- ---------
Operating income .................................. 42,159 37,769 82,178 60,391
Interest expense, net ............................. 19,305 8,827 38,084 16,886
Loss on sale of receivables ....................... 1,562 1,218 2,763 2,584
Other expense (income) ............................ 501 672 972 (387)
--------- --------- --------- ---------
Income from continuing operations
before income taxes ............................. 20,791 27,052 40,359 41,308
Income tax expense (benefit) ...................... 9,191 11,298 17,494 (132,852)
--------- --------- --------- ---------
Income from continuing operations ................. 11,600 15,754 22,865 174,160
Income (loss) from discontinued operations,
net of income taxes of $2,612, $2,866, $3,171
and $3,590 .................................... 3,881 4,980 4,802 (17,062)
Gain on sale of discontinued operations,
net of income taxes of $53,358 ................. -- -- 85,292 --
--------- --------- --------- ---------
Income before extraordinary loss .................. 15,481 20,734 112,959 157,098
--------- --------- --------- ---------
Extraordinary loss, net of income taxes of $443 and
$4,709 ........................................ (721) (6,610) (721) (6,610)
--------- --------- --------- ---------
Net income ........................................ $ 14,760 $ 14,124 $ 112,238 $ 150,488
========= ========= ========= =========
Net income per primary common share:
Continuing operations .......................... $ .17 $ .22 $ .34 $ 2.49
Discontinued operations ........................ .06 .07 .07 (.25)
Gain on sale of discontinued operations ........ -- -- 1.26 --
Extraordinary loss.............................. (.01) (.09) (.01) (.09)
--------- --------- --------- ---------
Net income...................................... $ .22 $ .20 $ 1.66 $ 2.15
========= ========= ========= =========
Net income per fully diluted common share:
Continuing operations .......................... $ .17 $ .22 $ .34 $ 2.49
Discontinued operations ........................ .06 .07 .07 (.25)
Gain on sale of discontinued operations ........ -- -- 1.25 --
Extraordinary loss............................ (.01) (.09) (.01) (.09)
--------- --------- --------- ---------
Net income...................................... $ .22 $ .20 $ 1.65 $ 2.15
========= ========= ========= =========
Average common shares outstanding:
Primary ........................................ 67,402 70,031 67,761 70,062
========= ========= ========= ==========
Fully diluted .................................. 67,421 70,031 67,912 70,062
========= ========= ========= ==========
</TABLE>
I-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 28, DECEMBER 28,
ASSETS 1997 1996
<S> <C> <C>
------------- ---------------
Current Assets:
Cash and cash equivalents................................... $ 12,421 $ 14,314
Accounts and other receivables, net......................... 179,302 200,763
Inventories................................................. 126,345 121,971
Net assets of discontinued operations....................... 232,486 263,523
Other....................................................... 124,297 128,762
----------- --------------
Total current assets...................................... 674,851 729,333
Property, plant and equipment, net............................. 350,028 351,282
Deferred tax assets............................................ 41,366 91,690
Goodwill, net.................................................. 279,629 283,271
Other assets................................................... 79,674 74,713
---------- --------------
$ 1,425,548 $ 1,530,289
========== ==============
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable............................................... $ 1,643 $ 1,920
Current maturities of long-term debt........................ 51,632 37,565
Accounts payable............................................ 127,596 123,899
Accrued expenses............................................ 141,457 176,147
---------- --------------
Total current liabilities................................. 322,328 339,531
Long-term debt................................................. 944,460 1,138,029
Other, including postretirement benefit obligation............. 258,701 247,307
Commitments and contingencies..................................
Common stock (150,000 shares authorized, 70,521 shares issued
and 66,101 shares outstanding at June
28, 1997 and 70,521 shares issued and 67,723 shares
outstanding at December 28, 1996)........................... 705 705
Other paid-in capital.......................................... 586,495 585,207
Accumulated deficit............................................ (618,945) (729,315)
Foreign currency translation adjustments....................... (23,779) (20,798)
Pension equity adjustment...................................... (10,165) (10,165)
Treasury stock, at cost (4,420 shares at June 28, 1997
and 2,798 shares at December 28, 1996)...................... (34,252) (20,212)
--------------- ---------------
Total common stockholders' deficit........................ (99,941) (194,578)
--------------- ---------------
$ 1,425,548 $ 1,530,289
=============== ===============
</TABLE>
I-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 28, JUNE 22, JUNE 28, JUNE 22,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations ................................... $ 11,600 $ 15,754 $ 22,865 $ 174,160
Adjustments to derive cash flow from continuing operating activities:
Deferred income tax expense (benefit) .......................... 3,240 6,158 6,784 (139,164)
Depreciation and leasehold amortization ........................ 10,611 6,542 21,480 12,564
Amortization of goodwill ....................................... 1,613 1,032 3,457 1,936
Amortization of other assets ................................... 1,562 1,706 3,443 3,228
Decrease (increase) in accounts and other receivables .......... (19,829) (33,336) 6,288 (44,142)
Decrease (increase) in inventories ............................. (3,783) 7,092 (4,374) 9,807
Increase in accounts payable ................................... 7,400 2,430 7,642 11,746
Increase (decrease) in interest payable ........................ (14,370) (2,093) (787) 1,392
Other, net ..................................................... (5,197) 9,886 (6,949) 2,964
--------- --------- --------- ---------
Net cash provided by (used in) continuing operating
activities ................................................. (7,153) 15,171 59,849 34,491
--------- --------- --------- ---------
Cash provided by Wallcoverings, Floorcoverings, Airbag and
the Mastercraft Group discontinued operations .................. 5,049 4,108 5,886 10,469
Cash provided by (used in) other discontinued operations ............ (1,027) (3,506) (4,728) 3,932
--------- --------- --------- ---------
Net cash provided by discontinued operations ............ 4,022 602 1,158 14,401
--------- --------- --------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment .......................... (18,099) (20,851) (34,850) (44,348)
Sales of property, plant and equipment .............................. 443 1,832 772 3,046
Proceeds from disposition of discontinued operations ................ -- -- 195,600 --
Acquisition of businesses, net of cash acquired ..................... -- (4,930) -- (188,029)
Proceeds from sale-leaseback arrangement ............................ -- -- -- 7,404
Other, net .......................................................... (18,694) (3,342) (36,754) (4,919)
--------- --------- --------- ---------
Net cash provided by (used in) investing activities .......... (36,350) (27,291) 124,768 (226,846)
--------- --------- --------- ---------
FINANCING ACTIVITIES
Issuance of long-term debt .......................................... -- 400,000 4,495 597,546
Repayment of long-term debt ......................................... (32,717) (269,055) (42,000) (277,020)
Proceeds from sales of a participating interest in accounts
receivable, net of redemptions ................................... 30,000 (18,000) 12,000 (24,000)
Net borrowings (repayments) on revolving credit facilities .......... 35,000 (80,000) (144,000) (92,000)
Net repayments on notes payable ..................................... (231) (995) (180) (906)
Purchase of treasury stock .......................................... (4,426) -- (16,237) (1,949)
Proceeds from exercise of stock options ............................. 189 -- 328 266
Other, net .......................................................... (2,109) (17,104) (2,074) (17,170)
--------- --------- --------- ---------
Net cash provided by (used in) financing activities .......... 25,706 14,846 (187,668) 184,767
--------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents ................ (13,775) 3,328 (1,893) 6,813
Cash and cash equivalents at beginning of period .................... 26,196 4,446 14,314 961
--------- --------- --------- ---------
Cash and cash equivalents at end of period .......................... $ 12,421 $ 7,774 $ 12,421 $ 7,774
========= ========= ========= =========
</TABLE>
I-3
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT
(UNAUDITED)
A. ORGANIZATION:
Collins & Aikman Corporation (the "Company") (formerly Collins & Aikman
Holdings Corporation) is a Delaware corporation. Prior to July 13, 1994, the
Company was a wholly-owned subsidiary of Collins & Aikman Holdings II
Corporation ("Holdings II"). In connection with an initial public offering of
common stock ("Common Stock") and a recapitalization (the "Recapitalization"),
Holdings II was merged into the Company. Concurrently, Collins & Aikman Group,
Inc., a wholly-owned subsidiary of the Company ("Group"), was merged into its
wholly-owned subsidiary, Collins & Aikman Corporation, which changed its name to
Collins & Aikman Products Co. ("C&A Products"). On July 7, 1994, the Company
changed its name from Collins & Aikman Holdings Corporation to Collins & Aikman
Corporation.
Prior to the Recapitalization, the Company was jointly owned by
Blackstone Capital Partners L.P. ("Blackstone Partners") and Wasserstein Perella
Partners, L.P. ("WP Partners") and their respective affiliates. As of June 28,
1997, Blackstone Partners and WP Partners and their respective affiliates
collectively own approximately 81% of the Common Stock.
The Company conducts all of its operating activities through its
wholly-owned C&A Products subsidiary.
B. BASIS OF PRESENTATION:
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries. In the opinion of management, the accompanying
condensed consolidated financial statements reflect all adjustments (consisting
of only normal recurring adjustments) necessary for a fair presentation of
financial position and results of operations. Results of operations for interim
periods are not necessarily indicative of results for the full year. Certain
reclassifications have been made to these condensed consolidated financial
statements for the quarter and six months ended June 22, 1996 to conform to the
fiscal 1997 presentation and are primarily related to the Mastercraft Group
being reclassified as a discontinued operation (see Note K) and to the change in
fiscal year (see Note C).
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Collins & Aikman Corporation Transition
Report on Form 10-K for the transition period from January 28, 1996 to December
28, 1996.
C. CHANGE IN FISCAL YEAR:
During fiscal 1996, the Company changed its fiscal year-end to the last
Saturday in December. For comparative purposes, quarterly data presented for
fiscal 1996 has been restated to reflect this change.
D. ACQUISITIONS:
On December 11, 1996, the Company completed the acquisition of JPS
Automotive L.P. ("JPS Automotive") for a purchase price of $220 million, subject
to post closing adjustment, consisting of approximately $195 million of
indebtedness of JPS Automotive and approximately $25 million in cash. In
connection with the acquisition of JPS Automotive, the Company acquired the
minority interest in a JPS Automotive subsidiary for $10 million. On December
11, 1996, the Company also acquired Perstorp AB's automotive supply operations
(primarily acoustical products) in North America, the United Kingdom and Spain
(collectively referred to as "Perstorp Components") for approximately $108
million, subject to adjustment. In addition, the Company and Perstorp AB
("Perstorp") entered into a joint venture agreement relating to Perstorp's
automotive supply operations (primarily acoustical and plastic components) in
I-4
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
Sweden, Belgium and France. On May 1, 1996, the Company acquired the business of
BTR Fatati Limited ("Fatati"), a manufacturer and supplier of molded floor
carpets and luggage component trim for the European automotive market. 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.
E. INTEREST RATE AND FOREIGN CURRENCY PROTECTION PROGRAMS:
The Company utilizes derivative financial instruments to manage risks
associated with foreign exchange rate and interest rate market volatility. Gains
and losses on hedges of existing assets or liabilities are included in the
carrying amounts of those assets or liabilities and are ultimately recognized
in income as part of those carrying amounts. Gains and losses related to
qualifying hedges of firm commitments or anticipated transactions are deferred
and are recognized in income or as adjustments of carrying amounts when the
hedged transaction occurs. Material gains and losses on derivative contracts
that do not qualify as hedges are recognized currently in "other expense
(income)". The Company does not hold or issue derivative financial
instruments for trading purposes.
The Company has 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%. In addition, during April
1997, the Company entered into a two year interest rate swap agreement in which
the Company effectively exchanged $27 million of 11-1/2% fixed rate debt for
floating rate debt at six month LIBOR plus a 4.72% margin. In connection with
this swap agreement, the Company also limited its interest rate exposure by
entering into an 8.50% cap on LIBOR on $27 million of notional principal amount.
Payments to be received, if any, as a result of these agreements are accrued as
a reduction of interest expense.
Amortization of certain interest rate protection agreements that
expired during October 1996 amounted to $.3 million and $.5 million during the
quarter and six months ended June 22, 1996, respectively.
During April 1997, the Company entered into an agreement to limit its
foreign currency exposure related to $45 million of US dollar denominated
borrowings of a Canadian subsidiary. The agreement swaps LIBOR based interest
rates for the Canadian equivalent as well as fixes the exchange rate for the
principal balance when the amount comes due in 2002.
F. 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 was $1.6 million and $3.5 million for the quarter and six
months ended June 28, 1997, respectively, and $1.0 million and $1.9 million for
the quarter and six months ended June 22, 1996, respectively. Accumulated
amortization at June 28, 1997 was $7.6 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 June 28, 1997, the
Company believes its goodwill of $279.6 million was fully recoverable.
G. RECEIVABLES FACILITY:
On March 31, 1995, C&A Products entered, through a trust (the "Trust")
formed by Carcorp, Inc., a wholly-owned, bankruptcy remote subsidiary of C&A
Products ("Carcorp"), into a new receivables facility (the "Receivables
Facility") comprised of (i) term certificates, which were issued on March 31,
1995, in an aggregate face amount of $110 million and have a term of five years
and (ii) variable funding certificates, which represent revolving commitments of
up to an aggregate of $75 million and have a term of five years. Carcorp
purchases on a revolving basis and transfers to the Trust virtually all trade
receivables generated by C&A Products and certain of its subsidiaries (the
"Sellers").
Availability under the variable funding certificates at any time
depends primarily on the amount of receivables generated by the Sellers from
sales to the automotive industry, the rate of collection on those receivables
and other characteristics of those receivables which affect their eligibility
(such as the bankruptcy
I-5
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
or downgrading below investment grade of the obligor, delinquency and
excessive concentration). Based on these criteria, at June 28, 1997,
approximately $72.6 million was available under the variable funding
certificates, $67.0 million of which was utilized.
The term certificates bear interest at an average rate equal to
one-month LIBOR plus .34% per annum. The variable funding certificates bear
interest, at Carcorp's option, at LIBOR plus .40% per annum or a prime rate.
As of June 28, 1997, the Trust's receivables pool was $221.6 million,
net of allowances for doubtful accounts. As of June 28, 1997, the holders of
term certificates and variable funding certificates collectively possessed a
$147.0 million undivided senior interest (net of settlements in transit) in the
Trust's receivables pool and, accordingly, such receivables were not reflected
in the Company's accounts receivable balance as of that date.
In connection with the proposed spin-off by the Company of its Imperial
Wallcoverings Inc. subsidiary ("Wallcoverings"), as discussed in Note K,
Wallcoverings was terminated as a Seller of receivables under the Receivables
Facility on September 21, 1996. Also, in connection with the sale of
Floorcoverings, as discussed in Note K, Floorcoverings was terminated as a
Seller of receivables under the Receivables Facility on February 6, 1997. On
March 25, 1997, the Trust redeemed $30.0 million face value of term certificates
primarily as a result of the Trust collecting Wallcoverings and Floorcoverings
receivables which were not replaced with eligible receivables. In connection
with the sale of the Mastercraft Group, effective July 16, 1997, receivables
generated by members of the Mastercraft Group are no longer sold in connection
with the Receivables Facility and Ack-Ti-Lining, Inc., a member of the
Mastercraft Group, was terminated as a Seller of receivables under the
Receivables Facility. The Company believes that approximately $30 million face
value of term certificates will ultimately be redeemed as receivables of the
Mastercraft Group previously sold to Carcorp are collected by the Trust.
See Note K for loss on sale amounts allocated to discontinued
operations associated with the Receivables Facility.
H. INVENTORIES:
Inventory balances are summarized as follows (in thousands):
JUNE 28, DECEMBER 28,
1997 1996
------------- ---------------
Raw materials............... $ 64,363 $ 60,930
Work in process............. 27,985 26,663
Finished goods.............. 33,997 34,378
------------ ---------------
$ 126,345 $ 121,971
=========== ==============
I. INTEREST EXPENSE, NET:
Interest expense allocated to continuing operations for the quarters
ended June 28, 1997 and June 22, 1996 is net of interest income of $.3 million
and $1.0 million, respectively. Interest expense allocated to continuing
operations for the six months ended June 28, 1997 and June 22, 1996 is net of
interest income of $.6 million and $1.5 million, respectively. See Note K for
interest expense allocated to discontinued operations.
I-6
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
J. FACILITY CLOSING COSTS:
In January 1996, the Company in its continuing operations provided for
the cost to rationalize 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. During the six months ended June 28, 1997, the Company expended
approximately $.1 million related to closure and disposal of idled facilities
and severance benefits for continuing operations. No expenditures were made for
facility closing costs for continuing operations in the quarter ended June 28,
1997. Cash outlays for facility closing costs related to discontinued operations
during the quarter and six months ended June 28, 1997 were approximately $.3
million and $.5 million, respectively, for severance benefits and $.5 million
and $1.1 million, respectively, for closing and disposal of idled facilities.
In connection with the acquisition of JPS Automotive, the Company has
developed preliminary plans for JPS Automotive to rationalize certain
manufacturing locations as well as marketing and administrative functions. These
plans have not been finalized. During the fourth quarter of fiscal 1996, costs
accrued for the shutdown of facilities and severance and other personnel costs
were $2.2 million and $7.0 million, respectively. The Company expended
approximately $.7 million and $1.3 million, respectively, during the quarter and
six months ended June 28, 1997 for the shutdown of facilities and severance and
other personnel costs related to the JPS Automotive facilities and personnel.
K. DISCONTINUED OPERATIONS:
On July 1, 1997, the Company announced that JPS Automotive had entered
into an agreement to sell its Air Restraint and Technical Products Division, an
airbag and industrial fabric business ("Airbag"), to Safety Components
International, Inc. for a purchase price of $56.3 million, subject to
adjustment. This sale was completed in July 1997. See Note R.
On April 25, 1997, the Company announced that it entered into an
agreement to sell the Mastercraft Group. This sale was completed during July
1997 for a purchase price of approximately $310 million, subject to adjustment.
See Note R.
On December 10, 1996, the Company announced that it entered into an
agreement to sell its Floorcoverings subsidiary. This sale occurred during
February 1997 for $195.6 million and the net proceeds were used to pay down debt
incurred to finance the Company's automotive strategy.
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
proposed spin-off requires, among other things, the declaration of the dividend
by the Company's Board of Directors. As a result of management changes at
Wallcoverings and other factors, the Company currently expects the proposed
spin-off to occur in the second half of 1997.
The Company has accounted for the financial results and net assets of
Airbag, the Mastercraft Group, Floorcoverings and Wallcoverings as discontinued
operations. Accordingly, previously reported financial results for all periods
have been restated to reflect these businesses as discontinued operations.
I-7
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
The following information relates to income (loss) from discontinued
operations, net of income taxes, (in millions):
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
----------------------- --------------------
JUNE 28, JUNE 22, JUNE 28, JUNE 22,
1997 1996 1997 1996
---------- ------- -------- ----------
<S> <C> <C> <C> <C>
Mastercraft Group $ 3.7 $ 2.3 $ 4.0 $ 2.7
Floorcoverings - 2.7 .5 3.4
Airbag .2 - .3 -
Wallcoverings - - - (23.2)
-------- -------- ------- ---------
$ 3.9 $ 5.0 $ 4.8 $ (17.1)
========= ======== ======== ==========
</TABLE>
Wallcoverings incurred operating losses subsequent to April 29, 1996
which were charged to the Company's existing discontinued operations reserves.
The Wallcoverings' operating losses were in excess of management's forecasted
expectations as of the date of discontinuance but within previously established
accruals. Included in Wallcoverings' first quarter 1996 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 J 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 the first quarter of 1996.
Net interest expense of discontinued operations including amounts
attributable to discontinued operations was $5.3 million and $12.6 million,
respectively, for the quarter and six months ended June 28, 1997, and $6.5
million and $13.2 million, respectively, for the quarter and six months ended
June 22, 1996. Interest expense of $5.3 million and $12.6 million, respectively,
for the quarter and six months ended June 28, 1997, and $6.5 million and $13.0
million, respectively, for the quarter and six months ended June 22, 1996, was
allocated to discontinued operations based upon the ratio of net book value of
discontinued operations to consolidated invested capital.
A portion of the loss on sale of receivables has been allocated to
discontinued operations based on the ratio of (x) receivables included in the
Trust's receivable pool related to Floorcoverings and the Mastercraft Group to
(y) the total of the Trust's receivables pool. For the quarter and six months
ended June 28, 1997, $.3 million and $.6 million, respectively, of loss on sale
of receivables was allocated to discontinued operations. For the quarter and six
months ended June 22, 1996, $.6 million and $1.2 million, respectively, of loss
on sale of receivables was allocated to discontinued operations.
L. RELATED PARTY TRANSACTIONS:
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. During the
first quarter of 1997, the Company incurred fees and expenses for services
performed by Blackstone Partners and WP Partners, or their respective
affiliates, in connection with the sale of Floorcoverings, totaling
approximately $2.7 million. During the first quarter of 1996, the Company
incurred fees and expenses for services performed by Blackstone Partners and WP
Partners, or their respective affiliates, in connection with the acquisition of
Manchester Plastics totaling $2.5 million. During the second quarter of 1996,
Wasserstein Perella Securities, Inc., an affiliate of WP Partners, participated
as a lead underwriter in C&A Products' offering of Subordinated Notes and was
paid fees of approximately $5.4 million in connection therewith.
I-8
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
M. INFORMATION ABOUT THE COMPANY'S OPERATIONS:
The geographic dispersion of the operations of the Company and its
subsidiaries did not change significantly from December 28, 1996 to June 28,
1997.
N. COMMITMENTS AND CONTINGENCIES:
See "PART II - OTHER INFORMATION, Item 1. Legal Proceedings." The
ultimate outcome of the legal proceedings to which the Company is a party will
not, in the opinion of the Company's management, based on the facts presently
known to it, have a material effect on the Company's consolidated financial
condition or results of operations.
See also "PART I - FINANCIAL INFORMATION, Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations."
C&A Products (or its predecessor, Group) has assigned leases related to
divested businesses. Although C&A Products has obtained releases from the
lessors of certain of these properties, C&A Products remains contingently liable
under most of the leases. C&A Products' future liability for these leases, in
management's opinion, based on the facts presently known to it, will not have a
material effect on the Company's consolidated financial condition or results of
operations.
O. COMMON STOCKHOLDERS' DEFICIT:
Activity in common stockholders' deficit is as follows (in thousands):
<TABLE>
<CAPTION>
FOREIGN
OTHER CURRENCY PENSION
COMMON PAID-IN ACCUMULATED TRANSLATION EQUITY TREASURY
STOCK CAPITAL DEFICIT ADJUSTMENTS ADJUSTMENT STOCK TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 28, 1996 $ 705 $ 585,207 $(729,315) $ (20,798) $ (10,165) $ (20,212) $(194,578)
Compensation expense
adjustment .............. -- 1,288 -- -- -- -- 1,288
Net income ................. -- -- 112,238 -- -- -- 112,238
Purchases of treasury stock
(1,884 shares) .......... -- -- -- -- -- (16,237) (16,237)
Exercise of stock options,
(262 shares) ............ -- -- (1,868) -- -- 2,197 329
Foreign currency
translation adjustments . -- -- -- (2,981) -- -- (2,981)
-------- --------- --------- --------- --------- ---------- --------
BALANCE AT JUNE 28, 1997 ... $ 705 $ 586,495 $(618,945) $ (23,779) $ (10,165) $ (34,252) $ (99,941)
========= ========= ========= ========= ========= ========= ======
</TABLE>
P. EARNINGS PER SHARE:
Earnings per common share are 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 deferred compensation expense.
I-9
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONCLUDED)
(UNAUDITED)
Q. 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
following periods (in thousands):
FOR THE QUARTER ENDED FOR THE SIX MONTHS ENDED
JUNE 28, JUNE 22, JUNE 28, JUNE 22,
1997 1996 1997 1996
---------- --------- --------- ----------
Net sales ....................... $416,018 $302,831 $831,578 $560,508
Gross margin .................... 72,189 60,376 142,434 106,963
Income from continuing operations 11,736 15,728 22,963 174,082
Income before extraordinary loss 15,617 20,708 113,057 157,020
Net income ...................... 14,896 14,098 112,336 150,410
JUNE 28, DECEMBER 28,
1997 1996
-------- ----------
Current assets ................... $ 674,593 $ 728,586
Noncurrent assets................. 750,697 800,594
Current liabilities............... 322,317 339,519
Noncurrent liabilities............ 1,200,579 1,382,754
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 have been or may be issued, there being no material differences between the
financial statements of C&A Products and the Company. The absence of separate
financial statements of C&A Products is also based upon the fact that any debt
of C&A Products issued, and the assumption that any debt to be issued, under the
Registration Statement on Form S-3 filed by the Company and C&A Products
(Registration No. 33-62665) is or will be fully and unconditionally guaranteed
by the Company.
R. SUBSEQUENT EVENTS:
The sale of the Mastercraft Group was completed during July 1997 for a
purchase price of approximately $310 million, subject to adjustment. The net
proceeds from the sale will be used to reduce the Company's long-term debt.
On July 1, 1997, the Company announced that JPS Automotive had entered
into an agreement to sell Airbag, its airbag and industrial fabric division, to
Safety Components International, Inc. This sale was completed on July 24, 1997
for a purchase price of $56.3 million, subject to adjustment. Pursuant to the
indenture governing the JPS Automotive 11-1/8% Senior Notes due 2001 (the "JPS
Automotive Senior Notes"), in connection with such sale, the Company currently
intends to cause JPS Automotive to make an offer to purchase the JPS Automotive
Senior Notes at 100% of their principal amount as soon as practicable. From the
date of the acquisition of JPS Automotive through August 11, 1997, however, the
JPS Automotive Senior Notes have traded at values in excess of 100% of their
principal amount. Accordingly, the Company currently expects to cause JPS
Automotive to use the proceeds remaining from the sale of Airbag after the
termination of the offer to purchase to make a distribution to C&A Products, to
the extent allowed under the restricted payments provisions of the JPS
Automotive Senior Notes indenture. See "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources". The Company currently estimates that approximately $40
million of such proceeds will be available to pay such distribution, which
amount the Company intends to use to reduce its long-term debt.
I-10
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
On July 1, 1997, the Company announced that JPS Automotive had entered
into an agreement to sell Airbag, its airbag and industrial fabric division, to
Safety Components International, Inc. This sale was completed on July 24, 1997
for a purchase price of $56.3 million, subject to adjustment. Pursuant to the
indenture governing the JPS Automotive Senior Notes, in connection with such
sale, the Company currently intends to cause JPS Automotive to make an offer to
purchase the JPS Automotive Senior Notes at 100% of their principal amount as
soon as practicable. From the date of the acquisition of JPS Automotive through
August 11, 1997, however, the JPS Automotive Senior Notes have traded at values
in excess of 100% of their principal amount. Accordingly, the Company currently
expects to cause JPS Automotive to use the proceeds remaining from the sale of
Airbag after the termination of the offer to purchase to make a distribution
to C&A Products, to the extent allowed under the restricted payments provisions
of the JPS Automotive Senior Notes indenture. See "Liquidity and Capital
Resources". The Company currently estimates that approximately $40 million of
such proceeds will be available to pay such distribution, which amount the
Company intends to use to reduce its long-term debt.
On April 25, 1997, the Company announced that it entered into a
definitive agreement to sell the Mastercraft Group, a leading manufacturer of
upholstery fabric, to Joan Fabrics Corporation, for a purchase price of $310
million, subject to adjustment,. The sale was completed in July 1997, and it is
intended that the net proceeds will be used to reduce the Company's long-term
debt.
GENERAL
The Company is a global supplier of automotive interior systems,
including textile and plastic trim, acoustics and convertible top systems.
During 1996 and the first half of 1997, the Company took major steps in
implementing its automotive growth strategy, which is to expand the Company's
core automotive businesses in North America and globally as well as to add
complementary product offerings.
The automotive supply industry in which the Company competes is
cyclical and is influenced by the level of North American vehicle production.
I-11
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
The results for 1996 have been restated to reflect the Company's change in
fiscal year end for comparative purposes.
<TABLE>
<CAPTION>
QUARTER ENDED
JUNE 28, 1997 JUNE 22, 1996
------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales ................................ $416,018 100.0% $302,831 100.0%
Cost of goods sold ....................... 343,829 82.7 242,455 80.1
-------- ------- -------- -----
Gross margin ............................. 72,189 17.3 60,376 19.9
Selling, general & administrative expenses 30,030 7.2 22,607 7.4
-------- ------- -------- -----
Operating income ......................... $ 42,159 10.1% $ 37,769 12.5%
======== ======= ======== =====
EBITDA (1) ............................... $ 55,971 13.5% $ 46,214 15.3%
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 28, 1997 JUNE 22, 1996
--------------- -------------
AMOUNT PERCENT AMOUNT PERCENT
------ --------- ------ --------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................... $ 831,578 100.0% $ 560,508 100.0%
Cost of goods sold........................... 689,144 82.9 453,545 80.9
------------ ----- ------------ -----
Gross margin................................. 142,434 17.1 106,963 19.1
Selling, general & administrative expenses 60,256 7.2 46,572 8.3
------------ ----- ------------ -----
Operating income............................. $ 82,178 9.9% $ 60,391 10.8%
============ ===== ============ =====
EBITDA (1)................................... $ 109,801 13.2% $ 76,358 13.6%
</TABLE>
(1) EBITDA represents earnings before deductions for net interest
expense, loss on sale of receivables, income tax, depreciation, amortization and
the non-cash portion of non-recurring charges. EBITDA does not represent and
should not be considered as an alternative to net income or cash flow from
operations as determined by generally accepted accounting principles.
NET SALES: The Company's net sales increased 37.4% to approximately $416.0
million in the second quarter of 1997, up $113.2 million over the comparable
1996 quarter. For the first six months of 1997, the Company's net sales of
$831.6 million were $271.1 million higher than the comparable period in 1996.
The overall increase was due primarily to the acquisitions of JPS Automotive and
Perstorp Components in December 1996 which together generated approximately
$109.1 million and $211.6 million in net sales during the quarter and six months
ended June 28, 1997, respectively. In addition, sales increased in plastic trim
components, molded
I-12
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
carpet, accessory mats and luggage compartment trim. These increases were
partially offset by decreased sales of convertible top systems as well as by
reduced sales of approximately $17.0 million as a result of strikes at
Chrysler and General Motors in the second quarter of 1997. During the
first quarter of 1996, the Company's sales were negatively impacted by the
General Motors strike in March 1996. During the second quarter of 1997,
there was a 2.0% decrease in the North American vehicle build compared to
the comparable quarter of the prior year. For the remainder of the year,
the Company currently does not expect any increase or decrease in the
North American vehicle build versus last year.
Automotive bodycloth sales decreased 6.2% and increased 2.6% in the quarter and
six months ended June 28, 1997, respectively, compared to the prior year
periods. An increase in sales resulting from the acquisition of JPS Automotive
was offset by reduced sales related to the strikes at Chrysler and General
Motors in the second quarter of 1997 as well as by reduced sales to the Chrysler
Caravan/Voyager and Ford Contour/Mercury Mystique.
Molded carpet sales increased 29.2% and 43.0% in the quarter and six months
ended June 28, 1997, respectively, over the comparable prior year periods
primarily resulting from the JPS Automotive acquisition and increased sales to
the European automotive market. Increased sales to the Buick Park Avenue and
Toyota Camry were partially offset by reduced sales to the Buick Century and
Oldsmobile Cutlass Cierra.
Convertible top system sales decreased 15.2% and 15.4% in the quarter and six
months ended June 28, 1997, respectively, over the comparable prior year periods
principally due to decreased shipments of the Chrysler Sebring and reduced sales
of the Ford Mustang. For the balance of the year, the Company expects
convertible sales to continue to be below last year's outstanding performance.
Accessory mat sales increased 4.2% and 16.0% in the quarter and six months ended
June 28, 1997, respectively, over the comparable prior year periods. The overall
increase is attributable to increased sales to General Motors' Minivans, the
Oldsmobile Cutlass, Buick Regal, Pontiac Grand Prix, Toyota Camry, Nissan Maxima
and Sentra and new export programs, offset by decreased sales to the Honda
Accord and Civic and Mitsubishi Gallant.
Luggage compartment trim sales increased 69.2% and 76.2% in the quarter and six
months ended June 28, 1997, respectively, over the comparable prior year
periods, primarily due to the acquisition of JPS Automotive. Increased sales to
the Subaru Legacy Wagon and Buick Park Avenue were partially offset by reduced
sales to the Mazda 626.
Plastic interior trim component sales increased 68.8% and 87.7% in the quarter
and six months ended June 28, 1997, respectively. The increase in sales relates
primarily to the launch during the latter part of 1996 of new programs for which
Manchester Plastics is the supplier as well as the negative impact of a General
Motors strike on Manchester Plastics' sales for the first quarter of 1996.
Acoustical products, which was acquired in December 1996, contributed $47.0
million and $91.4 million in net sales to the North American and European
automotive markets during the quarter and six months ended June 28, 1997,
respectively.
Of the Company's sales approximately 10% were attributable to products utilized
in vehicles built outside of North America.
The above factors resulted in the Company's continuing operations' average sales
content per vehicle built
I-13
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
in North America of approximately $89 for the second quarter of 1997 compared to
an average of approximately $68 for the fiscal 1996 year.
GROSS MARGIN: For the second quarter of 1997, gross margin was 17.3%, down from
19.9% in the comparable period in 1996. For the six months ended June 28, 1997,
gross margin decreased to 17.1% from 19.1% in the comparable 1996 period. The
decrease in gross margin is attributable primarily to the lower margins in
products sold by JPS Automotive and Perstorp Components and the decrease in
sales of higher margin convertible top systems .
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses increased 32.8% to $30.0 million in the second quarter
of 1997, up $7.4 million over the comparable 1996 period. Selling, general and
administrative expenses increased to $60.3 million for the six months ended June
28, 1997, up $13.7 million over the comparable 1996 period. The increase is
primarily due to the acquisitions of JPS Automotive and Perstorp Components.
INTEREST EXPENSE: Interest expense allocated to continuing operations, net of
interest income of $.3 million in the second quarter of 1997 and $1.0 million in
the second quarter of 1996, increased $10.5 million to $19.3 million in the
second quarter of 1997 from $8.8 million in the second quarter of 1996. Interest
expense allocated to continuing operations, net of interest income of $.6
million and $1.5 million for the six months ended June 28, 1997 and June 22,
1996, respectively, increased to $38.1 million for the six months ended June 28,
1997 as compared to $16.9 million for the comparable period in 1996. Total
interest expense, including amounts allocated to discontinued operations and
excluding interest income, increased to $24.9 million and $51.3 million in the
quarter and six months ended June 28, 1997, respectively, from $16.3 million and
$31.6 million in the quarter and six months ended June 22, 1996, respectively.
The overall increase in interest expense was due to a higher amount of overall
outstanding indebtedness, primarily related to the JPS Automotive and Perstorp
Components acquisitions, as well as the higher interest rates associated with
the $400 million principal amount of 11-1/2% Senior Subordinated Notes due 2006
(the "Subordinated Notes") issued by C&A Products in June 1996. The Subordinated
Notes are guaranteed by the Company.
LOSS ON THE SALE OF RECEIVABLES: The Company sells on a continuous basis,
through its Carcorp subsidiary, interests in a pool of accounts receivable. In
connection with the receivables sales, a loss of $1.6 million, net of amounts
allocated to discontinued operations, was allocated to continuing operations in
the second quarter of 1997 compared to a loss of $1.2 million, net of amounts
allocated to discontinued operations, in the prior year quarter. Losses of $2.8
million and $2.6 million were allocated to continuing operations for the six
months ended June 28, 1997 and June 22, 1996, respectively. Total loss on sale
of receivables, including amounts allocated to discontinued operations, was $1.8
million and $3.4 million in the quarter and six months ended June 28, 1997,
respectively, and $1.8 million and $3.8 million in the quarter and six months
ended June 22, 1996, respectively. The decrease in the loss for the six months
ended June 28, 1997 as compared to the prior year period relates to fewer
receivables being sold to Carcorp during the first quarter of 1997 as a result
of Floorcoverings and Wallcoverings being terminated as Sellers under the
Receivables Facility.
OTHER EXPENSE (INCOME): The Company recognized foreign currency transaction
losses of $1.1 million and $.7 million in the quarters ended June 28, 1997 and
June 22, 1996, respectively, related to obligations to be settled in currencies
other than the functional currency of its foreign operations. For the six months
ended June 28, 1997 and June 22, 1996, the Company recognized a foreign currency
transaction loss of $1.9 million and a gain of $.4 million, respectively. Also,
in the quarter and six months ended June 28, 1997, the Company recognized income
of $.6 million and $.9 million, respectively, related to its investment in the
Perstorp joint venture.
I-14
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
INCOME TAXES: In the quarter ended June 28, 1997, the provision for income taxes
was $9.2 million compared to $11.3 million in the prior year quarter. For the
six months ended June 28, 1997 the provision for income taxes was $17.5 million
compared with a benefit of $132.9 million for the six months ended June 22,
1996. In the second quarter and first six months of 1997, and in the second
quarter of 1996, income tax expense consisted of foreign, state, franchise and
federal taxes. In the first six months of 1996, the benefit principally resulted
from a reduction of valuation allowances against the Company's federal net
operating loss carryforwards and other deferred tax assets offset by current
foreign, state, franchise and federal taxes.
DISCONTINUED OPERATIONS: The Company's income from discontinued operations
decreased to $3.9 million in the second quarter of 1997 compared to $5.0 million
in the comparable 1996 period. The decrease results primarily from the sale of
Floorcoverings in February 1997 offset by improved operating results at the
Mastercraft Group. For the six months ended June 28, 1997, income from
discontinued operations was $4.8 million compared to a loss of $17.1 million for
the six months ended June 22, 1996. The increase relates primarily to
Wallcoverings' results subsequent to April 29, 1996 being charged to the
Company's existing discontinued operations reserves and improved operating
results at the Mastercraft Group offset by the sale of Floorcoverings in
February 1997. Wallcoverings has continued to experience sales declines since
its proposed spin-off was first announced by the Company in April 1996. In
January 1996, Wallcoverings reported a $23.3 million loss which resulted from
certain charges for the write-down of inventory, the consolidation of operations
and the closing of facilities.
The sale of Floorcoverings for approximately $195.6 million was completed in
February 1997, resulting in a gain on the sale of discontinued operations of
$85.3 million, net of taxes of $53.4 million.
EXTRAORDINARY LOSS: For the quarter and six months ended June 28, 1997, the
Company recognized a loss of $.7 million, net of income taxes of $.4 million, in
connection with the purchase of $19.4 million principal amount of JPS Automotive
Senior Notes on the open market at prices in excess of the carrying values. For
the quarter and six months ended June 22, 1996, the Company recognized a
non-cash extraordinary charge of $6.6 million, net of income taxes of $4.7
million, related to the refinancing of its bank facilities. The refinancing was
done in conjunction with the Company's offering of the Subordinated Notes.
NET INCOME: The combined effect of the foregoing resulted in net income of $14.8
million in the second quarter of 1997 compared to net income of $14.1 million
for the comparable period of 1996. Net income for the six months ended June 28,
1997 and June 22, 1996 was $112.2 million and $150.5 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents totaling
$12.4 million and $14.3 million at June 28, 1997 and December 28, 1996,
respectively. The Company had a total of $234.4 million of borrowing
availability under its credit arrangements as of June 28, 1997. The total was
comprised of $164.9 million under the Revolving Facility, $58.3 million under
the Delayed Draw Term Loan and approximately $11.2 million under bank demand
lines of credit in Canada and Austria. In addition, $88.7 million was available
at that date under the Delayed Draw Term Loan for specified purposes as
discussed below.
During February 1997, the Company sold its Floorcoverings subsidiary for
$195.6 million. The net proceeds were used to pay Facility. The Company
completed the sale of the Mastercraft Group in July 1997 for a purchase price of
$310 million, subject to adjustment. The Company intends to use the net proceeds
from the sale to further reduce long-term debt. In addition, effective July 16,
1997 receivables generated by members of the Mastercraft
I-15
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Group are no longer being sold in connection with the Receivables Facility,
as discussed below. Also, the Company completed the sale of Airbag in July 1997
for a purchase price of $56.3 million, subject to adjustment. Pursuant to the
indenture governing the JPS Automotive Senior Notes, in connection with such
sale, the Company currently intends to cause JPS Automotive to make an offer to
purchase the JPS Automotive Senior Notes at 100% of their principal amount as
soon as practicable. From the date of the acquisition of JPS Automotive through
August 11, 1997, however, the JPS Automotive Senior Notes have traded at values
in excess of 100% of their principal amount. Accordingly, the Company currently
expects to cause JPS Automotive to use the proceeds remaining from the sale of
Airbag after the termination of the offer to purchase to make a distribution to
C&A Products, to the extent allowed under the restricted payments provisions of
the JPS Automotive Senior Notes indenture discussed below. The Company currently
estimates that approximately $40 million of such proceeds will be available to
pay such distribution, which amount the Company intends to use to reduce its
long-term debt.
As part of the Recapitalization, the Company entered into credit
facilities consisting of (i) a Term Loan Facility, (ii) a Revolving Facility
(together with the Term Loan Facility, the "Credit Agreement Facilities") and
(iii) a bridge receivables facility, which was terminated and replaced with the
Receivables Facility described below. On December 22, 1995, the Company and C&A
Products entered into a $197 million credit facility (the "Term Loan B
Facility") to finance the January 1996 purchase of Manchester Plastics.
On June 3, 1996, the Company and C&A Products entered into an amendment
and restatement (the "Amendment") of the Credit Agreement Facilities and the
Term Loan B Facility (collectively, the "Bank Credit Facilities"). The Amendment
was effected in connection with the sale of the Subordinated Notes described
below and the use of proceeds from such sale to repay various outstanding loans
under the Credit Agreement Facilities. As a result of the Amendment and the
repayment of a portion of the Credit Agreement Facilities with a portion of the
proceeds from the Subordinated Notes, the Bank Credit Facilities consist of (i)
the Term Loan Facility, in an aggregate principal amount of $195 million
(including a $45 million facility in Canada), payable in installments until
final maturity on July 13, 2002, (ii) the Term Loan B Facility, in the principal
amount of $195.8 million, payable in installments until final maturity on
December 31, 2002, and (iii) the Revolving Facility, having an aggregate
principal amount of up to $250 million and terminating on July 13, 2001. The
Bank Credit 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 customary for such facilities. Certain of these tests and covenants
were waived for the second quarter of 1997 in connection with the sale of
Mastercraft and Airbag. In addition, C&A Products is generally prohibited from
paying dividends or making other distributions to the Company except to the
extent necessary to allow the Company to (w) pay taxes and ordinary expenses,
(x) make permitted repurchases of shares or options, (y) make permitted
investments in finance, foreign or acquired subsidiaries and (z) effect the
proposed spin-off of Wallcoverings or the distribution of certain net proceeds
of a sale of Wallcoverings if the proposed spin-off is not effected. In
addition, the Company is permitted to pay dividends and repurchase shares of the
Company in any fiscal year in an aggregate amount equal to the greater of (i)
$12 million (which amount has been increased to $24 million for fiscal 1997) and
(ii) if certain financial ratios are satisfied, 25% of the Company's
consolidated net income for the previous fiscal year, and is permitted to pay
additional dividends to effect the proposed spin-off of Wallcoverings or in
amounts representing certain net proceeds from any sale of Wallcoverings in the
event the proposed spin-off is not effected. The Company's obligations under the
Bank Credit Facilities are secured by a pledge of the stock of C&A Products and
its significant subsidiaries.
On June 10, 1996 C&A Products issued $400 million principal amount of
Subordinated Notes, which mature in 2006. The Subordinated Notes are guaranteed
by the Company. The indenture governing the
I-16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Subordinated Notes generally prohibits the Company, C&A Products and any
Restricted Subsidiary (as defined) from making certain payments and investments
(generally, dividends and distributions on their capital stock; repurchases or
redemptions of their capital stock; repayment prior to maturity of debt
subordinated to the Subordinated Notes; and investments (other than permitted
investments)) ("Restricted Payments") if (i) there is a default under the
Subordinated Notes or (ii) after giving pro forma effect to the Restricted
Payment, C&A Products could not incur at least $1.00 of additional indebtedness
under the indenture's general test for the incurrence of indebtedness, which is
a specified ratio (currently 2.0 to 1.0) of cash flow to interest expense or
(iii) the aggregate of all such Restricted Payments from the issue date exceeds
a specified threshold (based, generally, on 50% of cumulative consolidated net
income since the quarter in which the issue date occurred plus 100% of the net
proceeds of capital contributions to C&A Products from stock issuances by the
Company). These prohibitions are subject to a number of significant exceptions,
including dividends to stockholders of the Company or stock repurchases not
exceeding $10 million in any fiscal year or $20 million in the aggregate until
the maturity of the Subordinated Notes and dividends to the Company to permit it
to pay its operating and administrative expenses. The Subordinated Notes
indenture also contains other restrictive covenants (including, among others,
limitations on the incurrence of indebtedness, asset dispositions and
transactions with affiliates) which are customary for such securities. These
covenants are also subject to a number of significant exceptions.
In connection with the closing of the acquisition of JPS Automotive
(the "JPS Automotive Acquisition"), in early December 1996 the Company amended
the Bank Credit Facilities primarily to allow for the existence of the JPS
Automotive Senior Notes and to allow the Company to use the proceeds from the
sale of Floorcoverings to pay down the Revolving Facility and a portion of the
Receivables Facility. As part of the JPS Automotive Acquisition, the Company
paid off approximately $15 million of outstanding bank indebtedness of JPS
Automotive. The cash portion of the purchase price of the JPS Automotive
Acquisition, the purchase price for the acquisition of a minority interest in a
JPS Automotive subsidiary and the bank indebtedness at JPS Automotive that was
repaid at the time of closing were funded through the Company's Revolving
Facility. In addition, as a result of the JPS Automotive Acquisition, holders of
the JPS Automotive Senior Notes had the right to put their notes to JPS
Automotive at a price of 101% of their principal amount plus accrued interest.
Approximately $3.9 million principal amount of JPS Automotive Senior Notes were
so put to JPS Automotive and then purchased by JPS Automotive in the first
quarter of 1997. In addition, in the quarter ended June 28, 1997, an additional
$19.4 million principal amount of JPS Automotive Notes were purchased by JPS
Automotive on the open market and retired. After giving effect to the above, JPS
Automotive had as of June 28, 1997 approximately $92.3 million of indebtedness
outstanding (including a premium of $3.7 million) related to the JPS Automotive
Senior Notes. The Company is operating JPS Automotive as a restricted subsidiary
under the Bank Credit Facilities and the indenture governing the Subordinated
Notes.
The indenture governing the JPS Automotive Senior Notes generally
prohibits JPS Automotive from making certain restricted payments and investments
(generally, dividends and distributions on its equity interests; purchases or
redemptions of its equity interests; purchases of any indebtedness subordinated
to the JPS Automotive Senior Notes; and investments other than as permitted)
("JPS Automotive Restricted Payments") unless (i) there is no default under the
JPS Automotive Senior Notes indenture; (ii) after giving pro forma effect to the
JPS Automotive Restricted Payment, JPS Automotive would be permitted to incur at
least $1.00 of additional indebtedness under the indenture's general test for
the incurrence of indebtedness which is a specified ratio (currently 2.5 to 1.0)
of cashflow to interest expense, and (iii) the aggregate of all JPS Automotive
Restricted Payments from the issue date is less than a specified threshold
(based, generally, on 50% of JPS Automotive's cumulative consolidated net income
since the issue date plus 100% of the aggregate net cash proceeds of the
issuance by JPS Automotive of certain equity and convertible debt securities and
cash contributions to JPS Automotive) (the "JPS Automotive Restricted Payments
Tests"). These conditions were satisfied immediately following the closing of
the JPS Automotive Acquisition and as of June 28,
I-17
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
1997. The JPS Automotive Restricted Payments Tests are subject to a number
of significant exceptions. The indenture governing the JPS Automotive Senior
Notes also contains other restrictive covenants (including, among others,
limitations on the incurrence of indebtedness and issuance of preferred stock,
asset dispositions and transactions with affiliates including the Company and
C&A Products) which are customary for such securities. These covenants are also
subject to a number of significant exceptions.
Additionally, in December 1996, in connection with the JPS Automotive
Acquisition, the Company entered into a $200 million delayed draw term loan (the
"Delayed Draw Term Loan"). The Delayed Draw Term Loan is a 5.25 year term loan
which was entered into to finance or refinance the purchase of any JPS
Automotive Senior Notes put by the holders to JPS Automotive as a result of the
change in control resulting from the JPS Automotive Acquisition or otherwise
acquired. The Delayed Draw Term Loan is available until December 11, 1997. Up to
$20 million of the Delayed Draw Term Loan can be utilized for general corporate
purposes, including premium and accrued interest on the JPS Automotive Senior
Notes. Prior to the JPS Automotive Acquisition, the Company had purchased in the
open market $68.0 million principal amount of JPS Automotive Senior Notes, which
were subsequently retired by JPS Automotive. As of June 28, 1997, $53.0 million
had been drawn under the Delayed Draw Term Loan and $147.0 million was
available, consisting of $38.3 million available to refinance previously
acquired JPS Automotive Senior Notes, $20.0 million available for general
corporate purposes and $88.7 million available for future purchases of JPS
Automotive Senior Notes. The Board of Directors of the general partner of JPS
Automotive has authorized JPS Automotive to expend for the repurchase of JPS
Automotive Senior Notes up to the amount of funds that may be drawn for such
purpose under the Delayed Draw Term Loan. The Delayed Draw Term Loan's security
and restrictive covenants are identical to those in the Bank Credit Facilities.
Certain of these covenants were waived in connection with the sales of
Mastercraft and Airbag.
On March 31, 1995, C&A Products entered, through the Trust formed by
Carcorp, into 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.
Availability under the variable funding certificates at any time
depends primarily on the amount of receivables generated by the Sellers from
sales to the automotive industry, the rate of collection on those receivables
and other characteristics of those receivables which affect their eligibility
(such as the bankruptcy or downgrading below investment grade of the obligor,
delinquency and excessive concentration). Based on these criteria, at June 28,
1997 approximately $72.6 million was available under the variable funding
certificates, $67.0 million of which was utilized.
In connection with the proposed spin-off of Wallcoverings,
Wallcoverings was terminated as a Seller of receivables under the Receivables
Facility on September 21, 1996. The Company also terminated Floorcoverings as of
February 6, 1997 as a Seller of receivables under the Receivables Facility in
connection with the Company's sale of Floorcoverings. On March 25, 1997, the
Trust redeemed $30 million face value of term certificates primarily as a result
of the Trust collecting Wallcoverings and Floorcoverings receivables which were
not replaced by eligible receivables. In connection with the sale of the
Mastercraft Group, effective July 16, 1997 receivables generated by the
Mastercraft Group are no longer being sold to Carcorp and transferred to the
Trust, and the Company terminated Ack-Ti-Lining, Inc., a member of the
Mastercraft Group, as a Seller of receivables under the Receivables Facility.
The Company believes that approximately $30 million face value of term
certificates will ultimately be redeemed due to the sale of the Mastercraft
Group
I-18
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
as the related receivables are collected by the Trust. The Company anticipates
largely offsetting the impact of this redemption on the Company's liquidity by
utilizing receivables generated by the addition of recently acquired
subsidiaries of the Company as Sellers to increase the amount available to the
Company under the variable funding certificates.
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. 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 are subject to termination 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.
The Company has a master equipment lease agreement for a maximum of $50
million of machinery and equipment. At June 28, 1997, 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. In
the first six months of 1997, the Company made lease payments relating to
continuing operations of approximately $2.8 million for machinery and equipment
sold and leased back under this master lease. The Company expects lease payments
for continuing operations under this master lease to be $2.8 million during the
remainder of 1997.
The Company's principal sources of funds are cash generated from
continuing operating activities, borrowings under the Bank Credit Facilities,
the sale of receivables under the Receivables Facility and the proceeds from the
sales of the Mastercraft Group and, to the extent permitted by the JPS
Automotive Restricted Payments Tests, Airbag. Net cash used by the operating
activities of the Company's continuing operations was $7.2 million for the
second quarter of 1997. For the six months ended June 28, 1997 cash provided by
continuing operating activities was $59.8 million.
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, to a lesser extent, acquisitions.
At June 28, 1997, the Company had total outstanding indebtedness of $996.1
million (excluding approximately $25.1 million of outstanding letters of credit
and $.5 million of indebtedness of the discontinued operations) at an average
interest rate of 9.4% per annum. Of the total outstanding indebtedness, $885.0
million relates to the Bank Credit Facilities and the Subordinated Notes.
The Company's Board of Directors authorized the expenditure of up to
$24 million in 1997 to repurchase shares of the Company's Common Stock in
management's discretion. The Company believes it has sufficient liquidity under
its existing credit arrangements to effect the repurchase program. The Company
spent an aggregate of $4.4 million and $16.2 million to repurchase shares during
the quarter and six months ended June 28, 1997, respectively, and $9.6 million
to repurchase shares during fiscal 1996.
Indebtedness under the Term Loan Facility, the Revolving Facility and
the Delayed Draw Term Loan bears interest at a per annum rate equal to the
Company's choice of (i) Chase Manhattan Bank's ("Chase's") Alternate Base Rate
(which is the highest of Chase's announced prime rate, the Federal Funds Rate
plus .5% and Chase's base certificate of deposit rate plus 1%) plus a margin
(the "ABR Margin")
I-19
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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%. Margins, which are subject to
adjustment based on changes in the Company's ratios of senior funded debt to
EBITDA and cash interest expense to EBITDA, were 1.75% in the case of the
"LIBOR Margin" and .75% in the case of the ABR Margin on June 28, 1997. Such
margins will increase by .25% over the margins then in effect on July 13, 1999.
Indebtedness under the Term Loan B Facility bears interest at a per annum rate
equal to the Company's choice of (i) Chase'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 Bank Credit Facilities and the Delayed Draw Term Loan at
June 28, 1997 was 7.74%. The weighted average interest rate on the sold
interests under the Receivables Facility at June 28, 1997 was 6.45%. 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. The Subordinated Notes bear interest at a rate of 11.5% per
annum. The JPS Automotive Senior Notes bear cash interest at a rate of 11.125%
per annum. Cash interest paid was $38.6 million and $17.6 million in the
quarters ended June 28, 1997 and June 22, 1996, respectively. Cash interest
paid for the six months ended June 28, 1997 and June 22, 1996 was $50.8 million
and $28.9 million, respectively.
Due to the variable interest rates under the Bank Credit Facilities,
the Delayed Draw Term Loan and the Receivables Facility, the Company is
sensitive to increases in interest rates. Accordingly, during 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%. In addition, during April 1997, the Company entered into a
two year interest rate swap agreement in which the Company effectively exchanged
$27 million of 11-1/2% fixed rate debt for floating rate debt at six month LIBOR
plus a 4.72% margin. In connection with this swap agreement, the Company also
limited its interest rate exposure by entering into an 8.50% cap on LIBOR on $27
million of notional principal amount. Based upon amounts outstanding at June 28,
1997, a .5% increase in LIBOR (5.7% at June 28, 1997) would impact interest
costs by approximately $2.4 million annually on the Bank Credit Facilities and
the Delayed Draw Term Loan and $.7 million annually on the Receivables Facility.
During April 1997, the Company entered into an agreement to limit its foreign
currency exposure related to $45 million of US dollar denominated borrowings of
a Canadian subsidiary. The agreement swaps LIBOR based interest rates for the
Canadian equivalent as well as fixes the exchange rate for the principal balance
when the amount comes due in 2002.
The current maturities of long-term debt primarily consist of the
current portion of the Bank Credit Facilities, vendor financing, industrial
revenue bonds and other miscellaneous debt.
The maturities of long-term debt of the Company's continuing operations
during the remainder of 1997 and for 1998, 1999, 2000 and 2001 are $24.7
million, $53.1 million, $62.0 million $67.5 million and $163.0 million,
respectively. The JPS Automotive Senior Notes, to the extent not previously put
to JPS Automotive or otherwise acquired by the Company or JPS Automotive, will
mature in 2001. In addition, the Bank Credit Facilities and the Delayed Draw
Term Loan provide for mandatory prepayments of the Term Loan and Term Loan B
Facilities and the Delayed Draw Term Loan with certain excess cash flow of the
Company, net cash proceeds of certain asset sales or other dispositions by the
Company other than proceeds generated from the sale of Floorcoverings, net cash
proceeds of certain sale/leaseback transactions and net cash proceeds of certain
issuances of debt obligations. The indenture governing the Subordinated Notes
provides that in the event of certain asset dispositions, C&A Products must
apply net proceeds (to the extent not reinvested in the business) first to repay
Senior Indebtedness (as defined, which includes the Bank Credit Facilities and
the Delayed Draw Term Loan) and then, to the extent of remaining net proceeds,
to make an offer to purchase outstanding Subordinated Notes at 100% of their
principal amount plus accrued interest. C&A Products
I-20
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
must also make an offer to purchase outstanding Subordinated Notes at 101%
of their principal amount plus accrued interest if a Change in Control (as
defined) of the Company occurs. In addition, the Delayed Draw Term Loan, if
fully drawn, will require a payment of $27 million on December 11, 1997 (the
anniversary date of the initial draw) and equal quarterly payments in annual
amounts equal to $38 million in 1998, $41 million in 1999, $42 million in 2000,
$41 million in 2001 and $11 million at termination. In addition, the indenture
governing the JPS Automotive Senior Notes requires JPS Automotive to apply the
net proceeds from the sale of assets of JPS Automotive to offer to purchase JPS
Automotive Senior Notes, to the extent not applied within 270 days of such asset
sale to an investment in capital expenditures or other long term tangible assets
of JPS Automotive, to permanently reduce senior indebtedness of JPS Automotive
or to purchase JPS Automotive Senior Notes in the open market. As discussed
above, the Company currently intends to cause JPS Automotive to make such an
offer to purchase JPS Automotive Senior Notes in connection with the recent sale
of Airbag.
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of June 28, 1997, the Company's continuing
operations had approximately $27.6 million in outstanding capital expenditure
commitments. The Company currently anticipates that its capital expenditures for
continuing operations in fiscal 1997 will aggregate approximately $90 million, a
portion of which may be financed through leasing. The Company's capital
expenditures in future years will depend upon demand for the Company's products
and changes in technology. As of June 28, 1997, Wallcoverings had approximately
$5.3 million in outstanding capital expenditure commitments.
The Company is sensitive to price movements in its raw material supply
base. During the second quarter and first six months of 1997, prices for most of
the Company's primary raw materials remained constant with price levels at
December 28, 1996. 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.
Since the Company announced in April 1996 its plan to spin off
Wallcoverings, the Company has repaid $21 million of intercompany amounts owed
to Wallcoverings and expended approximately $35 million to fund operations,
working capital and capital expenditures and to replace receivables previously
sold to Carcorp. During the remainder of 1997, the Company currently expects to
expend (subject to the discretion of the Company's Board of Directors)
approximately $17 million prior to the proposed spin-off of Wallcoverings
principally to fund Wallcoverings' future operations, working capital and
capital expenditure requirements. Amounts actually required for these purposes
could differ materially from expected amounts due to, among other things,
changes in Wallcoverings' operating results and the availability of outside
financing for Wallcoverings. Wallcoverings has continued to experience sales
declines since the proposed spin-off was first announced in April 1996.
The Company has significant obligations relating to postretirement,
casualty, environmental, lease and other liabilities of discontinued operations.
In connection with the sale and acquisition of certain businesses, the Company
has indemnified the purchasers and sellers for certain environmental
liabilities, lease obligations and other matters. In addition, the Company is
contingently liable with respect to certain lease and other obligations assumed
by certain purchasers and may be required to honor such obligations if such
purchasers are unable or unwilling to do so. Management currently anticipates
that the net cash requirements of its discontinued operations, excluding
Wallcoverings, will be approximately $18 million in fiscal 1997. 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
I-21
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Company's cash needs relating to discontinued operations can be provided by
operating activities from continuing operations and by borrowings under the Bank
Credit Facilities.
TAX MATTERS
The Company recognized a $150 million tax benefit in the first quarter
of 1996 by reducing the valuation allowance related to its deferred tax assets
to reflect the amount the Company expects to be realized in the future. The
valuation allowance was reduced as a result of management's reassessment of the
Company's improved financial performance since its recapitalization and initial
public offering in July 1994, management's outlook for the Company's continuing
businesses, and the proposed spin-off of the Company's Wallcoverings subsidiary
to its shareholders.
At December 28, 1996, the Company had outstanding net operating losses
("NOLs") of approximately $284.2 million for Federal income tax purposes, which
excludes $10.4 million related to the Company's discontinued Wallcoverings
subsidiary. Substantially all of these NOLs expire over the period from 2000 to
2008. The Company also has unused Federal tax credits of approximately $12.7
million, $4.2 million of which expire during the period 1997 to 2007. 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 $85.9 million of the Company's NOLs and $4.2 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
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.
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 future 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
I-22
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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. As of June 28, 1997, 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 22 sites where the Company is participating in the
investigation or remediation of the site, either directly or through financial
contribution, and 9 additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. As of June 28, 1997, the
Company's estimate of its liability for these 31 sites, which exclude sites
related to Wallcoverings, is approximately $33.4 million. As of June 28, 1997,
the Company has established reserves of approximately $45.5 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
future 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.
SAFE HARBOR STATEMENT
This Report on Form 10-Q contains statements which, to the extent they
are not historical fact, constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking
statements involve risks and uncertainties. The forward-looking statements in
this Report on Form 10-Q are intended to be subject to the safe harbor
protection provided by the Safe Harbor Acts.
Risks and uncertainties that could cause actual results to vary
materially from those anticipated in the forward-looking statements included
in this Report on Form 10-Q include industry-based factors such as possible
declines in the North American automobile and light truck build, labor
strikes at the Company's major customers, changes in consumer tastes,
dependence on significant automotive customers and the level of competition
in the automotive supply industry as well as factors more specific to the
Company, such as the substantial leverage of the Company and its subsidiaries,
limitations imposed by the Company's debt facilities and changes made in
connection with operations acquired by the Company. The Company's divisions
may also be affected by changes in the popularity of particular car models
or the loss of programs on particular car models. For a discussion of
certain of these and other important factors which may affect
I-23
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONCLUDED)
the Company's operations, products and markets, see the Company's Securities and
Exchange filings, including without limitation "ITEM 1. BUSINESS" and "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" of the Company's Transition Report on Form 10-K for the transition
period from January 28, 1996 to December 28, 1996.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Disclosures not required at this time.
I-24
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no material developments in legal proceedings involving
the Company or its subsidiaries since those reported in the Company's Transition
Report on Form 10-K for the transition period from January 28, 1996 to December
28, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a), (c) On May 28, 1997, the Company held its Annual Meeting of
Stockholders. At such meeting, stockholders voted upon the election of three
directors to hold office until the year 2000 Annual Meeting of Stockholders. The
results of the voting were as follows:
Broker
Nominee For Withheld Nonvotes
Robert C. Clark 63,270,282 139,555 0
David A. Stockman 63,274,282 135,555 0
Randall J. Weisenburger 63,272,582 137,255 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS.
Please note that in the following description of exhibits, the title of
any document entered into, or filing made, prior to July 7, 1994 reflects the
name of the entity a party thereto or filing, as the case may be, at such time.
Accordingly, documents and filings described below may refer to Collins & Aikman
Holdings Corporation, Collins & Aikman Group, Inc. or Wickes Companies, Inc., if
such documents and filings were made prior to July 7, 1994.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
2.1 - Mastercraft Group Acquisition Agreement dated as of April 25, 1997
among Collins & Aikman Products Co., Joan Fabrics Corporation and MC
Group Acquisition Company L.L.C. is hereby incorporated by reference to
Exhibit 2.1 of Collins & Aikman Corporation's Report on Form 10-Q for
the fiscal quarter ended March 29, 1997.
2.2 - Asset Purchase Agreement dated as of June 30, 1997 by and between JPS
Automotive L.P. and Safety Components International, Inc. is hereby
incorporated by reference to Exhibit 2.1 of JPS Automotive L.P.'s and
JPS Automotive Products Corp.'s Current Report on Form 8-K dated July
24, 1997.
2.3 - Closing Agreement dated July 24, 1997 between JPS Automotive L.P.,
Safety Components International, Inc. and Safety Components Fabric
Technologies, Inc. is hereby incorporated by reference to Exhibit 2.2
of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s Current
Report on Form 8-K dated July 24, 1997.
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.
II-1
<PAGE>
3.2 - By-laws of Collins & Aikman Corporation, as amended, are hereby
incorporated by reference to Exhibit 3.2 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended January 27,
1996.
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 - Indenture, dated as of June 1, 1996, between Collins & Aikman
Products Co., Collins & Aikman Corporation and First Union National
Bank of North Carolina, as Trustee, is hereby incorporated by reference
to Exhibit 4.2 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended April 27, 1996.
4.3 - First Supplemental Indenture dated as of June 1, 1996, between
Collins & Aikman Products Co., Collins & Aikman Corporation and First
Union National Bank of North Carolina, as Trustee, is hereby
incorporated by reference to Exhibit 4.3 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended April
27, 1996.
4.4 - Amended and Restated Credit Agreement, dated as of June 3, 1996,
among Collins & Aikman Products Co., as - Borrower, Collins & Aikman
Canada Inc., as Canadian Borrower, Collins & Aikman Corporation, as
Guarantor, the lenders named therein, Bank of America N.T.S.A. and
NationsBank, N.A., as Managing Agents, and Chemical Bank, as
Administrative Agent, is hereby incorporated by Reference to Exhibit
4.1 of Collins & Aikman Corporation's Current Report on Form 8-K dated
June 3, 1996.
4.5 - Amendment, dated as of December 5, 1996, to the Amended and Restated
Credit Agreement, dated as of June 3, 1996, among Collins & Aikman
Products Co., as Borrower, Collins & Aikman Canada Inc., as Canadian
Borrower, Collins & Aikman Corporation, as Guarantor, the Lenders
parties thereto, and The Chase Manhattan 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
October 26, 1996.
4.6 - Waiver, dated as of June 28, 1997, to the Amended and Restated Credit
Agreement, dated as of June 3, 1996 among Collins & Aikman Products
Co., Collins & Aikman Canada, Inc., Collins & Aikman Corporation, the
Lenders parties thereto and The Chase Manhattan Bank, as Administrative
Agent.
4.7 - Credit Agreement, dated as of December 5, 1996, among Collins &
Aikman Products Co., as Borrower, Collins & Aikman Corporation, as
Guarantor, the Lenders named therein and The Chase Manhattan 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 October 26, 1996.
4.8 - Waiver, dated as of June 28, 1997, to the Credit Agreement, dated as
of December 5, 1996, among Collins & Aikman Products Co., Collins &
Aikman Corporation, the Lenders parties thereto and The Chase Manhattan
Bank, as Administrative Agent.
4.9 - Indenture dated as of June 28, 1994, between JPS Automotive Products
Corp., as Issuer, JPS Automotive L.P., as Guarantor and Shawmut Bank
Connecticut, N.A., as Trustee, is hereby
II-2
<PAGE>
incorporated by reference to Exhibit 4.2 of JPS Automotive Corp.'s
Registration Statement on Form S-1, Registration No. 33-75510.
4.10 - First Supplemental Indenture, dated as of October 5, 1994, between
JPS Automotive Products Corp. and JPS Automotive L.P., as Co-Obligors,
and Shawmut Bank Connecticut, N.A., as Trustee is hereby incorporated
by reference to Exhibit 4.48A of JPS Automotive L.P.'s and JPS
Automotive Products Corp.'s Report on Form 10-Q for the fiscal quarter
ended October 2, 1994.
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 ncorporated by
reference to Exhibit 10.3 of Wickes Companies, Inc.'s Report on Form
10-K for the fiscal year ended January 26, 1991.
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 - 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.
10.7 - Letter Agreement dated as of June 30, 1995 between Collins & Aikman
Corporation and an executive officer is - hereby incorporated by
reference to Exhibit 10.6 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended January 27, 1996.
10.8 - 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.
10.9 - Collins & Aikman Corporation 1996 Executive Incentive Compensation
Plan is hereby incorporated by reference to Exhibit 10.9 of Collins
& Aikman Corporation's Report on Form 10-Q for the fiscal quarter
ended July 27, 1996.
II-3
<PAGE>
10.10 - 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.
10.11 - 1993 Employee Stock Option Plan, as amended and restated, 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.
10.12 - 1994 Employee Stock Option Plan, as amended through February 7, 1997,
is hereby incorporated by reference to Exhibit 10.12 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended
March 29, 1997.
10.13 - 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.
10.14 - 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.
10.15 - 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.
10.16 - 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.
10.17 - 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.
10.18 - 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.
10.19 - 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.
10.20 - 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.
II-4
<PAGE>
10.21 - Amendment No. 2, dated October 25, 1995, among Carcorp, Inc., as
Company, Collins & Aikman Products Co., as Master Servicer, and
Chemical Bank, as Trustee, to the Pooling Agreement, dated as of March
30, 1995, among the Company, the Master Servicer and the Trustee 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.
10.22 - 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,
is hereby incorporated by reference to Exhibit 10.20 of Collins &
Aikman Corporation's Report on Form 10-K for the fiscal year ended
January 27, 1996.
10.23 - 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, is hereby incorporated by reference to
Exhibit 10.21 of Collins & Aikman Corporation's Report on Form 10-K for
the fiscal year ended January 27, 1996.
10.24 - 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.
10.25 - Underwriting Agreement dated June 5, 1996 between Collins & Aikman
Products Co., Collins & Aikman Corporation, Wasserstein Perella
Securities, Inc., Chase Securities Inc. and BA Securities, Inc. is
hereby incorporated by reference to Exhibit 1.1 of Collins & Aikman
Corporation's Current Report on Form 8-K dated June 3, 1996.
10.26 - Second Amendment, dated as of October 3, 1996, to the Employment
Agreement, dated as of July 22, 1992, as amended, between Collins &
Aikman Products Co. and an executive officer is hereby incorporated by
reference to Exhibit 10.26 of Collins & Aikman Corporation's Report on
Form 10-Q for the fiscal quarter ended October 26, 1996.
10.27 - Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS
Automotive L.P. and Collins & Aikman Products Co. dated August 28, 1996
is hereby incorporated by reference to Exhibit 2.1 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended July 27,
1996.
10.28 - Amendment No. 1 to Equity Purchase Agreement by and among JPSGP,
Inc., Foamex - JPS Automotive L.P., Foamex International Inc. and
Collins & Aikman Products Co. dated as of December 11, 1996 is hereby
incorporated by reference to Exhibit 2.2 of Collins & Aikman
Corporation's Current Report on Form 8-K dated December 10, 1996.
10.29 - Equity Purchase Agreement by and among Seiren U.S.A. Corporation,
Seiren Automotive Textile Corporation, Seiren Co., Ltd. and Collins &
Aikman Products Co. dated December 11, 1996, is hereby incorporated by
reference to Exhibit 2.3 of Collins & Aikman Corporation's Current
Report on Form 8-K dated December 10, 1996.
10.30 - Acquisition Agreement between Perstorp A.B. and Collins & Aikman
Products Co. dated December 11, 1996 is hereby incorporated by
reference to Exhibit 2.4 of Collins & Aikman Corporation's Current
Report on Form 8-K dated December 10, 1996.
10.31 - Agreement among Perstorp A. B., Perstorp GmbH, Perstorp Biotec A.B.
and Collins & Aikman Products Co. dated December 11, 1996 is hereby
incorporated by reference to Exhibit 2.5 of Collins & Aikman
Corporation's Current Report on Form 8-K dated December 10, 1996.
II-5
<PAGE>
10.32 - Shareholders Agreement among Collins & Aikman Products Co., Collins &
Aikman Europe, Inc., Perstorp GmbH, Perstorp A.B., Perstorp Biotec
A.B., Perstorp Components N.V. and Perstorp Components A.B., dated
December 11, 1996 is hereby incorporated by reference to Exhibit 2.6 of
Collins & Aikman Corporation's Current Report on Form 8-K dated
December 10, 1996.
10.33 - Acquisition Agreement dated as of December 9, 1996 among Collins &
Aikman Products Co., Collins & Aikman Floor Coverings Group, Inc.,
Collins & Aikman Floor Coverings, Inc., CAF Holdings, Inc. and CAF
Acquisition Corp. is hereby incorporated by reference to Exhibit 2.7 of
Collins & Aikman Corporation's Current Report on Form 8-K dated
December 10, 1996.
11 - Computation of Earnings Per Share.
27 - Financial Data Schedules.
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>
(B) REPORTS ON FORM 8-K.
During the quarter for which this Report on Form 10-Q is filed, the
Company did not file any Reports on Form 8-K.
II-6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 11, 1997
COLLINS & AIKMAN CORPORATION
(Registrant)
By: /s/ J. Michael Stepp
J. Michael Stepp
Chief Financial Officer and
Executive Vice President
(On behalf of the Registrant and as Principal
Financial and Accounting Officer)
Exhibit 4.6
AMENDED AND RESTATED
CREDIT AGREEMENT DATED
AS OF JUNE 3, 1996
WAIVER
WAIVER, dated as of June 28, 1997 (this "Waiver"), to the Amended and
Restated Credit Agreement, dated as of June 3, 1996 (as amended prior to the
date hereof and as further amended, supplemented or otherwise modified from time
to time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation (the "Borrower"), COLLINS & AIKMAN CANADA INC., a Canadian
corporation (the "Canadian Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware
corporation ("Holdings"), the financial institutions parties thereto (the
"Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as
agent to the lenders thereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Canadian Borrower and Holdings have
requested the Lenders to agree to waive certain provisions of Sections 6.08(i)
and 6.16 of the Credit Agreement; and
WHEREAS, the Lenders are willing to agree to waive certain provisions
of Sections 6.08(i) and 6.16 of the Credit Agreement, but only on the terms and
subject to the conditions set forth in this Waiver;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein, terms defined
in the Credit Agreement are used herein as therein defined.
SECTION 2. Waiver. Compliance with the provisions of:
(a) Section 6.08(i) of the Credit Agreement is hereby waived to permit
the sale of the Air Restraint and Technical Products Division of JPS Automotive
L.P. and the Borg Textile Division of Collins & Aikman Canada, Inc. and to
exclude such sales from the calculation of the maximum amount of assets that may
be sold pursuant to such section; provided that the Net Proceeds of such sale
are applied in accordance with Section 2.12(c) of the Credit Agreement; and
(b) Section 6.16 of the Credit Agreement is hereby waived for the
second fiscal quarter of 1997 of Holdings; provided that the Leverage Ratio is
not in excess of 2.75 to 1.00.
<PAGE>
SECTION 3. Representations and Warranties. The parties hereto hereby
represent and warrant to the Administrative Agent and each Lender that after
giving effect to the waivers contained herein, each party hereto hereby
confirms, reaffirms and restates the representations and warranties set forth in
Article III of the Credit Agreement as if made on and as of the Waiver Effective
Date, except as they may specifically relate to an earlier date; provided that
such representations and warranties shall be and hereby are amended so that all
references to the Agreement therein shall be deemed a reference to (i) the
Credit Agreement, (ii) this Waiver and (iii) the Credit Agreement as amended by
this Waiver.
SECTION 4. Conditions Precedent. This Waiver shall become effective as
of the date hereof (the "Waiver Effective Date") when each of the conditions
precedent set forth below shall have been fulfilled:
(a) Waiver. The Administrative Agent shall have received this Waiver,
executed and delivered by a duly authorized officer of each of the Borrower, the
Canadian Borrower, Holdings and the Required Lenders.
(b) No Default or Event of Default. On and as of the Waiver Effective
Date and after giving effect to this Waiver and the transactions contemplated
hereby, no Default or Event of Default shall have occurred and be continuing.
(c) Representations and Warranties. The representations and warranties
made by the Borrower and the Canadian Borrower in the Credit Agreement and
herein after giving effect to this Waiver shall be true and correct in all
material respects on and as of the Waiver Effective Date as if made on such
date, except where such representations and warranties relate to an earlier date
in which case such representations and warranties shall be true and correct as
of such earlier date.
(d) Acknowledgement, Consent and Waiver. The Administrative Agent shall
have received from each of Holdings, the Borrower, the Canadian Borrower and the
other Loan Parties with respect to each Loan Document to which it is a party a
duly executed Acknowledgment, Consent and Waiver, substantially in the form of
Exhibit A hereto.
SECTION 5. No Other Waivers. Except as expressly waived hereby, the
Credit Agreement shall remain in full force and effect in accordance with its
terms, without any waiver, amendment or modification of any provision.
SECTION 6. Expenses. The Borrower and the Canadian Borrower agree to
pay or reimburse the Administrative Agent for all of its reasonable
out-of-pocket costs and expenses incurred in connection with (a) the
negotiation, preparation, execution and delivery of this Waiver and any other
documents prepared in connection herewith, and consummation of the transactions
contemplated hereby and thereby, including the fees and expenses of Simpson
Thacher & Bartlett, counsel to the Administrative Agent, and (b) the enforcement
or preservation of any rights under this Waiver and any other such documents.
<PAGE>
SECTION 7. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 8. Counterparts. This Waiver may be executed in any number of
counterparts by the parties hereto, each of which counterparts when so executed
shall be an original, but all counterparts taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed and delivered by their respective duly authorized officers as of
the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
----------------------------------
Name:
Title:
COLLINS & AIKMAN CANADA INC.
By /s/ J. Michael Stepp
----------------------------------
Name:
Title:
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By /s/ Rosemary Bradley
__________________________________
Name: Rosemary Bradley
Title: Vice President
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Managing Agent and
a Lender
By Linda A. Carper
----------------------------------
Name: Linda A. Carper
Title: Managing Director
NATIONSBANK, N.A., as Managing Agent and a
Lender
By__________________________________
Name:
Title:
ALEXANDER HAMILTON LIFE INSURANCE
By__________________________________
Name:
Title:
ARAB BANKING CORPORATION
By__________________________________
Name:
Title:
AERIES FINANCE LTD.
By /s/ Andrew Wignall
----------------------------------
Name: Andrew Ian Wignall
Title: Director
<PAGE>
CERES FINANCE LTD.
By /s/ J.H. Cullinane
----------------------------------
Name: John H. Cullinane
Title: Director
STRATA FUNDING LTD.
By /s/ J.H. Cullinane
----------------------------------
Name: John H. Cullinane
Title: Director
RESTRUCTURED OBLIGATIONS BACKED BY
SENIOR ASSETS B.V.
By: Chancellor LGT Senior Secured Management,
Inc., as Portfolio Advisor
By /s/ Stephen M. Alfieri
----------------------------------
Name: Stephen M. Alfieri
Title: Managing Director
BANKBOSTON, N.A.
By __________________________________
Name:
Title:
BANK OF IRELAND - GRAND CAYMAN BRANCH
By /s/ John Cusack
---------------------------------------
Name: John G. Cusack
Title: A.V.P.
<PAGE>
THE BANK OF NEW YORK
By /s/ Ann Marie Hughes
----------------------------------
Name:Ann Marie Hughes
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By /s/ W.E. Zarrett
----------------------------------
Name: William E. Zarrett
Title: Senior Relationship Manager
BANK OF SCOTLAND
By /s/ Annie Chin Tat
----------------------------------
Name: Annie Chin Tat
Title: Vice President
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By /s/ Friedrich N. Wilms
----------------------------------
Name: Friedrich N. Wilms
Title: Vice President
BANQUE PARIBAS
By__________________________________
Name:
Title:
<PAGE>
BRANCH BANKING AND TRUST COMPANY
By /s/ Thatcher L. Townsend III
----------------------------------
Name: Thatcher L. Townsend III
Title: Vice President
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO
(a unit of The Chase Manhattan Bank)
By /s/ James Ferguson
----------------------------------
Name: James P. Ferguson
Title: Managing Director
CIBC INC.
By__________________________________
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPIENNE
By /s/ Sean Mounier /s/ Brian O'Leary
------------------------------------------
Name: Sean Mounier Brian O'Leary
Title: First Vice President Vice President
CONTINENTAL BANK
By__________________________________
Name:
Title:
<PAGE>
CREDIT LYONNAIS, NEW YORK BRANCH AND
CREDIT LYONNAIS ATLANTA AGENCY
By ______________________________
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By /s/ W. Craig Stamm
__________________________________
Name: W. Craig Stamm
Title: Vice President
By /s/ Scott Kray
----------------------------------
Name: Scott Kray
Title: Vice President
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company
its Investment Manager
By /s/ Justin L. Driscoll
__________________________________
Name: Justin L. Driscoll
Title: Senior Vice President
CRESTAR BANK
By /s/ C. Gray Key
__________________________________
Name: C. Gray Key
Title: Vice President
DRESDNER BANK, A.G. NEW YORK AND GRAND
CAYMAN BRANCHE
By /s/ Christopher E. Sarisky
__________________________________
Name: Christopher E. Sarisky
Title: Assistant Treasurer
By /s/ John W. Sweeney
__________________________________
Name: John W. Sweeney
Title: Assistant Vice President
<PAGE>
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By /s/ David Silander
__________________________________
Name: David Silander
Title: Vice President
FUJI BANK, LIMITED
By__________________________________
Name:
Title:
GIROCREDIT BANK
By /s/ John Redding /s/ Anca Trifan
__________________________________
Name: John Redding Anca Trifan
Title: Vice President Vice President
INDOSUEZ CAPITAL FUNDING II LTD.
By: Indosuez Capital, as Portfolio Advisor
By__________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LTD.
By /s/ Takuya Honjo
__________________________________
Name: Takuya Honjo
Title: Senior Vice President
<PAGE>
KEYPORT LIFE INSURANCE COMPANY
By__________________________________
Name:
Title:
LEHMAN COMMERCIAL PAPER INC.
By /s/ Michelle Swanson
__________________________________
Name: Michelle Swanson
Title: Authorized Signatory
THE LONG-TERM CREDIT BANK OF JAPAN LTD.,
NEW YORK BRANCH
By /s/ S. Tajima
__________________________________
Name: Shuichi Tajima
Title: Deputy General Manager
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By /s/ Gilles Marchand
__________________________________
Name: Gilles Marchand, CFA
Title: Authorized Signatory
<PAGE>
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By /s/ Gilles Marchand
__________________________________
Name: Gilles Marchand, CFA
Title: Authorized Signatory
MIDLAND BANK, PLC
By__________________________________
Name:
Title:
SENIOR HIGH INCOME PORTFOLIO, INC.
By /s/ Gilles Marchand
__________________________________
Name: Gilles Marchand, CFA
Title: Authorized Signatory
SENIOR HIGH INCOME PORTFOLIO,
INC., as successor in interest
to SENIOR HIGH INCOME PORTFOLIO
II, INC.
By /s/ Gilles Marchand
__________________________________
Name: Gilles Marchand
Title: Authorized Signatory
SENIOR HIGH INCOME PORTFOLIO,
INC., as successor in interest
to SENIOR STRATEGIC INCOME FUND,
INC.
By /s/ Gilles Marchand
__________________________________
Name: Gilles Marchand
Title: Authorized Signatory
<PAGE>
THE MITSUBISHI TRUST AND BANKING CORPORATION
By__________________________________
Name:
Title:
NATIONAL CITY BANK
By__________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By__________________________________
Name:
Title:
NEW YORK LIFE INSURANCE COMPANY
By /s/ Steven M. Benevento
__________________________________
Name: Steven M. Benevento
Title: Investment Manager
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION
By /s/ Steven M. Benevento
__________________________________
Name: Steven M. Benevento
Title: Investment Manager
<PAGE>
THE NIPPON CREDIT BANK, LTD.
By__________________________________
Name:
Title:
THE SAKURA BANK, LIMITED
By__________________________________
Name:
Title:
SOCIETE GENERALE
By /s/ Richard M. Lewis
__________________________________
Name: Richard M. Lewis
Title: Vice President
SOCIETY NATIONAL BANK
By__________________________________
Name:
Title:
SUMITOMO BANK, LIMITED
By__________________________________
Name:
Title:
<PAGE>
SUNTRUST BANK, ATLANTA
By /s/ David W. Penter
__________________________________
Name: David W. Penter
Title: GVP
By /s/ R. B. King
__________________________________
Name: Raymond B. King
Title: V.P.
THE SUMITOMO TRUST & BANKING CO., LTD.
By /s/ Naoya Takeuchi
__________________________________
Name: Naoya Takeuchi
Title: Deputy General Manager
THE TORONTO-DOMINION BANK
By /s/ Debbie A. Greene
__________________________________
Name: Debbie A. Greene
Title: Mgr. Cr. Admin.
THE TRAVELERS INSURANCE COMPANY
By__________________________________
Name:
Title:
<PAGE>
THE TRAVELERS INDEMNITY COMPANY
By__________________________________
Name:
Title:
UNITED STATES NATIONAL BANK OF OREGON
By /s/ Julie Ann Boyd
__________________________________
Name: Julie Ann Boyd
Title: Relationship Manager
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By__________________________________
Name:
Title:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By /s/ Sarah T. Warren
__________________________________
Name: Sarah T. Warren
Title: Vice President
WELLS FARGO BANK
By
__________________________________
Name:
Title:
<PAGE>
THE YASUDA TRUST & BANKING CO., LTD.
By__________________________________
Name:
Title:
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By__________________________________
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By__________________________________
Name:
Title:
<PAGE>
EXHIBIT A TO
WAIVER
ACKNOWLEDGEMENT, CONSENT AND WAIVER
Each of the undersigned corporations hereby:
(a) acknowledges and consents to the execution, delivery and
performance of the Waiver, dated as of June 28, 1997 (the "Waiver") to the
Amended and Restated Credit Agreement dated as of June 3, 1996 (as the same may
be amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Collins & Aikman Canada Inc. (the "Canadian Borrower")
Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman Corporation
("Holdings"), the several banks and other institutions from time to time parties
to the Credit Agreement (the "Lenders") and The Chase Manhattan Bank, as
administrative agent to the lenders thereunder (in such capacity, the
"Administrative Agent"); and
(b) agrees that such execution, delivery and performance shall not in
any way affect such corporation's obligations under any Loan Document (as
defined in the Credit Agreement) to which such corporation is a party, which
obligations on the date hereof remain absolute and unconditional and are not
subject to any defense, set-off or counterclaim;
Dated: June 28, 1997
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
COLLINS & AIKMAN CANADA INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
PACJ, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
<PAGE>
THE AKRO CORPORATION
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
DURA CONVERTIBLE SYSTEMS, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
IMPERIAL WALLCOVERINGS, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
MARKETING SERVICE, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
GREFAB, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
<PAGE>
WICKES ASSET MANAGEMENT, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
COLLINS & AIKMAN INTERNATIONAL
CORPORATION
By /s/ Len Ferro
__________________________________
Name:
Title:
WICKES MANUFACTURING COMPANY
By /s/ Robert L. Johnson
__________________________________
Name:
Title:
WICKES REALTY, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
COLLINS & AIKMAN FLOOR COVERINGS, INC.
By__________________________________
Name:
Title:
<PAGE>
AMCO CONVERTIBLE FABRICS, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
MANCHESTER PLASTICS, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
HUGHES PLASTICS, INC.
By /s/ J. Michael Stepp
__________________________________
Name:
Title:
COLLINS & AIKMAN PROPERTIES, INC.
(formerly COLLINS & AIKMAN FLOOR COVERINGS
GROUP, INC.)
By /s/ Len Ferro
__________________________________
Name:
Title:
WAIVER
WAIVER, dated as of June 28, 1997 (this "Waiver"), to the
Credit Agreement, dated as of December 5, 1996 (as amended prior to the date
hereof and as further amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware
corporation (the "Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware
corporation ("Holdings"), the financial institutions parties thereto (the
"Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as
agent to the lenders thereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower and Holdings have requested the Lenders to agree
to waive certain provisions of Sections 6.08(i) and 6.16 of the Credit
Agreement; and
WHEREAS, the Lenders are willing to agree to waive certain provisions
of Sections 6.08(i) and 6.16 of the Credit Agreement, but only on the terms and
subject to the conditions set forth in this Waiver;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein, terms defined
in the Credit Agreement are used herein as therein defined.
SECTION 2. Waiver. Compliance with the provisions of:
(a) Section 6.08(i) of the Credit Agreement is hereby waived to permit
the sale of the Air Restraint and Technical Products Division of JPS Automotive
L.P. and the Borg Textile Division of Collins & Aikman Canada, Inc. and to
exclude such sales from the calculation of the maximum amount of assets that may
be sold pursuant to such section; provided that the Net Proceeds of such sale
are applied in accordance with Section 2.12(c) of the Credit Agreement; and
(b) Section 6.16 of the Credit Agreement is hereby waived for the
second fiscal quarter of 1997 of Holdings; provided that the Leverage Ratio is
not in excess of 2.75 to 1.00.
<PAGE>
SECTION 3. Representations and Warranties. The parties hereto hereby
represent and warrant to the Administrative Agent and each Lender that after
giving effect to the waivers contained herein, each party hereto hereby
confirms, reaffirms and restates the representations and warranties set forth in
Article III of the Credit Agreement as if made on and as of the Waiver Effective
Date, except as they may specifically relate to an earlier date; provided that
such representations and warranties shall be and hereby are amended so that all
references to the Agreement therein shall be deemed a reference to (i) the
Credit Agreement, (ii) this Waiver and (iii) the Credit Agreement as amended by
this Waiver.
SECTION 4. Conditions Precedent. This Waiver shall become effective as
of the date hereof (the "Waiver Effective Date") when each of the conditions
precedent set forth below shall have been fulfilled:
(a) Waiver. The Administrative Agent shall have received this Waiver,
executed and delivered by a duly authorized officer of each of the Borrower,
Holdings and the Required Lenders.
(b) No Default or Event of Default. On and as of the Waiver Effective
Date and after giving effect to this Waiver and the transactions contemplated
hereby, no Default or Event of Default shall have occurred and be continuing.
(c) Representations and Warranties. The representations and warranties
made by the Borrower in the Credit Agreement and herein after giving effect to
this Waiver shall be true and correct in all material respects on and as of the
Waiver Effective Date as if made on such date, except where such representations
and warranties relate to an earlier date in which case such representations and
warranties shall be true and correct as of such earlier date.
(d) Acknowledgement, Consent and Waiver. The Administrative Agent shall
have received from each of Holdings, the Borrower and the other Loan Parties
with respect to each Loan Document to which it is a party a duly executed
Acknowledgment, Consent and Waiver, substantially in the form of Exhibit A
hereto.
SECTION 5. No Other Waivers. Except as expressly waived hereby, the
Credit Agreement shall remain in full force and effect in accordance with its
terms, without any waiver, amendment or modification of any provision.
SECTION 6. Expenses. The Borrower agrees to pay or reimburse the
Administrative Agent for all of its reasonable out-of-pocket costs and expenses
incurred in connection with (a) the negotiation, preparation, execution and
delivery of this Waiver and any other documents prepared in connection herewith,
and consummation of the transactions contemplated hereby and thereby, including
the fees and expenses of Simpson Thacher & Bartlett, counsel to the
Administrative Agent, and (b) the enforcement or preservation of any rights
under this Waiver and any other such documents.
<PAGE>
SECTION 7. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 8. Counterparts. This Waiver may be executed in any number of
counterparts by the parties hereto, each of which counterparts when so executed
shall be an original, but all counterparts taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be
duly executed and delivered by their respective duly authorized officers as of
the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
________________________________
Name:
Title:
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
________________________________
Name:
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent and as
a Lender
By /s/ Rosemary Bradley
________________________________
Name: Rosemary Bradley
Title: Vice President
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Linda A. Carper
________________________________
Name: Linda A. Carper
Title: Managing Director
NATIONSBANK, N.A.
By _____________________________
Name:
Title:
AERIES FINANCE LTD.
By _____________________________
Name:
Title:
BANKBOSTON, N.A.
By _____________________________
Name:
Title:
BANK OF IRELAND - GRAND CAYMAN
BRANCH
By /s/ John Cusack
_____________________________
Name: John G. Cusack
Title: A.V.P.
<PAGE>
THE BANK OF NEW YORK
By /s/ Ann Marie Hughes
_____________________________
Name: Ann Marie Hughes
Title: Assistant Vice
President
THE BANK OF NOVA SCOTIA
By /s/ W.E. Zarrett
________________________________
Name: William E. Zarrett
Title: Senior Relationship
Manager
BANK OF SCOTLAND
By ____________________________
Name:
Title:
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY
By /s/ Friedrich N. Wilms
____________________________
Name: Friedrich N. Wilms
Title: Vice President
BANQUE FRANGAISE DU COMMERCE
EXTIRIEUR
By _____________________________
Name:
Title:
<PAGE>
BANQUE PARIBAS
By ____________________________
Name:
Title:
BRANCH BANKING AND TRUST COMPANY
By /s/ Thatcher L. Townsend
_______________________________
Name: Thatcher L. Townsend III
Title: Vice President
CAISSE NATIONALE DE CRIDIT
AGRICOLE
By /s/ D. Bouhl
_____________________________
Name: David Bouhl, AVP
Title: Head of Corporate Banking
Chicago
CERES FINANCE LTD.
By _____________________________
Name:
Title:
CIBC INC.
By _____________________________
Name:
Title:
<PAGE>
COMERICA BANK
By /s/ Deborah S. Albrecht
____________________________
Name: Deborah S. Albrecht
Title: Account Officer
COMPAGNIE FINANCIORE DE CIC ET DE
L'UNION EUROPIENNE
By ____________________________
Name:
Title:
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By /s/ D. Hemenway
_____________________________
Name: Dana W. Hemenway
Title: Vice President
By /s/ W.P.C. Kodde
_____________________________
Name: W. Pieter C. Kodde
Title: Vice President
ALLIED SIGNAL INC.
By _____________________________
Name:
Title:
<PAGE>
CREDITANSTALT CORPORATE FINANCE,
INC.
By /s/ Craig Stamm
_____________________________
Name: W. Craig Stamm
Title: Vice President
By /s/ Scott Kray
____________________________
Name: Scott Kray
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH
AND CREDIT LYONNAIS ATLANTA
AGENCY
By _____________________________
Name:
Title:
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management
Company its
Investment Manager
By _____________________________
Name:
Title:
DRESDNER BANK, A.G. NEW YORK AND
GRAND CAYMAN BRANCHES
By /s/ C. Sarisky
_____________________________
Name: Christopher E. Sarisky
Title: Assistant Treasurer
By /s/ John W. Sweeney
_____________________________
Name: John W. Sweeney
Title: Assistant Vice
President
<PAGE>
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Lori J. McCarthy
________________________________
Name: Lori J. McCarthy
Title: Vice President
<PAGE>
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By /s/ David Silander
________________________________
Name: David Silander
Title: Vice President
FUJI BANK, LIMITED
By _____________________________
Name:
Title:
GIROCREDIT BANK
By _____________________________
Name:
Title:
INDOSUEZ CAPITAL FUNDING II LTD.
By: Indosuez Capital, as
Portfolio Advisor
By _____________________________
Name:
Title:
INDUSTRIAL BANK OF JAPAN, LTD.
By _____________________________
Name:
Title:
<PAGE>
LEHMAN COMMERCIAL PAPER INC.
By /s/ Michelle Swanson
_______________________________
Name: Michelle Swanson
Title: Authorized Signatory
THE LONG-TERM CREDIT BANK OF
JAPAN LTD., NEW YORK BRANCH
By /s/ S. Tajima
________________________________
Name: Shuichi Tajima
Title: Deputy General
Manager
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By _____________________________
Name:
Title:
MITSUBISHI TRUST AND BANKING
CORPORATION
By _____________________________
Name:
Title:
ML CBO IV (CAYMAN) LTD.
By ____________________________
Name:
Title:
<PAGE>
NATIONAL CITY BANK
By _____________________________
Name:
Title:
NBD BANK
By _____________________________
Name:
Title:
NEW YORK LIFE INSURANCE AND
ANNUITY CORPORATION
By _____________________________
Name:
Title:
NEW YORK LIFE INSURANCE COMPANY
By _____________________________
Name:
Title:
THE NIPPON CREDIT BANK, LTD.
By _____________________________
Name:
Title:
<PAGE>
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (a unit of The Chase
Manhattan Bank)
By _____________________________
Name:
Title:
PARIBAS CAPITAL FUNDING LLC
By _____________________________
Name:
Title:
RESTRUCTURED OBLIGATIONS BACKED
BY SENIOR ASSETS B.V.
By: Chancellor LGT Senior
Secured Management, Inc.,
as Portfolio Advisor
By _____________________________
Name:
Title:
THE ROYAL BANK OF SCOTLAND, PLC
By /s/ Derek Bonnar
_____________________________
Name: Derek Bonnar
Title: Vice President
SAKURA BANK, LIMITED
By ____________________________
Name:
Title:
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and
Research, as
Investment Advisor
By _____________________________
Name:
Title:
SOCIETE GENERALE
By /s/ Richard M. Lewis
________________________________
Name: Richard M. Lewis
Title: Vice President
STRATA FUNDING LTD.
By _____________________________
Name:
Title:
SUMITOMO BANK, LIMITED
By /s/ Masayuki Fukushima
________________________________
Name: Masayuki Fukushima
Title: Joint General
Manager
THE SUMITOMO TRUST & BANKING
CO., LTD.
By /s/ Naoya Takeuchi
_______________________________
Name: Naoya Takeuchi
Title: Deputy General
Manager
<PAGE>
SUNTRUST BANK, ATLANTA
By /s/ Jeffrey D. Drucker
____________________________
Name: Jeffrey D. Drucker
Title: Banking Officer
By /s/ R. B. King
____________________________
Name: Raymond B. King
Title: V.P.
THE TORONTO-DOMINION (NEW YORK),
INC.
By /s/ Debbie A. Greene
____________________________
Name: Debbie A. Greene
Title: Vice President
THE TRAVELERS INSURANCE COMPANY
By ____________________________
Name:
Title:
UNITED STATES NATIONAL BANK OF
OREGON
By ____________________________
Name:
Title:
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/ J. Maillet
____________________________
Name: Jeffrey W. Maillet
Title: Sr. Vice Pres.-
Portfolio Mgr.
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
By /s/ Sarah T. Warren
____________________________
Name: Sarah T. Warren
Title: Vice President
WELLS FARGO BANK
By ____________________________
Name:
Title:
THE YASUDA TRUST & BANKING CO.,
LTD.
By ____________________________
Name:
Title:
<PAGE>
EXHIBIT A TO
WAIVER
ACKNOWLEDGEMENT, CONSENT AND WAIVER
Each of the undersigned corporations hereby:
(a) acknowledges and consents to the execution, delivery and
performance of the Waiver, dated as of June 28, 1997 (the "Waiver") to the
Credit Agreement dated as of December 5, 1996 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman
Corporation ("Holdings"), the several banks and other institutions from time to
time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan
Bank, as administrative agent to the lenders thereunder (in such capacity, the
"Administrative Agent"); and
(b) agrees that such execution, delivery and performance shall not in
any way affect such corporation's obligations under any Loan Document (as
defined in the Credit Agreement) to which such corporation is a party, which
obligations on the date hereof remain absolute and unconditional and are not
subject to any defense, set-off or counterclaim;
Dated: June 28, 1997
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ J. Michael Stepp
___________________________
Name:
Title:
COLLINS & AIKMAN CANADA INC.
By: /s/ J. Michael Stepp
___________________________
Name:
Title:
COLLINS & AIKMAN CORPORATION
By: /s/ J. Michael Stepp
__________________________
Name:
Title:
<PAGE>
PACJ, INC.
By: /s/ J. Michael Stepp
__________________________
Name:
Title:
THE AKRO CORPORATION
By: /s/ J. Michael Stepp
___________________________
Name:
Title:
DURA CONVERTIBLE SYSTEMS, INC.
By: /s/ J. Michael Stepp
___________________________
Name:
Title:
IMPERIAL WALLCOVERINGS, INC.
By: /s/ J. Michael Stepp
__________________________
Name:
Title:
MARKETING SERVICE, INC.
By: /s/ J. Michael Stepp
________________________
Name:
Title:
<PAGE>
GREFAB, INC.
By: /s/ J. Michael Stepp
________________________
Name:
Title:
WICKES ASSET
MANAGEMENT, INC.
By: /s/ J. Michael Stepp
_________________________
Name:
Title:
COLLINS & AIKMAN INTERNATIONAL
CORPORATION
By: /s/ J. Michael Stepp
_________________________
Name:
Title:
WICKES MANUFACTURING COMPANY
By: /s/ Robert L. Johnson
_________________________
Name:
Title:
WICKES REALTY, INC.
By: /s/ J. Michael Stepp
_________________________
Name:
Title:
<PAGE>
COLLINS & AIKMAN FLOOR
COVERINGS, INC.
By:
_________________________
Name:
Title:
AMCO CONVERTIBLE FABRICS, INC.
By: /s/ J. Michael Stepp
________________________
Name:
Title:
MANCHESTER PLASTICS, INC.
By: /s/ J. Michael Stepp
_________________________
Name:
Title:
HUGHES PLASTICS, INC.
By: /s/ J. Michael Stepp
_________________________
Name:
Title:
COLLINS & AIKMAN PROPERTIES,
INC.
(formerly COLLINS & AIKMAN
FLOOR COVERINGS GROUP, INC.)
By: /s/ Len Ferro
________________________
Name:
Title:
<PAGE>
ACK-TI-LINING, INC.
By: _________________________
Name:
Title:
EXHIBIT 11
COLLINS & AIKMAN CORPORATION
COMPUTATION OF EARNINGS PER SHARE
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
QUARTER ENDED SIX MONTHS ENDED
------------ ------------- ------------- ------------
JUNE 28, JUNE 22, JUNE 28, JUNE 22,
1997 1996 1997 1996
------------ ------------- ------------- ------------
Average shares outstanding during the period................... 66,144 69,074 66,635 69,082
------------ ------------- ------------- ------------
Incremental shares under stock options computed
under the treasury stock method using the average
market price of issuer's stock during the period............ 1,258 957 1,126 980
------------ ------------- ------------- ------------
Total shares for primary EPS.............................. 67,402 70,031 67,761 70,062
Additional shares under stock options computed
under the treasury stock method using the ending
price of issuer's stock.................................... 19 - 151 -
------------ ------------- ------------- ------------
Total shares for fully diluted EPS........................ 67,421 70,031 67,912 70,062
============ ============= ============= ============
Income applicable to common shareholders:
Continuing operations..................................... $ 11,600 $ 15,754 $ 22,865 $ 174,160
Discontinued operations................................... 3,881 4,980 4,802 (17,062)
Gain on sale of discontinued operations................... - - 85,292 -
Extraordinary loss........................................ (721) (6,610) (721) (6,610)
------------ ------------- ------------- ------------
Net income................................................ $ 14,760 $ 14,124 $112,238 $ 150,488
============ ============= ============= ============
Income per primary common share:
Continuing operations..................................... $ .17 $ .22 $ .34 $ 2.49
Discontinued operations................................... .06 .07 .07 (.25)
Gain on sale of discontinued operations................... - - 1.26 -
Extraordinary loss........................................ (.01) (.09) (.01) (.09)
------------ ------------- ------------- ------------
Net income................................................ $ .22 $ .20 $ 1.66 $ 2.15
============ ============= ============= ============
Income per fully diluted common share:
Continuing operations..................................... $ .17 $ .22 $ .34 $ 2.49
Discontinued operations................................... .06 .07 .07 (.25)
Gain on sale of discontinued operations................... - - 1.25 -
Extraordinary loss........................................ (.01) (.09) (.01) (.09)
------------ ------------- ------------- ------------
Net income................................................ $ .22 $ .20 $ 1.65 $ 2.15
============ ============= ============= ============
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 28, 1997 AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-28-1997
<CASH> 12,421
<SECURITIES> 0
<RECEIVABLES> 188,094
<ALLOWANCES> 8,792
<INVENTORY> 126,345
<CURRENT-ASSETS> 674,851
<PP&E> 472,227
<DEPRECIATION> 122,199
<TOTAL-ASSETS> 1,425,548
<CURRENT-LIABILITIES> 322,328
<BONDS> 944,460
0
0
<COMMON> 705
<OTHER-SE> (100,646)
<TOTAL-LIABILITY-AND-EQUITY> 1,425,548
<SALES> 831,578
<TOTAL-REVENUES> 831,578
<CGS> 689,144
<TOTAL-COSTS> 689,144
<OTHER-EXPENSES> 972
<LOSS-PROVISION> 446
<INTEREST-EXPENSE> 38,084
<INCOME-PRETAX> 40,359
<INCOME-TAX> 17,494
<INCOME-CONTINUING> 22,865
<DISCONTINUED> 90,094
<EXTRAORDINARY> (721)
<CHANGES> 0
<NET-INCOME> 112,238
<EPS-PRIMARY> 1.66
<EPS-DILUTED> 1.65
<PAGE>
</TABLE>
