<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|x|ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 30, 1995
OR
|_|TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File
Number 1-6853
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Shaw Industries, Inc.
(Exact name of registrant as specified in its charter)
- ----------------------------------------------------------------------------
Georgia 58-1032521
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
616 East Walnut Avenue,
Dalton, Georgia 30720
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: 706/278-3812
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class On Which Registered
Common Stock, No Par Value The New York Stock Exchange
$1.11 Stated Value The Pacific Stock Exchange
Rights to Purchase Series A
Participating Preferred Stock The New York Stock Exchange
$.50 Stated Value The Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filled 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_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the closing sales price on The New York
Stock Exchange on March 15, 1996 was: $1,332,896,623
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title of Each Class Outstanding at March 15, 1996
Common Stock, No Par Value 137,146,418 Shares
DOCUMENTS INCORPORATED BY REFERENCE
1995 Annual Report to Shareholders --- Part II.
Definitive Proxy Statement for the 1996 Annual Meeting of Shareholders on
April 25, 1996 --- Part III.
<PAGE>
PART I
Item I. Business
Shaw Industries, Inc. ("Shaw" or the "Company") is the world's largest
carpet manufacturer based on both revenue and volume of production. Shaw designs
and manufactures approximately 2,300 styles of tufted and woven carpet for
residential and commercial use under the PHILADELPHIA, TRUSTMARK, CABIN CRAFTS,
SHAW COMMERCIAL CARPETS, STRATTON, NETWORX, SHAWMARK, EVANS BLACK, SALEM,
SUTTON, KOSSET, CROSSLEY, ABINGDON, REDBOOK, MINSTER and INVICTA trade names and
under certain private labels. The Company's manufacturing operations are fully
integrated from the processing of yarns through the finishing of carpet. The
Company's carpet is sold in a broad range of prices, patterns, colors and
textures with the majority of its sales in the medium to high retail price
range. Shaw sells its products to retailers, distributors and commercial users
throughout the United States, Canada, Mexico, Australia and the United Kingdom,
and to a lesser degree, exports to additional overseas markets.
On May 31, 1994, the Company formed a joint venture (the "Terza 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
primarily in Mexico and South America. The Company originally acquired a 51
percent interest in the Terza Joint Venture for $14,050,000, and accordingly,
the joint venture's financial statements were consolidated with the Company's
financial statements at December 31, 1994. Effective January 1, 1995, the
Company sold a 2 percent interest in the Terza Joint Venture for $550,000
reducing its interest to 49 percent. As a result, the Company's investment in
the Terza Joint Venture is being accounted for using the equity method. The
deconsolidation of the Terza Joint Venture had an insignificant effect on the
Company's consolidated total assets and net sales as of and for the year ended
December 30, 1995.
On January 9, 1995, the Company acquired through its wholly owned
subsidiary, Carpets International (U.K.) Plc, substantially all the operating
assets of the Carpets Division of Coats Viyella Plc for approximately
$29,503,000. The acquisition was accounted for as a purchase, and accordingly,
the purchase price has been allocated to the assets acquired and liabilities
assumed based on management's estimate of their fair values as of the
acquisition date.
In December 1995, the Company announced a new retail and contract
distribution strategy and subsequently executed letters of intent to acquire a
company which owns and franchises residential floorcovering centers throughout
the United States, as well as several commercial carpet contractors. In February
1996, the Company initiated this new distribution program by completing certain
of these transactions. The Company believes that, by combining the resources of
the manufacturer and retailer and developing a contract distribution network, it
can provide a full range of products and services to more effectively meet the
needs of the end-users of both residential and commercial carpet products at
significantly improved margins.
The Company, based upon its international growth which began in 1993 and
continued into 1995, is now positioned to supply the Australian, Pacific Rim and
European markets with high quality products. For 1995 and 1994, international
operations accounted for 12.6 percent and 10.4 percent of the Company's net
sales, respectively. As a result of its foreign expansion, the Company has
limited exposure to fluctuations in foreign currency exchange rates on its
intercompany payables. The Company may employ foreign exchange
contracts when, in the normal course of business, they are determined to
effectively manage and reduce such exposure. Geographical information about the
Company's sales, operating profit and identifiable assets is incorporated by
reference to pages 19 and 20 of Exhibit 13 to this report
<PAGE>
Products and Marketing
Substantially all carpet manufactured by the Company is tufted carpet made
from nylon, polypropylene yarn and wool. In the tufting process, yarn is
inserted by multiple needles into a synthetic backing, forming loops which may
be cut or left uncut, depending on the desired texture or construction.
According to industry estimates, tufted carpet accounted for 91.4% of unit
volume shipments of carpet manufactured in the United States during 1995.
Substantially all carpet manufactured in the United States is made from
synthetic fibers, with nylon accounting for 63.6% of the total, polypropylene
28.5%, polyester 7.5% and wool 0.4%. During 1995, the Company processed
approximately 95% of its requirements for carpet yarn in its own yarn processing
facilities.
The Company believes that its significant investment in modern,
state-of-the-art equipment has been an important factor in achieving and
maintaining its leadership position in the marketplace. During the past five
fiscal years, the Company has invested approximately $696 million in property
additions. The Company continually seeks opportunities for increasing its sales
volume and market share. For example, the Company continues to expand its
product lines of carpet manufactured from polypropylene fiber, including fibers
produced by the Company's own extrusion equipment. The Company also has a
manufacturing facility for the production of carpet tiles for the commercial
market.
The overall level of sales for the Company and the carpet industry is
influenced by a number of factors, including consumer confidence and spending
for durable goods, interest rates, turnover in housing, the condition of the
residential construction industry and the overall strength of the economy. The
Company's international operations are also impacted by the markets in which
they operate.
The marketing of carpet is influenced significantly by current trends in
style and fashion, principally color trends. The Company believes it has been a
leader in the development of color technology in the carpet industry and that
its dyeing facilities are among the most modern and versatile in the industry.
The Company maintains an in-house product development department to identify
developing color and style trends which are expected to affect its customers'
buying decisions. This department is strengthened by the Company's Research and
Development Center. This state-of-the-art complex includes a 75,000 square foot
pilot plant featuring sample extrusion, yarn processing, tufting, dyeing,
coating and shearing equipment, and three fiber and dye development
laboratories.
Sales and Distribution
The Company's products are marketed domestically by approximately 940
salaried sales personnel in its various marketing divisions directly to
retailers and distributors and to large national accounts through the Company's
National Accounts Division. The Company's ten (10) regional warehouse facilities
and eight (8) redistribution centers, along with its centralized management
information system, enable it to provide prompt delivery of its products to both
its retail customers and wholesale distributors. The Company's substantial
investment in management information systems permits efficient production
scheduling and control of inventory levels.
The Company sells to approximately 41,230 retailers, distributors and
national accounts located throughout the United States, Australia, Mexico, the
United Kingdom and Canada. Retailers and national accounts, on a combined basis,
accounted for approximately 91.8% of the Company's carpet sales for 1995. Shaw
also sells to approximately 100 wholesale distributors. Approximately 8.2% of
the Company's carpet sales in 1995 were to distributors. Sales of Shaw products
in foreign markets, including the sales of foreign subsidiaries, accounted for
approximately 12.6% of total sales in 1995. No single customer accounted for
more than 2% of the Company's sales during 1995.
<PAGE>
Competition
The carpet industry is highly competitive with more than 200 companies
engaged in the manufacture and sale of carpet in the United States. Carpet
manufacturers also face competition from the hard surface floorcovering
industry. According to industry estimates, carpet accounts for approximately 72%
of the total United States production of all flooring types. The principal
methods of competition within the carpet industry are quality, style, price and
service. The Company believes its strategically located regional warehouse
facilities and redistribution centers provide a competitive advantage by
enabling it to supply carpet on a timely basis to customers. The Company's
long-standing practice in investing in modern, state-of-the-art equipment
contributes significantly to its ability to compete effectively on the basis of
quality, style and price.
Raw Materials
The principal raw materials used by the Company are nylon fiber and
filament, and synthetic backing; additional raw materials include polyester,
polypropylene and wool fibers and filaments, jute, latex and dye. During 1995,
the Company experienced no significant shortages of raw materials.
Employees
At December 30, 1995, the Company had approximately 25,000 full-time
employees. In the opinion of management, employee relations are good. Employees
are involved in the Quality Improvement Process, which began in 1985 as a
program designed to improve the Company's products and services through
education and training. None of the Company's employees in the United States are
represented by unions. Certain employees of foreign subsidiaries are represented
by unions.
Environmental Matters
Management believes the Company is currently in compliance in all material
respects with applicable federal, state and local statutes and ordinances
regulating the discharge of materials into the environment and otherwise
relating to the protection of the environment. Management does not believe the
Company will be required to expend any material amounts in order to remain in
compliance with these laws and regulations or that compliance will materially
affect its capital expenditures, earnings or competitive position.
The Company continued its commitment to the environment during 1995.
Because of this commitment to finding new ways of using mill waste, the Company
is agressively pursuing an environmentally friendly use for all of its waste
products. For example, future possibilities for use of fiber reinforced concrete
include road and bridge construction, military applications, building
foundations, tile, brick and concrete blocks.
Patents, Trademarks, etc.
Patent protection has not been significant to the Company's business,
although the Company does hold several patents covering machinery used in a
specific carpet coloring process.
<PAGE>
Item 2. Properties
The Company's executive offices are located in Dalton, Georgia. At December
30, 1995, the Company operated additional facilities as follows:
Domestic Facilities
Alabama Redistribution, yarn spinning and yarn extrusion
Michigan Redistribution
Missouri Redistribution
Florida Redistribution
North Carolina Redistribution, primary backing manufacturing
Ohio Redistribution
Pennsylvania Redistribution
Virginia Redistribution
California Warehousing
Colorado Warehousing
Illinois Warehousing
Massachusetts Warehousing
Minnesota Warehousing
New Jersey Warehousing
Texas Warehousing
Washington Warehousing
Georgia Administrative, distribution, carpet manufacturing, yarn
processing, yarn spinning, tufting, dyeing, coating, finishing, rug
manufacturing, sample manufacturing, warehousing, design center and research and
development center.
Tennessee Carpet manufacturing, yarn spinning
Foreign Facilities (facilities are located in or near the areas listed)
Bradford, England Tufting, weaving, coating, yarn processing,
distribution and administrative offices
Gwent, Wales Yarn extrusion, yarn processing
Victoria, Australia Yarn extrusion, yarn processing, tufting, dyeing,
coating, distribution and administrative offices
Cork, Ireland Wool spinning
Donaghadee, N. Ireland Tufting, dyeing and finishing
During 1995, two domestic yarn spinning facilities and a yarn spinning
facility in Australia were closed. The operations of these facilities have been
phased out. The Company maintains leased warehouses and customer service
facilities in or near Dallas; Los Angeles (2); Seattle; San Francisco; Chicago;
Minneapolis; Boston; and Cranbury, New Jersey. Each leased warehouse facility
includes a sales showroom. The Company believes that current facilities are
adequately insured and well maintained, substantially used and provide adequate
production capacity for current and anticipated future operations.
<PAGE>
Item 3. Legal Proceedings
From time to time the Company is subject to claims and suits arising in the
course of its business. The Company is 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. The Company believes that is has meritorious defenses 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
this suit.
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. In December 1995, the
Company learned that it was one of six carpet companies named as additional
defendants in a pending antitrust suit filed in United States District Court in
Rome, Georgia. The amended complaint alleges price-fixing regarding certain
types of carpet products in violation of Section 1 of the Sherman Act. The
Company believes the suit is spurious and without merit, and that once
completed, it will not have a material adverse effect on the Company's financial
condition or results of operations.
In February 1996, a jury in Greensboro, North Carolina returned a verdict
against the Company in litigation brought by four former employees of Salem
Carpet Mills, acquired by the Company in 1992, alleging age discrimination and
sex discrimination in employment decisions with regard to such employees. The
verdict is now under review by the trial judge and may subsequently be appealed
by either party after judgement is entered. The Company believes that the
litigation will not have a material adverse effect on the Company's financial
condition or results of operations.
At the end of fiscal year 1995, there were no other pending legal
proceedings to which the Company was a party or to which any of its property was
subject which, in the opinion of management, were likely to have a material
adverse effect on the Company's business, financial condition or results of
operations.
Item 4. Submission of Matters to Vote of Security Holders
Not applicable.
<PAGE>
Item 4(A). Executive Officers of the Registrant
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Officer Position
Since
Robert E. Shaw 64 1967 Chairman, Chief Executive Officer and Director
W. Norris Little 64 1978 President and Chief Operating Officer and Director
William C. Lusk, Jr. 60 1971 Senior Vice President, Treasurer and Director
Vance D. Bell 44 1983 Vice President, Marketing
Kenneth G. Jackson 38 1996 Vice President and Chief Financial Officer
Carl P. Rollins 52 1991 Vice President, Administration
Bennie M. Laughter 44 1986 Vice President, Secretary and General Counsel
Douglas H. Hoskins 61 1978 Controller
</TABLE>
Officers of the Company are elected annually by the Board of Directors. All
of the executive officers of the Company except for Mr.Jackson and Mr. Rollins
have served as executive officers for the Company for more than the past five
years.
Mr. Rollins joined the Company in June 1991, as a Vice President. Prior to
June 1991, Mr. Rollins had been engaged in the private practice of law with the
firm of McCamy, Phillips, Tuggle, Rollins & Fordham, in Dalton, Georgia.
Mr. Jackson joined the Company in February 1996. Prior to February 1996,
Mr. Jackson had been a partner with Arthur Andersen LLP in Atlanta, Georgia.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder Matters
The high and low sales prices for the Company's common stock as reported by
the New York Stock Exchange and the amount of dividends paid by quarter for the
last two fiscal years are set forth on page 23 of Exhibit 13.
Reference is made to Note 2 of Notes to Consolidated Financial Statements
on page 12 of Exhibit 13 for information concerning restrictions on the payment
of cash dividends.
At March 4, 1996, there were 4,159 holders of record of the Company's
common stock.
Item 6. Selected Financial Data
This information is set forth on page 1 of the Exhibit 13 under the caption
"Ten Year Financial Review."
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This information is set forth on pages 2 - 4 of Exhibit 13 to this report.
Item 8. Financial Statements and Supplementary Data
This information is set forth on pages 5 - 24 of Exhibit 13.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors is incorporated by reference to "Election
of Class of Directors" on pages 3 - 6 of the Proxy Statement for the 1996 Annual
Meeting of Shareholders. Reference is also made to Item 4(A) of Part I of this
report, "Executive Officers of the Registrant," which information is
incorporated herein.
Item 11. Executive Compensation
This information is incorporated by reference to "Executive Compensation"
on pages 7 - 14 of the Proxy Statement for the 1996 Annual Meeting of
Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This information is incorporated by reference to "Voting Rights and
Principal Shareholders" and "Election of Directors" on pages 1 - 2 and 3 - 6
respectively, of the Proxy Statement for the 1996 Annual Meeting of
Shareholders.
<PAGE>
PART IV
Item 13.Certain Relationships and Related Transactions
This information is incorporated by reference to "Certain Relationships" on
page 5 of the Proxy Statement for the 1996 Annual Meeting of Shareholders.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
Exhibit 13, a copy of which is filed with this Form 10-K, contains the
balance sheets as of December 30, 1995 and December 31, 1994, the related
statements of income, shareholders' investment and cash flows for each of the
three years in the period ended December 30, 1995, and the related report of
Arthur Andersen LLP. These financial statements and the report of Arthur
Andersen LLP are incorporated herein by reference. The financial statements
incorporated by reference include the following:
Balance Sheets -- December 30, 1995 and December 31, 1994
Statements of Income for the years ended December 30, 1995,
December 31, 1994 and January 1, 1994.
Statements of Shareholders' Investment for the years ended
December 30, 1995, December 31, 1994 and January 1, 1994.
Statements of Cash Flows for the years ended December 30, 1995, December
31, 1994 and January 1, 1994.
2. Financial Statement Schedules
Report of Independent Public Accountants on Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts for the Years Ended
December 30, 1995, December 31, 1994 and January 1, 1994.
<PAGE>
3. Exhibits incorporated by reference or filed with this report.
<TABLE>
<S> <C>
Number Description
3(a) Amended and Restated Articles of Incorporation. [Incorporated herein by reference to Exhibit 3(a) to
Registrant's Registration Statement filed with the commission on December 28, 1993 (File No. 33-51719).]
3(b) Bylaws. [Incorporated herein by reference to Exhibit 3(b) to Registrant's Registration Statement
filed with the commission on December 28, 1993 (File No. 33-51714).]
4(a) Specimen form of Common Stock Certificate. [Incorporated herein by reference to Exhibit 2 to
Registrant's Report on Form 8-A filed with the Securities and Exchange Commission on May 12, 1989 (File No.
1-6853).]
4(b) Restated Articles of Incorporation, filed as, Exhibit 3(a), and the Bylaws of Registrant,
filed as Exhibit 3(b), are incorporated herein by reference.
4(c) Rights Agreement dated as of April 10, 1989, between Registrant and Citizens and Southern Trust
Company (Georgia), N.A., as Rights Agent. [Incorporated herein by reference to Exhibit 1 to Registrant's Current
Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 1989 (File No. 1-6853).]
10(a) Reserved
10(b)* Deferred Compensation Plan and form of Deferred Compensation Agreement of Registrant as adopted in April,
1980. [Incorporated herein by reference to the Registrant's July 2, 1994 Form 10-K filed with the Securities and
Exchange Commission (File No. 1-6853).]
10(c), 10(d), 10(e) and 10(f) Reserved
10(g) Credit Agreement dated November 30, 1994, between Registrant and Nationsbank of Georgia, National
Association, regarding a $600,000,000 revolving credit facility. [Incorporated herein by reference to the
Registrant's December 31, 1994 Form 10-K filed with the Securities and Exchange Commission (File No. 1-6853).]
10(h)* 1987 Incentive Stock Option Plan of the Registrant. [Incorporated herein by reference to Exhibit A to
Registrant's 1987 Proxy Statement, dated September 22, 1987 (File No. 1-6853).]
10(i) Reserved
10(j)* 1989 Discounted Stock Option Plan of the Registrant. [Incorporated herein by reference to Exhibit A to
Registrant's 1989 Proxy Statement, dated September 21, 1989 (File No. 1-6853).]
10(k)* 1992 Incentive Stock Option Plan of the Registrant. [Incorporated herein by reference to Exhibit A to
Registrant's 1992 Proxy (File No. 1-6853).]
11 Computation of Earnings per Share for the fiscal years ended December 30, 1995, December 31, 1994 and
January 1, 1994.
13 Items Incorporated by Reference from the 1995 Annual Report to Shareholders.
21 List of Subsidiaries.
23 Consent of independent public accountants.
27 Financial Data Schedule.
*Compensatory plan or management contract required to be filed as an
exhibit to Item 14 (c) of Form 10-K.
(b) No reports on Form 8-K were filed during the last quarter of fiscal 1995.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SHAW INDUSTRIES, INC.
Date: March 28, 1996 By: /s/ ROBERT E. SHAW
Robert E. Shaw
Chairman, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 28, 1996 /s/ ROBERT E. SHAW
Robert E. Shaw
Chairman, Chief Executive
Officer and Director
(Principal Executive Officer)
Date: March 28, 1996 /s/ J.C. SHAW
J.C. Shaw
Chairman Emeritus and Director
Date: March 28, 1996 /s/ W. NORRIS LITTLE
W. Norris Little
President and Chief Operating
Officer and Director
Date: March 28, 1996 /s/ WILLIAM C. LUSK, JR.
William C. Lusk, Jr.
Sr. Vice President, Treasurer
and Director (Principal
Financial and Accounting
Officer)
Date: March 28, 1996 /s/ ROBERT R. HARLIN
Robert R. Harlin
Director
Date: March 28, 1996 /s/ THOMAS G. COUSINS
Thomas G. Cousins
Director
Date: March 28, 1996 /s/ S. TUCKER GRIGG
S. Tucker Grigg
Director
Date: March 28, 1996 /s/ CLIFFORD M. KIRTLAND, JR.
Clifford M. Kirtland, Jr.
Director
Date: March 28, 1996 /s/ J. HICKS LANIER
J. Hicks Lanier
Director
Date: March 28, 1996 /s/ R. JULIAN McCAMY
R. Julian McCamy
Director
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Shaw Industries, Inc.:
We have audited in accordance with generally accepted auditing standards
the financial statements of SHAW INDUSTRIES, INC. included in the annual report
to shareholders incorporated by reference in this Form 10-K and have issued our
report thereon dated February 19, 1996. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. Schedule
II is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 19, 1996
<PAGE>
<TABLE>
SCHEDULE II
SHAW INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 30, 1995, DECEMBER 31, 1994 AND JANUARY 1, 1994
<S> <C> <C> <C> <C>
$ in thousands
Additions
Balance at Charged to
Beginning Costs and Balance at
of Year Expenses Deductions End of Year
YEAR ENDED JANUARY 1, 1994:
Allowance for doubtful accounts and
discounts $ 14,821 $ 98,230 $ 100,000 $ 13,051
YEAR ENDED DECEMBER 31, 1994:
Allowance for doubtful accounts and
discounts $ 13,051 $ 112,978 $ 108,104 $ 17,925
YEAR ENDED DECEMBER 30, 1995:
Allowance for doubtful accounts and
discounts $ 17,925 $ 110,541 $ 113,720 * $ 14,746
* Deductions for December 30, 1995 include $1,018,000 related to the deconsolidation of the Terza Joint Venture.
</TABLE>
<TABLE>
SHAW INDUSTRIES, INC. EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
FOR THE YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994 and JANUARY 1, 1994
(In Thousands, Except Share Data)
<S> <C> <C> <C>
1995 1994 1993
PRIMARY:
Weighted average common shares outstanding 135,872 141,432 142,946
Additional shares assuming exercise of stock options 506 1,051 1,977
Average common shares outstanding, as adjusted 136,378 142,483 144,923
Income before extraordinary item and accounting change $64,381 $130,389 $117,636
Extraordinary item, net of tax benefit - (3,363) -
Cumulative effect of accounting change, net of tax benefit (12,077) - -
Net income $52,304 $127,026 $117,636
Earnings per Common Share:
Income before extraordinary item and accounting change $0.47 $0.92 $0.81
Extraordinary item, net of tax benefit - (0.02) -
Cumulative effect of accounting change, net of tax benefit (0.09) - -
Net income $0.38 $0.89 $0.81
FULLY DILUTED:
Weighted average common shares outstanding 135,872 141,432 142,946
Additional shares assuming exercise of stock options 506 1,058 2,371
Average common shares outstanding, as adjusted 136,378 142,490 145,317
Income before extraordinary item and accounting change $64,381 $130,389 $117,636
Extraordinary item, net of tax benefit - (3,363) -
Cumulative effect of accounting change, net of tax benefit (12,077) - -
Net income $52,304 $127,026 $117,636
Earnings per Common Share:
Income before extraordinary item and accounting change $0.47 $0.92 $0.81
Extraordinary item, net of tax beneift - (0.02) -
Cumulative effect of accounting change, net of tax benefit (0.09) - -
Net income $0.38 $0.89 $0.81
Note: Adjusted for a two-for-one stock split effected in the form of a stock dividend in December 1993.
</TABLE>
<TABLE>
Ten-Year Financial Review
(Dollars in 000s except share data)
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
Net Sales $ 2,869,828 $ 2,788,527 $ 2,476,282 $ 2,035,962 $ 1,618,923
Cost of Sales 2,319,894 2,187,439 1,963,206 1,641,404 1,341,312
Selling, General and Administrative
Expenses 393,868 366,189 301,790 240,192 188,363
Nonrecurring Plant Shutdown Costs 6,967 - - - -
Interest, Net 41,901 30,022 24,107 26,083 30,973
Other Expense (Income), Net 443 (4,922) (2,530) 324 (74)
Income Before Income Taxes, Equity in
Income of Joint Venture, Extraordinary Item
and Accounting Change 106,755 209,799 189,709 127,959 58,349
As a Percentage of Net Sales 3.7% 7.5% 7.7% 6.3% 3.6%
Effective Tax Rate 40.8% 37.9% 38.0% 38.5% 38.3%
Income Before Equity in Income of Joint
Venture, Extraordinary Item and Accounting
Change 63,152 130,389 117,636 78,695 35,985
Equity in Income of Joint Venture 1,229 - - - -
Extraordinary Item - (3,363) - - -
Accounting Change (12,077) - - - -
Net Income 52,304 127,026 117,636 78,695 35,985
As a Percentage of Net Sales 1.8% 4.6% 4.8% 3.9% 2.2%
As a Percentage of Average Total Assets 3.1% 8.1% 8.8% 7.7% 4.5%
As a Percentage of Average Invested Capital 3.9% 10.7% 12.1% 10.5% 6.2%
As a Percentage of Average
Shareholders' Investment 7.4% 17.7% 17.5% 16.1% 12.8%
Earnings Per Share:
Primary and Fully Diluted 0.38 0.89 0.81 0.59 0.32
Cash Dividends Per Share 0.30 0.22 0.18 0.15 0.125
Property Additions (including acquisitions) 93,805 187,045 174,635 191,830 48,230
Depreciation and Amortization 91,083 84,898 82,416 67,414 62,075
Weighted Average Shares Outstanding:
Primary 136,378,493 142,483,289 144,922,740 132,422,293 113,018,088
Fully Diluted 136,378,493 142,489,938 145,317,217 132,596,479 113,220,148
At Year-End:
Working Capital 641,445 617,338 437,445 448,089 290,305
Current Ratio 3.5 3.0 2.2 2.6 2.5
Property, Plant and Equipment, Net 631,990 656,178 551,873 453,276 344,182
Total Assets 1,662,783 1,697,378 1,454,266 1,223,439 816,874
Total Long-Term Debt 627,130 612,061 317,914 281,742 235,424
Shareholders' Investment 710,189 713,025 723,830 619,977 358,643
Total Invested Capital* 1,337,319 1,325,086 1,041,744 901,719 594,067
Shareholders' Investment Per Share $ 5.22 $ 5.20 $ 5.04 $ 4.38 $ 2.89 $
* The sum of shareholders' investment and long-term debt.
NOTE: All share data have been adjusted for two-for-one stock splits
effected in the form of stock dividends in December 1993, March 1992, May 1989
and May 1986.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
1990 1989 1988 1987 1986
Net Sales $ 1,658,771 $ 1,266,142 $ 1,120,163 $ 753,378 $ 624,453
Cost of Sales 1,348,808 1,017,084 905,305 613,002 498,616
Selling, General and Administrative
Expenses 179,381 138,708 126,500 81,134 69,305
Nonrecurring Plant Shutdown Costs - - - - -
Interest, Net 35,026 20,828 23,776 11,305 5,641
Other Expense (Income), Net (483) (640) (145) (172) (525)
Income Before Income Taxes, Equity in
Income of Joint Venture, Extraordinary Item
and Accounting Change 96,039 90,162 64,727 48,109 51,416
As a Percentage of Net Sales 5.8% 7.1% 5.8% 6.4% 8.2%
Effective Tax Rate 38.0% 38.4% 37.8% 42.5% 47.1%
Income Before Equity in Income of Joint
Venture, Extraordinary Item and Accounting
Change 59,515 55,567 40,285 27,666 27,191
Equity in Income of Joint Venture - - - - -
Extraordinary Item - - - - -
Accounting Change - - - - -
Net Income 59,515 55,567 40,285 27,666 27,191
As a Percentage of Net Sales 3.6% 4.4% 3.6% 3.7% 4.4%
As a Percentage of Average Total Assets 8.0% 9.4% 8.1% 6.7% 9.6%
As a Percentage of Average Invested Capital 11.1% 12.7% 10.7% 8.9% 12.7%
As a Percentage of Average
Shareholders' Investment 29.1% 29.4% 25.4% 19.0% 19.7%
Earnings Per Share:
Primary and Fully Diluted 0.50 0.46 0.33 0.21 0.20
Cash Dividends Per Share 0.125 0.10 0.083 0.078 0.044
Property Additions (including acquisitions) 116,739 144,308 30,362 114,882 45,991
Depreciation and Amortization 60,734 38,600 41,866 27,361 21,796
Weighted Average Shares Outstanding:
Primary 118,909,198 120,135,363 123,830,721 131,969,354 136,233,599
Fully Diluted 118,909,198 120,135,363 123,830,721 131,969,354 136,233,599
At Year-End:
Working Capital 260,644 224,443 199,458 194,754 149,916
Current Ratio 2.4 2.3 3.0 2.8 3.3
Property, Plant and Equipment, Net 341,266 293,030 192,194 193,237 107,384
Total Assets 790,935 690,202 496,374 500,609 325,263
Total Long-Term Debt 376,499 292,763 205,775 228,203 103,298
Shareholders' Investment 201,667 207,434 170,309 147,139 144,158
Total Invested Capital* 576,166 500,197 376,084 375,342 247,456
Shareholders' Investment Per Share $ 1.87 $ 1.73 $ 1.39 $ 1.09 $ 1.09
*The sum of shareholders' investment and long-term debt.
NOTE: All share data have been adjusted for two-for-one stock splits
effected in the form of stock dividends in December 1993, March 1992, May 1989
and May 1986.
EXHIBIT 13, PAGE 1
</TABLE>
<PAGE>
SHAW INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's business, as well as the U.S. 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 Company's international operations are also impacted by the
economic climates of the markets in which they operate (primarily the United
Kingdom, Australia and Mexico). Sales prices and demand were stable in the U.S.
in 1995, but weakened in the international markets of the United Kingdom and
Australia. Margins declined in the U.S. and internationally due to higher
production costs. The Company expanded its operations in the United Kingdom in
January 1995 by acquiring substantially all of the operating assets of the
Carpets Division of Coats Viyella Plc (the "CV Acquisition") for approximately
$29.5 million. Effective January 1, 1995, the Company reduced its interest in
the Terza Joint Venture in Mexico from 51 percent to 49 percent. As a result,
the Company's investment in the Terza Joint Venture is being accounted for using
the equity method. The deconsolidation of the Terza Joint Venture had an
insignificant effect on the Company's consolidated financial statements for
1995.
In December 1995, the Company announced a new retail and contract
distribution strategy and subsequently executed letters of intent to acquire a
company which owns and franchises residential floorcovering centers throughout
the United States, as well as several commercial carpet contractors. In February
1996, the Company initiated this new distribution program by completing certain
of these transactions. The Company believes that, by combining the resources of
the manufacturer and retailer and developing a contract distribution network, it
can provide a full range of products and services to more effectively meet the
needs of end-users of both residential and commercial carpet products at
significantly improved margins.
LIQUIDITY AND CAPITAL RESOURCES
At December 30, 1995, the Company had working capital of $641.4 million, an
increase of $24.1 million, or 3.9 percent, over working capital of $617.3
million at December 31, 1994. Cash and cash equivalents decreased $2.9 million
to $31.5 million at December 30, 1995. Cash flow provided by operating
activities was $161.2 million for 1995, principally net income of $52.3 million
adjusted for depreciation and amortization of $91.1 million, compared to $88.6
million in 1994. While net income decreased in 1995, operating cash flow
increased primarily due to decreases in other current assets and a net increase
in accounts payable and accrued expenses. Cash used in investing activities
consisted of additions to property, plant and equipment of $67.3 million and the
CV Acquisition for $29.5 million. Cash was used in financing activities to fund
payments on debt of $35.0 million, cash dividends of $40.8 million and stock
repurchases of $20.6 million, offset by an increase in long-term debt of $33.8
million.
The Company has continued to maintain a strong working capital position.
Effective use of capital and the Company's ability to generate cash flow from
operations has enabled it to invest in technologies which reduce production
costs and generate operating margins that have historically exceeded industry
averages and has enabled the Company to be a preeminent force in the carpet
industry. During 1995, accounts payable decreased 23.8 percent due to the timing
of purchases, while accrued liabilities increased 24.1 percent due to the CV
Acquisition and increases in various accruals.
Capital expenditures for property, plant and equipment necessary to
maintain the Company's facilities in a modern state-of-the-art condition were
$67.3 million, excluding the CV Acquisition. Management anticipates capital
expenditures and capitalized lease obligations of approximately $60 million in
1996 to maintain its facilities and to expand and upgrade its manufacturing and
distribution equipment to meet anticipated increases in sales volume and to
improve efficiency. These expenditures will be funded through cash flows from
operations and, if appropriate, through additional sources of long-term capital.
The Company's primary source of financing is an unsecured revolving credit
agreement with a banking syndicate which provides for borrowings of up to $620.0
million and expires in December 1997. Interest on borrowings under this facility
is currently based on LIBOR, which was 5 7/16 percent at December 30, 1995. At
December 30, 1995, borrowings outstanding under this credit facility were $519.0
million. In addition, the Company maintains revolving credit facilities in the
United Kingdom and Australia with $31.1 million and $59.1 million, respectively,
available and outstanding at December 30, 1995.
The Company believes that available borrowings under its existing credit
agreements, available cash and internally generated funds will be sufficient to
support its working capital, capital expenditure and debt service requirements
for the foreseeable future. In addition, the Company believes it could expand
its revolving credit and long-term bank facilities, if necessary.
EXHIBIT 13, PAGE 2
<PAGE>
INFLATION
The Company's manufacturing costs and operating expenses are affected by
price changes. The costs of fiber and other raw materials increased slightly in
1995 and 1994, and decreased in 1993. The Company has historically mitigated
inflationary effects by passing price changes along to its customers and by
continually developing and implementing more cost-effective manufacturing and
other operational procedures. The Company's ability to mitigate the effects of
price changes will depend on market factors.
RESULTS OF OPERATIONS
1995 Compared To 1994
Net sales increased $81.3 million, or 2.9 percent, to $2,869.8 million in
1995. After excluding sales in 1994 related to the Terza Joint Venture, sales
increased 4.0 percent. The increase was primarily attributable to incremental
net sales of $134.1 million related to the CV Acquisition, offset by declines in
net sales at the Company's other foreign operations. Gross margin as a percent
of net sales decreased 2.4 percent to 19.2 percent for 1995, compared to 21.6
percent in 1994, primarily due to increased production costs, competitive price
pressures and lower production volumes at the Company's international
operations.
Selling, general and administrative expenses for 1995 were $393.9 million,
or 13.7 percent of net sales, compared to $366.2 million, or 13.1 percent of net
sales, in 1994. Additionally, 1995 results include nonrecurring plant shutdown
costs of $4.4 million related to the closure of two domestic yarn spinning mills
and $2.6 million related to the closure of a yarn spinning mill in Australia.
Interest expense, net, increased $11.9 million, or 39.6 percent, as a result of
higher average borrowings due primarily to stock repurchases and the CV
Acquisition, offset in part by lower average interest rates on the Company's
borrowings. The effective income tax rate for 1995 was 40.8 percent compared to
37.9 percent in 1994, as a result of lower taxable income which increased the
effect of permanent tax differences.
Effective January 1, 1995, the Company changed its method of accounting for
sample costs from expensing sample costs that exceed the estimated net
realizable value when shipped to expensing that portion of sample costs as they
are produced. This change was made in recognition of an increasing number of
samples placed with customers that do not result in future sales and to better
control the sample order process. The cumulative effect of the change was to
decrease net income for 1995 by $12.1 million, or $.09 per share, net of income
tax benefit.
1994 Compared To 1993
Net sales increased $312.2 million, or 12.6 percent, to $2,788.5 million in
1994 compared to 1993. The increase was primarily attributable to incremental
net sales of $163.5 million related to international acquisitions and an
increase in the volume of domestic shipments, offset in part by lower prices
caused by increased competition. Gross margin as a percent of net sales
increased .9 percent to 21.6 percent in 1994, compared to 20.7 percent in 1993,
as increases in the efficiency relationship of volume and fixed costs outweighed
higher raw materials costs.
Selling, general and administrative expenses for 1994 were $366.2 million,
or 13.1 percent of net sales, compared to $301.8 million, or 12.2 percent of net
sales, in 1993. The .9 percent increase as a percent of net sales was primarily
due to continuing aggressive efforts to increase sales in an increasingly
competitive environment. Interest expense, net, increased $5.9 million, or 24.5
percent, as a result of significantly higher borrowings due primarily to stock
repurchases and international acquisitions which were offset somewhat by lower
average interest rates on the Company's borrowings. The effective income tax
rate for 1994 was 37.9 percent, compared to 38.0 percent in 1993. During 1994,
the Company recorded an extraordinary loss of $3.4 million, net of income tax
benefit, related to the early repayment of certain term notes payable.
EXHIBIT 13, PAGE 3
<PAGE>
NONRECURRING PLANT SHUTDOWN COSTS
In 1995, the Company closed two of its domestic yarn spinning mills. As a
result, the Company recorded a charge of $4.4 million related primarily to
termination benefits for 591 employees and to recording affected property, plant
and equipment at net realizable value. The production of these two mills has
been consolidated with the Company's other yarn spinning facilities. The Company
did not experience any disruption to its consolidated operations. The Company
expects to realize future savings as a result of the consolidation of these
facilities.
Also in 1995, the Company closed a yarn spinning mill in Australia and
recorded a charge of $2.6 million. The charge primarily related to termination
benefits for 127 employees and writedowns of property, plant and equipment to
net realizable value.
FOREIGN OPERATIONS
Beginning in early 1993 and continuing into 1995, the Company has expanded
its operations through acquisitions in Australia, the United Kingdom and Mexico.
The Company's primary foreign operations are conducted through its United
Kingdom and Australian subsidiaries, where the functional currencies are British
pounds and Australian dollars, respectively. International operations accounted
for approximately 12.6 percent, 10.4 percent and 3.9 percent of the Company's
net sales in 1995, 1994 and 1993, respectively. Fluctuations in foreign currency
exchange rates create limited exposures which can impact the Company's operating
results due to its intercompany payables. The Company may employ foreign
currency forward exchange contracts when, in the normal course of business, they
are determined to effectively manage and reduce such exposure. The Company does
not enter into foreign currency forward exchange contracts for speculative
trading purposes.
NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121
establishes, among other things, accounting standards for the impairment of
long-lived assets and certain identifiable intangibles. The Company will adopt
the new standard in 1996. The Company has not determined the impact of the
adoption on the 1996 financial statements or results of operations.
OUTLOOK
The Company will continue to be affected by general economic conditions
including consumer spending, fluctuations in interest rates, new housing starts
and international economic climates. Fiscal 1996 is expected to be a challenging
year for the Company and the carpet industry. The Company views 1996 as a year
of opportunity in light of the recent acquisitions of retail floor covering
centers and commercial contractors.
EXHIBIT 13, PAGE 4
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
For Years Ended December 30, 1995, December 31, 1994
and January 1, 1994
<TABLE>
<S> <C> <C> <C>
1995 1994 1993*
------------------ ------------------ -----------------
Net Sales $ 2,869,828,000 $ 2,788,527,000 $ 2,476,282,000
Costs and Expenses:
Cost of sales 2,319,894,000 2,187,439,000 1,963,206,000
Selling, general and administrative 393,868,000 366,189,000 301,790,000
Nonrecurring plant shutdown costs 6,967,000 - -
Interest, net 41,901,000 30,022,000 24,107,000
Other expense (income), net 443,000 (4,922,000) (2,530,000)
------------------ ------------------ -----------------
Income Before Income Taxes 106,755,000 209,799,000 189,709,000
Provision for Income Taxes 43,603,000 79,410,000 72,073,000
Income Before Equity in Income of Joint Venture, ------------------ ------------------ -----------------
Extraordinary Item and Accounting Change 63,152,000 130,389,000 117,636,000
Equity in Income of Joint Venture 1,229,000 - -
------------------ ------------------ -----------------
Income Before Extraordinary Item and Accounting Change 64,381,000 130,389,000 117,636,000
Extraordinary Item, net of tax benefit - (3,363,000) -
Cumulative Effect of Accounting Change, net of
tax benefit (12,077,000) - -
------------------ ------------------ -----------------
Net Income $ 52,304,000 $ 127,026,000 $ 117,636,000
================== ================== =================
Earnings Per Common Share :
Primary and Fully Diluted Basis-
Before Extraordinary Item and Accounting Change $ 0.47 $ 0.91 $ 0.81
Extraordinary Item - (0.02) -
Cumulative Effect of Accounting Change (0.09) - -
------------------ ------------------ -----------------
Net Income $ 0.38 $ 0.89 $ 0.81
================== ================== =================
Weighted Average Shares Outstanding:
Primary 136,378,493 142,483,289 144,922,740
Fully Diluted 136,378,493 142,489,938 145,317,217
The accompanying notes are an integral part of these consolidated financial statements.
*Fifty-three week period.
</TABLE>
EXHIBIT 13, PAGE 5
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
December 30, 1995 and December 31, 1994 1995 1994
-------------------- -----------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 31,453,000 $ 34,365,000
-------------------- -----------------
Accounts receivable, less allowance for doubtful
accounts and discounts of $14,746,000 in 1995 and
$17,925,000 in 1994 345,443,000 350,128,000
Inventories -
Raw materials 232,693,000 236,579,000
Work-in-process 25,330,000 22,902,000
Finished goods 231,189,000 238,670,000
-------------------- -----------------
489,212,000 498,151,000
-------------------- -----------------
Other current assets 36,403,000 39,585,000
-------------------- -----------------
Total current assets 902,511,000 922,229,000
-------------------- -----------------
Property, Plant and Equipment, at cost:
Land and land improvements 27,173,000 29,329,000
Buildings and leasehold improvements 269,715,000 258,119,000
Machinery and equipment 914,126,000 842,975,000
Construction in progress 22,986,000 44,336,000
-------------------- -----------------
1,234,000,000 1,174,759,000
Less - Accumulated depreciation and amortization 602,010,000 518,581,000
-------------------- -----------------
631,990,000 656,178,000
-------------------- -----------------
Goodwill, net 104,280,000 106,960,000
-------------------- -----------------
Investment in Joint Venture 15,513,000 -
-------------------- -----------------
Other Assets 8,489,000 12,011,000
-------------------- -----------------
TOTAL ASSETS $ 1,662,783,000 $ 1,697,378,000
==================== =================
EXHIBIT 13, PAGE 6
<PAGE>
1995 1994
-------------------- -----------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Current maturities of long-term debt $ 5,305,000 $ 40,898,000
Accounts payable 114,326,000 150,023,000
Accrued liabilities 141,435,000 113,970,000
-------------------- -----------------
Total current liabilities 261,066,000 304,891,000
-------------------- -----------------
Long-Term Debt, less current maturities 627,130,000 612,061,000
-------------------- -----------------
Deferred Income Taxes 51,000,000 45,972,000
-------------------- -----------------
Other Liabilities 13,398,000 21,429,000
-------------------- -----------------
Commitments and Contingencies
Shareholders' Investment:
Preferred stock; 250,000 shares authorized, no shares issued - -
Common stock, no par, $1.11 stated value, authorized
500,000,000 shares; issued and outstanding: 135,956,602
shares at December 30, 1995 and 137,017,402 shares
at December 31, 1994 150,913,000 152,090,000
Paid-in capital 101,718,000 118,635,000
Cumulative translation adjustment 1,895,000 (1,815,000)
Retained earnings 455,663,000 444,115,000
-------------------- -----------------
Total shareholders' investment 710,189,000 713,025,000
-------------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 1,662,783,000 $ 1,697,378,000
==================== =================
</TABLE>
EXHIBIT 13, PAGE 7
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For Years Ended December 30, 1995,
December 31, 1994 and January 1, 1994
<TABLE>
Common Stock Paid-In Cumulative Retained Unearned
Shares Amount Capital Translation Earnings Compensation
Adjustment
----------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 26, 1992 70,754,848 $ 78,538,000 $ 286,703,000 $ - $ 256,329,000 $ (1,267,000)
Net income - - - - 117,636,000 -
Issuance of stock in
acquisition 142,147 157,000 6,288,000 - - -
Issuance of two-for-one
stock split 71,754,831 79,648,000 (79,648,000)
Exercise of stock options 970,636 1,079,000 3,898,000
Purchase and retirement - - -
of common stock (100,000) (111,000) (3,282,000)
Cumulative translation
adjustment - - - (594,000) - -
Tax benefit on
disqualified dispositions
of stock options - - 3,389,000 - - -
Amortization of unearned
compensation - - - - - 798,000
Cash dividends paid
($.18 per share) - - - - (25,731,000) -
Balance, January 1, 1994 143,522,462 159,311,000 217,348,000 (594,000) 348,234,000 (469,000)
----------- ------------- ------------- ------------- ------------- ------------
Net income - - - - 127,026,000 -
Purchase and retirement
of common stock (7,173,300) (7,962,000) (102,427,000) - - -
Exercise of discounted
stock options 102,840 114,000 (475,000) - - -
Exercise of stock options 565,400 627,000 814,000 - - -
Cumulative translation
adjustment - - - (1,221,000) - -
Tax benefit on
disqualified dispositions
of stock options - - 3,375,000 - - -
Amortization of unearned
compensation - - - - - 469,000
Cash dividends paid
($.22 per share) - - - - (31,145,000) -
----------- ------------- ------------- ------------- ------------- ------------
Balance, December 31, 1994 137,017,402 152,090,000 118,635,000 (1,815,000) 444,115,000 -
Net income - - - - 52,304,000 -
Purchase and retirement
of common stock (1,384,200) (1,537,000) (19,053,000) - - -
Exercise of stock options 323,400 360,000 2,136,000 - - -
Cumulative translation
adjustment - - - 3,710,000 - -
Cash dividends paid
($.30 per share) - - - - (40,756,000) -
----------- ------------- ------------- ------------- ------------- ------------
Balance, December 30, 1995 135,956,602 $ 150,913,000 $ 101,718,000 $ 1,895,000 $ 455,663,000 $ -
=========== ============= ============= ============= ============= ============
The accompanying notes are an integral part of these consolidated financial statements.
EXHIBIT 13, PAGE 8
</TABLE>
<PAGE>
SHAW INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Years Ended December 30, 1995, December 31, 1994 and
January 1, 1994
<TABLE>
<S> <C> <C> <C>
1995 1994 1993 *
OPERATING ACTIVITIES:
Net Income $ 52,304,000 $ 127,026,000 $ 117,636,000
--------------------- ----------------- -------------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and amortization 91,083,000 84,898,000 82,416,000
Provision for doubtful accounts 8,629,000 12,747,000 12,987,000
Deferred income taxes 5,028,000 (1,457,000) 1,717,000
Cumulative effect of accounting change 12,077,000 - -
Extraordinary loss on early extinguishment of debt - 3,363,000 -
Stock option compensation expense - 469,000 798,000
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (21,137,000) (44,132,000) (24,846,000)
Inventories 2,456,000 (45,664,000) (18,306,000)
Accounts payable (32,899,000) (16,341,000) 8,376,000
Accrued liabilities 28,277,000 (9,769,000) 18,846,000
Other, net 15,429,000 (22,512,000) (16,537,000)
--------------------- ----------------- -------------
Total Adjustments 108,943,000 (38,398,000) 65,451,000
--------------------- ----------------- -------------
Net Cash Provided by Operating Activities 161,247,000 88,628,000 183,087,000
--------------------- ----------------- -------------
INVESTING ACTIVITIES:
Increase in property, plant and equipment (67,257,000) (148,904,000) (97,709,000)
Acquisition of business assets (29,503,000) (8,386,000) (72,908,000)
Investment in joint venture (3,500,000) (10,001,000) -
Deconsolidation of joint venture (3,828,000) - -
--------------------- ----------------- -------------
Net Cash Used in Investing Activities (104,088,000) (167,291,000) (170,617,000)
--------------------- ----------------- -------------
FINANCING ACTIVITIES:
Borrowings under revolving credit agreement 30,000,000 389,143,000 5,000,000
Repayment of revolving credit agreement (35,000,000) - -
Borrowings on other long-term debt 3,779,000 - 45,000,000
Repayment of long-term debt - (142,887,000) (68,627,000)
Net payments on short-term debt - (20,000,000) (40,000,000)
Cash paid to retire debt - (5,513,000) -
Purchase and retirement of common stock (20,590,000) (110,389,000) (3,393,000)
Payment of cash dividends (40,756,000) (31,145,000) (25,731,000)
Proceeds from exercise of stock options 2,496,000 1,080,000 4,977,000
--------------------- ----------------- -------------
Net Cash (Used in) Provided by Financing Activities (60,071,000) 80,289,000 (82,774,000)
--------------------- ----------------- -------------
CASH AND CASH EQUIVALENTS:
Net change (2,912,000) 1,626,000 (70,304,000)
Beginning of period 34,365,000 32,739,000 103,043,000
--------------------- ----------------- -------------
End of period $ 31,453,000 $ 34,365,000 $ 32,739,000
===================== ================= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for -
Interest $ 41,751,000 $ 31,451,000 $ 28,712,000
Income taxes $ 36,874,000 $ 64,308,000 $ 79,826,000
Noncash capital lease obligations $ 3,450,000 $ 1,667,000 $ 2,896,000
The accompanying notes are an integral part of these consolidated financial statements.
* Fifty-three week period.
EXHIBIT 13, PAGE 9
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
December 30, 1995, December 31, 1994 and January 1, 1994
Note 1 Summary of Accounting Policies
Principles of Consolidation - The consolidated financial statements include
the accounts of Shaw Industries, Inc. and subsidiaries (the "Company"). All
significant intercompany balances and transactions are eliminated in
consolidation.
Nature of Business - The Company manufactures and distributes carpet in a
broad range of prices, patterns, colors and textures for residential and
commercial use. The Company markets its products to floorcovering retailers,
distributors and contractors throughout the United States, Canada, Australia,
Mexico and the United Kingdom.
Fiscal Period - The Company's fiscal year-end is the Saturday closest to
December 31. The results of operations for 1995 and 1994 were based on a 52-week
year. For 1993, results of operations were based on a 53-week year.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Revenue Recognition - Revenues are recognized when goods are shipped.
Cash and Cash Equivalents - The Company considers all investments with an
original maturity of three months or less to be cash equivalents.
Inventory Valuation - Inventories are stated at the lower of cost or
market. Cost includes materials, direct and indirect labor and factory overhead.
Market with respect to raw materials is replacement cost and for work-in-process
and finished goods is net realizable value. The Company uses the last-in,
first-out (LIFO) method of valuing substantially all of its domestic inventories
to more properly match current costs against current revenues, thereby reducing
the effects of price changes on earnings. If LIFO inventories were valued at
current costs, the inventory amounts would have been $9,992,000 and $5,598,000
lower than those reported at December 30, 1995 and December 31, 1994,
respectively. Although current replacement cost for inventories was less than
LIFO carrying value at December 30, 1995, the Company's management believes that
the carrying value will be recovered through profit margins on future sales. The
Company's foreign inventories, representing approximately 16.8 percent of total
inventories, are valued at the lower of first-in, first-out
(FIFO) cost or market.
Property, Plant and Equipment - Property, plant and equipment is recorded
at cost. Renewals and betterments are capitalized; maintenance and repairs are
charged to expenses as incurred. The cost and accumulated depreciation of
property retired or otherwise disposed of are removed from the accounts,and any
gains or losses thereon are included in income. For financial reporting
purposes, depreciation is computed using the straight-line method over the
estimated useful lives of the assets (15 to 39 years for buildings and 5 to 14
years for machinery and equipment). Leasehold improvements are amortized over
the terms of the related leases.
Goodwill - Costs in excess of the fair value of net assets of businesses
acquired are recorded as goodwill and are amortized using the straight-line
method over a period not to exceed 40 years. The recoverability of goodwill is
periodically reviewed by management based on current and anticipated conditions.
The amount of goodwill considered realizable, however, could be reduced in the
near term if changes occur in anticipated conditions. Accumulated amortization
was $6,210,000 and $3,692,000 at December 30, 1995 and December 31, 1994,
respectively.
Accrued Liabilities - Accrued liabilities include $24,879,000 and
$21,149,000 for workers' compensation claims and $26,375,000 and $22,328,000 for
returns and allowances at December 30, 1995 and December 31, 1994, respectively.
Employee Benefits - The Company's Retirement Savings Plan provides, among
other things, for voluntary contributions by domestic employees not to exceed 15
percent of their gross salaries and wages. The Company provides matching
contributions of 25 to 50 percent based on the employee's contribution
percentage. During 1995, 1994 and 1993, the Company contributed $9,356,000,
$8,936,000 and $9,229,000, respectively, under the plan.
The Company has a Deferred Compensation Plan for key personnel. The plan
provides, among other things, for certain deferred compensation to become
payable on the employee's death, retirement or total disability as set forth in
the plan. During 1995, 1994 and 1993, the Company provided $1,425,000,
$2,564,000, and $2,122,000, respectively, under the plan. These amounts have
been recorded as other liabilities in the accompanying balance sheets.
Earnings Per Share - Earnings per share have been computed based upon the
weighted average shares and dilutive common stock equivalents outstanding during
the year. All earnings per share and shareholders' investment amounts have been
adjusted for the two-for-one stock split effected in the form of a stock
dividend in December 1993.
Foreign Currency Translation - The financial statements of the Company's
foreign subsidiaries are translated into United States currency in accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation." Assets and liabilities are translated into United States dollars
at period-end exchange rates. Income and expense items are translated at average
rates of exchange prevailing during the period. Translation adjustments are
accumulated as a separate component of shareholders' investment. Gains and
losses which result from foreign currency transactions are included in the
accompanying statements of income.
EXHIBIT 13, PAGE 10
<PAGE>
Accounting Change - Effective January 1, 1995, the Company changed its
method of accounting for sample costs from expensing sample costs that exceed
the estimated net realizable value when shipped to expensing that portion of
sample costs as they are produced. This change was made in recognition of an
increasing number of samples placed with customers that do not result in future
sales. The cumulative effect of the change was to decrease net income for the
year ended December 30, 1995 by $12,077,000, or $.09 per share, net of tax
benefit of $7,885,000.
Nonrecurring Plant Shutdown Costs - During 1995, the Company closed two of
its domestic yarn spinning mills and one yarn spinning mill in Australia. As a
result, the Company recorded a charge of $4,360,000 related to the domestic
plant closings and $2,607,000 related to the foreign plant closing. These
charges related primarily to termination benefits and to recording affected
property, plant and equipment at net realizable value.
New Accounting Pronouncement - The Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS No. 121 establishes, among other things, accounting standards for the
impairment of long-lived assets and certain identifiable intangibles. The
Company will adopt the new standard in 1996. The Company has not determined the
impact of adoption on the 1996 financial statements or results of operations.
Reclassifications - Certain prior year amounts have been reclassified to
conform to the 1995 presentation.
EXHIBIT 13, PAGE 11
<PAGE>
Notes to Consolidated Financial Statements
Note 2 Long-Term Debt
Long-term debt presented in the accompanying consolidated balance sheets at
December 30, 1995 and December 31, 1994 consisted of the following (000s
omitted):
<TABLE>
<S> <C> <C>
1995 1994
- --------------------------------------------------------------------------------- ---------------- -----------------
Revolving credit agreement at LIBOR-based rate, due in fiscal 1998 $519,000 $524,000
Revolving loan facility, United Kingdom, at LIBOR-based rate, due in fiscal 1997 59,108 50,473
Revolving loan facility, Australia, at LIBOR-based rate, due in fiscal 1997 31,060 28,072
Other 18,403 40,997
Capitalized lease obligations (Note 5) 4,864 9,417
- --------------------------------------------------------------------------------- ---------------- -----------------
632,435 652,959
Less: current maturities (5,305) (40,898)
- --------------------------------------------------------------------------------- ---------------- -----------------
$627,130 $612,061
================ =================
</TABLE>
The domestic revolving credit agreement provides for borrowings of up to
$620,000,000. The borrowings bear interest at variable rates equal to the London
Interbank Offered Rate (LIBOR) plus margins ranging from 0.150 percent to 0.625
percent, depending on the Company's consolidated funded debt to earnings ratios,
as defined. Fees associated with the domestic revolving credit agreement include
a facility fee on the committed amount ranging from 0.10 percent to 0.20
percent. At December 30, 1995, $519,000,000 was outstanding under the revolving
credit agreement. The LIBOR rate at December 30, 1995 was 5 7/16 percent. The
Company also has revolving loan facilities through which its foreign
subsidiaries obtain funds necessary for operations. The repayment of these
revolving loan facilities is guaranteed by the Company.
The domestic revolving credit agreement contains covenants which, among
other provisions, (i) limit the Company's ability to incur indebtedness or
assume liens, (ii) limit the payment of cash dividends and repurchases of common
stock, (iii) limit new indebtedness and lease obligations, and (iv) require the
Company to satisfy certain ratios related to net worth, debt-to-equity and
interest coverage. At December 30, 1995, retained earnings of $20,424,000 are
available for the payment of cash dividends. The foreign revolving loan
facilities have covenants that are no more restrictive than those of the
domestic revolving credit agreement. At December 30, 1995, the Company was in
compliance with the terms of these agreements.
In 1994, the Company elected to exercise its option to prepay certain 9.48
percent, 9.31 percent and 10.49 percent term notes payable. An extraordinary
charge of $3,363,000, net of income tax benefit of $2,150,000, was incurred as a
result of the early extinguishment of the notes payable. The aggregate annual
maturities of long-term debt, including the capitalized lease obligations, as of
December 30, 1995 are as follows: 1996 - $5,305,000; 1997 - $91,772,000; 1998 -
$533,236,000; 1999 - $2,113,000; 2000 - $9,000.
The following is presented with respect to amounts outstanding under
revolving credit agreements in 1995 and 1994 (000s omitted):
Revolving Credit: 1995 1994
- ---------------------------------------- -------- --------
Available at year-end $710,168 $698,544
Unused at year-end 101,000 99,119
EXHIBIT 13, PAGE 12
<PAGE>
Notes to Consolidated Financial Statements
Note 3 Shareholders' Investment
Under the Company's 1987 and 1992 Incentive Stock Option Plans, 8 million
and 6 million shares of common stock, respectively, are reserved for issuance at
a price no less than the market value on the date granted. These options are
exercisable over five to ten years.
The following is a summary of stock option information for the 1987 and
1992 Incentive Stock Option Plans:
1995 1994
- -------------------------------------------------------------------------------
Options outstanding, beginning of year 2,828,900 3,142,900
Options granted 1,939,200 325,000
Options exercised (323,400) (565,400)
Options canceled (144,600) (73,600)
Options outstanding, end of year 4,300,100 2,828,900
Option price range per share $2.07 - $17.02 $2.07 - $17.02
Options exercisable, end of year 51,200 200,700
Options available for grant 4,421,000 6,215,800
- -------------------------------------------------------------------------------
The Company's 1989 Discounted Stock Option Plan provided for the issuance
of up to 880,000 shares of common stock to key employees. Options for 880,000
shares were granted to three officers at $.25 per share and all 880,000 had been
exercised at December 31, 1994. The difference between the option price and
market price at the date of grant was amortized over the option period resulting
in compensation expense of $469,000 in 1994 and $798,000 in 1993.
During March 1989, the Company adopted a Shareholder Rights Plan and
pursuant thereto declared a dividend of one Right for each outstanding share of
common stock. When exercisable, each Right will entitle its holder to buy one
one-hundredth of a share of Series A Participating Preferred Stock at a price of
$12.50 per share (the "Purchase Price"). If a person or group acquires or makes
a tender or exchange offer to acquire 20% or more of the Company's common stock
without the consent of the Company (an "Acquiring Shareholder"), the Rights will
become exercisable and each Right will entitle the holder, other than the
Acquiring Shareholder , to receive, upon payment of the Purchase Price, in lieu
of preferred stock, a number of shares of common stock of the Company having a
market value equal to twice the Purchase Price. The Rights may be redeemed by
the Company under certain circumstances at a price of $.01 per Right. The Rights
have no voting power and, until exercised, no dilutive effect on net income per
common share. If not previously redeemed, the Rights will expire in April 1999.
The Company has designated 200,000 shares, of the 250,000 shares of preferred
stock authorized, as Series A Participating Preferred Stock for issuance upon
exercise of the Rights.
The Company's board of directors has approved a stock repurchase plan
whereby the Company's management is authorized to repurchase up to an additional
7,380,748 shares of the Company's common stock. For the year ended December 30,
1995, a total of 1,384,200 shares of the Company's common stock had been
purchased and retired at a cost of $20,590,000.
In 1995, the Company's board of directors approved a dividend reinvestment
plan whereby all holders of record of the Company's common stock are eligible to
participate. The plan provides a method of investing cash dividends and optional
cash payments in shares of the Company's common stock. All costs associated with
administering the plan are paid by the Company.
EXHIBIT 13, PAGE 13
<PAGE>
Notes to Consolidated Financial Statements
Note 4 Income Taxes
In, 1993, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." Under SFAS No. 109, deferred tax
assets and liabilities are determined based on the difference between the
financial accounting and tax accounting bases of assets and liabilities.
Deferred tax assets or liabilities at the end of each period are determined
using the currently enacted tax rate expected to apply to taxable income in the
periods in which the deferred tax asset or liability is expected to be realized.
There was no cumulative effect resulting from the adoption.
The provision for income taxes consisted of the following (000s omitted):
Current: 1995 1994 1993
- -------------------------------------------------------------------------------
Federal $45,579 $59,254 $61,142
State 6,907 10,656 11,032
Foreign - 2,558 -
- -------------------------------------------------------------------------------
52,486 72,468 72,174
Foreign operating loss carryforwards (10,688) - -
Deferred 1,805 6,942 (101)
- -------------------------------------------------------------------------------
$43,603 $79,410 $72,073
- -------------------------------------------------------------------------------
The differences between the Federal statutory income tax rate and the
Company's effective tax rate were as follows:
1995 1994 1993
- --------------------------------------------------------------------------------
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 4.4 3.9 3.8
Other, net 1.4 (1.0) (.8)
- --------------------------------------------------------------------------------
40.8% 37.9% 38.0%
================================================================================
EXHIBIT 13, PAGE 14
<PAGE>
Note 4 Income Taxes (cont)
Components of the net deferred income tax liability at December 30, 1995
and December 31, 1994 are shown below (000s omitted):
1995 1994
- --------------------------------------------------------------------------------
Deferred income tax assets:
Accrued advertising expenses not currently deductible $ 4,221 $3,587
Reserve for cash discounts and bad debts 4,850 6,291
Employee benefit accruals not currently deductible 20,893 16,491
Reserve for returns and allowances 10,526 9,211
Foreign net operating loss carryforwards 14,345 3,657
Other 2,490 3.291
- --------------------------------------------------------------------------------
57,325 42,528
- --------------------------------------------------------------------------------
Deferred income tax liabilities:
Book basis of inventory over tax basis (14,054) (13,274)
Sample costs (2,073) (7,362)
Book basis of property, plant and equipment over
tax basis (56,405) (50,229)
Other (4,499) (3,812)
- --------------------------------------------------------------------------------
(77,031) (74,677)
- --------------------------------------------------------------------------------
$(19,706) $(32,149)
================================================================================
The Company has recorded a deferred tax asset of $14,345,000 for income tax
loss carryforwards related to its foreign operations. Realization is dependent
on generating sufficient future taxable income at the related foreign
operations. Although realization is not assured, management believes it is more
likely than not that all of the deferred tax asset will be realized. The amount
of the deferred tax asset considered realizable, however, could be reduced in
the near term if estimates of future taxable income are reduced.
EXHIBIT 13, PAGE 15
<PAGE>
Notes to Consolidated Financial Statements
Note 5 Commitments and Contingencies
From time to time, the Company is subject to claims and suits arising in
the course of its business. The Company is 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. The Company believes that it has meritorious defenses 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
this suit.
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. In December 1995, the
Company learned that it was one of six carpet companies named as additional
defendants in a pending antitrust suit filed in the United States District Court
in Rome, Georgia. The amended complaint alleges price-fixing regarding certain
types of carpet products in violation of Section 1 of the Sherman Act. The
Company believes that the suit is spurious and without merit, and that once
completed, it will not have a material adverse effect on the Company's financial
condition or results of operations.
In February 1996, a jury in Greenboro, North Carolina, returned a verdict
against the Company in litigation brought by four former employees of Salem
Carpet Mills, acquired by the Company in 1992, alleging age discrimination and
sex discrimination in employment decisions made with regard to such employees.
The verdict is now under review by the trial judge and may subsequently be
appealed by either party after judgment is entered. The Company believes that
the litigation will not have a material adverse effect on the Company's
financial condition or results of operations.
The Company has entered into several capitalized leases for machinery and
equipment, including computer equipment, at a cost of $57,113,000 at December
30, 1995 and $53,663,000 at December 31, 1994. These assets are amortized on a
straight-line basis over the lease terms and amortization is included in
depreciation expense. Accumulated amortization of capital lease cost was
$45,218,000 and $34,777,000 at December 30, 1995 and December 31, 1994,
respectively. The related obligations are included in long-term debt (Note 2).
The Company also leases warehouses and showroom space, customer service centers
and certain equipment under operating leases.
At December 30, 1995, future minimum lease payments for all capital and
operating leases exceeding one year were as follows (000s omitted):
Capital Operating Total Future
Leases Leases Payments
- --------------------------------------------------------------------------------
1996 3,692 19,412 23,104
1997 1,183 14,635 15,818
1998 520 9,256 9,776
1999 50 6,250 6,300
2000 9 4,022 4,031
2001 and thereafter - 4,509 4,509
- --------------------------------------------------------------------------------
Total Payments 5,454 $58,084 63,538
==============================
Less: amount representing interest 590
- --------------------------------------------------------------------------------
Present value of capitalized lease
payments with a weighted average
interest rate of 8.25% $4,864
================================================================================
Rental payments under noncancelable operating leases were $32,187,000,
$30,389,000 and $27,486,000 in 1995, 1994 and 1993, respectively.
At December 30, 1995, the Company had commitments to purchase certain
capital assets of approximately $22,000,000.
EXHIBIT 13, PAGE 16
<PAGE>
Notes to Consolidated Financial Statements Shaw Industries, Inc.
Note 6 Financial Instruments
The carrying amount and fair value of the Company's financial instruments
are as follows (000s omitted):
December 30, 1995 December 31, 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------------------------------------------
Debt:
Revolving credit
agreements $609,168 $609,168 $602,545 $602,545
Other obligations 23,267 23,267 50,414 50,414
Foreign currency exchange
contract - - - (4,390)
REVOLVING CREDIT AGREEMENTS: The carrying values of the revolving credit
agreements approximate their fair values due to the floating market interest
rates charged on those agreements.
OTHER OBLIGATIONS: The carrying values of other obligations approximate
their fair values due to the interest rates charged on those agreements: either
floating market rates or fixed rates which approximated market rates available
at December 30, 1995 and December 31, 1994.
FOREIGN CURRENCY EXCHANGE CONTRACTS: The Company may employ foreign
currency exchange contracts when, in the normal course of business, they are
determined to effectively manage and reduce foreign currency exchange rate
fluctuation risk. As of December 30, 1995, the Company had no foreign currency
exchange contracts outstanding. At December 31, 1994, one contract was
outstanding to purchase Mexican pesos at the spot rate on the contract date
through which the Company had effectively hedged approximately $14,100,000 of
U.S. dollar- denominated net liabilities of its Mexican joint venture. The
market value gain resulting from the contract offset the exchange rate loss at
December 31,1994. The contract expired in January 1995, at which time the
counter party fully performed under the terms of the contract.
EXHIBIT 13, PAGE 17
<PAGE>
Notes to Consolidated Financial Statements Shaw Industries, Inc.
Note 7 Acquisitions
On March 31, 1993, the Company acquired all of the outstanding stock of
Kosset Carpets, Ltd., Bradford, England ("Kosset") for approximately $19,043,000
in cash. The acquistion has been accounted for as a purchase transaction, and
accordingly, the results of operations of Kosset have been included in the
accompanying financial statements since April 1, 1993.
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"). 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 formed a joint venture (the "Terza 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
primarily in Mexico and South America. The Company originally acquired a 51
percent interest in the Terza Joint Venture for $14,050,000, and accordingly,
the joint venture's financial statements were consolidated with the Company's
financial statements at December 31, 1994 and for the period from the
acquisition date to December 31, 1994. Effective January 1, 1995, the Company
sold a 2 percent interest in the Terza Joint Venture for $550,000 reducing its
interest to 49 percent. As a result, the Company's investment in the Terza Joint
Venture is being accounted for using the equity method. The deconsolidation of
the Terza Joint Venture had an insignificant effect on the Company's
consolidated total assets and net sales as of and for year ended December 30,
1995.
In January 1995, the Company increased its operations in the United Kingdom
by acquiring substantially all of the operating assets of the Carpets Division
of Coats Viyella Plc for approximately $29,503,000.
Pro forma presentation of operations after giving retroactive effect to
these acquisitions is not provided as these acquisitions were not material to
require such presentation.
EXHIBIT 13, PAGE 18
<PAGE>
Notes to Consolidated Financial Statements
Note 8 - Information about the Company's Foreign Operations
The following information is presented regarding the Company's consolidated
foreign operations for the years ended December 30, 1995, December 31, 1994 and
January 1, 1994 (000s omitted).
<TABLE>
1995
- --------------------------------------------- ----------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Adjustments
and
Domestic Foreign Eliminations Consolidated
Consolidated
- --------------------------------------------- ----------------- ----------------- ---------------- -----------------
Sales to unaffiliated customers $2,509,443 $360,385 $ -- $2,869,828
============================================= ================= ================= ================ =================
Operating profit (loss) $ 168,500 $(19,401) $ -- $ 149,099
============================================= ================= ================= ================
Interest expense (41,901)
Miscellaneous expense, net (443)
-----------------
Income before income taxes $ 106,755
=================
Identifiable assets $1,504,756 $292,850 $(134,823) $1,662,783
============================================= ================= ================= ================ =================
1994
- ------------------------------------- ---------------- ----------------- ---------------- -----------------
Adjustments
and
Domestic Foreign Eliminations Consolidated
- --------------------------------------------- ---------------- ----------------- ---------------- -----------------
Sales to unaffiliated customers $2,498,090 $290,437 $ -- $2,788,527
============================================ ================= ================ ================= =================
Operating profit $ 228,168 $ 6,731 $ -- $ 234,899
============================================ ================= ================ =================
Interest expense, net (30,022)
Miscellaneous income, net 4,922
-----------------
Income before income taxes $ 209,799
=================
Identifiable assets $1,439,260 $340,790 $(82,672) $1,697,378
============================================ ================= ================ ================= =================
EXHIBIT 13, PAGE 19
<PAGE>
Note 8 (Cont.)
1993
- --------------------------------------------- ----------------- ----------------- ---------------- -----------------
Adjustments
and
Domestic Foreign Eliminations Consolidated
============================================= ================= ================= ================ =================
Sales to unaffiliated customers $2,379,045 $97,237 $ -- $2,476,282
============================================= ================= ================= ================ =================
Operating profit $ 207,373 $ 3,913 $ -- $ 211,286
============================================= ================= ================= ================
Interest expense, net (24,107)
Miscellaneous income, net 2,530
-----------------
Income before income taxes $ 189,709
=================
Identifiable assets $1,316,863 $247,322 $(109,919) $1,454,266
============================================= ================= ================= ================ =================
</TABLE>
Sales and transfers between geographic areas and export sales are not
material. Operating profit is total revenue less operating expenses. In
computing operating profit, none of the following items have been added or
deducted: net interest expense, net miscellaneous income, income taxes, equity
in income of joint venture, the cumulative effect of an accounting change or the
extraordinary item related to early extinguishment of debt.
Identifiable assets are those assets of the Company that are identified
with the operations in each geographic area, including goodwill.
EXHIBIT 13, PAGE 20
<PAGE>
Notes to Consolidated Financial Statements
Note 9 Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1995, 1994 and 1993 is as follows
(000s except per share amounts):
<TABLE>
1995 Quarters
First Second Third Fourth
*
<S> <C> <C> <C> <C>
Net Sales $676,550 $738,326 $748,364 $706,588
Gross Profit 117,081 144,516 142,716 145,621
Net Income (7,600) 18,673 21,905 19,326
Earnings Per Share - Primary and
Fully Diluted (0.06) 0.14 0.16 0.14
1994 Quarters
First Second Third Fourth
**
Net Sales $620,126 $722,219 $734,100 $712,082
Gross Profit 126,198 165,926 156,880 152,084
Net Income 25,325 40,479 33,162 28,060
Earnings Per Share - Primary and
Fully Diluted 0.17 0.28 0.24 0.20
1993 Quarters
First Second Third Fourth
****
Net Sales $519,318 $669,275 $649,516 $638,173
Gross Profit 100,507 145,574 137,301 129,694
Net Income 16,596 37,672 34,096 29,272
Earnings Per Share - Primary and
Fully Diluted *** 0.12 0.26 0.24 0.20
</TABLE>
* The first quarter net income and per share amounts for 1995 include a
charge of $12,077,000, or $.09 per share, net of tax benefit, from the
cumulative effect of a change in the method of accounting for sample costs from
expensing sample costs that exceed the estimated net realizable value when
shipped to expensing that portion of sample costs as they are produced.
* *The second quarter net income and per share amounts for 1994 include the
effect of an extraordinary loss on early extinguishment of debt of $3,363,000,
or $.02 per share, net of tax benefit.
***The sum of the 1993 quarterly net earnings per share amounts is
different from the annual net earnings per share amounts because of differences
in the weighted average number of common shares outstanding used in the
quarterly and annual computations.
****Fourteen week period.
EXHIBIT 13, PAGE 21
<PAGE>
Notes To Consolidated Financial Statements
Note 10 Subsequent Events
In February 1996, the Company acquired certain companies for cash and
common stock as part of its plan to develop a residential dealer and commercial
contractor distribution network.
EXHIBIT 13, PAGE 22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Shareholders of Shaw Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Shaw
Industries, Inc. (a Georgia corporation) and subsidiaries as of December 30,
1995 and December 31, 1994 and the related consolidated statements of income,
shareholders' investment, and cash flows for each of the three years in the
period ended December 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Shaw Industries, Inc. and
subsidiaries as of December 30, 1995 and December 31, 1994 and the results of
their operations and their cash flows for each of the three years in the period
ended December 30, 1995 in conformity with generally accepted accounting
principles.
As discussed in Note 1 of the Notes to Consolidated Financial Statements,
effective January 1, 1995, the Company changed its method of accounting for
sample costs.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 19, 1996
EXHIBIT 13, PAGE 23
<PAGE>
Stock Information
High and low stock prices and cash dividends paid by fiscal quarter
(after giving effect to a two-for-one stock split effected in the form of a
stock dividend in December 1993 )
<TABLE>
1995 1994 1993
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
1st Quarter 17 1/8 12 25 17 7/8 19 3/4 14 7/8
2nd Quarter 17 3/8 12 1/4 25 1/2 15 3/4 19 7/8 14 1/8
3rd Quarter 17 1/4 14 1/4 17 7/8 13 7/8 24 5/8 16
4th Quarter 16 3/8 12 5/8 15 3/4 12 7/8 25 1/2 20 1/8
</TABLE>
Dividends Paid
1995 1994 1993
1st Quarter 7.50 cents 5.50 cents 4.50 cents
2nd Quarter 7.50 cents 5.50 cents 4.50 cents
3rd Quarter 7.50 cents 5.50 cents 4.50 cents
4th Quarter 7.50 cents 5.50 cents 4.50 cents
Total 30.00 cents 22.00 cents 18.00 cents
Number of Shareholders
As of March 4, 1996, there were 4,159 holders of record of the Company's
Common Stock.
EXHIBIT 13, PAGE 24
EXHIBIT 21
Subsidiaries of the Registrant are Shaw Transport, Inc., a Georgia
corporation; Shaw Financial Services, Inc., a Georgia Corporation; Bell-Mann,
Inc., a Georgia corporation; Carpetland USA, Inc., an Indiana corporation;
Carpets International, PLC., a United Kingdom corporation; and Capital Carpet
Industries, Pty., Ltd., an Australian corporation.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included and incorporated by reference in this Form 10-K into the
Company's previously filed Registration Statement File No. 33-45089.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the
consolidated balance sheet of Shaw Industriess, Inc. and subsidiaries as of
December 30, 1995 and the related consoldiated statements of income,
shareholders' investment and cash flows for the year ended December 30, 1995,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 31,453,000
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<RECEIVABLES> 345,443,000
<ALLOWANCES> (14,746,000)
<INVENTORY> 489,212,000
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<PP&E> 1,234,000,000
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<BONDS> 0
<COMMON> 150,913,000
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0
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<CGS> 2,319,894,000
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<OTHER-EXPENSES> 392,649,000
<LOSS-PROVISION> 8,629,000
<INTEREST-EXPENSE> 41,901,000
<INCOME-PRETAX> 106,755,000
<INCOME-TAX> 43,603,000
<INCOME-CONTINUING> 63,152,000
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<EXTRAORDINARY> 0
<CHANGES> (12,077,000)
<NET-INCOME> 52,304,000
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
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