<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from________________________to__________________
Commission file number 1-6853
SHAW INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
GEORGIA
(State or other jurisdiction of incorporation or organization)
58-1032521
(I.R.S. Employer Identification No.)
616 E. WALNUT AVENUE, DALTON, GEORGIA 30720
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area
code (706) 278-3812
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check [X] 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: November 5, 1994 -139,337,802 shares
<PAGE>
SHAW INDUSTRIES, INC.
FORM 10- Q
October 1, 1994
I N D E X
PART I - FINANCIAL INFORMATION PAGE NUMBER
Consolidated Balance Sheets - October 1, 1994
and July 2, 1994 1-2
Consolidated Statements of Income and Retained
Earnings -
For the Three Months Ended
October 1, 1994 and
October 2, 1993 3
Consolidated Statements of Cash Flows
For the Three Months Ended
October 1, 1994 and
October 2, 1993 4
Notes to Consolidated Financial Statements 5-6
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-8
PART II - OTHER INFORMATION 9
SIGNATURES 10<PAGE>
PART 1 - ITEM ONE - FINANCIAL INFORMATION
<TABLE>
SHAW INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<S> <C> <C>
October 1, 1994 July 2, 1994
------------- -------------
CURRENT ASSETS:
Cash $ 25,202,000 $ 12,597,000
------------- -------------
Temporary cash investments 40,000,000 0
------------- -------------
Accounts and notes receivable, less
allowance for doubtful accounts and
discounts of $19,977,000 and $18,455,000 362,872,000 367,613,000
------------- -------------
Inventories -
Raw materials 231,835,000 240,726,000
Work-in-process 33,641,000 36,110,000
Finished goods 258,291,000 249,302,000
------------- -------------
523,767,000 526,138,000
------------- -------------
Prepaid expenses 24,503,000 24,507,000
------------- -------------
TOTAL CURRENT ASSETS 976,344,000 930,855,000
------------- -------------
PROPERTY, PLANT AND EQUIPMENT,
at cost:
Land and land improvements 28,739,000 28,196,000
Building and leasehold improvements 252,196,000 231,892,000
Machinery and equipment 775,512,000 743,908,000
Construction in progress 95,523,000 114,604,000
------------- -------------
1,151,970,000 1,118,600,000
Less - Accumulated depreciation 500,257,000 481,025,000
------------- -------------
651,713,000 637,575,000
------------- -------------
OTHER ASSETS 113,538,000 113,718,000
------------- -------------
TOTAL ASSETS $ 1,741,595,000 $ 1,682,148,000
============= =============
-1-<PAGE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
October 1, 1994 July 2, 1994
------------- -------------
CURRENT LIABILITIES:
Notes payable $ 0 $ 135,000,000
Current maturities of long-term debt 38,923,000 40,579,000
Accounts payable 181,258,000 225,368,000
Accrued liabilities 128,931,000 125,193,000
Accrued income taxes 12,339,000 0
------------- -------------
TOTAL CURRENT LIABILITIES 361,451,000 526,140,000
------------- -------------
LONG-TERM DEBT, less current maturities above 591,537,000 382,192,000
------------- -------------
DEFERRED INCOME TAXES 38,121,000 38,095,000
------------- -------------
OTHER CREDITS 12,226,000 11,831,000
------------- -------------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 13,960,000 13,790,000
------------- -------------
SHAREHOLDERS' INVESTMENT:
Preferred stock; 250,000 shares authorized,
no shares issued - -
Common stock, no par, $1.11 stated value,
authorized 500,000,000 shares; 139,321,102
shares issued at October 1, 1994 and
139,868,162 shares issued at July 2, 1994 154,647,000 155,254,000
Paid-in capital 149,022,000 159,192,000
Foreign currency translation adjustment (3,088,000) (2,488,000)
Retained earnings 423,719,000 398,212,000
------------- -------------
724,300,000 710,170,000
Less -Unearned compensation 0 70,000
------------- -------------
Total Shareholders' Investment 724,300,000 710,100,000
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
INVESTMENT $ 1,741,595,000 $ 1,682,148,000
============= =============
The accompanying notes are an integral part of these consolidated financial statements.
-2-<PAGE>
SHAW INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED
October 1, 1994 October 2, 1993
------------- -------------
NET SALES $ 734,100,000 $ 649,516,000
------------- -------------
COSTS AND EXPENSES:
Cost of sales 577,220,000 512,215,000
Selling expense 68,020,000 51,558,000
General and administrative expense 27,226,000 24,623,000
------------- -------------
672,466,000 588,396,000
------------- -------------
OPERATING INCOME 61,634,000 61,120,000
------------- -------------
OTHER EXPENSE (INCOME):
Interest expense 8,255,000 5,836,000
Interest income (181,000) (288,000)
------------- -------------
Interest, net 8,074,000 5,548,000
Miscellaneous, net (644,000) 24,000
------------- -------------
Total 7,430,000 5,572,000
------------- -------------
INCOME BEFORE INCOME TAXES 54,204,000 55,548,000
------------- -------------
PROVISION FOR INCOME TAXES 20,869,000 21,452,000
------------- -------------
INCOME BEFORE MINORITY INTEREST 33,335,000 34,096,000
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY (173,000) -
------------- -------------
NET INCOME $ 33,162,000 $ 34,096,000
============= =============
EARNINGS PER COMMON SHARE:
Primary $ 0.24 $ 0.24
============= =============
Fully diluted $ 0.24 $ 0.24
============= =============
RETAINED EARNINGS:
Beginning of period $ 398,212,000 $ 297,754,000
Add-net income 33,162,000 34,096,000
Deduct - dividends paid 7,655,000 6,433,000
------------- -------------
End of period $ 423,719,000 $ 325,417,000
============= =============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
-3-<PAGE>
<TABLE>
SHAW INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
THREE MONTHS ENDED
October 1, 1994 October 2, 1993
------------- -------------
OPERATING ACTIVITIES:
Net Income $ 33,162,000 $ 34,096,000
------------- -------------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 20,610,000 21,315,000
Provision for doubtful accounts 2,167,000 3,005,000
Stock option compensation expense 70,000 199,000
Change in assets and liabilities, net of
acquisitions:
Accounts receivable 2,574,000 7,760,000
Inventories 2,371,000 (14,751,000)
Trade accounts payable (44,110,000) 15,464,000
Other accrued liabilities 3,738,000 5,427,000
Income taxes payable 12,339,000 8,326,000
Deferred income taxes and other credits 421,000 709,000
Other, net (836,000) (3,698,000)
------------- -------------
Total Adjustments (656,000) 43,756,000
------------- -------------
Net Cash Provided by Operating Activies 32,506,000 77,852,000
------------- -------------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (34,158,000) (23,568,000)
Business assets acquired 0 (38,443,000)
Increase in temporary cash investments (40,000,000) (20,231,000)
------------- -------------
Net Cash Used in Investing Activities (74,158,000) (82,242,000)
------------- -------------
FINANCING ACTIVITIES:
Increase (decrease) in debt, net 72,689,000 (1,212,000)
Exercise of stock options 973,000 348,000
Dividends paid (7,655,000) (6,433,000)
Purchase and retirement of common stock (11,750,000) (3,393,000)
------------- -------------
Net Cash Provided (Used) in Financing Activities 54,257,000 (10,690,000)
------------- -------------
NET INCREASE (DECREASE) IN CASH 12,605,000 (15,080,000)
CASH AT BEGINNING OF PERIOD 12,597,000 35,807,000
------------- -------------
CASH AT END OF PERIOD $ 25,202,000 $ 20,727,000
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for -
Interest $ 6,313,000 $ 5,752,000
Income taxes $ 3,120,150 $ 11,612,000
Noncash capital lease obligations $ 0 $ 378,000
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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SHAW INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 1, 1994
(UNAUDITED)
______________________________________________________________
1. The financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the
information not misleading. These financial statements should be
read in conjunction with the financial statements and related
notes contained in the 1994 Annual Report on Form 10-K. In the
opinion of management, the financial statements contain all
adjustments necessary to present fairly the financial position as
of October 1, 1994 and the results of operations and cash flows
for the three months then ended. These adjustments were of a
normal recurring nature. The results of operations for the
three months ended October 1, 1994 are not necessarily indicative
of the results to be expected for the year ending December 31,
1994.
The Company uses the last-in, first-out (LIFO) method
of valuing substantially all of its inventories in order to more
properly match current costs against current revenues, thereby
reducing the effects of inflation on earnings. If LIFO
inventories were valued at current costs, the inventories would
have been $10,307,000 and $6,449,000 lower at October 1, 1994 and
at July 2, 1994, respectively. Certain of the Company's physical
inventories are taken on a weekly, monthly or quarterly basis and
the Company computes the LIFO inventory amount on a quarterly
basis after considering anticipated prices, quantities and
product mix as of year-end.
2. The weighted average number of shares used in computing
earnings per share for the three months ended October 1, 1994 and
October 2, 1993 were as follows:
Three Months Ended
October 1, 1994 October 2, 1993
Primary 140,291,568 145,100,288
Fully diluted 140,291,567 145,275,926
See Computation of Per Share Earnings - Exhibit 11.
-5-<PAGE>
3. On July 21, 1994, the Board of Directors of the Company
approved the change of the Company's fiscal year-end from the
Saturday closest to the end of June to the new fiscal year-end of
the Saturday closest to the end of December. Accordingly,
December 31, 1994 will be the next fiscal year-end for the
Company.
4. In September, 1994, the Company entered into an
agreement to replace its existing revolving credit agreement of
$300 million with a syndicated bank facility for $600 million.
The new syndicated bank facility matures in 1997 with an option
to extend it for two additional one-year terms at a LIBOR based
interest rate. Accordingly, $205 million of short-term
borrowings have been reclassified to long-term debt in the
accompanying balance sheet as of October 1, 1994 reflecting the
Company's intention to refinance this debt with borrowings under
the new agreement.
5. On July 12, 1993, the Company formed a joint venture
through which it acquired an interest in Capital Carpet
Industries, Pty., Ltd., Melbourne, Victoria, Australia and
Invicta Group Industries, Pty., Ltd., Braybrook, Victoria,
Australia (together, "CCI"), enabling the Company to participate
in a government-supported rationalization of the Australian
carpet industry. On November 4, 1993, the Company acquired the
remaining interest in the joint venture. Until November 4, 1993,
the investment was accounted for using the equity method, and
accordingly, the Company included its share of CCI's income in
other income. Subsequent to November 4, 1993, the results of
operations of CCI are included in the accompanying financial
statements.
On September 10, 1993, the Company acquired Abingdon
Carpets, Gwent, Wales. Abingdon is a British producer of medium
priced tufted carpets and carpet yarns. The acquisition has been
accounted for as a purchase transaction, and accordingly, the
results of operations of Abingdon are included in the
accompanying financial statements since September 10, 1993.
On May 31, 1994, the Company entered into an agreement
to form a joint venture with Grupo Industrial Alfa, S.A. de C.V.
of Monterrey, Mexico, for the manufacture, distribution and
marketing of carpets, rugs and related products in Mexico and
South America. The Company acquired a 51 percent interest in
Terza, S.A. de C.V., and accordingly, the subsidiary is included
in consolidation at July 2, 1994 and the results of operations of
Terza are included in the accompanying financial statements since
May 31, 1994.
-6-<PAGE>
SHAW INDUSTRIES, INC.
ITEM TWO-MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's business, as well as the United States'
carpet industry in general, is cyclical in nature and is
significantly affected by general economic conditions. The level
of carpet sales tends to reflect fluctuations in consumer
spending for durable goods, and to a lesser extent, fluctuations
in interest rates and new housing starts. The industry achieved
reasonable growth in the quarter ended October 1, 1994 compared
to the same period last year.
The Company's working capital at October 1, 1994 of
$614,893,000 is $210,178,000 greater than the prior year because
short-term notes payable of $205,000,000 were reclassified to
long-term debt as described in Note 4 of the Notes to
Consolidated Financial Statements. Operating and financing
activities during the quarter ended October 1, 1994 provided a
strong cash flow to fund investing activities. Net cash provided
by operating activities in the first quarter totaled $32,506,000
and was provided principally from net income of $33,162,000,
depreciation and amortization of $20,610,000, and other items,
net of $22,844,000. Net cash was used by operating activities to
reduce trade accounts payable by $44,110,000. Cash flow used in
investing activities in the first quarter totaled $74,158,000.
Cash was used for additions to property, plant and equipment of
$34,158,000 and an increase in temporary cash investments of
$40,000,000. The principal cash used in financing activities was
for cash dividends of $7,655,000 and the purchase and retirement
of common stock of $11,750,000. Cash was provided by financing
activities through an increase in debt of $72,689,000 and the
exercise of stock options of $973,000.
The Company's liquidity condition remains strong.
Conservation of capital and the maintenance of a strong balance
sheet have enabled the Company to become a preeminent force in
the carpet industry. Capital expenditures (including capital
lease obligations ) for incremental additions and modifications
to plant and equipment necessary to maintain the facilities in a
modern state-of-the-art condition were $34,158,000 for three
months ended October 1, 1994. During the remainder of fiscal
1994, which ends December 31, 1994, the Company will continue to
expand and upgrade its tufting, dyeing, finishing, yarn
processing, distribution, transportation and materials handling
equipment to meet an anticipated increase in sales volume and to
improve efficiency. Management anticipates capital expenditures
and capitalized lease obligations of approximately $20,000,000
during the remainder of fiscal 1994 which will be funded through
cash flow from operations and, if appropriate, through additional
sources of long-term capital. As described in Note 4 of the
Notes to Consolidated Financial Statements, the Company has
arranged to replace its existing revolving credit agreement of
$300,000,000 with a $600,000,000 syndicated bank facility to meet
expected borrowing requirements.
-7-<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 1, 1994 COMPARED TO THREE MONTHS ENDED
OCTOBER 2, 1993
Net sales increased $84,584,000, or 13.0 percent, primarily
as a result of an increase in the volume of shipments. Results
for the three months ended October 1, 1994 included incremental
sales of $55,545,000 attributable to acquisitions as described in
Note 5 to the Consolidated Financial Statements included herein.
Gross profit margins increased .3 percent to 21.4 percent from
21.1 percent for the current three months compared to the same
period last year principally as a result of an improvement in the
efficiency relationship of volume and fixed costs. Selling,
general and administrative expense increased $19,065,000 in the
current three months compared to the same period last year, and
increased 1.3 percent to 13.0 percent of net sales due
principally to higher selling and sampling costs. Interest
expense, net, increased $2,526,000 to $8,074,000 in the current
three months compared to the same period last year due primarily
to an increase in outstanding short and long-term borrowings.
The effective income tax rate decreased from 38.6 percent to 38.5
percent for the current three months compared to the same period
last year.
-8-<PAGE>
PART II - OTHER INFORMATION
ITEM ONE - LEGAL PROCEEDINGS
From time to time the Company is subject to claims and
suits arising in the course of its business. In April 1993, the
Company became a defendant in certain litigation alleging
personal injury resulting from personal exposure to volatile
organic compounds found in carpet produced by the Company. The
complaints seek injunctive relief and unspecified money damages
on all claims. The Company has denied any liability. In May
1993, the Company became a defendant in certain litigation
alleging violation of both federal and state laws relating to
unfair competition. The complaint seeks an injunction regarding
the unfair competition claims and money damages. The Company has
denied any liability. The Company believes that it has
meritorious defenses in these suits and that the litigation will
not have a material adverse effect on the Company's financial
condition or results of operations. The Company will vigorously
defend these suits. In June 1994, the Company and several other
carpet manufacturers received a grand jury subpoena from the
Antitrust Division of the United States Department of Justice
relating to an investigation of the industry. The Company
believes that once this investigation is completed, it will not
have a material adverse effect on the Company's financial
condition or results of operations.
ITEM TWO - CHANGES IN SECURITIES
None
ITEM THREE - DEFAULTS UPON SENIOR SECURITIES
None
ITEM FOUR - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM FIVE - OTHER INFORMATION
None
ITEM SIX - EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - Computation of Per Share Earnings (Exhibit 11)
- Financial Data Schedule (Exhibit 27)
(B) A report on Form 8-K was filed during the fiscal
quarter ended October 1, 1994 reporting a change in
fiscal year. On July 21, 1994, the Board of
Directors of the Company, approved the change of the
Company's fiscal year-end from the Saturday closest to
the end of June to the new fiscal year-end of the
Saturday closest to the end of December.
-9-<PAGE>
SIGNATURES
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
SHAW INDUSTRIES, INC.
(The Registrant)
DATE: November 10, 1994 /s/ Robert E. Shaw
Robert E. Shaw
President and Chief Executive
Officer
DATE: November 10, 1994 /s/ William C. Lusk, Jr.
William C. Lusk, Jr.
Senior Vice President and Treasurer
(Principal Financial Officer)
-10-<PAGE>
<TABLE>
EXHIBIT 11
SHAW INDUSTRIES, INC.
COMPUTATION OF PER SHARE EARNINGS
-----------------------------------------------------------------------------------------------------------------
(In Thousands, Except Per Share Data)
(Unaudited)
<S> <C> <C>
Three Months Ended
October 1, 1994 October 2, 1993
PRIMARY:
Weighted average common shares outstanding 139,432 143,112
Additional shares assuming exercise of stock options 860 1,988
----------- -----------
Average common shares outstanding, as adjusted 140,292 145,100
=========== ===========
Net Income $ 33,162 $ 34,096
=========== ===========
Primary earnings per common share $ 0.24 $ 0.24
=========== ===========
FULLY DILUTED
Weighted average common shares outstanding 139,432 143,112
Additional shares assuming exercise of stock options 860 2,164
----------- -----------
Average common shares outstanding, as adjusted 140,292 145,276
=========== ===========
Net Income $ 33,162 $ 34,096
=========== ===========
Fully diluted earnings per common share $ 0.24 $ 0.24
=========== ===========
-11-<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> QUARTER
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> OCT-01-1994
<CASH> 65,202,000
<SECURITIES> 0
<RECEIVABLES> 382,849,000
<ALLOWANCES> (19,977,000)
<INVENTORY> 523,767,000
<CURRENT-ASSETS> 976,344,000
<PP&E> 1,151,970,000
<DEPRECIATION> 500,257,000
<TOTAL-ASSETS> 1,741,595,000
<CURRENT-LIABILITIES> 361,451,000
<BONDS> 591,537,000
<COMMON> 154,647,000
0
0
<OTHER-SE> 569,653,000
<TOTAL-LIABILITY-AND-EQUITY> 1,741,595,000
<SALES> 734,100,000
<TOTAL-REVENUES> 734,100,000
<CGS> 577,220,000
<TOTAL-COSTS> 577,220,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,167,000
<INTEREST-EXPENSE> 8,074,000
<INCOME-PRETAX> 54,204,000
<INCOME-TAX> 20,869,000
<INCOME-CONTINUING> 33,162,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,162,000
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
