<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED NOVEMBER 29, 1996
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO________________________
COMMISSION FILE NUMBER 33-68412
---------------
AVONDALE INCORPORATED
(Exact name of registrant as specified in its charter)
GEORGIA 58-0477150
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
506 SOUTH BROAD STREET 30655
MONROE, GEORGIA (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (770) 267-2226
Former name, former address and former fiscal year, if changed since last
report: N/A
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Description As Of Shares Outstanding
- -------------------- --------------- ------------------
<S> <C> <C>
Class A Common Stock January 1, 1997 12,312,034 Shares
Class B Common Stock January 1, 1997 978,939 Shares
</TABLE>
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<PAGE> 2
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
PART I - FINANCIAL INFORMATION (UNAUDITED)
<S> <C>
Condensed Consolidated Balance Sheets at November 29, 1996 and August 30, 1996...................... 1
Condensed Consolidated Statements of Income for the Thirteen Weeks Ended
November 29, 1996 and November 24, 1995............................................................. 2
Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended
November 29, 1996 and November 24, 1995............................................................. 3
Notes to Condensed Consolidated Financial Statements................................................ 4
Management's Discussion and Analysis of Financial Condition and Results of Operations............... 6
PART II - OTHER INFORMATION
Item 1: Legal Proceedings.......................................................................... 8
Item 2: Changes in Securities...................................................................... 8
Item 3: Defaults upon Senior Securities............................................................ 8
Item 4: Submission of Matters to a Vote of Security Holders........................................ 8
Item 5: Other Information.......................................................................... 8
Item 6: Exhibits and Reports on Form 8-K........................................................... 8
Signature............................................................................................ 9
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
AVONDALE INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AUG. 30, NOV. 29,
1996 1996
--------- ---------
ASSETS
<S> <C> <C>
Current assets
Cash $ 7,253 $ 9,073
Accounts receivable, less allowance for doubtful
accounts of $4,920 in 1996 and $5,069 in 1997 84,428 86,200
Due from Triarc 7,250 --
Inventories 127,698 137,368
Prepaid expenses 2,792 1,606
--------- ---------
Total current assets 229,421 234,247
Property, plant and equipment
Land 8,532 8,532
Buildings 64,694 65,384
Machinery and equipment 357,406 361,003
--------- ---------
430,632 434,919
Less accumulated depreciation (190,838) (200,918)
--------- ---------
239,794 234,001
Other assets 23,864 20,002
--------- ---------
$ 493,079 $ 488,250
========= =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable $ 47,045 $ 51,371
Accrued compensation, benefits and related expenses 20,182 16,774
Other accrued expenses 26,530 21,029
Long-term debt due in one year 3,250 3,250
Income taxes payable 88 1,153
--------- ---------
Total current liabilities 97,095 93,577
Long-term debt 299,850 299,775
Deferred income taxes and other long-term liabilities 28,622 27,145
Shareholders' equity
Preferred Stock
$.01 par value; 10,000 shares authorized -- --
Common Stock
Class A, $.01 par value; 100,000 shares
authorized, 12,312 issued and outstanding 123 123
Class B, $.01 par value; 5,000 shares
authorized, 979 issued and outstanding 10 10
Capital in excess of par value 41,844 41,844
Retained earnings 25,535 25,776
--------- ---------
Total shareholders' equity 67,512 67,753
--------- ---------
$ 493,079 $ 488,250
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
1
<PAGE> 4
AVONDALE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
13 WEEKS ENDED
---------------------
NOV. 24, NOV. 29,
1995 1996
-------- --------
<S> <C> <C>
Net sales $128,949 $254,064
Operating costs and expenses
Cost of goods sold 108,960 218,303
Depreciation 6,228 10,279
Selling and administrative expenses 6,725 11,470
-------- --------
Operating income 7,036 14,012
Interest expense 3,008 6,498
Discount and expenses on sale of receivables -- 1,611
Loss attributable to investment in Oneita -- 3,690
Other (income) expense, net (470) 258
-------- --------
Income before income taxes 4,498 1,955
Provision for income taxes 1,745 784
-------- --------
Net income $ 2,753 $ 1,171
======== ========
Per share data:
Net income $ .25 $ .09
======== ========
Dividends declared $ .07 $ .07
======== ========
Weighted average shares outstanding 11,135 13,400
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 5
AVONDALE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
13 WEEKS ENDED
-----------------------
NOV. 24, NOV. 29,
1995 1996
-------- --------
<S> <C> <C>
Operating activities
Net income $2,753 $ 1,171
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,239 10,348
Change in other assets (507) 3,614
Provision for deferred income taxes (968) (1,476)
Interest expense on payment-in-kind notes 1,229 --
Gain on sale of equipment (511) (2)
Changes in operating assets and liabilities (868) (6,526)
------ -------
Net cash provided by operating activities 7,367 7,129
Investing activities
Purchases of property, plant and equipment (4,952) (4,306)
Proceeds from sale of property, plant and equipment 511 2
------ -------
Net cash used in investing activities (4,441) (4,304)
Financing activities
Net payments on revolving line of credit (2,150) (75)
Dividends paid (775) (930)
Net cash used by financing activities (2,925) (1,005)
------ -------
Increase in cash 1 1,820
Cash at beginning of period 1,334 7,253
------ -------
Cash at end of period $1,335 $ 9,073
====== =======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 6
AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOVEMBER 29, 1996
1. Basis of Presentation: The accompanying unaudited condensed
consolidated financial statements include the accounts of Avondale Incorporated
and its wholly owned subsidiaries, Avondale Mills, Inc. and Avondale
Receivables Company (collectively, the "Company"). These statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The August 30, 1996 balance sheet has been
derived from the audited financial statements at that date. The accounting
policies and basis of presentation followed by the Company are presented in
Note 1 to the August 30, 1996 Audited Consolidated Financial Statements.
Effective September 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 "Accounting for the Impairment of Long-lived
Assets and Long-Lived Assets to be Disposed Of." The adoption of this statement
had no impact on the Company's financial results.
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.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation. Operating results for
the thirteen weeks ended November 29, 1996 are not necessarily indicative of
the results that may be expected for the fiscal year ending August 29, 1997.
2. Inventories: Components of inventories are as follows (amounts in
thousands):
<TABLE>
<CAPTION>
AUG. 30, NOV. 29,
1996 1996
-------- --------
<S> <C> <C>
Finished goods $ 35,746 42,575
Work in process 56,826 57,647
Raw materials 26,817 30,959
Dyes and chemicals 9,119 6,595
-------- --------
Inventories at FIFO 128,508 137,776
Less allowance to reduce carrying value to
LIFO basis (7,725) (7,525)
-------- --------
120,783 130,251
Supplies at average cost 6,915 7,117
-------- --------
$127,698 $137,368
======== ========
</TABLE>
4
<PAGE> 7
AVONDALE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CON.)
(UNAUDITED)
NOVEMBER 29, 1996
Valuation of the Company's inventories under the last-in, first-out (LIFO)
method at November 29, 1996 and the related impact on the statement of income
for the thirteen weeks then ended has been determined using estimated
quantities and costs as of the fiscal 1997 year-end. As a result, interim
amounts are subject to the final year-end LIFO valuation.
3. Investment in securities: In January 1996, the Company purchased a
$7.5 million subordinated note due February 26, 1999, having convertible
features, from Oneita Industries, Inc. ("Oneita"). On August 27, 1996, the
Company converted the subordinated note plus accrued interest into 2,270,833
shares of common stock of Oneita, representing ownership of 24.8% of Oneita's
outstanding shares. This investment, which is accounted for under the equity
method, is included in Other assets in the Consolidated Balance Sheet.
The following summarizes the results of operations reported by Oneita for
its fiscal quarter ended September 29, 1996, the first quarter reported by
Oneita subsequent to the Company's conversion of the subordinated note into
Oneita's common stock (amounts in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 28, 1996
------------------
<S> <C>
Net Sales $ 34,711
========
Loss from Operations $(16,615)
========
Net Loss $(18,828)
========
</TABLE>
During the thirteen weeks ended November 29, 1996, the Company recorded a
loss of $3.7 million attributable to its investment in Oneita. Such loss
represented the Company's pro rata share of the net loss incurred by Oneita
subsequent to the August 27, 1996 conversion of the Company's investment into
equity.
4. Contingencies: The Company is involved in certain environmental
matters and claims. The Company has provided reserves to cover management's
estimates of the cost of investigating, monitoring and remediating these and
other environmental conditions. If more costly remediation measures are
necessary than those believed to be probable based on current facts and
circumstances, actual costs may exceed the reserves provided. However, based on
the information currently available, management does not believe that the
outcome of these matters will have a material adverse effect on its future
results of operations or financial position.
The Company is also a party to litigation incidental to its business from
time to time. The Company is not currently a party to any litigation that
management, in consultation with legal counsel, believes, if determined
adversely to the Company, would have a material adverse effect on the Company's
financial condition or results of operations.
5
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Thirteen Weeks Ended November 29, 1996 Compared to Thirteen Weeks Ended
November 24, 1995
NET SALES. Net sales increased 97.0% to $254.1 million in fiscal 1997
from $129.0 million in fiscal 1996, primarily as a result of the Company's
acquisition of substantially all of the textile assets of Graniteville Company
("Graniteville") in April 1996.
Apparel fabric sales increased 245.1% to $178.6 million in fiscal 1997
from $51.8 million in fiscal 1996. This increase in sales reflected a 289.6%
increase in yards sold, which was partially offset by a 11.4% decline in
average selling prices. The increase in yards sold was primarily attributable
to the acquisition of Graniteville in April 1996. The decline in average
selling prices resulted from the inclusion of net sales attributable to
Graniteville, which generally were at lower average selling prices than the
Company's other apparel fabric sales.
Greige and specialty fabric sales increased 32.1% to $15.1 million in
fiscal 1997 from $11.4 million in fiscal 1996. This increase in sales was
primarily the result of an increase in yards sold due to the inclusion of net
sales attributable to Graniteville, which was acquired in April 1996.
Yarn sales decreased 8.1% to $60.5 million in fiscal 1997 from $65.8
million in fiscal 1996. This decrease reflected a 3.5% decrease in pounds sold
and a 4.8% decrease in average selling prices. These decreases reflected weak
demand in the knitted apparel market and excess production capacity within the
yarn industry during the period.
COST OF GOODS SOLD. Cost of goods sold increased 100.4% to $218.3 million
in fiscal 1997 from $109.0 million in fiscal 1996. Cost of goods sold as a
percentage of net sales increased to 85.9% in fiscal 1997 from 84.5% in fiscal
1996, primarily due to higher production costs of certain Graniteville
products. Raw material costs as a percentage of net sales decreased to 50.0% in
fiscal 1997 from 52.2% in fiscal 1996, while conversion costs as a percentage
of net sales increased to 35.9% in fiscal 1997 from 32.4% in fiscal 1996.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
increased 70.6% to $11.5 million in fiscal 1997 from $6.7 million in fiscal
1996, primarily due to additional expenses attributable to Graniteville.
Selling and administrative expenses as a percentage of net sales decreased to
4.5% in fiscal 1997 from 5.2% in fiscal 1996.
INTEREST EXPENSE, NET. Interest expense, net increased 116.1% to $6.5
million in fiscal 1997 from $3.0 million in fiscal 1996. This increase
reflected a higher level of outstanding borrowings during fiscal 1997 as a
result of the acquisition of Graniteville.
DISCOUNT AND EXPENSES ON SALE OF RECEIVABLES. Discount and expenses on
sale of receivables were $1.6 million for fiscal 1997, which related to the
receivables securitization facility established by the Company in April 1996.
LOSS ATTRIBUTABLE TO INVESTMENT IN ONEITA. Based upon Oneita's
expectations of continued operating losses for its first and second quarters of
1997, the Company anticipates recording additional losses attributable to its
investment in Oneita during fiscal 1997. The carrying value of this investment
at November 29, 1996 was less than the New York Stock Exchange quoted market
value.
6
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CON.)
RESULTS OF OPERATIONS (CON.)
PROVISION FOR INCOME TAXES. Provision for income taxes decreased 55.1% to
$0.8 million for fiscal 1997 from $1.7 million for fiscal 1996. The Company's
effective tax rate was 40.1% in fiscal 1997 compared to 38.8% in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $7.1 million for the
thirteen weeks ended November 29, 1996. Principal working capital changes
included a $5.5 million decrease in Accounts Receivable, a $9.7 million
increase in Inventories, and a $4.6 million decrease in Accounts Payable and
Accrued Expenses. The Company's investing activities included $4.3 million in
capital improvements relating to the ongoing modernization of the Company's
manufacturing facilities. Net cash used in financing activities aggregated $1.0
million, including $930,000 used to pay dividends on outstanding capital stock.
At November 29, 1996, the Company had borrowings of $161.0 million
outstanding under its revolving line of credit and $64.0 million of borrowing
availability thereunder.
Management estimates that capital expenditures for fiscal 1997 will be
approximately $40.0 million, and that such amounts will be used primarily to
upgrade weaving equipment and to improve fabric finishing facilities.
Management believes that cash generated from operations, together with
borrowings available under its revolving line of credit and proceeds received
in connection with sales of trade receivables, will be sufficient to meet the
Company's working capital and capital expenditure needs in the foreseeable
future. The Company will also continue to consider other options available to
it in connection with future working capital and capital expenditure needs,
including the issuance of additional debt and equity securities.
7
<PAGE> 10
AVONDALE INCORPORATED
PART II - OTHER INFORMATION
<TABLE>
<S> <C>
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Shareholders on November 13, 1996.
(b) Eight directors were elected at the Annual Meeting to serve until the Annual Meeting of
Shareholders in 1997. The names of these Directors are as follows:
G. Stephen Felker
Jack R. Altherr, Jr.
Dale J. Boden
Robert B. Calhoun
Kenneth H. Callaway
Harry C. Howard
C. Linden Longino, Jr.
John P. Stevens
(c) The Company had outstanding shares of Class A Common Stock and Class B Common
Stock having an aggregate of 31,890,814 votes entitled to be cast at the Annual Meeting.
Of such aggregate outstanding votes, 42,630 votes were not present at the Annual
Meeting in person or by proxy. The remaining outstanding 31,848,184 votes were present
at the Annual Meeting in person or by proxy and voted For the 8 directors that were
elected at the Annual Meeting. There were no abstentions or broker non-votes and no
votes were withheld.
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
1. On October 18, 1996, the Company filed a current report on Form 8-K regarding
the Company's position relative to "forward looking statements" and certain safe
harbors provided in the Securities Act of 1933 and the Securities Exchange Act
of 1934.
2. On October 18, 1996, the Company filed a current report on Form 8-K regarding
its press release for the fiscal year ended August 30, 1996.
</TABLE>
8
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AVONDALE INCORPORATED
By: /s/ G. STEPHEN FELKER
------------------------------------------------
G. Stephen Felker
Chairman, President, and Chief Executive Officer
By: /s/ JACK R. ALTHERR, JR.
------------------------------------------------
Jack R. Altherr, Jr.
Vice Chairman and Chief Financial Officer
Date: January 8, 1997
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED NOVEMBER 29, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-29-1997
<PERIOD-END> NOV-29-1996
<CASH> 9,073
<SECURITIES> 0
<RECEIVABLES> 86,200
<ALLOWANCES> 5,069
<INVENTORY> 137,368
<CURRENT-ASSETS> 234,247
<PP&E> 434,919
<DEPRECIATION> 200,918
<TOTAL-ASSETS> 488,250
<CURRENT-LIABILITIES> 93,577
<BONDS> 299,775
0
0
<COMMON> 133
<OTHER-SE> 67,620
<TOTAL-LIABILITY-AND-EQUITY> 488,250
<SALES> 254,064
<TOTAL-REVENUES> 254,064
<CGS> 218,303
<TOTAL-COSTS> 240,052
<OTHER-EXPENSES> 5,559
<LOSS-PROVISION> 369
<INTEREST-EXPENSE> 6,498
<INCOME-PRETAX> 1,955
<INCOME-TAX> 784
<INCOME-CONTINUING> 1,171
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,171
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
