UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-20080
GALEY & LORD, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 56-1593207
(State or other jurisdiction of (IRS Employer
incorporation or organization) (Identification No.)
980 Avenue of the Americas
New York, New York 10018
(Address of principal executive offices) Zip Code
212/465-3000
Registrant's telephone number, including area code
Not Applicable
Former name, former address and former fiscal year, if changed since last
report.
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 periods 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 __.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 Par Value - 11,619,824 shares as of August 4, 1997.
Exhibit Index at page 18
1
<PAGE>
INDEX
GALEY & LORD, INC.
<TABLE>
<CAPTION>
Page
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets -- 3
June 28, 1997, June 29, 1996
and September 28, 1996
Consolidated Statements of Income -- 4
Three and nine months ended June 28, 1997
and June 29, 1996
Consolidated Statements of Cash Flows -- 5
Nine months ended June 28, 1997
and June 29, 1996
Notes to Consolidated Financial Statements -- 6-9
June 28, 1997
Item 2. Management's Discussion and Analysis of 10-15
Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures About 15
Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security 16
Holders
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GALEY & LORD, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
JUNE 28, JUNE 29, SEPTEMBER 28,
1997 1996 1996
(Unaudited) (Unaudited) *
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,040 $ 602 $ 3,799
Trade accounts receivable 86,416 87,388 74,180
Sundry notes and accounts receivable 191 116 164
Inventories 82,782 78,729 76,934
Deferred income taxes 602 1,769 404
Prepaid expenses and other current assets 4,048 733 1,853
-------- -------- --------
Total current assets 177,079 169,337 157,334
Property, plant and equipment, at cost 184,362 158,950 162,199
Less accumulated depreciation and
amortization (64,436) (52,642) (55,178)
-------- -------- --------
119,926 106,308 107,021
Deferred charges 895 1,173 1,055
Intangibles 38,372 39,558 39,466
-------- -------- --------
$336,272 $316,376 $304,876
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 13,318 $ 13,620 $ 13,506
Trade accounts payable 22,252 20,837 20,957
Accrued salaries and employee benefits 8,382 8,820 10,766
Accrued liabilities 3,211 4,289 3,311
Income taxes payable 2,398 2,121 1,115
-------- -------- --------
Total current liabilities 49,561 49,687 49,655
Commitments
Long-term debt 167,866 164,009 149,265
Other long-term liabilities 84 162 143
Deferred income taxes 16,575 15,467 16,168
Stockholders' equity:
Common stock 120 120 120
Contributed capital in excess of par
value 35,722 34,429 34,687
Retained earnings 68,395 53,321 56,889
Treasury stock, at cost (2,051) (819) (2,051)
-------- -------- --------
Total stockholders' equity 102,186 87,051 89,645
-------- -------- --------
$336,272 $316,376 $304,876
======== ======== ========
</TABLE>
*Condensed from audited financial statements.
See accompanying notes to consolidated financial statements.
3
<PAGE>
GALEY & LORD, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 135,113 $ 115,437 $375,470 $ 300,965
Cost of sales 118,839 102,042 332,766 270,265
------------- ------------- ------------ -------------
Gross profit 16,274 13,395 42,704 30,700
Selling, general and administrative
expenses 5,958 3,616 13,503 10,102
Amortization of goodwill 421 321 1,258 879
------------- ------------- ------------- -------------
Operating income 9,895 9,458 27,943 19,719
Interest expense
3,112 2,819 9,225 8,509
Write-off of merger costs - - - 1,600
------------- ------------- ------------ -------------
Income before income taxes 6,783 6,639 18,718 9,610
Income tax expense (benefit):
Current 2,765 1,616 7,003 2,233
Deferred (166) 972 209 1,467
------------- ------------- ------------ -------------
Net income $ 4,184 $ 4,051 $ 11,506 $ 5,910
======= ======= ============= =============
Net income per common share:
Primary:
Average common shares outstanding 12,055 11,889 11,990 11,942
Net income per common share -
Primary $ .35 $ .34 $ .96 $ .49
===== ===== =========== ===========
Fully diluted:
Average common shares outstanding 12,107 11,889 12,095 11,949
Net income per common share -
Fully diluted $ .35 $ .34 $ .95 $ .49
===== ===== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
GALEY & LORD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
June 28, June 29,
1997 1996
-------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,506 $ 5,910
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation of property, plant and equipment 10,028 7,557
Amortization of intangible assets 1,258 879
Amortization of deferred charges 224 146
Deferred income taxes 209 1,467
Non-cash compensation 522 -
(Gain)/loss on disposals of property, plant
and equipment 122 (2)
Changes in assets and liabilities (net of acquisition):
(Increase)/decrease in accounts receivable - net (12,236) (305)
(Increase)/decrease in sundry notes & accounts
receivable (27) 53
(Increase)/decrease in inventories (5,848) 7,503
(Increase)/decrease in prepaid expenses and other
current assets (2,195) (70)
(Decrease)/increase in accounts payable - trade 1,295 2,272
(Decrease)/increase in accrued liabilities (3,205) (2,634)
(Decrease)/increase in income taxes payable 1,283 3,596
-------- -------
Net cash provided by (used in) operating activities 2,936 26,372
Cash flows from investing activities:
Acquisition of business - net of cash acquired - (22,371)
Property, plant and equipment expenditures (23,537) (9,484)
Proceeds from sale of property, plant and equipment 1,202 1,088
Other (163) (57)
---------- -------
Net cash provided by (used in) investing activities (22,498) (30,824)
Cash flows from financing activities:
Increase in revolving line of credit 30,800 12,800
Principal payments on long-term debt (12,387) (10,930)
Increase in common stock 513 14
Purchase of treasury stock - (752)
Payment of bank fees and loan costs (64) (465)
Other (59) (50)
-------- -------
Net cash provided by (used in) financing activities 18,803 617
-------- -------
Net increase/(decrease) in cash and cash equivalents (759) (3,835)
Cash and cash equivalents at beginning of period 3,799 4,437
-------- -------
Cash and cash equivalents at end of period $ 3,040 $ 602
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Galey & Lord, Inc.
(the "Company") and its wholly-owned subsidiaries, Galey & Lord Industries,
Inc., G&L Service Company, North America, Inc. ("G&L Service Company") and
Dimmit Industries, S.A. de C.V. ("Dimmit"). Intercompany items have been
eliminated in consolidation.
The accompanying unaudited consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to present fairly
the financial position as of June 28, 1997 and the results of operations and
cash flows for the periods ended June 28, 1997 and June 29, 1996. Such
adjustments consisted only of normal recurring items. Interim results are not
necessarily indicative of results for a full year. These financial statements
should be read in conjunction with the financial statements and footnotes
included in the Company's annual report on Form 10-K for the fiscal year ended
September 28, 1996.
NOTE B - BUSINESS ACQUISITIONS
On June 7, 1996, the Company, through its newly formed subsidiary, G&L Service
Company, acquired the capital stock of Dimmit and certain related assets from
Farah Incorporated for approximately $23.0 million in cash including certain
costs related to the acquisition (the "Acquisition"). Dimmit sews and finishes
pants and shorts for the casual wear market in its six manufacturing facilities
located in Piedras Negras, Mexico. Funding for the Acquisition was provided
through funds generated by operations, working capital reductions and by the
Company's current bank group through amendments to the Company's term loan and
revolving credit facility. These amendments increased the Company's borrowing
capacity by $20 million. In connection with the Acquisition, which has been
accounted for as a purchase transaction, the Company acquired assets with an
estimated fair value of approximately $12.7 million and assumed liabilities of
approximately $1.1 million. The Company has allocated the purchase price and has
recorded goodwill of approximately $11.4 million for the excess of the purchase
price over the fair value of the assets acquired. The goodwill amount is being
amortized over a 20-year period. The results of operations of G&L Service
Company and Dimmit have been included in the consolidated financial statements
from the date of the Acquisition.
6
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(UNAUDITED)
NOTE B - BUSINESS ACQUISITIONS (CONTINUED)
On January 25, 1996, the Company and Triarc Companies, Inc. ("Triarc") mutually
agreed not to go forward with their previously announced merger of the Company
and the Graniteville Company, a subsidiary of Triarc, due to current economic
conditions existing at that time in the retail, textile and apparel sectors. The
Company incurred fees and expenses related to the proposed merger of $1.6
million and took a charge during the December quarter 1995 for the write-off of
those costs.
NOTE C - LONG-TERM DEBT
On June 4, 1996, the Company amended its term loan and revolving credit facility
with its bank group led by First Union National Bank, as agent and lender. The
amendment increased the Company's maximum allowable borrowings under the
revolving credit facility, which expires March 31, 2000, from $150 million to
$170 million. The term loan was restated to the outstanding principal balance of
$48 million and continues to require equal quarterly principal payments of $3
million through the term loan's expiration on April 30, 2000. The amended term
loan and revolving credit facility bear interest at a per annum rate, at the
Company's option, of either (i) the greater of the prime rate or federal funds
rate or (ii) LIBOR plus .5%, LIBOR plus .75%, LIBOR plus 1.0%, LIBOR plus 1.25%
or LIBOR plus 1.5%, in accordance with a pricing grid based on certain financial
ratios. On May 20, 1997, the spread on the Company's LIBOR borrowings was
reduced from 1.25% to 1.0% and will remain at 1.0% throughout the September
quarter 1997. The average interest rate paid by the Company during the June
quarter 1997 was 6.8%.
On May 13, 1997, the Company amended its term loan and revolving credit facility
with its bank group. The amendment modified the Company's current covenants
related to debt service, eliminated the covenant limiting the amount of capital
expenditures to be made and permits the Company to enter into a trade
receivables securitization transaction.
The Company's obligations under the credit facility are secured by all of the
Company's inventory, equipment, accounts receivable and general intangibles, and
a pledge by the Company of all the outstanding capital stock of its wholly-owned
domestic subsidiaries, Galey & Lord Industries, Inc. and G&L Service Company and
a pledge of 65% of the outstanding capital stock of its foreign subsidiary,
Dimmit.
7
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(UNAUDITED)
NOTE C - LONG-TERM DEBT (CONTINUED)
During January 1996, the Company entered into interest rate swaps on $50 million
of its outstanding bank debt to fix the LIBOR interest rate on which those
borrowings are based. The interest rate swaps assure that the Company under its
current credit agreement will pay a maximum rate of 6.77% (LIBOR fixed at 5.27%
plus the maximum spread allowed under the credit agreement of 1.5%) on $25
million of bank debt for a two-year period and 7.03% (LIBOR fixed at 5.53% plus
the maximum spread allowed under the credit agreement of 1.5%) on the other $25
million of debt for a five-year period.
NOTE D - INVENTORIES
The components of inventory at June 28, 1997, June 29, 1996 and September 28,
1996 consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 28, June 29, September 28,
1997 1996 1996
<S> <C> <C> <C>
Raw materials $ 4,098 $ 2,173 $ 2,361
Stock in process 16,349 14,985 13,396
Produced goods 65,159 64,996 64,571
Dyes, chemicals and supplies 4,890 4,922 4,805
------- ------- -------
90,496 87,076 85,133
Less LIFO and other reserves (7,714) (8,347) (8,199)
------- ------- -------
$82,782 $78,729 $76,934
======= ======= =======
</TABLE>
NOTE E - NET INCOME PER COMMON SHARE
Net income per common share data is computed based on the average number of
shares of Common Stock and Common Stock equivalents outstanding during the
period.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," ("FAS 128") which will be adopted by the Company on
December 27, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact is expected to
result in an increase in primary earnings per share for the quarter and nine
months ended June 28, 1997 of $.01 per share and $.03 per share, respectively,
and in an increase in primary earnings per share for both the quarter and nine
months ended June 29, 1996 of $.01 per share. The impact of FAS 128 on the
calculation of fully
8
<PAGE>
GALEY & LORD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1997
(UNAUDITED)
NOTE E - NET INCOME PER COMMON SHARE (CONTINUED)
diluted earnings per share for these periods is not expected to be material.
NOTE F - STOCKHOLDERS' EQUITY
Activity in Stockholders' Equity is as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
COMMON CONTRIBUTED RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
------------- --------------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Balance at
September 28, 1996 $120 $34,687 $56,889 $(2,051) $89,645
Compensation earned
related to stock
options - 115 - - 115
Net income for
December 28, 1996 - - 3,522 - 3,522
---- ------- ------- ------- -------
Balance at
December 28, 1996 $120 $34,802 $60,411 $(2,051) $93,282
Issuance of 30,800
shares of Common
Stock for exercise
of options - 104 - - 104
Tax benefit from
exercise of stock
options - 80 - - 80
Issuance of 16,384
shares of Restricted
Common Stock - 270 - - 270
Compensation earned
related to stock
options - 233 - - 233
Net income for
March 29, 1997 - - 3,800 - 3,800
------- ----------- ----------- ----------- -----------
Balance at
March 29, 1997 $120 $35,489 $64,211 $(2,051) $97,769
Issuance of 4,400
shares of Common
Stock for exercise
of options - 53 - - 53
Tax benefit from
exercise of stock
options - 6 - - 6
Compensation earned
related to stock
options - 174 - - 174
Net income for
June 28, 1997 - - 4,184 - 4,184
------- ----------- ------- ----------- --------
Balance at
June 28, 1997 $120 $35,722 $68,395 $(2,051) $102,186
==== ======= ======= ======= ========
</TABLE>
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SIGNIFICANT EVENTS
On April 23, 1997, the Company's Board of Directors authorized the Company's
Management to buy back up to 900,000 shares or 7.7% of the Company's outstanding
common stock over the following twelve months. Shares purchased will be at
prevailing prices in open-market transactions. As of August 4, 1997, under the
current buy back program, the Company has acquired 12,200 shares of its
outstanding common stock at an average price of $16.04 per common share. Under
the Company's previous buy back program, which terminated January 16, 1997, the
Company acquired 197,003 shares of its outstanding common stock at an average
price of $10.07 per common share.
On June 7, 1996, Galey & Lord, Inc. (the "Company"), through its newly formed
subsidiary, G&L Service Company North America, Inc. ("G&L Service Company")
acquired the capital stock of Dimmit Industries, S.A. de C.V. ("Dimmit") and
certain related assets from Farah Incorporated for approximately $23.0 million
in cash including certain costs related to the Acquisition (the "Acquisition").
Dimmit sews and finishes pants and shorts for the casual wear market in its six
manufacturing facilities located in Piedras Negras, Mexico. Funding for the
Acquisition was provided through funds generated by operations, working capital
reductions and by the Company's current bank group through amendments to the
Company's term loan and revolving credit facility. These amendments increased
the Company's borrowing capacity by $20 million.
On January 25, 1996, the Company and Triarc Companies, Inc. ("Triarc") mutually
agreed not to go forward with their previously announced merger of the Company
and the Graniteville Company ("Graniteville"), a subsidiary of Triarc, due to
economic conditions existing at that time in the retail, textile and apparel
sectors. The Company incurred fees and expenses related to the merger of $1.6
million and took a charge during the December quarter 1995 for the write-off of
those costs.
10
<PAGE>
RESULTS OF OPERATIONS
The Company's operations are classified into two business segments, apparel
fabrics and home fabrics. Results for the three and nine month periods ended
June 28, 1997 and June 29, 1996 for each segment are shown below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
06/28/97 06/29/96 06/28/97 06/29/96
(dollar amounts in millions)
<S> <C> <C> <C> <C>
Net Sales Per Segment
Apparel fabrics $124.7 $ 102.4 $348.3 $266.6
Home fabrics 10.4 13.0 27.2 34.4
------ ------ ------ ------
Total net sales $135.1 $115.4 $375.5 $301.0
====== ====== ====== ======
Operating Income (Loss) Per Segment
Apparel fabrics $ 11.6 $ 10.5 $ 29.6 $ 20.4
% of Apparel Fabrics Net Sales 9.3% 10.2% 8.5% 7.6%
Home fabrics $ (1.7) $ (1.0) $ (1.7) $ (.7)
% of Home Fabrics Net Sales (16.0)% (7.7)% (6.3)% (1.9)%
------ ------ ------ ------
Total $ 9.9 $ 9.5 $ 27.9 $ 19.7
% of Total Net Sales 7.3% 8.2% 7.4% 6.5%
</TABLE>
Net sales for the June quarter 1997 (the third quarter of fiscal 1997) were
$135.1 million as compared to $115.4 million for the June quarter 1996 (third
quarter of fiscal 1996). Net sales for the first nine months of fiscal 1997 were
$375.5 million as compared to $301.0 million for the first nine months of fiscal
1996. Apparel fabrics sales increased $22.3 million or 21.8% during the June
quarter 1997 and $81.7 million or 30.6% during the first nine months of fiscal
1997 while home fabrics net sales declined $2.6 million or 20% during the June
quarter 1997 and $7.2 million or 20.9% during the first nine months of fiscal
1997. The increases in apparel fabrics net sales reflected a strong business
environment as compared to the same periods of fiscal 1996 when the Company's
customers were adjusting their inventory levels due to a slow retail
environment. The decrease in home fabrics sales was due to a continued weak
market for home decorative prints as well as the Company's decision to
significantly reduce its sales of unfinished fabrics (greige goods) in the home
fabrics business because of a lack of profitability for unfinished fabrics in
the home furnishings market.
Operating income was $9.9 million or 7.3% of net sales for the third quarter of
fiscal 1997 as compared to $9.5 million or 8.2% of net sales for the third
quarter of fiscal 1996. Apparel fabrics operating income increased $1.1 million
for the third quarter of fiscal 1997 as compared to the third quarter of fiscal
1996 as a result of higher sales volume. Home fabrics operating income declined
$.7 million for the third quarter of fiscal 1997. Home fabrics operating income
was adversely impacted by a $2.0 million pre-tax bad debt reserve taken as a
result of a major home fabrics customer filing for bankruptcy
11
<PAGE>
protection during the quarter. Excluding this charge, home fabrics operating
income would have increased $1.3 million to $.3 million for the third quarter of
fiscal 1997 as compared to a $1.0 million operating loss in the third quarter of
fiscal 1996. This improvement resulted from the reduction in sales of unfinished
fabrics and improved gross margins on home fabrics finished goods sales.
Operating income for the first nine months of fiscal 1997 was $27.9 million or
7.4% of net sales as compared to $19.7 million or 6.5% of net sales for the
first nine months of fiscal 1996. Excluding the $2.0 million bad debt reserve
mentioned above, operating income for the first nine months would have been
$29.9 million or 8.0% of net sales. The increase in operating income for the
first nine months of fiscal 1997 as compared to the first nine months of fiscal
1996 was due primarily to the higher apparel sales volume.
Interest expense was $3.1 million for the June quarter 1997 and $9.2 million for
the first nine months of fiscal 1997 as compared to $2.8 million for the June
quarter 1996 and $8.5 million for the first nine months of fiscal 1996. The
increase in interest expense for both the June quarter 1997 and the first nine
months of fiscal 1997 was primarily due to higher debt levels and higher
interest rates due to higher spreads over LIBOR, both resulting from the
Acquisition.
Net income for the third quarter of fiscal 1997 was $4.2 million or $.35 per
common share on a fully diluted basis as compared to net income for the third
quarter of fiscal 1996 of $4.1 million or $.34 per common share. Net income for
the third quarter of fiscal 1997 was adversely impacted by the $2.0 million
pre-tax ($1.2 million after-tax) or $.10 per common share bad debt reserve.
Excluding this charge, net income for the third quarter would have been $5.4
million or $.45 per common share. Net income for the first nine months of fiscal
1997, which includes the $2.0 million pre-tax ($1.2 million after-tax) or $.10
per common share bad debt reserve mentioned above, was $11.5 million or $.95 per
common share. Net income for the first nine months of fiscal 1996 was $5.9
million or $.49 per common share, which included the pre-tax charge of $1.6
million ($1.0 million after-tax) or $.08 per common share for the write-off of
fees and expenses related to the proposed merger with Graniteville. Excluding
the above charges, net income for the first nine months of fiscal 1997 would
have been $12.7 million or $1.05 per common share as compared to net income of
$6.9 million or $.57 per common share for the first nine months of fiscal 1996.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," ("FAS 128") which will be adopted by the Company on
December 27, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact is
12
<PAGE>
expected to result in an increase in primary earnings per share for the quarter
and nine months ended June 28, 1997 of $.01 per share and $.03 per share,
respectively, and in an increase in primary earnings per share for both the
quarter and nine months ended June 29, 1996 of $.01 per share. The impact of FAS
128 on the calculation of fully diluted earnings per share for these periods is
not expected to be material.
The Company's order backlog at June 28, 1997 was $139 million, a 51% increase
from the June 29, 1996 backlog of $92 million. As a result of a strong business
environment, apparel fabrics backlog was up 71% over the June 29, 1996 level
while home fabrics backlog was 32% lower than the previous year primarily due to
the bankruptcy of the customer mentioned above. The Company continues to sell to
the home fabrics customer who filed for bankruptcy protection and who is now
operating as a debtor-in-possession. However, the Company now books orders for
that customer only upon receipt of cash deposits.
LIQUIDITY AND CAPITAL RESOURCES
On June 4, 1996, the Company amended its term loan and revolving credit facility
with its bank group led by First Union National Bank of North Carolina, as agent
and lender. The amendment increased the Company's maximum allowable borrowings
under the revolving credit facility, which expires March 31, 2000, from $150
million to $170 million. The term loan was restated to the outstanding balance
of $48 million and continues to require equal quarterly principal payments of $3
million through the term loan's expiration on April 30, 2000. At June 28, 1997,
the outstanding term loan principal balance and revolving credit facility
principal balance were $34 million and $139 million, respectively. The amended
term loan and revolving credit facility bear interest at a per annum rate, at
the Company's option, of either (i) the greater of the prime rate or federal
funds rate or (ii) LIBOR plus .5%, LIBOR plus .75%, LIBOR plus 1.0%, LIBOR plus
1.25% or LIBOR plus 1.5%, in accordance with a pricing grid based on certain
financial ratios. On May 20, 1997, the spread on the Company's LIBOR borrowings
was reduced from 1.25% to 1.0% and will remain at 1.0% throughout the September
quarter 1997.
On May 13, 1997, the Company amended its term loan and revolving credit facility
with the current bank group. The amendment modified the Company's current
covenants related to debt service, eliminated the covenant limiting the amount
of capital expenditures to be made and permits the Company to enter into a trade
receivables securitization transaction. The amendment requires that immediately
upon the closing of the proposed trade receivables securitization, the proceeds
will be used to pay in full the balance of the term loan and reduce the
outstanding balance on the revolving credit facility. The maximum available
under the revolving credit facility would then be reduced from $170 million to
$155 million. The Company is currently
13
<PAGE>
negotiating to enter into the proposed securitization transaction and
anticipates that the transaction will be finalized by the December quarter 1997;
however, there can be no assurance that the trade receivables securitization
will be finalized within the expected time frame or at all.
The Company's obligations under the credit facility are secured by all of the
Company's inventory, equipment, accounts receivable and general intangibles, and
a pledge by the Company of all the outstanding capital stock of its wholly-owned
domestic subsidiaries, Galey & Lord Industries, Inc. and G&L Service Company and
a pledge of 65% of the outstanding capital stock of its foreign subsidiary,
Dimmit.
During January 1996, the Company entered into interest rate swaps on $50 million
of its outstanding bank debt to fix the LIBOR interest rate on which those
borrowings are based. The interest rate swaps assure that the Company under its
current credit agreement will pay a maximum rate of 6.77% (LIBOR fixed at 5.27%
plus the maximum spread allowed under the credit agreement of 1.5%) on $25
million of bank debt for a two-year period and 7.03% (LIBOR fixed at 5.53% plus
the maximum spread allowed under the credit agreement of 1.5%) on the other $25
million of debt for a five-year period.
For the first nine months of fiscal 1997, the Company spent approximately $23.5
million for capital expenditures. In fiscal 1997, the Company expects to spend
in excess of $30 million on capital expenditures. These expenditures will be
primarily for (1) the expansion of the Company's weaving and dyeing and
finishing operations, (2) the modernization of the Company's existing spinning
and weaving facilities and (3) the installation of a cutting operation and
expansion of the Company's garment operations. The Company expects to fund these
expenditures through funds from operations and borrowings under its revolving
credit facility.
Working capital increased approximately $7.8 million to $127.5 million at June
28, 1997 as compared to $119.7 million at June 29, 1996. The increase in working
capital was primarily attributable to a $4.1 million increase in inventories and
a $3.3 million increase in prepaid expenses and other current assets. The $4.1
million increase in inventories resulted from the addition of G&L Service
Company inventory in fiscal 1997 and an increase of apparel fabrics inventory to
support higher apparel fabrics sales, partially offset by reductions in home
fabrics greige goods inventory levels. The $3.3 million increase in prepaid
expenses and other current assets was primarily due to payments of security
deposits associated with the modernization and expansion of the Company's
facilities.
The Company anticipates that cash requirements including working capital and
capital expenditure needs will be met through funds generated from operations
and through borrowings under the Company's
14
<PAGE>
revolving credit facility. In addition, from time to time, the Company uses
borrowings under secured and unsecured bank loans, through capital leases or
through operating leases for various equipment purchases.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (not applicable)
Item 2. Changes in Securities (not applicable)
Item 3. Defaults Upon Senior Securities (not applicable)
Item 4. Submission of Matters to a Vote of Security Holders (not applicable)
Item 5. Other Information (not applicable)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - The exhibits to this Form 10-Q are listed in
the accompanying Exhibit Index
(b) Reports on Form 8-K - None
16
<PAGE>
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.
Galey & Lord, Inc.
(Registrant)
/s/Michael R. Harmon
Michael R. Harmon
Executive Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer), Treasurer
and Secretary
August 11, 1997
Date
17
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page No.
<S> <C> <C>
10.34 1996 Restricted Stock Plan of the Company.
10.35 First Amendment to the Amended and Restated
Credit Agreement dated May 13, 1997 between
Galey & Lord Industries, Inc., the Company
and certain subsidiaries and First Union
National Bank of North Carolina, as agent and lender.
11 Statement Regarding Computation
of Per Share Earnings
27 Financial Data Schedule
</TABLE>
18
<PAGE>
GALEY & LORD, INC.
1996 RESTRICTED STOCK PLAN
(As Adopted Effective as of November 12, 1996)
1. Purpose. The purpose of the Galey & Lord, Inc., 1996 Restricted
Stock Plan (the "Plan") is to induce certain non-employee directors to continue
to serve as directors of Galey & Lord, Inc. (the "Corporation"), to encourage
ownership of shares in the Corporation by such non-employee directors and to
provide additional incentive for such directors to promote the success of the
Corporation's business.
2. Effective Date of the Plan. The Plan became effective on November
12, 1996, by action of the Board of Directors (the "Board") subject to approval
by the stockholders of the Corporation.
3. Stock Subject to Plan. 150,000 of the authorized but unissued shares
of the common stock, $.01 par value, of the Corporation (the "Common Stock") are
hereby reserved for issuance under the Plan; provided, however, that the number
of shares so reserved may from time to time be reduced to the extent that a
corresponding number of issued and outstanding shares of the Common Stock are
purchased by the Corporation and set aside for issuance under the Plan. If any
shares of the Common Stock issued under the Plan ("Restricted Shares") are
reacquired by the Corporation as provided in Section 9, such shares shall again
be available for the purposes of the Plan.
<PAGE>
4. Committee. The committee (the "Committee") shall consist of two or
more members of the Board. The Chief Executive Officer of the Corporation shall
also be a member of the Committee, ex-officio, whether or not he or she is
otherwise a member of the Committee. The Committee shall be appointed annually
by the Board, which may at any time and from time to time remove any members of
the Committee, with or without cause, appoint additional members to the
Committee and fill vacancies, however caused, in the Committee. In the event
that no Committee shall have been appointed, the Board shall act as the
Committee. A majority of the members of the Committee shall constitute a quorum.
All determinations of the Committee shall be made by a majority of its members
present at a meeting duly called and held. Any decision or determination of the
Committee reduced to writing and signed by all of the members of the Committee
shall be fully effective as if it had been made at a meeting duly called and
held.
5. Administration. Subject to the provisions of the Plan, the Committee
shall have authority to interpret the Plan and to prescribe, amend and rescind
rules and regulations relating to it. Any determination by the Committee in
carrying out, administering or construing the Plan shall be final and binding
for all purposes and upon all interested persons and their heirs, successors and
personal representatives.
6. Eligibility. An allocation of Restricted Shares may only be made to
persons who are directors of the Corporation and
2
<PAGE>
who are not common law employees of the Corporation.
7. Grants of Restricted Shares. A. On December 30, 1996 and continuing
annually thereafter on the third Trading Day after the date of the Annual
Meeting of stockholders of the Corporation, through and including the Annual
Meeting of stockholders of the Corporation held in 2005, and on the third
Trading Day after the date on which each person described below first becomes a
director (if such date is a date other than the Annual Meeting of Stockholders
of the Corporation), each person who (a) is serving as a director of the
Corporation on the date of grant, (b) is not a common law employee of the
Corporation and (c) has filed an election with the Corporation (at such time and
in such manner as may be prescribed by the Corporation) to receive an allocation
of Restricted Shares for the current year in lieu of an option under the Amended
and Restated 1989 Stock Option Plan of Galey & Lord, Inc. (or any other stock
option plan subsequently adopted by the Corporation), shall automatically be
allocated 1,200 Restricted Shares, subject to availability under the Plan.
B. On the third Trading Day after January 1, 1997 and on the third
Trading Day after each January 1 thereafter, through and including January 1,
2006, and at the time each person described below first becomes a director, each
person who (a) is serving as a director of the Corporation on such date, (b) is
not a common law employee of the Corporation on such date and (c) filed an
election with the Corporation on or prior to the
3
<PAGE>
preceding December 1, or at the time a person first became a director (at such
time and in such manner as may be prescribed by the Corporation) to receive all
of his or her annual director's fee for the subsequent calendar year (or, for
the remainder of the current calendar year, in the case of a person who first
becomes a director during such calendar year) in the form of a combination of
cash and Restricted Shares in lieu of (i) cash or (ii) a grant of options under
the Amended and Restated 1989 Stock Option Plan of Galey & Lord, Inc. (or any
other stock option plan subsequently adopted by the Corporation), shall be paid
for such subsequent calendar year (or, for the remainder of the current calendar
year, in the case of a person who first becomes a director during such calendar
year) in the form of a combination of ten thousand dollars ($10,000) of cash and
an allocation, subject to availability under the Plan, of the number of
Restricted Shares derived by dividing fifteen thousand (15,000) by the Fair
Market Value per Share of the Common Stock on the third Trading Day after
January 1 of such subsequent calendar year (or the third Trading Day after the
date on which such person first becomes a director, as the case may be), rounded
to the next highest share. Notwithstanding the foregoing provisions of this
Section 7B, the amount of the annual directors' fee to be paid (whether in the
form of cash, stock options or a combination of cash and Restricted Shares) with
respect to a calendar year to a director who first becomes a director during
such calendar year shall be reduced to an amount calculated by multiplying the
amount to which a director otherwise would be payable pursuant to
4
<PAGE>
the foregoing provisions of this Section 7B (whether in the form of cash, stock
options or a combination of cash and Restricted Shares) by a fraction, the
numerator of which is the number of calendar days remaining in such calendar
year measured from the date on which such person first becomes a director and
the denominator of which is three hundred sixty-five (365).
8. Purchase Price. Each person who shall be allocated Restricted Shares
hereunder shall purchase the same from the Corporation at and for a purchase
price of $.01 a share. Failure by a Participant to purchase and pay for all of
the Restricted Shares allocated to him or her within thirty days after he or she
shall have been given written notice of such allocation shall result in a
cancellation of such allocation and he or she shall no longer have the right to
purchase the same hereunder.
9. Restricted Shares. A. Except as otherwise provided in this Section,
the Restricted Shares allocated to a Participant may not be sold, assigned,
transferred or otherwise disposed of, and may not be pledged or hypothecated.
The Stock Restrictions shall terminate on the third anniversary of the date of
his or her Restricted Stock Agreement (as such term is defined in paragraph E.
of this Section 9).
B. In addition, if the Participant to whom Restricted Shares have been
allocated as of any Allocation Date leaves the service of the Corporation and
its subsidiaries by reason of his or her Discharge for Cause prior to the
termination of the Stock
5
<PAGE>
Restrictions with respect to the Restricted Shares allocated to such Participant
as of such Allocation Date, he or she shall be obligated to redeliver such
Restricted Shares to the Corporation immediately and the Corporation shall pay
to him or her, in redemption of such shares, an amount equal to the price paid
by the Participant for such Restricted Shares.
C. If the Participant to whom Restricted Shares have been allocated as
of any Allocation Date leaves the service of the Corporation and its
subsidiaries for any reason other than his or her Discharge for Cause prior to
the termination of the Stock Restrictions with respect to the Restricted Shares
allocated to such Participant as of such Allocation Date, such Participant (or,
in the event of his or her death, the executors or administrators of his or her
estate) shall retain all of his or her rights with respect to such Restricted
Shares; provided, however, that such Restricted Shares shall remain subject to
the terms of the Plan and of such Participant's Restricted Stock Agreement.
D. Upon issuance of the certificate or certificates for the Restricted
Shares in the name of a Participant, the Participant shall thereupon be a
stockholder with respect to all the Restricted Shares represented by such
certificate or certificates and shall have the rights of a stockholder with
respect to such Restricted Shares, including the right to vote such Restricted
Shares and to receive all dividends and other distributions paid with respect to
such Restricted Shares.
6
<PAGE>
E. Each Participant receiving Restricted Shares shall (a) agree that
such Restricted Shares shall be subject to, and shall be held by him or her in
accordance with all of the applicable terms and provisions of, the Plan, (b)
represent and warrant to the Corporation that he or she is acquiring such
Restricted Shares for investment for his or her own account (unless there is
then current a prospectus relating to the Restricted Shares under Section 10(a)
of the Securities Act of 1933, as amended) and, in any event, that he or she
will not sell or otherwise dispose of said shares except in compliance with the
Securities Act of 1933, as amended, and (c) agree that the Corporation may place
on the certificates representing the Restricted Shares or new or additional or
different shares or securities distributed with respect to the Restricted Shares
such legend or legends as the Corporation may deem appropriate and that the
Corporation may place a stop transfer order with respect to such Restricted
Shares with the Transfer Agent(s) for the Common Stock. The foregoing agreement,
representation and warranty shall be contained in an agreement in writing
("Restricted Stock Agreement") which shall be delivered by the Participant to
the Corporation. The Committee shall adopt, from time to time, such rules with
respect to the return of executed Restricted Stock Agreements as it deems
appropriate and failure by a Participant to comply with such rules shall
terminate the allocation of such Restricted Shares to such Participant.
10. Adjustment of Number of Shares. A. In the event that
7
<PAGE>
a dividend shall be declared upon the Common Stock payable in shares of the
Common Stock, the number of shares of the Common Stock then subject to any
Restricted Stock Agreement and the number of shares of the Common Stock reserved
for issuance in accordance with the provisions of the Plan but not yet issued
shall be adjusted by adding to each such share the number of shares which would
be distributable thereon if such shares had been outstanding on the date fixed
for determining the stockholders entitled to receive such stock dividend. In the
event that the outstanding shares of the Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Corporation or of another corporation, whether through reorganization,
recapitalization, stock split-up, combination of shares, sale of assets, merger
or consolidation in which the Corporation is the surviving corporation, then,
there shall be substituted for each share of the Common Stock then subject to a
Restricted Stock Agreement and for each share of the Common Stock reserved for
issuance in accordance with the provisions of the Plan but not yet issued, the
number and kind of shares of stock or other securities into which each
outstanding share of the Common Stock shall be so changed or for which each such
share shall be exchanged.
B. In the event that there shall be any change, other than as specified
in this Section 10, in the number or kind of outstanding shares of the Common
Stock, or of any stock or other
8
<PAGE>
securities into which the Common Stock shall have been changed, or for which it
shall have been exchanged, then, if the Committee shall, in its sole discretion,
determine that such change equitably requires an adjustment in the number or
kind of shares then subject to a Restricted Stock Agreement and the number or
kind of shares reserved for issuance in accordance with the provisions of the
Plan but not yet issued, such adjustment shall be made by the Committee and
shall be effective and binding for all purposes of the Plan and of each
Restricted Stock Agreement entered into in accordance with the provisions of the
Plan.
C. No adjustment or substitution provided for in this Section 10 shall
require the Corporation to deliver a fractional share under the Plan or any
Restricted Stock Agreement.
11. Withholding and Waivers. In the event of the death of a
Participant, an additional condition to the Corporation's obligation to release
Restricted Shares to the executors or administrators of such Participant's
estate and to release the Stock Restrictions provided hereunder on any
Restricted Shares owned by such Participant as provided in Section 9 shall be
the delivery to the Corporation of such tax waivers, letters testamentary and
other documents as the Committee may reasonably determine.
12. Definitions. For the purposes hereof:
A. The term "Allocation Date" shall mean the date as of which
a Participant shall have received a grant of
9
<PAGE>
Restricted Shares.
B. The term "Discharge for Cause" shall mean the termination
of a Participant's service as a director of the Corporation by reason
of (i) the commission by such Participant of any act or omission that
would constitute a crime under federal, state or equivalent foreign
law, (ii) the commission by such Participant of any act of moral
turpitude, (iii) fraud, dishonesty or other acts or omissions that
result in a breach of any fiduciary or other material duty to the
Corporation or (iv) continued alcohol or other substance abuse that
renders such Participant incapable of performing his or her material
duties to the satisfaction of the Corporation.
C. The term "Fair Market Value per Share " shall mean the last
reported sale price for Common Stock (regular way) or, in case no such
reported sale takes place on such Trading Day, the average of the
closing bid and asked prices (regular way) for the Common Stock for
such Trading Day, in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or
if the Common Stock is not listed or admitted to trading on any
national securities exchange, but is traded in the over-the-counter
market, the closing sale price of the Common Stock or, if no sale is
publicly reported, the average of the closing bid and asked quotations
for the Common Stock, as reported by the National Association of
Securities
10
<PAGE>
Dealers Automated Quotation System ("Nasdaq") or any comparable system
or, if the Common Stock is not listed on Nasdaq or a comparable system,
the closing sale price of the Common Stock, or, if no sale is publicly
reported, the average of the closing bid and asked prices, as furnished
by two members of the National Association of Securities Dealers, Inc.
who make a market in the Common Stock selected from time to time by the
Corporation for that purpose. In addition, for purposes of this
definition and as otherwise used in the Plan, "Trading Day" shall mean,
if the Common Stock is listed on any national securities exchange, a
business day during which such exchange was open for trading and at
least one trade of Common Stock was effected on such exchange on such
business day, or, if the Common Stock is not listed on any national
securities exchange but is traded in the over-the-counter market, a
business day during which the over-the-counter market was open for
trading and at least one "eligible dealer" quoted both a bid and asked
price for the Common Stock. An "eligible dealer" for any day shall
include any broker-dealer who quoted both a bid and asked price for
such day, but shall not include any broker-dealer who quoted only a bid
or only an asked price for such day.
D. The term "Stock Restrictions" shall mean the restrictions
on the ability of a Participant to transfer Restricted Shares issued to
such Participant hereunder
11
<PAGE>
referred to in Section 9 and embodied in a Restricted Stock Agreement
between the Corporation and such Participant.
13. Expenses of Administration. All costs and expenses incurred in the
operation and administration of the Plan shall be borne by the Corporation.
14. No Employment Right. Neither the existence of the Plan nor the
grant of any Restricted Shares hereunder shall require the Corporation or any
subsidiary to continue any Participant as a director of the Corporation or any
subsidiary.
15. Amendment of Plan. The Board may, at any time and from time to
time, by a resolution appropriately adopted, make such modifications of the Plan
as it shall deem advisable. No amendment of the Plan may, without the consent of
the Participants to whom any Restricted Shares shall theretofore have been
allocated, adversely affect the rights or obligations of such Participants with
respect to such Restricted Shares. The Committee may, in its discretion, cause
the restrictions imposed in accordance with the provisions of Section 9 hereof
with respect to any Restricted Shares to terminate, in whole or in part, prior
to the time when they would otherwise terminate.
16. Expiration and Termination of the Plan. The Plan shall terminate on
November 11, 2006 or at such earlier time as the Board may determine; provided,
however, that such termination shall not, without the consent of the
Participants to whom any Restricted Shares shall theretofore have been
allocated,
12
<PAGE>
adversely affect the rights or obligations of such Participants with respect to
such Restricted Shares.
17. Governing Law. The Plan shall be governed by the laws of the State
of New York.
13
<PAGE>
AMENDMENT NO. 1
THIS AMENDMENT NO. 1, dated as of May 13, 1997 (the "Amendment")
relating to the Credit Agreement referenced below, by and among GALEY & LORD
INDUSTRIES, INC., a Delaware corporation, as borrower, GALEY & LORD, INC., a
Delaware corporation, and certain subsidiaries and affiliates party to the
Credit Agreement and identified on the signature pages hereto, the Lenders
identified herein and FIRST UNION NATIONAL BANK OF NORTH CAROLINA., as Agent.
Terms used but not otherwise defined shall have the meanings provided in the
Credit Agreement.
W I T N E S S E T H
WHEREAS, a $218 million credit facility has been extended to Galey &
Lord Industries, Inc. pursuant to the terms of that Amended and Restated Credit
Agreement dated as of June 4, 1996 (as amended and modified, the "Credit
Agreement") among Galey & Lord Industries, Inc., as Borrower, Galey & Lord, Inc.
and the other Guarantors and Lenders identified therein, and First Union
National Bank of North Carolina, as Agent;
WHEREAS, the Borrower plans to enter into a $65 million Qualified
Securitization Transaction with The First National Bank of Chicago ("First
Chicago");
WHEREAS, the Company has requested certain modifications described
herein in connection therewith; and
WHEREAS, the Agent and the Lenders have consented to the requested
modifications on the terms and conditions set forth herein;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended and modified in the following
respects:
1. The Agent and the Lenders hereby consent to the
structure, terms and tenor of the proposed securitization transaction with First
Chicago on the terms attached as Schedule 1 and agree to waive application of
the provisions of Section 2.6(b) in connection with such securitization
transaction; provided that immediately upon closing of the proposed
securitization transaction:
(a) the Term Loan shall be paid in full ($34 million remaining
outstanding on the date of this Amendment); and
(b) the aggregate Revolving Committed Amount shall be
permanently reduced from ONE HUNDRED SEVENTY MILLION DOLLARS
($170,000,000) to ONE
<PAGE>
HUNDRED FIFTY-FIVE MILLION DOLLARS ($155,000,000).
2. The following definitions in Section 1.1 are amended
and modified to read as follows:
"Consolidated Debt Service": for any period, the sum of
Consolidated Interest Expense plus current maturities of Funded Debt
(excluding for purposes hereof payments or maturities relating to the
Term Loan) and current maturities under Capital Leases as of the date
of determination, for the Company and its Subsidiaries on a
consolidated basis as determined in accordance with GAAP applied on a
consistent basis. The applicable period shall be for eight (8)
consecutive quarters ending as of the date of determination.
"Consolidated Net Income Available for Debt Service": for the
applicable period ending as of the date of determination, the sum of
Consolidated EBITDA minus cash taxes paid minus Capital Expenditures
made or incurred minus Dividends, in each case for the Company and its
Subsidiaries on a consolidated basis determined in accordance with GAAP
applied on a consistent basis. Except as otherwise specified, the
applicable period shall be for the eight (8) consecutive quarters
ending as of the date of computation.
3. Section 5.9(b) regarding the ratio of Consolidated
Funded Debt to Consolidated Total Capitalization is amended to read as follows:
(b) Consolidated Funded Debt to Consolidated Total
Capitalization. There shall be maintained at all times a ratio of
Consolidated Funded Debt to Consolidated Total Capitalization of not
greater than:
Period
Closing Date through September 29, 1998 .70 : 1.0
September 30, 1998 and thereafter .65 : 1.0
4 Section 5.9(d) regarding Capital Expenditures is
deleted in its entirety and replaced with the following:
(d) [Intentionally Omitted];
5 Section 6.5(a) is amended to delete the "and" at the
end of subsection (iv), replace the "." at the end subsection (v) with "; and"
and to include an additional subsection (vi) to read as follows:
(vi) in connection with a Qualified Securitization Transaction.
B. Except as modified hereby, all of the terms and provisions of
the Credit Agreement (and Exhibits and Schedules) remain in full force and
effect.
2
<PAGE>
C. The Company agrees to pay all reasonable costs and expenses
of the Administrative Agent in connection with the preparation, execution and
delivery of this Amendment, including without limitation the reasonable fees and
expenses of Moore & Van Allen, PLLC.
D. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and it shall not be necessary in making proof of this Amendment to
produce or account for more than one such counterpart.
E. This Amendment, and the Credit Agreement as amended hereby,
shall be governed by and construed and interpreted in accordance with the laws
of the State of North Carolina.
[Remainder of Page Intentionally Left Blank]
3
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
BORROWER: GALEY & LORD INDUSTRIES, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice President
GUARANTORS: GALEY & LORD, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Executive Vice President
G&L SERVICE COMPANY, NORTH AMERICA, INC.,
a Delaware corporation
By: /s/ Michael R. Harmon
Name: Michael R. Harmon
Title: Vice President
LENDERS: FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
- -------- as Agent and as a Lender
By: /s/ Shannan S. Townsend
Name: Shannan S. Townsend
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Courtenay R. Wood
Name: Courtenay R. Wood
Title: Vice President
NATIONSBANK, N.A.
By: /s/ Joseph R. Netzel
Name: Joseph R. Netzel
Title: Vice President
<PAGE>
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: /s/ W. S. Laight
Name: W. S. Laight
Title: Senior Vice President
BANK OF AMERICA ILLINOIS
By: /s/ Michael J. McKenney
Name: Michael J. McKenney
Title: Vice President
CORESTATES BANK, N.A.
By: /s/ James P. Richards
Name: James P. Richards
Title: Vice President
CIBC INC.
By: /s/ Roger Colden
Name: Roger Colden
Title: CIBC Wood Gundy Securities Corp.
as Agent
FLEET BANK, N.A.
By: /s/ Tami Cohen
Name: Tami Cohen
Title: Vice President
THE BANK OF TOKYO-MITSUBISHI, LTD.,
ATLANTA AGENCY
By: /s/ Gary L. England
Name: Gary L. England
Title: Vice President & Manager
BANK OF SCOTLAND
By: /s/ Annie Chin Tat
Name: Annie Chin Tat
Title: Assistant Vice President
<PAGE>
SUNTRUST BANK, ATLANTA
By: /s/ Jeffrey D. Drucker
Name: Jeffrey D. Drucker
Title: Banking Officer
By: /s/ Raymond B. King
Name: Raymond B. King
Title: Vice President
Exhibit 11
GALEY & LORD, INC.
STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS
Computation of Average Shares Outstanding (In Thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 28, 1997 June 29, 1996 June 28, 1997 June 29, 1996
<S> <C> <C> <C> <C>
Average Common Shares
Outstanding 11,625 11,691 11,600 11,732
Add Dilutive Options 430 198 390 210
-------- -------- -------- --------
Primary Average Shares 12,055 11,889 11,990 11,942
Incremental Shares Arising
from Full Dilution
Assumption 52 0 105 7
-------- -------- --------- --------
Average Shares Assuming
Full Dilution 12,107 11,889 12,095 11,949
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 3,040
<SECURITIES> 0
<RECEIVABLES> 86,416
<ALLOWANCES> 0
<INVENTORY> 82,782
<CURRENT-ASSETS> 177,079
<PP&E> 184,362
<DEPRECIATION> 64,436
<TOTAL-ASSETS> 336,272
<CURRENT-LIABILITIES> 49,561
<BONDS> 0
0
0
<COMMON> 120
<OTHER-SE> 35,722
<TOTAL-LIABILITY-AND-EQUITY> 102,186
<SALES> 375,470
<TOTAL-REVENUES> 375,470
<CGS> 332,766
<TOTAL-COSTS> 332,766
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,225
<INCOME-PRETAX> 18,718
<INCOME-TAX> 7,212
<INCOME-CONTINUING> 11,506
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,506
<EPS-PRIMARY> .96
<EPS-DILUTED> .95
</TABLE>
