U.S. 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 June 29, 1996
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: 0-22942
CONSO PRODUCTS COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
SOUTH CAROLINA 57-986680
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
513 North Duncan Bypass, P.O. Box 326, Union, SC 29379
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (864) 427-9004
Securities registered pursuant to Section 12(b) of the
Act:
None.
Securities registered pursuant to Section 12(g) of the
Act:
No Par Value Common Stock
--------------------------------------------
(Title of class)
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 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 [ ]
The aggregate market value of shares of the Registrant's no par value Common
Stock, its only outstanding class of voting stock, held by non-affiliates
of the registrant as of August 15, 1996, was $46,936,967.
The number of shares outstanding of the Registrant's no par value Common Stock,
its only outstanding class of common equity, as of August 15, 1996, was
4,987,793.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Parts into which Incorporated
----------------------- ------------------------------
Proxy Statement for Annual Meeting of Part III
Shareholders to be held October 15, 1996
PART I
Item 1. Business
General
Conso Products Company (together with its subsidiaries, the "Company")
is the world's largest manufacturer of decorative trimmings for the home
furnishings industry. The Company produces and sells a full range of knitted and
woven fringes, decorative cords, tasselled and other decorative accessories,
jacquard and other woven braids, and apparel trims, as well as workroom tapes
and supplies. The Company also distributes brassware and other home furnishings
accessories and, through its British subsidiaries, conducts a mail order catalog
and wholesale haberdashery business and distributes apparel trimmings and
accessories to the retail trade. The Company's products are marketed worldwide
to manufacturers, distributors and retailers, and its manufacturing facilities
are located in the United States, the United Kingdom, and Mexico.
The Company's US business, which can be traced back to 1867, was
acquired from Springs Industries, Inc. in 1986 when the company was organized by
a group of investors that included J. Cary Findlay, who became its Chief
Executive Officer and, subsequently, its sole shareholder. In December 1993, the
Company made its initial public offering of its Common Stock and, using a
portion of the proceeds of the offering, acquired British Trimmings (Holdings)
Limited, a privately held English company which is now known as "British
Trimmings Limited" and is one of the leading producers of decorative trimmings
in the United Kingdom. In connection with the offering, Conso Products Company
changed its jurisidiction of incorporation from Delaware to South Carolina.
Unless the context otherwise requires, all references in this report to "Conso"
or "Conso US" are to Conso Products Company, its Delaware predecessor, and its
majority-owned Mexican subsidiary, and all references to "British Trimmings" are
to British Trimmings Limited, its corporate predecessors and subsidiaries, and
all references to the "Company" include both Conso and British Trimmings.
Also in December 1993, the Company changed its fiscal year from the
calendar year to the annual period ending on the Saturday nearest June 30
of each year. The fiscal year ended June 29, 1996 (consisting of 52 weeks) is
referred to herein as the "1996 fiscal year" or "fiscal 1996," the fiscal year
ended July 1, 1995 (consisting of 52 weeks) is referred to herein as the "1995
fiscal year" or "fiscal year 1995," the fiscal year ended July 2, 1994
(consisting of 52 weeks) is referred to herein as the "1994 fiscal year" or
"fiscal 1994" and the 53-week period ended July 3, 1993 is referred to herein
as the "year ended 1993". As a result of such change, the Company was required
to file a Transition Report on Form 10-KSB for the transition period from
January 1, 1993 through July 3, 1993, including audited financial statements for
the transition period.
Since its initial public offering and the British Trimmings
acquisition, the Company has devoted substantial management time and attention
to the integration of the Conso US and British Trimmings operations. Particular
emphasis was placed on the transfer of Conso US's data processing technology, as
well as production, marketing and customer service systems, to British
Trimmings. A major goal in this process has been to increase the levels of stock
inventory and reduce backorders at British Trimmings so that most customer
orders for stock products can be shipped within three days.
The Company also has made three smaller acquisitions since acquiring
British Trimmings. In May 1994, it acquired the assets of Conso Graber Canada
Inc., a Canadian producer and distributor of decorative trimmings whose business
had once been under common ownership with Conso's. The assets were
acquired at a total cost of approximately $300,000 and consisted primarily of
additional equipment which is being used at the Company's existing locations. In
June 1994, the Company acquired Wendy A. Cushing Limited and Wendy
Cushing Trimmings Limited, both English companies, for approximately $112,000.
Wendy A. Cushing, a leading designer of old world decorative trimmings, will
serve Conso US's and British Trimmings' upper-end customers internationally.
These companies maintain a design studio in London and a showroom in Chelsea
Harbour. In March 1996, Conso acquired all of the assets of The Claesson
Company in consideration of the assumption of approximately $310,000 in
liabilities. In connection with the acquisition, Margareta Claesson has
joined Conso as Manager of the Decorative Accessories products Division.
The Company's global growth strategy for the future includes:
o Additional business acquisitions as attractive opportunities are
identified;
o Continual introduction of new decorative trimmings products and the
cross-merchandising of existing products between Conso US and British
Trimmings;
o Continued expansion of the Company's customer base, including increased
sales to furniture manufacturers, mass merchandisers and high-end
designers;
o Expansion into new decorative accessory products; and
o Expanded international production and distribution operations, as well as
increased export sales.
British Trimmings Acquisition
The Company's acquisition of British Trimmings was completed in
December 1993, contemporaneously with the Company's initial public offering.
Conso acquired all of the outstanding share capital of British Trimmings in
consideration of (pound)2,224,480 (approximately $3.3 million) and the issuance
of 173,850 shares of the Company's Common Stock to two executive shareholders of
British Trimmings. The transaction was accounted for as a purchase, and the
aggregate purchase price for British Trimmings' assets, including the effective
assumption of British Trimmings' liabilities of approximately $6.3 million and
costs and expenses of the transaction, was approximately $11.2 million.
Initial Public Offering
In December 1993 and January 1994, the Company issued and sold shares
of common stock in its initial public offering for net proceeds (after
underwriting discounts and offering expenses) of approximately $14.8 million.
Approximately $3.3 million of the net proceeds were applied to pay the cash
portion of the purchase price for British Trimmings. The remaining net
proceeds were used to pay a portion of the purchase price for a dyehouse and
manufacturing facility at Leek, England that British Trimmings had been leasing
(approximately $875,000), to repay approximately $6.4 million of outstanding
debt of Conso and British Trimmings, and to fund the distribution of
approximately $4.2 million of previously taxed earnings of Conso to its sole
shareholder as an S Corporation distribution. In connection with the offering,
Conso terminated its S Corporation status, and the Company is now taxed as a C
Corporation for US income tax purposes.
Industry
The decorative trimmings industry constitutes a small portion of the
home furnishings industry. The Company's management is not aware of any
definitive published data on the size of the decorative trimmings industry. Both
Conso US and British Trimmings have many competitors for various parts of their
businesses; however, many of these competitors are small and most do not offer
the same breadth or depth of collections or ranges.
Demand for Conso US's and British Trimmings' products varies as fashion
trends in home furnishings and the relative cost of various products changes.
Total demand also is affected by population growth and demographics, consumer
spending and confidence in the economy, levels of disposable income, geographic
mobility of consumers, housing starts and residential housing sales. The Company
believes that it has been able to increase the demand for decorative trimmings,
and therefore expand the market, through aggresive merchandising support of
resellers and education of end-users as to applications for its products.
Products
The decorative trimmings produced and sold by both Conso US and British
Trimmings include various fringes, cords and tasselled accessories that are used
on the edges of chairs, sofas, decorative pillows, draperies and other home
furnishings. Fringes may include a brush fringe or ruche around the edge of a
pillow or a heavy bullion fringe around the base of a sofa. Tassel fringe is
often used to edge draperies and decorative pillows. Knitted and woven braids
produced by both companies are used to border or frame pillows, curtains and
upholstered pieces. Cord without a lip or flange may be used to border a mirror
or a room and can be used to hang pictures and mirrors.
British Trimmings also sells apparel trimmings and distributes apparel
trimmings and accessories to the retail trade. Through subsidiaries, British
Trimmings also conducts a mail order catalog and retail haberdashery. Apparel
fashions produced and distributed by British Trimmings include sequin and
glitter trimmings, gimp trims and froggings. Some of the braids and other stock
products that are produced by both Conso US and British Trimmings are also
used in apparels. Conso US also produces and sells workroom tapes and
cords, and distributes other sewing and workroom supplies purchased from
others. Conso US and British Trimmings import and distribute brass
accessories for window furnishings and other decorative accessories for the
home.
The following table sets forth for the periods indicated certain
information relating to sales of the Company's product lines:
<TABLE>
<CAPTION>
Fiscal years ended
- ------------------------------------------------------------------------------
June 29, 1996 July 1, 1995* July 2, 1994
- -------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Stock Collections:
Conso US $18,684 26.4% $15,584 26.1% $12,645 30.5%
British Trimmings 8,975 12.7 6,843 11.5 2,657 6.4
Wendy Cushing Trimmings 562 0.8 474 0.8 - -
Other Stock Trims:
Conso US 14,125 20.0 10,129 17.0 8,346 20.1
British Trimmings 1,149 1.6 1,961 3.3 940 2.2
Apparel Fashions 2,361 3.3 2,870 4.8 1,280 3.1
Manufacturing Specials 17,372 24.7 13,521 22.7 9,566 23.0
Wendy Cushing Trimmings
Specials 740 1.0 556 0.9 - -
Decorative Accessories 726 1.0 512 0.9 235 0.6
Workroom supplies 4,519 6.4 4,673 7.8 4,918 11.8
Other miscellaneous products 1,501 2.1 2,498 4.2 972 2.3
______________________________________________
Total $70,714 100.0% $59,621 100.0% $41,559 100.0%
______________________________________________
</TABLE>
* Certain 1995 amounts have been reclassified as a result of improved
management information.
Product Design and Development
Because the demand for decorative trimmings is based upon their fashion
appeal to home furnishings manufacturers, interior designers and ultimately
consumers, the success of the Company's business is dependent upon its ability
to design and develop a broad range of attractive products in a wide array of
colors and color combinations (known as "colorways"). Conso US's current stock
product lines of decorative trimmings include numerous items in various yarns,
stylings and colorways comprising over 12,000 stock keeping units ("SKUs"), and
British Trimmings currently stocks at its non-wholesale operations products
comprising over 3,500 SKUs. Both Conso US and British Trimmings develop and
market lines of complementary products in various stylings and colorways as
"collections" or "ranges." Both businesses also manufacture custom trimmings as
specified by their customers.
Since 1987, Conso's management has developed products in response to
national market research and customer demand. The first line was the "Empress
Collection," introduced in 1987 for the medium price range market. Wesley
Mancini, a prominent designer of home furnishings fabrics, was engaged to color
the first 13 colorways in the line and develop additional lines. Conso US has
also introduced 12 additional collections of decorative trimmings in different
yarns and colorways for various markets and price points, including the
"Imperial Collection" designed by Mr. Mancini and introduced in 1989 for the
higher price range market. The "Princess Collection", developed in 1989, and the
"Louis XVII Collection", introduced in 1993 and designed by Louis Nichole,
another well-known home furnishings designer, are marketed in the lower to
medium price range for major retailers.
British Trimmings has offered its "Tudor Range" since 1990 and
introduced its "Elizabethan Range" in 1993, both of which are aimed at the
medium price range market. The Tudor Range was expanded with additional
colorways in 1992 and 1994. The Elizabethan Range, based on historical trimmings
as would be found in a 15th century English mansion, emphasizes Britain's
heritage in marketing British trimmings in home furnishings worldwide. In
1996, British Trimmings introduced its "Bloomsbury Range", aimed at the upper
end market.
Marketing and Sales
Conso US's marketing program is directed by its four-person marketing
department, assisted by its three-person graphic design team and a eight-person
sample department. The marketing department is responsible for trade shows,
advertising, sample binders and cards, displays, videos, catalogs, brochures and
other selling aids as well as the development of new stock products.
To market its collections of decorative trimmings, Conso US has created
special sample binders for most collections. The binders allow the easy removal
and use of sample cards, as well as the insertion of cards for new colorways and
stylings added to the collections in later years. Conso US also distributes a
color wholesale catalog produced annually by its graphic design team, as well as
other brochures, sample cards and selling aids, and advertises its products in
major trade publications.
Since the acquisition of British Trimmings, the Company has established
a three-person marketing department at British Trimmings. British Trimmings also
uses sample books and cards as its primary selling aids, as well as brochures
and other materials produced by its in-house printing operation at its Leek,
England facility. British Trimmings' first wholesale color catalog was
introduced in January 1995 and is being produced annually.
Conso US displays its products at showrooms located at its New York
sales office and at the Furniture Mart in Hickory, North Carolina and its Miami
international sales office. British Trimmings maintains showrooms at its three
manufacturing facilities and Wendy Cushing Trimmings has a showroom at Chelsea
Harbour in London. In 1996, the Company has displayed (or is scheduled to
display) the products of both Conso US and British Trimmings at a total of five
trade shows in the United States, four in Europe, and one in Hong Kong, one in
Dubai, and one in Singapore.
Conso US's products are marketed and sold through a sales force of 19
persons located in various major cities in the United States and five foreign
independent sales representatives: one in Canada, one in Puerto Rico, and three
in the Pacific Rim. British Trimmings has eight sales personnel operating mainly
out of its Stockport, England offices and 19 independent sales representatives,
of whom 14 are located in Europe and the Middle East and five in the Pacific
Rim. Wendy Cushing Trimmings is serviced by a sales representative in the
United Kingdom and 24 designer (agent) showrooms in the United States and
Canada. The Company is consolidating its sales efforts outside the United States
and England. As a result, international sales offices were established in
September 1994 in Miami, Florida, for Latin America and the Caribbean and in
Stockport for Continental Europe and the Middle East. A representative office
was established in Bangkok, Thailand, for the Pacific Rim in August 1995,
although we have closed the office as of August 1996. An international sales
manager located in the Stockport Office will serve the Pacific Rim in fiscal
1997. Our plans within the next two years are to reopen an international
sales office for the Pacific Rim, probably based in Singapore. Three
international sales managers are now directing these offices with primary
responsibility for implementing the sales and marketing programs for these
geographic areas.
Order Processing and Customer Service
Most of Conso US's orders are received directly from customers by Conso
US's customer service representatives in its offices in Union, South Carolina.
More than half of the customer orders are received by facsimile transmission and
the balance by telephone. The customer service operation includes eight
representatives for domestic stock orders, two representatives who process all
international orders and two representatives who handle custom orders.
Because most of Conso US's customer orders are for stock items
(approximately 75% of sales during fiscal 1996) and because prompt response to
customer orders is critical to customer satisfaction, Conso US emphasizes
customer service and prompt fulfillment of orders. To that end, Conso US
maintains a large inventory of stock items in a wide range of colors and color
combinations, and has implemented computerized order entry, production,
inventory management and shipping systems, including a computerized factory
order materials requisition program with pre-established minimum and maximum
formulas for levels of inventories based on sales history and forecasts for each
SKU. These systems have enabled Conso US to better anticipate future demand by
customers for each of its SKU's and to minimize backorders.
Most of British Trimmings' customer orders are processed at its
Stockport offices. Approximately 63% are orders of stock items and the remainder
are custom orders. During fiscal 1995, the Company implemented Conso US's
inventory management systems at British Trimmings and expanded British
Trimmings' inventory of stock items. These measures were taken to improve
British Trimmings' customer service and responsiveness to customer orders.
British Trimmings' backorders of stock goods have been reduced from
approximately 15% of total open customer orders at the end of Fiscal 1994 to
approximately 1.6% at June 29, 1996.
Customers
The Company's products are marketed worldwide to manufacturers,
distributors and retailers, including manufacturers of upholstered furniture,
draperies, bedding, decorative pillows and other home furnishings; trim, fabric
and workroom supply distributors; and major retailers, retail fabric store
chains and interior designers. The following table sets forth for the periods
indicated certain information relating to sales of products to the Company's
three major categories of customers, including sales by British Trimmings since
its acquisition.
<TABLE>
<CAPTION>
Fiscal Years Ended
- ---------------------------------------------------------------------------------------------------
June 29, 1996 July 1, 1995 July 2, 1994
- ---------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Manufacturers $30,476 43.1% $25,351 42.5% $16,416 39.5%
Distributors 28,199 39.9 24,630 41.3 18,535 44.6
Retailers 12,039 17.0 9,640 16.2 6,608 15.9
- ----------------------------------------------------------------------------------------------------
Total $70,714 100.0% $59,621 100.0% $41,559 100.0%
- ----------------------------------------------------------------------------------------------------
</TABLE>
Approximately 93% of Conso US's sales for fiscal 1996 were to US
customers; the remainder were export sales, primarily to customers in Canada and
Central and South America. Approximately 82% of British Trimmings' sales for
fiscal 1996 were to customers in the United Kingdom, with the remainder being
export sales primarily to customers in other European countries.
The following table set forth for the periods indicated the Company's
sales outside the United States and the United Kingdom and as a percentage of
total Company sales, by the geographic region:
<TABLE>
<CAPTION>
Fiscal Years Ended
- ----------------------------------------------------------------------------------------------------
June 29, 1996 July 1, 1995 July 2, 1994
- ----------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Canada and Latin America $ 3,020 4.3% $2,251 3.8% $1,721 4.1%
Continental Europe and
Middle East 2,324 3.3 1,816 3.0 661 1.6
Pacific Rim 1,250 1.8 1,176 2.0 654 1.6
- ---------------------------------------------------------------------------------------------------
Total $ 6,594 9.4% $5,243 8.8% $3,036 7.3%
- ---------------------------------------------------------------------------------------------------
</TABLE>
At June 29, 1996, the Company had approximately 4,900 customer accounts
with open balances. In fiscal 1996, the Company's largest customer accounted for
less than 6% of total sales, and no other single customer accounted for more
than 3% of total sales. Open customer orders believed to be firm of the
Company's products at June 29, 1996 was $2.4 million as compared to $3.9 million
at July 1, 1995. The Company expects that substantially all of the open orders
at June 29, 1996 will be recognized as revenue within the first quarter.
Manufacturing and Raw Materials
Conso US and British Trimmings purchase undyed yarns, some dyed yarns
and other supplies, and manufacture their trimmings products through various
processes. Because of the variety of products they manufacture, Conso US and
British Trimmings employ a wide range of machinery and equipment in their
operations. Each business uses the generally available techniques for weaving,
knitting and braiding yarns, as well as processes for making tassel fringe, ball
and knotted fringes, laminated trims, cords and stud tapes. Much of the
machinery is developed and often constructed in their own engineering
departments. Conso US and British Trimmings have developed their own adaptations
of machinery for specific products or types of products to provide greater
speed, flexibility or novelty in production. Both Conso US and British Trimmings
employ their own staffs to continually evaluate alternative raw materials and
processes, the use of new textile technology and in-house machinery improvement.
Both Conso US and British Trimmings have their own dyehouse facilities,
with space available to add additional dyeing equipment as necessary. This
enables both businesses to dye their own yarns quickly and assure better
consistency of color. In addition, commission dyehouses are available to both
businesses when demand exceeds in-house capacity. Conso US is currently fully
utilizing its dyehouse facility and contracting with independent dyers.
In the US, Conso is planning the construction of a new 17,000 square
foot dyehouse facility with an estimated cost of $2.3 million and a new 86,000
square foot distribution center with an estimated cost of $3.7 million. Both of
these facilities will be located adjacent to our exisiting main plant in Union,
SC and are scheduled to be completed during the calendar year 1997.
Certain of the Company's products require handwork assembly. Most
of the handwork is done at Conso US's facility in Juarez, Mexico, and on a piece
work basis by home workers directed from the Stockport and London facilities of
British Trimmings.
The various departments in each of Conso US's and British Trimmings'
manufacturing plants operate one to three shifts per day, five or six days per
week, depending upon market conditions and customer orders.
The raw materials used by Conso US in its manufacturing operations
include spun rayon, spun and filament polyester, cotton and acetate yarns. The
primary yarns used by British Trimmings are spun rayon and filament viscose
rayon. These yarns are commodities generally available as needed from various
suppliers located throughout the world. The Company expects that yarn supplies
will continue to be available as needed for the Company's operations. Changes in
the price of cotton, wood pulp and petrochemicals, the base materials for most
of the Company's yarns, however, could cause significant changes in the
Company's raw material costs, and there can be no assurance that there will not
be any changes in the availability, price or quality of any raw materials.
Competition
While the business of manufacturing decorative trimmings for the home
furnishings industry is competitive, and includes many relatively small
producers with limited product lines or products designed for the lower end of
the market, there are a few US domestic or foreign manufacturers of substantial
size. The Company is the largest manufacturer of decorative trimmings for the
home furnishings industry in the world and is aware of no more than four other
major producers with which it competes for customers worldwide. There are,
however, a number of large manufacturers of textiles, home furnishings and other
products with resources substantially greater than those of the Company who have
the ability to enter the decorative trimmings business by either establishing
their own operations or acquiring and combining other existing operations.
Management is aware of no current plans by any such manufacturer to enter the
decorative trimmings business.
The Company competes on the basis of styling, color, delivery, price
and customer service. The Company believes that its ability to promptly fill
customer orders, due to its large inventory, its production and inventory
management systems, its customer service and sales staff and its control over
availability of yarn colors, gives it a competitive advantage and is valued by
its customers.
Although the Company's current operations are not significantly
affected by competition from foreign manufacturers, the North American Free
Trade Agreement ("NAFTA"), which was implemented during 1994, and the most
recent changes in the General Agreement on Trade and Tariffs ("GATT"), which
were implemented during 1995, could increase US competition for sales of Conso
US's products. While the Company believes that the elimination of international
trade barriers under both GATT and NAFTA will be beneficial to it as it
implements its strategy of expanding its worldwide operations, there can be no
assurance that increased US competition from foreign manufacturers as a result
of NAFTA or GATT would not have a material adverse effect on its business.
Employees
As of June 29, 1996, Conso had 724 full-time employees, of whom 605 are
hourly employees and 119 are salaried employees. In addition, 282 contract
workers at Conso US's assembly plant in Juarez, Mexico work under the
supervision of a Conso US manager in a "Maquiladora" operation, which provides
for contract labor in accordance with certain Mexican regulations. None of Conso
US's employees are represented by a union. Conso US's management considers its
relationship with its personnel to be good. While Conso US has historically had
a high turnover rate among its hourly employees during the first three months of
employment, Conso US has been able to attract and retain qualified personnel.
As of June 29, 1996, British Trimmings had 423 full-time employees, of
whom 287 are hourly employees and 136 are salaried employees. Approximately 30%
of the employees of British Trimmings are represented by the Union of Textile
Workers (the "Union"). British Trimmings and the Union agreed in 1995 to the
annual renewal of their contract for the year ending December 31, 1996, with an
increase of 3.6% in the basic wage rate. Although any strike or other disruption
of operations by members of the Union could have a material adverse effect on
the Company, the Union has represented the production workers of British
Trimmings for at least 27 years, during which time there has never been a strike
or work stoppage.
The Company has discontinued its defined benefit plan at British
Trimmings and replaced it with an alternative "defined contribution" type plan.
As a result of a 1990 court decision affecting pension plans in the
United Kingdom, it is expected that pensionable retirement ages for men and
women under old pension plans, including British Trimmings', which provide
different retirement ages for men and women, will be required to be equalized.
During 1995, British Trimmings had a new actuarial analysis performed on their
defined benefit plan, including the impact of the equalization of retirement
age, and it was determined that the effect of the court decision did not have
a material impact on British Trimmings' financial statements.
The largest portion of plan obligations totaling $1.8 million, were
discharged through the purchase of annunities in July 1996. The remaining assets
of the plan ($260,000 at July 1996) are being used for remaining costs of
terminating the existing plan. On this basis, the unrecognized net assets are
not available for or recorded as prepaid pension costs.
The Company provided a new defined contribution plan for its employees
in the US beginning in fiscal 1996. Under both the Conso US and British
Trimmings defined contribution type plans the Company matches employee
contributions up to 3% of the participating employee's base pay.
Governmental Regulation
The business and operations of the Company are subject to governmental
regulation, including employee health and safety laws and regulations; laws and
regulations governing employment practices, wages and hours, and employee
benefits; and environmental laws and regulations. The Company believes that it
is in compliance in all material respects with applicable laws and regulations
(including those regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment), and that such
compliance has not materially affected its business or required major capital
expenditures. Future changes in laws and regulations, or any determination that
the company is not in compliance with applicable laws and regulations, could
have a material adverse effect on the Company.
Trademarks
Conso has registered the trademark CONSO(R) for its products, and
British Trimmings has registered the trademarks SPECTRUM(R) for lace, braids and
woven labels and POLYUROCOL(R) for certain yarns and threads in the United
Kingdom.
Item 2. Properties
The following table sets forth the location, utilization and
approximate size in square feet of floor space of the principal facilities of
Conso and British Trimmings, and whether they are owned or leased by the
respective companies.
<TABLE>
<CAPTION>
Owned or Square
Location Utilization Leased Feet
<S> <C> <C> <C>
Conso:
Union, SC Offices, production and dyehouse facility Owned 220,000
(Main Plant)
Union, SC Warehousing and yarn processing Owned 101,000
(Annex Plant)
Union, SC Sample card assembly Leased (1) 4,000
New York, NY Showroom and sales office Leased (2) 2,780
Hickory, NC Showroom and sales office Leased (3) 514
Miami, FL Showroom and sales office Leased (4) 980
Juarez, Mexico Assembly plant Leased (5) 41,680
British Trimmings:
Stockport Offices and production facilities (six buildings at one Owned 185,000
location)
Leek, England Warehousing, dyehouse and production facility Owned 43,000
Leek, England Printing operation Leased (6) 2,000
London, England Assembly operation Owned (7) 20,000
London, England Showroom and wholesale operation Leased (8) 2,400
London, England Chelsea Harbour showroom Leased (9) 384
London, England Chelsea Harbour showroom Leased (10) 835
</TABLE>
- ------------------------
(1) This facility is leased on a month-to-month basis.
(2) This facility is leased for a term expiring April 30, 1999.
(3) This facility is leased on a month to month basis.
(4) This facility is leased for a term expiring August 31, 1997.
(5) This facility is leased for a term expiring December 31, 1999.
(6) This facility is leased for a term expiring June 18, 1997.
(7) Prior to February 1996, the assembly operation was located in a 9,500
square foot facility in London which is owned by the Company and is being
offered for sale.
(8) This facility is subleased with portions of such sublease expiring at
December 24, 1999 and November 27, 2011, respectively.
(9) This facility is leased for a term expiring November 16, 1997.
(10) This facility is leased for a term expiring December 24, 2001.
Substantially all of the Company's manufacturing facilities in Union
and Stockport are subject to liens securing its bank indebtedness. The principal
manufacturing facilities of both Conso US and British Trimmings are of brick
construction, are sprinklered and are generally in satisfactory operating
condition and repair. Conso US's main plant and annex plant in Union were
constructed at various times from 1959 to 1967 and from 1964 to 1983,
respectively; British Trimmings' Stockport facilities were constructed at
various times between the 1920's and 1979, its Leek dyehouse and production
facilities were constructed in the 1920's and 1970's, respectively, and its new
London facility was constructed in 1980. The Company believes that the
facilities of both companies are suitable for their present use. The Company is
investigating the possibilty of acquiring or building additional facilities in
the future in anticipation of further growth including the possible expansion of
the Company into the Pacific Rim. In the US, Conso is planning the construction
of a new 17,000 square foot dyehouse facility with an estimated cost of $2.3
million and a new 86,000 square foot distribution center with an estimated cost
of $3.7 million. Both of these facilities will be located adjacent to our
exisiting main plant in Union, SC and are scheduled to be completed during the
calendar year 1997. These expansions will free up approximately 65,000 square
feet for much needed additional office and production space. The Company will
consider additional capital expenditures for building expansions or business
acquisitions as opportunities arise.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is traded on the NASDAQ National Market
System (NMS) under the symbol "CNSO". The following table presents the high and
the low sales prices of the common stock reported on the NMS for each quarter
during the Company's two most recent fiscal years. All prices are adjusted for
the Company's 3-for-2 stock split effected by means of a 50% share dividend in
October 1995.
<TABLE>
<CAPTION>
1996 1995
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $11.50 $ 8.67 $ 9.67 $ 8.17
Second Quarter 19.00 10.75 10.00 7.96
Third Quarter 19.75 14.88 10.17 7.83
Fourth Quarter 18.00 15.50 10.50 8.67
</TABLE>
Approximate number of shareholders of record on August 23, 1996: 98
- -------------------------------------------------------------------------------
The Company has not paid any cash dividends, except for certain
distributions in connection with the termination of its S Corporation status,
since its initial public offering in December 1993. The Company currently has
no plans to declare any cash dividends, and plans to retain its earnings to
finance the growth of its business for the forseeable future.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1996 (a) 1995 (a) 1994 (a) 1993 (a) 1992 (b)
Summary of Operations (in thousands)
<S> <C> <C> <C> <C> <C>
Net sales $ 70,714 $59,621 $41,559 $26,045 $ 23,770
Gross Margin 25,432 20,736 13,215 8,246 7,580
Operating Income 9,872 7,696 5,102 2,805 2,550
Income before taxes 9,119 6,826 4,414 1,926 1,675
Income taxes 2,676 1,287(d) 1,638 713(c) 620(e)
Net Income 6,443 5,539(d) 2,776 1,213 1,055
- --------------------------------------------------------------------------------------------------------------------------
Average Common Stock Outstanding
(in thousands) 4,971 4,950 4,106 3,191 3,191
- --------------------------------------------------------------------------------------------------------------------------
Per share of Common Stock (m):
Net income $ 1.30 $ 1.12(d) $ .68 $ .38(c) $ .33
Shareholders' equity (f) 6.19 4.87 4.48 1.25 1.08
- --------------------------------------------------------------------------------------------------------------------------
Common stock price range (g)(m):
High $ 19.75 $ 10.50 $ 10.67
Low 8.67 7.83 7.50
Price at fiscal year end 16.25 9.33 9.17
- --------------------------------------------------------------------------------------------------------------------------
Statistical Data:
Gross Margin to net sales 36.0% 34.8% 31.8% 31.7% 31.9%
Operating income to net sales 14.0% 12.9% 12.3% 10.8% 10.7%
Net income to net sales 9.1% 9.3%(d) 6.7% 4.7% 4.4%
Net income to average shareholders' equity 23.6% 26.0%(d) 24.8% 31.3% 34.1%
Operating return on assets employed (h) 21.6% 18.8% 17.6% 18.8% 18.3%
Inventory turnover (i) 2.3 2.2 2.5 2.4 2.4
Accounts receivable turnover (j) 6.5 6.3 6.0 7.0 7.0
Net sales divided by average assets 1.5 1.5 1.7 1.7 1.7
Current ratio 2.4 1.9 1.9 1.5 1.6
Long term debt to equity ratio .07 .1 .2 1.0 1.3
Total Liabilities to equity ratio .5 .8 .9 3.2 3.3
Capital expenditures (in thousands) $ 1,811(k) $2,678 $ 1,891(k) $ 1,408 $ 1,382
Depreciation and amortization (in thousands) $ 1,751 $1,519 $ 1,010 $ 762 $ 730
EBITDA (in thousands) (l) $ 11,623 $9,215 $ 6,111 $ 3,567 $ 1,785
Approximate number of shareholders 1,200 1,100 1,000 1 1
Number of employees and associates at year 1,446 1,472 1,177 654 654
end
- --------------------------------------------------------------------------------------------------------------------------
Selected Balance Sheet Data (in thousands):
Working capital $ 19,461 $14,470 $11,944 $ 4,099 $ 3,916
Property:
Cost 18,966 17,242 14,637 7,309 7,075
Accumulated Depreciation (6,592) (5,799) (4,518) (3,556) (3,189)
Net 12,374 11,443 10,119 3,753 3,868
Total assets 47,278 43,699 35,326 16,778 14,972
Long-term debt 2,108 2,598 3,127 3,930 4,388
Total Liabilities 16,499 19,575 16,924 12,777 11,518
Shareholders' equity (f) 30,778 24,124 18,402 4,001 3,454
</TABLE>
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
Summary of Operations (in thousands)
<S> <C> <C> <C> <C> <C>
Net sales $20,972 $21,510 $21,982 $17,633 $15,023
Gross Margin 6,690 6,849 6,607 5,035 4,283
Operating Income 2,130 2,418 1,949 1,432 1,034
Income before taxes 1,141 1,285 792 554 512
Income taxes 422(c) 475(c) 293(c) 205(c) 189(c)
Net Income 719 810 499 349 323
- --------------------------------------------------------------------------------------------------------------------------
Average Common Stock Outstanding
(in thousands) 2,972(e) 2,888(e) 2,818(e) 2,780(e) 2,693(e)
- --------------------------------------------------------------------------------------------------------------------------
Per share of Common Stock (m):
Net income $ .24(c) $ .28(c) $ .18(c) $ .13(c) $ .12(c)
Shareholders' equity (f) .92 .75 .60 .52 .32
- --------------------------------------------------------------------------------------------------------------------------
Common stock price range (g) (m):
High
Low
Price at fiscal year end
- --------------------------------------------------------------------------------------------------------------------------
Statistical Data:
Gross Margin to net sales 31.9% 31.8% 30.1% 28.6% 28.5%
Operating income to net sales 10.2% 11.2% 8.9% 8.1% 6.9%
Net income to net sales 3.4% 3.8% 2.3% 2.0% 2.2%
Net income to average shareholders' equity 29.3% 41.8% 31.7% 30.2% 45.1%
Operating return on assets employed (h) 16.3% 17.8% 15.1% 13.5% 13.5%
Inventory turnover (i) 2.2 2.4 2.7 2.9 3.4
Accounts receivable turnover (j) 7.2 7.4 8.2 8.1 8.6
Net sales divided by average assets 1.6 1.6 1.7 1.7 2.0
Current ratio 1.9 1.7 1.4 1.5 1.0
Long term debt to equity ratio 1.8 2.6 3.0 3.8 3.3
Total Liabilites to equity ratio 3.6 5.0 6.7 7.0 9.0
Capital expenditures (in thousands) $ 278 $ 184 $ 582 $ 820 $ 435
Depreciation and amortization (in thousands) $ 718 $ 762 $ 653 $ 496 $ 283
EBITDA (in thousands) (l) $ 1,443 $1,539 $1,152 $1,727 $1,098
Approximate number of shareholders 1 2 2 4 4
Number of employees and associates at year 500 535 650 450 375
end
- --------------------------------------------------------------------------------------------------------------------------
Selected Balance Sheet Data (in thousands):
Working capital $ 4,336 $3,799 $2,198 $2,226 $74
Property:
Cost $ 5,675 5,397 5,213 4,555 3,360
Accumulated Depreciation (2,508) (1,877) (1,274) (715) (298)
Net 3,167 3,520 3,939 3,840 3,062
Total assets 12,532 13,133 13,025 11,534 8,627
Long-term debt 4,983 5,578 5,090 5,489 2,470
Total Liabilities 9,800 10,959 11,325 10,089 7,762
Shareholders' equity (f) 2,732 2,174 1,700 1,445 865
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Fiscal years 1996, 1995, 1994, and 1993 presented on a 52 or 53 week basis
with the closing on the Saturday nearest to June 30th, and include British
Trimmings since it acquisition in December 1993. Data for the 53 week
period ended July 3, 1993 is unaudited. See "Business--General."
(b) 1992 and prior years are on a calendar year basis.
(c) Proforma US income taxes computed at a combined federal and state tax rate
of 37%. Prior to December 18, 1993, the Company was treated as an S
Corportion for income tax purposes.
(d) 1995 net income includes $913,000 or 18 cents per share for a one-time
carryforward of Jobs Tax Credits.
(e) Proforma average common stock outstanding for the years 1992 and prior have
been adjusted for the 25,712 to 1 stock split effected December 1993 and
for the number of shares which would have been necessary to distribute
accumulated retained earnings at an offering price of $7.50 less insurance
expenses.
(f) Shareholders' equity used in this calculation is historical. Net income
used is proforma using a C Corporation tax provision. The effect on
shareholders equity is not material since, prior to December 1993,
distributions were made equivalent to the personal income taxes payable by
the Company's shareholders.
(g) Common stock was not publicly traded prior to December 15, 1993.
(h) Pre-tax income before interest expense divided by average of month-end
total assets.
(i) Cost of goods sold divided by average of month-end total inventories.
(j) Net sales divided by average of month-end receivables.
(k) Excludes the purchase of British Trimmings' assets, the Leek, England
building, the Conso/Graber Canada assets, and Wendy Cushing Ltd in 1994,
and the purchase of the London production facility and the Claesson assets
in 1996.
(l) Represents earnings before deductions for interest, income taxes,
depreciation and amortization ("EBITDA"), a non-GAAP (generally accepted
accounting principles) measurement. EBITDA is not intended to represent
cash flow from operations as defined by GAAP, and should not be considered
as an alternative to net income as an indicator of operating performance or
to cash flows (determined in accordance with GAAP) as a measure of
liquidity.
(m) Per share amounts and stock prices have been restated to reflect the
3-for-2 stock split in October 1995 effected in the form of a 50% share
dividend.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The Company's fiscal year is the 52 or 53 week period ending on the
Saturday nearest June 30; interim reporting periods are based on 13 week
quarters. The fiscal years ended June 29, 1996, July 1, 1995, and July 2, 1994,
each include 52 weeks.
1996 Compared with 1995
Net sales for the year ended June 29, 1996, grew to $70.7 million, a
$11.1 million or 18.6% increase over fiscal 1995. Sales by Conso US were up 28%
to $51.1 million reflecting the strong US economy and the results of prior
marketing and merchandising efforts. Sales to manufacturers continued to show
the best percentage improvement primarily due to the strong US economy and
Conso's ability to serve large production demands on a reliable and
timely delivery basis. Sales by British Trimmings continued to be
relatively flat, reflecting the slow housing industry and weak
consumer spending in the United Kingdom. Sales outside the US and UK
(the Company's major sales regions) increased to $6.6 million,
a 25.9% increase over the prior year.
The gross margin improved from $20.7 million or 34.8% of net sales to
$25.4 million or 36% of net sales with margins (after intercompany eliminations
and purchase price adjustments) improving from 36% to 38.4% at Conso US and
decreasing from 32.1% to 29.6% at British Trimmings. At Conso US, the
improvements in gross margin were due in part to price increases, process
improvements and greater economies of scale due to increased production relating
to increased sales. At British Trimmmmings, price increases and improvements in
product mix and were more than offset by reductions in production volume due to
flat customer orders and completion of the build up of stock inventory earlier
in the 1995 calendar year.
Distribution expenses increased $526,000. Of the increase, Conso US
contributed $427,000 while British Trimmings contributed the remaining $99,000.
Distribution expenses, as a percentage of net sales, increased slightly from
4.1% to 4.2% in fiscal 1996.
Selling expenses increased $1.4 million and edged up as a percentage of
net sales from 11.4% to 11.6%. The increase is due to the additional sales
personnel and marketing costs, the international sales offices, and costs
related to the introduction of the new Wendy Cushing Trimmings lines.
General and adminstrative expenses increased $554,000 but declined from
6.4% to 6.2% as a percentage of net sales. Of the increase, Conso US contributed
$606,000, remaining at 5.6% of net sales. The increase was due to the separation
of the offices of Chairman and President, increased shareholder communications,
travel, and other expenses related to domestic and international expansion, and
some increase in supply cost (especially paper). British Trimmings'
administrative costs which represented 7.8% of its
net sales for fiscal 1996 declined $52,000 due to higher initial
data processing expenditures in the prior year following the introduction
of Conso's data processing systems.
Net interest costs decreased $117,000 due to decreased borrowings in
part as a result of regularly scheduled principal payments and a significant
increase in operating cash flow with decreased cash requirements for inventory
since the Company completed the majority of its build-up of inventory to support
the cross-merchandising efforts between Conso US and British Trimmings' in the
prior year.
Net income for the fiscal year ended June 29, 1996, was $6.4 million,
an increase of $904,000, or 16.3% over the prior year's $5.5 million. Excluding
the one-time net tax credits carryforward of $913,000, received in March 1995,
earnings increased 39%. Of the $1.8 million increase in net income (excluding
the one-time net tax credits), the increase in Conso US's net income over the
prior year contributed $2 million, while British Trimmings' net income declined
$200,000 (after consolidating adjustments).
1995 Compared with 1994
The Company experienced strong sales growth in fiscal 1995. Net sales
were $59.6 million, an increase of $18.1 million, or 43.5% over the prior year.
This increase was due to the improving US economy, price increases in early
1995, orders remaining strong as a result of prior marketing and merchandising
effort, the introduction of new products including decorative brassware,
expansion of existing product lines, and the addition of British Trimmings,
which provided 56.5% or $10.2 million of the increase. Fiscal 1994 includes only
six months of activity for British Trimmings since it was acquired in a purchase
transaction on December 22, 1993, and, due to the Christmas holidays, there was
no significant activity at British Trimmings from December 22 through December
31, 1993. Conso US contributed $7.9 million of the net sales increase, a 24.5%
improvement over the prior year for Conso US only.
Cost of goods sold increased 37.2% or $10.5 million resulting in an
increase in gross profit of $7.5 million, a 56.9% improvement over the prior
year. The overall gross margin improved from 31.8% to 34.8% of net sales with
gross margins (after intercompany eliminations and purchase price adjustments)
improving from 33.1% to 36.1% at Conso US and from 27.5% to 32.1% at British
Trimmings. At Conso US, the improvements in the gross margin were due in part to
price increases but primarily to process improvements and greater economies of
scale with increased production related to increasing sales. At British
Trimmings, significant improvements in the gross margin came primarily from
pricing as increases in volume were steady but slow. Some sales were lost as
customers pursued other vendors for certain products with low margins as British
Trimmings concentrated its efforts toward higher margin products in anticipation
of future sales through its new (and first) catalog. Improvements have also
included benefits derived through the sharing of technology between Conso US and
British Trimmings.
Distribution expenses increased $862,000. Of the increase, Conso US
contributed $182,000 while British Trimmings contributed the remaining $680,000.
Distribution expenses, as a percentage of net sales, increased slightly from
3.8% to 4.1% in fiscal 1995.
Selling expense increased $2.2 million and edged up as a percentage of
net sales from 10.9% to 11.4%. Of the increase, $1,285,000 is due to the
addition of British Trimmings for an additional six months in fiscal 1995 as
well as additional costs related to the establishment of a formal marketing
department at British Trimmings. The increase of $958,000 at Conso US, in
addition to the normal recurring increases related to the increase in sales
(such as sales commissions), is due to the recent focus on the international
market including the establishment of the new Miami international showroom and
start-up costs for expansions into the Middle East and Pacific Rim.
General and adminstrative expenses increased $1.8 million from 4.8% to
6.4% of net sales. Of the increase, Conso US contributed $834,000, increasing
from 4.5% to 5.7% of net sales primarily due to additional operational and
reporting requirements of a public company. British Trimmings, with historically
higher adminstrative costs, accounted for the additional $1.0 million of the
increase over the prior year with its total general and adminstrative costs
coming in at 8.0% of its net sales.
Net interest expense increased $182,000 due to increased borrowings in
part to fund additional increases in accounts receivable and inventory to
support increasing sales and the addition of products, and to finance capital
expenditures.
Net income for fiscal 1995 was $5.5 million including both the one-time
carryforward and current net tax credits at Conso US of $1.2 million (see "Jobs
Tax Credits" below), an increase of $2.7 million, or 99.5%, over the prior
year's $2.8 million (pro forma for C Corporation taxes). Excluding the one-time
net tax credits carryforward of $913,000, earnings increased 66.7% to $4.6
million. Of the $1.8 million increase in net income from the pro forma fiscal
1994 amount (excluding the one-time net tax credits carryforward), the increase
in Conso US's net income over the prior year (after consolidating adjustments)
contributed $1.5 million, while the inclusion of tweleve months of net income
for British Trimmings compared to the inclusion of six months of net income in
the prior year contributed the remaining $303,000 (after consolidating
adjustments).
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations and capital
requirements through both internally generated funds and bank borrowings. Other
than the acquisition of British Trimmings, capital requirements in recent years
have arisen principally from expansion of product lines and production capacity
and increased working capital needs to support higher sales volume. Working
capital increased to $19.5 million at June 29, 1996, from $14.8 million at July
1, 1995, and from $11.9 million at July 2, 1994. Since the acquisition
of British Trimmings, the Company has significantly increased
inventories at British Trimmings to reduce backorders and improve
deliveries, and at both British Trimmings and Conso US to support the
cross-merchandising of their products and the introduction of new
product lines. Most of such increases occurred in fiscal
1995. The rate of growth in inventories relative to sales growth declined in
fiscal 1996.
Capital expenditures for fiscal 1996 were approximately $1.8 million,
primarily for manufacturing equipment at both Conso US and British Trimmings and
data processing improvements at British Trimmings. In December 1995, the Company
also spent approximately $791,000 to acquire a 20,000 square foot facility for
its London showroom and wholesale operations, and is offering for sale the 9,500
square foot London facility previously used for that purpose. The Company has
budgeted approximately $1.3 million for capital expenditures for fiscal 1997
(other than capital expenditures for building expansions
or possible acquisitions of other businesses). In the US, Conso
is planning the construction of a new 17,000 square foot dyehouse
facility with an estimated cost of $2.3 million and a new 86,000
square foot distribution center with an estimated cost of $3.7 million.
Both of these facilities will be located adjacent to our existing main
plant in Union, SC and are scheduled to be completed during calendar year 1997.
These expansions will free up approximately 65,000 square feet for much needed
additional office and production space. The Company will consider additional
capital expenditures for building expansions or business acquisitions as
opportunities arise.
At June 29, 1996, the Company had outstanding long-term indebtedness,
consisting of term loans and capital lease obligations, of approximately $2.6
million, including the current portion of long-term debt of approximately
$500,000. The Company also has a $10 million revolving line of credit with a
bank, of which approximately $5.6 million was outstanding at June 29, 1996, and
under which $4.4 million was available for additional borrowings, subject to
continued compliance with borrowing base requirements. Such revolving line of
credit permits advances under the line in British pounds sterling of up to
(pound)5,000,000, providing some protection against currency fluctuations.
British Trimmings also has an overdraft borrowing facility with its bank
(similar to a revolving line of credit) for up to (pound)500,000 ($776,000 based
upon the exchange rates at June 29, 1996), of which approximately (pound)692,032
($1,074,034) was outstanding at June 29, 1996, of which no additional amount was
then available for additional borrowings.
The Company's borrowings are secured by Conso US's real property,
inventory and accounts receivable and certain of British Trimmings' properties.
Since the Company retired a $1.6 million equipment loan in 1994, Conso US's
equipment, in addition to certain of British Trimmings' assets are available as
collateral for additional borrowings.
The Company believes that cash generated by operations and available
borrowings under lines of credit will be adequate to fund its working capital
and capital expenditure requirements for the foreseeable future, but excluding
possible building expansions and acquisitions of other businesses. Based on the
Company's financial position, the Company believes that it will be able to
obtain any additional financing necessary to fund its planned long-term growth
and expansion. Such additional financing may include long-term debt or equity;
however, the Company has not yet obtained any such additional financing. It is
management's intention to fund the construction of the new dyehouse and
distribution center in South Carolina in fiscal 1997, for an estimated $6
million, with long-term debt.
LONG-LIVED ASSETS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for the Long-Lived Assets to be Disposed Of." The
provisions of the Statement, which will be implemented by the Company for the
fiscal year beginning June 30, 1996, require the recognition of a loss in the
income statement and related disclosures whenever events or circumstances
indicate that the carrying amount of a long-lived asset may not be recoverable.
The Company does not believe that adoption of the provisions of the Statement
will have a material impact, if any, on it results of operations or financial
position.
EMPLOYEE BENEFITS
The Company has discontinued its defined benefit plan at British
Trimmings and replaced it with an alternative "defined contribution" type plan.
The largest portion of plan obligations totaling $1.8 million, were discharged
through the purchase of annunities in July 1996. The remaining assets of the
plan ($260,000 at July 1996) are being used for remaining costs of terminating
the existing plan. On this basis, the unrecognized net assets are not available
for or recorded as prepaid pension costs. The Company provided a new defined
contribution plan for its employees in the US beginning in fiscal 1996. Under
both the Conso US and British Trimmings defined contribution type plans the
Company matches employee contributions up to 3% of the participating employee's
base pay.
The Company established a stock option plan which became effective upon
the completion of its initial public offering of common stock. The plan permits
the award of options to buy up to 405,000 shares of the Company's common stock
to certain managers and other key employees. On May 15, 1995, a key employee was
granted options under the plan to purchase up to 37,500 shares of the Company's
common stock. The options were exercised at $8.67 per share of which options for
25,000 shares were exercised on November 28, 1995, and the remaining options for
12,500 shares were exercised on January 10, 1996. On September 7, 1995, the
Company granted additional options to certain key employees to purchase an
aggregrate of 62,400 shares of the Company's common stock. The options were
granted at $10 per share and are exercisable with respect to one-third of the
total shares after one year, an additional one-third of the shares after two
years, and the final one-third of the shares after three years. The options
expire after five years, are incentive stock options, and are subject to
continued employment of the employee. (All amounts have been adjusted to reflect
the 3-for-2 stock split issued on October 6, 1995).
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No.123, "Accounting for
Stock-Based Compensation," which will be effective for the Company beginning
June 30, 1996. SFAS No.123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation cost to be measured based on fair value of the equity instrument
awarded. Companies are permitted, however, to continue to apply APB Opinion
No. 25, which recognizes compensation cost based on the intrinsic value of the
equity instrument awarded. The Company will continue to apply APB Opinion
No. 25 to its stock-based compensation awards to employees and will disclose
the required proforma effect on net income and earnings per share for its next
fiscal year.
JOBS TAX CREDITS CARRYFORWARD
In March 1995, the Company received a private letter ruling from the
South Carolina Tax Commission allowing the Company to carryforward certain
Job Tax Credits ("one-time credits") totalling $1,383,000, resulting in a
one-time net tax benefit (net of applicable federal income tax effect) of
$913,000. The recording of these credits in the third quarter of fiscal 1995
resulted in the creation of a deferred tax asset for the future utilization of
the credits. This one-time net tax credit of $913,000, representing $.18 per
share for the year, has been recorded as a reduction in tax expense and recorded
as a deferred tax asset in accordance with SFAS No. 109, as discussed below.
In addition to the one-time credit for prior years, the Company
recorded Jobs Tax Credits earned in fiscal 1995 totalling $448,000, resulting in
a net tax benefit (net of applicable federal income tax effect) of $295,680 for
fiscal 1995, and has recorded a total of $630,808 in Jobs Tax Credits for fiscal
1996, resulting in a net tax benefit of $416,333 for the year.
The Company is uncertain as to the amount and net income effect of
credits, if any, which may be earned in future years, because future credits are
contingent upon regionally specific increases in employment, and the net income
effect is contingent upon additional future South Carolina taxable income
sufficient to fully utilize such credits as may become available in the future.
According to Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS No. 109"), such tax credits are to be
recorded as assets to the extent it is more likely than not that the income in
future periods will be sufficient to utilize the credits. SFAS No. 109 also
requires that, on an ongoing basis, management assess any changes in conditions
which may affect the likelihood of realizing these tax credits and that a
valuation allowance be established should a degree of uncertainty about the
likelihood of realizing these credits become apparent. A valuation allowance
would be established with a charge against income. Based on management's review
of the Company's historical and current performance and its plans for future
growth including the introduction of new products, the expansion of existing
products and expansion into international markets, management believes it is
more likely than not that the Company will be able to fully utilize these tax
credits and no valuation allowance is considered necessary at this time.
EFFECTS OF INFLATION
Inflation during the three years ended June 29, 1996, has had little
effect on the Company's capital costs and results of operations.
CAUTIONARY STATEMENT AS TO FORWARD LOOKING INFORMATION
Statements contained herein as to the Company's outlook for sales,
operations, capital expenditures and other amounts, budgeted amounts and
other projections of future financial or economic performance of the Company,
and statements of the Company's plans and objectives for the future operations
are "forward looking" statements, and are being provided in reliance upon the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Important factors that could cause actual results or events to differ
materially from those projected, estimated, assumed or anticipated in any such
forward looking statements include, without limitation: general economic
conditions in the Company's markets, including inflation, recession, interest
rates and other economic factors, especially in the United States and the United
Kingdom but also including other areas of the world where the Company markets
its products; changes in consumer fashion preferences for finished products in
the home furnishings market, which may affect the demand for the Company's
products; any loss of the services of the Company's key management personnel;
increased competition in the United States and abroad, both from existing
competitors and from any new entrants in the decorative trimmings business; the
Company's ability to successfully continue its international expansion and to
successfully and profitably integrate into its operations any existing
businesses it may acquire; changes in the cost and availability of raw
materials; changes in governmental regulations applicable to
the Company's business; fluctuations in exchange rates relative
to the US dollar for currencies of the United Kingdom and other nations
where the Company does business; casualty to or disruption of
the Company's production facilities and equipment; delays and
disruptions in the shipment of the Company's products and raw materials;
disruption of operations due to strikes or other labor unrest; and other factors
that generally affect the business of manufacturing companies with international
operations.
Item 8. Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Conso Products Company
We have audited the accompanying consolidated balance sheets of Conso
Products Company and its subsidiaries ("the Company") as of June 29, 1996 and
July 1, 1995, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the fiscal years ended June 29, 1996,
July 1, 1995 and July 2, 1994. 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 did not audit
the financial statements of British Trimmings Limited (a consolidated
subsidiary), which statements reflect total assets constituting 28% and 37%,
respectively, of consolidated total assets at June 29, 1996, and July 1, 1995,
and total revenues constituting 28%, 33%, and 23%, respectively, of
consolidated total revenues for the fiscal years ended June 29, 1996,
July 1, 1995 and July 2, 1994. Those statements were audited by other
auditors whose report has been furnished to us and our opinion, insofar as it
relates to the amounts included for British Trimmings Limited is based solely
on the report of such other auditors.
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 and the report of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
such consolidated financial statements present fairly, in all material
respects, the financial position of Conso Products Company and its
subsidiaries as of June 29, 1996, and July 1, 1995, and the results of their
operations and their cash flows for the fiscal years ended June 29, 1996,
July 1, 1995 and July 2, 1994, in conformity with generally accepted
accounting principles.
(Deloitte & Touche LLP signature)
Greenville, South Carolina
August 14, 1996
Chartered Accountants Grant Thornton (logo)
The UK Member Firm of
Grant Thornton International
INDEPENDENT AUDITORS' REPORT
BRITISH TRIMMINGS LIMITED
We have audited the consolidation packages (not presented separately herein)
consisting of the consolidated balance sheets at June 29, 1996 and July
1, 1995 and July 2, 1994, the related consolidated statements of income and
cashflow of British Trimmings Limited for the years ended June 29, 1996 and
July 1, 1995 and the six month period ended July 2, 1994, expressed in pounds
sterling. All information included in the consolidation package is the
responsibility of the company's management. Our responsibility is to
express an opinion on the consolidation packages based on our audit.
We conduct our audits in accordance with generally accepted auditing
standards of the United States of America. 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 audit provides a reasonable basis for our opinion.
The consolidation package has been prepared on the basis of accounting
principles generally accepted in the United States of America for the
purpose of inclusion in the consolidated financial statements of Conso
Products Company for the years ended June 29, 1996 and July 1, 1995 and
July 2, 1994 and are intended solely for that purpose.
In our opinion, the consolidation packages referred to above (not
presented separately herein), expressed in pounds sterling, are suitable
for inclusion in the consolidated financial statements of Conso
Products Company for the years ended June 29, 1996 and July 1, 1995
and July 2, 1994 and present fairly, in all material respects, the
information shown therein for the years ended June 29, 1996, July 1,
1995 and the six months ended July 2, 1994.
(Signature of Grant Thornton)
GRANT THORNTON
14 August 1996
Heron House
Albert Square
Manchester M60 8GT
Tel 0161 834 5414
Tel 0161 953 0214
Fax 0161 832 6042
Authorised by The Institute of
Chartered Accountants in England
and Wales to carry on investment
business. A list of partners may be
inspected at the above address and
at Grant Thornton House
Euston Square London NW1 2EP
Consolidated Balance Sheets
June 29, 1996 and July 1, 1995
<TABLE>
<CAPTION>
June 29, 1996 July 1, 1995
-----------------------------------------
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 189,845 $ 142,555
Accounts receivable, net of allowances for bad debts and
customer deductions of $327,770 and $317,642 in
1996 and 1995, respectively (Notes 1 and 3) 11,522,528 9,805,603
Inventories (Notes 1,2 and 3) 20,064,822 19,931,881
Deferred income taxes - current portion 602,936 323,600
Prepaid expenses and other 941,702 842,840
-----------------------------------------
Total current assets 33,321,833 31,046,479
-----------------------------------------
Investment:
Cash surrender value of officer's life insurance - 39,270
-----------------------------------------
Property and Equipment (Notes 1 and 3):
Land and improvements 1,082,911 1,089,499
Buildings and improvements 6,779,693 5,655,790
Machinery and equipment 11,104,034 10,496,453
-----------------------------------------
Total 18,966,638 17,241,742
Accumulated depreciation (6,592,375) (5,798,641)
-----------------------------------------
Total property and equipment, net 12,374,263 11,443,101
-----------------------------------------
Deferred Income Taxes (Note 5) 1,282,531 931,766
Deferred Costs (Note 1) 298,885 238,195
-----------------------------------------
Total $47,277,512 $43,698,811
-----------------------------------------
</TABLE>
Consolidated Balance Sheets - Continued
<TABLE>
<CAPTION> June 29, July 1,
1996 1995
--------------------- --------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C>
Short-term borrowings (Note 3) $ 6,990,509 $ 9,073,531
Current maturities of long-term debt (Notes 3 and 4) 477,933 571,044
Trade accounts payable 3,415,876 3,749,179
Accrued liabilities 2,976,595 2,859,467
--------------------- ---------------------
Total current liabilities 13,860,913 16,253,221
--------------------- ---------------------
Noncurrent Liabilities:
Long-term debt (Notes 3 and 4) 2,107,910 2,598,315
Deferred income taxes (Note 5) 530,356 723,544
--------------------- ---------------------
Total noncurrent liabilities 2,638,266 3,321,859
--------------------- ---------------------
Commitments and Contingencies: (Notes 4, 6, 7 and 8) - -
--------------------- ---------------------
Shareholders' Equity: (Notes 9 and 10):
Preferred stock (no par, 10,000,000 shares authorized,
no shares issued) - -
Common stock (no par, 50,000,000 shares authorized,
4,987,793, and 4,950,293 shares issued
in 1996 and 1995 respectively. 16,896,346 16,571,214
Retained earnings 13,701,279 7,258,119
Cumulative translation gain 180,708 294,398
--------------------- ---------------------
Total shareholders' equity 30,778,333 24,123,731
--------------------- ---------------------
Total $47,277,512 $43,698,811
--------------------- ---------------------
</TABLE>
Consolidated Statements of Operations
For the Fiscal Years Ended June 29, 1996, July 1, 1995, and July 2, 1994
<TABLE>
<CAPTION>
OPERATIONS 1996 1995 1994
------------------- ------------------ -------------------
<S> <C> <C> <C>
Net Sales $70,713,651 $59,621,181 $41,558,613
Cost Of Goods Sold 45,281,292 38,885,055 28,343,230
------------------- ------------------- -------------------
Gross Margin 25,432,359 20,736,126 13,215,383
------------------- ------------------- -------------------
Selling, general and administrative
expenses
Distribution expense 2,965,645 2,439,239 1,576,875
Selling expense 8,215,116 6,775,448 4,532,492
General and administrative expense 4,399,610 3,849,455 2,083,053
Currency exchange gain (20,114) (23,717) (78,769)
------------------- ------------------- -------------------
Total 15,560,257 13,040,425 8,113,651
------------------- ------------------- -------------------
Income from operations 9,872,102 7,695,701 5,101,732
------------------- ------------------- -------------------
Interest expense (income):
Interest expense 917,349 981,078 778,044
Interest income (164,352) (111,253) (89,832)
------------------- ------------------- -------------------
Total 752,997 869,825 688,212
------------------- ------------------- -------------------
Income before income taxes 9,119,105 6,825,876 4,413,520
------------------- ------------------- -------------------
Income taxes (Note 5)
Income tax provision before credits 3,092,278 2,495,707 1,018,583
Net Jobs Tax Credits - current (416,333) (295,680) -
Net one-time Jobs Tax Credits - (913,000) -
------------------- ------------------- -------------------
Total income tax provision 2,675,945 1,287,027 1,018,583
------------------- ------------------- -------------------
Net income $ 6,443,160 $ 5,538,849 $ 3,394,937
------------------- ------------------- -------------------
Net income per share $ 1.30 $ 1.12
------------------- ------------------
Weighted average number of shares outstanding
(Note 9) 4,971,046 4,950,293
------------------- ------------------
Proforma Data (Unaudited) (Notes 10 and 12):
Historical income before income taxes $ 4,413,520
Deduct - proforma income taxes 1,637,774
-------------------
Proforma net income assuming C Corporation tax status $ 2,775,746
-------------------
Proforma net income per share $ .67
-------------------
Proforma weighted average number of shares outstanding
(Notes 9, 10, and 12) 4,113,511
-------------------
</TABLE>
Consolidated Statement Of Shareholders' Equity
For the Fiscal Years Ended July 2, 1994, July 1, 1995 and June 29, 1996.
<TABLE>
<CAPTION>
Common Stock
__________________
Additional Cumulative
Shares Paid-in Retained Treasury Translation
Issued Amount Capital Earnings Stock Adjustments Total
<S> <C> <C> <C> <C> <C> <C>
Balance July 3, 1993 2,699,700 10,500 $700,000 $3,496,102 $(205,000) $4,001,602
Net income 3,394,937 3,394,937
Retirement of
treasury stock (128,557) (205,000) 205,000 -
Change in par value
of common stock 700,000 (700,000) -
Common stock sold 2,205,300 14,761,839 14,761,839
Common stock issued
for purchase of
British Trimmings 173,850 1,303,875 1,303,875
Shareholder
distributions
declared (Note 9) (5,171,769) (5,171,769)
Translation gain 111,950 111,950
- ---------------------------------------------------------------------------------------------------------------------------
Balance July 2, 1994 4,950,293 16,571,214 1,719,270 111,950 18,402,434
Net income 5,538,849 5,538,849
Translation gain 182,448 182,448
- ---------------------------------------------------------------------------------------------------------------------------
Balance July 1, 1995 4,950,293 16,571,214 7,258,119 - 294,398 24,123,731
Stock options exercised 37,500 325,132 325,132
Net income 6,443,160 6,443,160
Translation loss (113,690) (113,690)
- ---------------------------------------------------------------------------------------------------------------------------
Balance June 29, 1996 4,987,793 $16,896,346 $ - $13,701,279 $ - $180,708 $30,778,333
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Consolidated Statements Of Cash Flows
For the Fiscal Years Ended June 29, 1996, July 1, 1995, and July 2, 1994.
<TABLE>
<CAPTION>
OPERATING ACTIVITIES: June 29, 1996 July 1, 1995 July 2, 1994
<S> <C> <C> <C>
Net income $6,443,160 $5,538,849 $3,394,937
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 1,662,823 1,469,748 976,853
Amortization of deferred expenses 87,810 49,519 33,262
Deferred tax (benefit) expense (757,716) (1,314,403) 145,318
Currency transaction gain (20,112) (23,717) (78,769)
Gain on sale of embroidery equipment (124,719) - -
Change in assets and liabilities excluding effects of businesses acquired:
Accounts receivable (1,732,181) (842,874) (787,026)
Inventory (171,124) (4,461,111) (2,685,991)
Prepaid expenses and other (107,168) (18,356) (190,125)
Trade accounts payable (285,363) (784,698) 820,455
Accrued liabilities 106,109 245,443 (424,125)
------------------------------------------------------
Net cash provided by (used in) operating activities 5,101,519 (141,600) 1,204,789
------------------------------------------------------
INVESTING ACTIVITIES
Collection of note receivable from shareholder - - 66,634
Sale (purchase) of officer's life insurance 39,271 (6,611) (32,658)
Purchase of London and Leek facilities (790,919) - (874,000)
Purchases of other property and improvements (264,156) (323,401) (426,921)
Purchases of equipment (1,546,916) (2,354,484) (1,464,165)
Payment for investment in common stock of British
Trimmings - - (3,553,327)
Payments for other businesses acquired (385,962) - (472,372)
Sale of embroidery equipment 138,088 - -
------------------------------------------------------
Net cash used in investing activities (2,810,594) (2,684,496) (6,756,809)
------------------------------------------------------
FINANCING ACTIVITIES:
Net borrowings (repayments) under line of credit
arrangements (2,006,120) 3,293,552 (1,587,853)
Proceeds from long-term debt - - 15,861
Principal payments on long-term debt (410,317) (397,343) (2,122,579)
Payments of capitalized loan origination costs (1,111) (36,694) (12,798)
Principal payments under capital lease obligations (151,219) (192,874) (83,507)
Proceeds from issuance of common stock, net of
expenses 325,132 - 14,761,839
Shareholder's distributions paid - - (5,168,082)
------------------------------------------------------
Net cash provided by (used in) financing activities (2,243,635) 2,666,641 5,802,881
------------------------------------------------------
Increase (decrease) in cash 47,290 (159,455) 250,861
Cash at beginning of year 142,555 302,010 51,149
------------------------------------------------------
Cash at end of year $ 189,845 $ 142,555 $ 302,010
======================================================
</TABLE>
Notes to Consolidated Financial Statements
Fiscal Years Ended June 29, 1996, July 1, 1995 and July 2, 1994.
1. Organization and Summary of Significant Accounting Policies
Organization and Operations - The Company's (Conso and all of its
subsidiaries) corporate headquarters are located at Conso's main plant in Union,
South Carolina. The Company has an additional plant in Union. The Company also
has an assembly operation in Juarez, Mexico, showrooms in New York City and
Hickory, North Carolina, and sales representatives located in certain major
cities in the United States. In December 1993, the Company acquired British
Trimmings (Holdings) Limited, an English company based in Stockport, England. In
addition to Stockport, British Trimmings has a production, warehousing and
dyehouse facility and a separate printing operation in Leek, an assembly
operation and a showroom and wholesale operation in London, and sales
representatives located in certain major cities in the United Kingdom. The
Company also employs an international sales force and has sales representatives
located throughout the world. Some products are sold by independent sales
agents.
The Company manufactures and sells decorative narrow trimmings and
other items including:
Knitted and woven fringes
Decorative cords
Tasselled accessories
Jacquard and other woven braids
Workroom tapes and supplies
The Company also markets decorative window accoutrements and other home
furnishing accessories.
Consolidation - The financial statements include the accounts of the
Company, its wholly-owned subsidiary British Trimmings and its subsidiaries
(all operating within the United Kingdom), and Conso's majority-owned
subsidiary, Val-Mex, S.A. de C.V., which operates Conso's Juarez, Mexico,
assembly plant. The Val-Mex subsidiary's operations are not significant in
relation to the Company's operations. All significant intercompany accounts and
transactions, and profit and loss on intercompany transactions are eliminated.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions (e.g. allowance for bad debts) 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.
Fair Value of Financial Instruments - The carrying amount of cash,
accounts receivable, current liabilities and notes payable approximates their
respective fair values.
Inventories - Inventories are stated at the lower of first-in, first-
out cost, or market. Cost includes materials, direct production labor and
production-related overhead costs.
Property and Equipment - Property and equipment are stated at cost, and
depreciation is provided on a straight-line basis over the estimated useful
lives of the related assets as follows:
Buildings 25 years
Building improvements 10 years
Leasehold improvements 5 years
Machinery and equipment 7 years
Mobile and computer equipment 5 years
Maintenance and repair costs are charged to expense as incurred; costs
of major additions and betterments are capitalized.
Loan Costs - The costs related to borrowings by the Company have been
deferred and are being amortized over the term of the loan.
Long-Lived Assets - The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The provisions of the Statement, which will be implemented by the Company for
the fiscal year beginning June 30, 1996, require the recognition of a loss in
the income statement and related disclosures whenever events or circumstances
indicate that the carrying amount of a long-lived asset may not be recoverable.
The Company does not believe that adoption of the provisions of the Statement
will have a material impact, if any, on its results of operations or financial
position.
Income taxes - Prior to December 18, 1993, the Company had elected to
be taxed as an S Corporation for federal and state income tax purposes and,
accordingly, the Company's income was allocable to its shareholders for
inclusion in the determination of their personal taxable income. Accordingly, no
provision for income taxes has been recorded by the Company for periods prior to
December 18, 1993. While an S Corporation, the Company made shareholder
distributions in amounts not exceeding the maximum individual income tax rates
applied to financial statement income in order to fund the taxes payable by the
then S Corporation shareholders, in addition to certain other distributions. On
December 18, 1993, in anticipation of its change in ownership from the Company's
initial public offering, the Company terminated its election to be treated as an
S Corporation and adopted Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes" for income tax purposes (see Notes 5 and
12).
Advertising Costs - The Company's policy is to expense advertising
costs upon initial publication of advertisements.
Reclassifications - Certain balances in prior years have been
reclassified to conform with the presentation adopted in the current fiscal
year.
2. Inventories
<TABLE>
<CAPTION>
June 29, 1996 July 1, 1995
<S> <C> <C>
Raw materials $ 6,357,327 $ 7,150,304
Work-in-progress 3,325,497 2,849,966
Finished goods 10,381,998 9,931,611
- -------------------------------------------------------------------------------------------------
Totals $20,064,822 $19,931,881
- -------------------------------------------------------------------------------------------------
</TABLE>
3. Notes Payable, Long-Term Debt
During 1996, the Company renegotiated with its US bank the terms of its
then outstanding revolving loan agreement. The amended agreement provides for
advances on a revolving line of $10,000,000 (as in the previous agreement) but
with advances of up to (pound)5,000,000 (in British pounds sterling, previously
(pound)2,500,000) providing some protection against currency fluctuations.
Advances in US dollars bear interest at the rate equal to the bank's 90 day CD
rate plus 2.75% (8.23% at June 29, 1996). Previously, interest was at the bank's
prime rate plus .50%. Advances in British pounds sterling are made under London
Inter-bank Offered Rate ("LIBOR") related contracts. These contracts bear
interest based on the rates at which banks lend to each other for specific
periods of time (typically 1, 3, or 6 months) plus 1.25% (1.75% previously)
(7.09375%, 7.125%, or 7.125%, respectively at June 29, 1996). At June 29, 1996,
$4,374,000 was available for borrowing under the agreement. The average US
dollar borrowings outstanding under line of credit agreements for the fiscal
years ended June 29, 1996, July 1, 1995, and July 2, 1994, were $2,935,041,
$5,408,765, and $4,176,367 at weighted average interest rates of 8.84%, 9.15%,
and 7.39%, respectively. The maximum outstanding US dollar borrowings during
these periods were $8,550,944, $8,186,291, and $6,387,749, respectively.
Borrowings in British pounds sterling by British Trimmings totaled
(pound)3,500,000 (or $5,432,000 at the June 29, 1996 exchange rate), under two
LIBOR contracts in the amounts of (pound)3,000,000 ($4,656,000) and
(pound)500,000 ($776,000) for 90 and 30 days at interest rates of 7.375% and
7.09375%, respectively. The US dollar balance represented the remaining
$194,000. Of the available balance at June 29, 1996, (pound)1,500,000
($2,328,000) of the amount was available for borrowing in British pounds
sterling (or US dollars) with the additional $2,046,000 available for borrowing
in US dollars only. The average borrowings outstanding in British pounds
sterling under the line of credit agreements for the fiscal years ended June 29,
1996, and July 1, 1995, were (pound)2,409,589 ($3,744,501), and (pound)493,151
($786,000), at weighted average interest rates of 7.7995% and 7.5186%. The
maximum outstanding borrowings during these periods were (pound)4,000,000
($6,208,000 at the June 29,1996 exchange rate), and (pound)2,000,000 ($3,189,000
at the July 1, 1995 exchange rate), respectively. There were no borrowings under
the revolving loan agreement in British pounds sterling during the fiscal year
ended July 2, 1994.
During 1995, British Trimmings renegotiated overdraft borrowing
facilities (similar to revolving loan facilities used in the US) available in
British pounds sterling with its United Kingdom based bank for itself and
certain of its subsidiaries. The new agreement provides overdraft facilities
with its United Kingdom based bank totaling (pound)500,000 (or $776,000 at the
June 29, 1996, exchange rate). Overdrafts bear interest at the bank's base rate
plus 1.50% (subject to a minimum rate of 5.5%) which was 7.25% at June 29, 1996.
The prior agreement provided for overdraft facilities totaling (pound)1,200,000
(or $1,862,400 at the June 29, 1996 exchange rate).
In addition, the bank provides British Trimmings with other services
including letters of credit, and bank-guaranteed standby credit for value-added
tax payments of an additional (pound)260,000 (or $403,520 at the June 29, 1996
exchange rate) bearing the same interest rates as in the overdraft facility. At
June 29, 1996, no amounts were available for borrowings under this overdraft
facility. The average overdraft outstanding under the overdraft facility was
(pound)180,091 ($279,861), (pound)218,408 ($345,412) and (pound)202,715
($302,572) (at the average exchange rates for the fiscal years ended June 29,
1996, July 1, 1995, and July 2, 1994, from the acquisition date through the
fiscal year end) bearing interest at weighted average rates of 7.89%, 7.64% and
6.8%, respectively. The maximum overdraft outstanding during the fiscal years
ended June 29, 1996, July 1, 1995, and July 2, 1994, (from the acquisition date
through the fiscal year end) was (pound)707,410 ($1,097,900), (pound)415,452
($657,037) and (pound)789,065 ($1,177,758), respectively (at the average
exchange rates during the periods). There were no material other services used
or outstanding at June 29, 1996.
The balances owed under the long-term agreements are as follows:
<TABLE>
<CAPTION>
June 29, 1996 July 1, 1995
<S> <C> <C>
Term loan $2,130,570 $2,347,230
European Coal & Steel Community (ECSC) loan 388,000 597,938
Capital lease obligations 67,273 224,191
- -------------------------------------------------------------------------------------------------------------
Total 2,585,843 3,169,359
Less current portion (477,933) (571,044)
- -------------------------------------------------------------------------------------------------------------
Total long-term debt $2,107,910 $2,598,315
- -------------------------------------------------------------------------------------------------------------
</TABLE>
During 1993, the Company refinanced its then outstanding real estate
loans with a $2,800,000 term loan. In 1994 the Company exercised its option to
fix the interest rate (previously prime rate plus 1%) at 9% and amended the then
remaining balance with a $2,600,000 note with additional borrowings of
approximately $16,000. The amended loan is repayable in 83 monthly principal
payments of $18,055 with a final principal payment of $1,101,435 due on April 1,
2001.
The European Coal and Steel Community loan, entered into by British
Trimmings with an original loan amount of (pound)500,000 or $776,000, is
repayable in semi-annual installments of (pound)62,500 or $97,000 (at June 29,
1996, exchange rate), beginning December 1994 with the final payment due June
1998. The loan bears interest at the rate of 10% with substantial penalty for
prepayment. Maturities of long-term debt (excluding capital lease obligations -
see Note 4) at June 29, 1996, are as follows:
June 28, 1997 $ 410,660
June 27, 1998 410,660
July 3, 1999 234,715
July 1, 2000 198,605
June 30, 2001 1,263,930
- --------------------------------------------------------------------------------
Total $2,518,570
- --------------------------------------------------------------------------------
Of the Company's assets, the Conso US real estate, inventory and
accounts receivable, and the British Trimmings' Stockport real estate are
pledged as collateral under the loan agreements, which contain various covenants
requiring, among other things, that the Company maintain certain minimum levels
of working capital, net worth (as defined), and other ratios. In the opinion of
management, the Company was in compliance with all such covenants at June 29,
1996.
Net interest expense paid during the fiscal years ended June 29, 1996,
July 1, 1995, and July 2, 1994 were $700,746, $819,143, and $588,366,
respectively.
The Company has not entered into any agreements to manage the risk of
foreign exchange fluctuations except to the extent it is able to borrow funds in
foreign currency as previously noted.
4. Leases
The Company's operations utilize property, facilities, equipment, and
vehicles leased from others. Buildings and facilities leased from others
primarily are for sales offices, showrooms, and the Val-Mex manufacturing
operation. The lease arrangements generally provide for a fixed basic rent, and
in some instances adjustments for inflation. Initial terms of leases generally
are not more than six years exclusive of options to renew. Leases of other
equipment primarily consist of manufacturing and vehicles. Information regarding
the Company's leasing activities at June 29, 1996, is as follows:
<TABLE>
<CAPTION>
Capital leases Operating Lease
----------------- ------------------
Minimum Minimum Lease
Lease Payments Payments
<S> <C> <C>
1997 $ 92,156 $ 509,133
1998 - 346,129
1999 - 253,523
2000 - 93,779
- ----------------------------------------------------------------------------------------------------
Total $ 92,156 $1,202,564
Less imputed interest 24,883
- ------------------------------------------------------------------------
Present value of capital lease obligations $ 67,273
- ------------------------------------------------------------------------
</TABLE>
Rent expense under operating leases totalled $425,602, $315,749, and
$287,345 during the fiscal years ended June 29, 1996, July 1, 1995, and July 2,
1994, respectively. The Company incurred capital leases of $35,993 during the
fiscal year ended July 2, 1994 (other than those assumed in the acquisition of
British Trimmings). The Company did not enter into any capital leases during the
fiscal years ended June 29, 1996, or July 1, 1995.
5. Income Taxes
In conjunction with the initial public offering of the common stock of
the Company, on December 18, 1993, the Company terminated its status as an S
Corporation and adopted SFAS No. 109, "Accounting for Income Taxes" for income
tax purposes. The charges for the income tax provision for the fiscal years
ended June 29, 1996, and July 1, 1995, and the period December 18, 1993,
subsequent to the termination of the Company's S Corporation status (and
subsequent to the acquisition date for British Trimmings), through the fiscal
year ended July 2, 1994, represent:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
United States corporation tax $3,555,230 $2,136,668 $ 853,123
United Kingdom corporation tax (121,569) 464,762 236,489
Deferred taxation (757,716) (1,314,403) ( 71,029)
- -----------------------------------------------------------------------------------------------------------------
Total $2,675,945 $1,287,027 $1,018,583
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
Reconciliation to effective tax rate:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Expected provision at statutory US tax rate 34.0% 34.0% 34.0%
Difference between statutory US rates and UK tax (3.4) (.6) (1.0)
Effective US state tax rate 3.3 3.3 3.3
Adjustment for Jobs Tax Credits* (4.6) (17.7) -
Adjustment for Foreign Investment Sales Corporation - (.1) -
Adjustment for non-taxable (S Corporation) income
(prior to change to C Corporation, December 1993) - - (13.2)
- ------------------------------------------------------------------------------------------------------------------------
Total 29.3% 18.9% 23.1%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*In March 1995, the Company received a private letter ruling from the South
Carolina Tax Commission allowing the Company to carryforward certain Jobs Tax
Credits totaling $1,383,000 resulting in a one-time net tax benefit (net of
applicable federal income tax effect) of $913,000. In addition, the Company has
recorded Jobs Tax Credits totalling $630,808 and $448,000, resulting in a net
tax benefit (net of applicable federal income tax effect) of $416,333 and
$295,680 for credits earned in the current and prior fiscal years, respectively.
The recording of these credits resulted in the creation of a deferred tax asset
for the future utilization of the credits. The Company is uncertain as to the
amount of additional credits, if any, which may be earned in future years,
because future credits are contingent upon regionally specific increases in
employment and are contingent upon additional future income sufficient to fully
utilize such credits as may become available in the future.
Net deferred income tax asset (liability) is attributable to the following
temporary differences:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Purchase accounting $ (231,139) $ (281,663) $ (357,449)
Intercompany inventory 180,323 168,008 -
Accounts receivable reserve 86,683 61,390 66,813
Inventory reserve 296,809 82,909 160,037
Accruals 280,968 187,074 175,071
Prepaid expense (10,459) (17,953) (31,702)
Depreciation (754,505) (658,803) (477,132)
Capital gains rolled over - (124,562) (420,643)
Jobs tax credit 1,505,293 1,210,604 -
Other temporary differences 1,138 (95,182) 102,424
- ------------------------------------------------------------------------------------------------------------------------
Net asset (liability) $ 1,355,111 $ 531,822 $ (782,581)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Income taxes paid by the Company during the fiscal years ended June 29,
1996, July 1, 1995, and July 2, 1994, were $3,821,745, $2,755,028 and
$1,079,180, respectively.
6. Postretirement and Postemployment Benefits
The Company adopted, upon completion of its initial public offering in December
of 1993, SFAS No. 106, "Employers' Accounting for Postretirement Benefits other
than Pensions," retroactive to July 4, 1993. The Company also adopted, upon
completion of its initial public offering, SFAS No. 112, "Employers' Accounting
for Postemployment Benefits." These statements require accrual of the cost of
providing postretirement and postemployment benefits, including medical
benefits, during the active service period of covered employees. At this time,
the Company does not have any postretirement plan or postemployment benefit
plan.
7. Retirement Benefits
Conso operates a non-qualified deferred compensation plan for certain
of its key officers and employees. The plan allows selected employees to defer
up to 25% of their compensation. Interest is paid on compensation deferred by
the employee at the month-end prime rate (8.25% at June 29, 1996) adjusted
monthly, with interest compounded quarterly. For the fiscal years ended June 29,
1996, and July 1, 1995, the unfunded liabilities included in accrued liabilities
and representing the plan balance were $116,652 and $77,727, respectively.
The British Trimmings subsidiary operates a defined benefit
contribution plan for the benefit of a certain executive. The plan requires the
Company to contribute funds to the executive's own private pension plan in order
to provide benefits, which comprise two-thirds of his annual salary, at his
retirement. Contributions are calculated by independent advisors of the managing
company for the executive's private pension fund. The cost for the fiscal years
ended June 29, 1996, July 1, 1995, and July 2, 1994, (since date acquired)
amounted to (pound)44,915 ($69,807), (pound)39,998 ($63,257) and (pound)17,998
($26,864), respectively, and these amounts have been included in the Company's
expenses. Management of the Company has determined that the obligation of
remaining contributions to the executive's private pension fund is not material
to the Company's financial statements due to the length of service and related
contribution amounts remaining under the agreement with the executive.
In January 1996, Conso established a defined contribution plan in the
US pursuant to Section 401(k) of the Internal Revenue Code which covers all
employees. Contributions are equal to each employee's contribution up to a
maximum of 3% of each employee's compensation. Aggregate contributions of
$180,113 were made for the fiscal year ended June 29, 1996 (since plan
inception).
Prior to July 1995, British Trimmings maintained a defined benefit
plan. Plan assets consisted of units held in a specialist pension investment
company investing mainly in UK and overseas equities. Total net pension cost of
the defined benefit plan for employees for the fiscal years ended July 1, 1995,
and July 2, 1994, (since date of acquisition), amounted to (pound)47,000
($74,331) and (pound)25,000 ($37,315), respectively.
The compents of net pension cost of the British Trimmings defined
benefit plan for the fiscal years ended July 1, 1995, and July 2, 1994,
determined under SFAS 87 follow:
<TABLE>
<CAPTION>
June 29, 1996 July 1, 1995 July 2, 1994
<S> <C> <C> <C>
Service cost-benefits earned during the year N/A- $ 82,238 $ 38,807
PLAN
Interest cost on projected benefit obligations TERMINATED 131,265 68,660
Actual return on plan assets (139,172) (70,152)
- -----------------------------------------------------------------------------------------------------------------------------
Net pension cost $ 74,331 $ 37,315
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the funded status of the plans and amounts
unrecognized in the Company's balance sheet for its defined benefit plans:
Plan assets at fair value $1,870,349 $1,411,576
- --------------------------------------------------------------------------------
Accumulated benefits obligations $1,358,514 $1,233,784
Additional amount related to projected compensation
increases 210,474 161,798
- --------------------------------------------------------------------------------
Projected benefit obligation $1,568,988 $1,395,582
- --------------------------------------------------------------------------------
Unrecognized net asset $ 301,361 $ 15,994
- --------------------------------------------------------------------------------
Significant assumptions used in determining net pension cost and funded
status information for all periods shown above are as follows:
Assumed discount rate 9%
Assumed rate of compensation increase 7%
Assumed long-term rate of return on plan assets 9%
In July 1995, British Trimmings discontinued its defined benefit plan
and replaced it with an alternative "defined contribution" type (group personal
pension) plan. The unrecognized net asset ($301,361) at July 1, 1995 is being
used for payments in terminating the defined benefit plan. On this basis the
unrecognized net asset is not recorded as a prepaid pension cost. The largest
portion of plan obligations totaling (pound)1,173,117 ($1,820,678), were
discharged through the purchase of annunities in July 1996. Management of the
Company and the Company's actuaries have determined that the remaining
assets of the plan, (pound)167,517 ($259,986), are sufficient to discharge
remaining plan obligations. Any remaining net asset (or liability) is
immaterial. Due to the discontinuance of the defined benefit plan in July 1995,
the fiscal 1996 pension activity was not material to the Company's financial
statements.
British Trimmings "defined contribution" type (group personal pension)
plan was established pursuant to the United Kingdom's Inland Revenue codes and
covers substantially all employees. Contributions are equal to each employee's
contribution up to a maximum of 3% of each employee's compensation. Aggregate
contributions of (pound)34,362 ($53,402) were made for the year ended
June 29, 1996 (since plan inception).
8. Commitments and Contingencies
Royalties - The Company has entered into agreements with several
designers requiring royalty payments which are accrued and paid currently based
on sales of specific product styles. Royalty expenses were $195,840, $165,578,
and $161,868, for fiscal years ended June 29, 1996, July 1, 1995, and July 2,
1994, respectively.
Litigation - The Company is routinely involved in various disputes and
legal actions related to its business operations. In the opinion of management,
based on the advice of the Company's legal counsel, the ultimate resolution of
these actions will not have a material effect on the Company's financial
position or future results of operations.
9. Capital Stock
Public Offering of Common Stock - The Company completed an initial
public offering of 1,350,000 shares of common stock on December 22, 1993. The
Company issued an additional 120,200 shares on January 18, 1994, in connection
with the offering due to the exercise of an over-allotment option by the
underwriters. The proceeds of the offering were used to acquire all the
outstanding capital stock of British Trimmings in a business combination as
described below, to repay outstanding debt, to fund a cash distribution of
undistributed S Corporation earnings to the then sole shareholder of the
Company, and to fund a portion of the purchase price of a manufacturing facility
that had been leased by British Trimmings (see Note 10).
Capital Stock Transactions - In conjunction with its initial public
offering of common stock, the Company changed its jurisdiction of incorporation
from Delaware to South Carolina and in connection therewith: (i) increased the
number of authorized common shares (no par) to 50,000,000 shares and authorized
10,000,000 shares of preferred stock; and (ii) increased the Company's
outstanding common stock to 1,714,100 shares (having the effect of a 17,141 for
1 stock split). On September 7, 1995, the Company announced a 3-for-2 split of
its common stock, paid on October 6, 1995, to shareholders of record at the
close of business on September 18, 1995. All per share data presented in the
accompanying financial statements has been restated to reflect the 3-for-2 stock
split.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No.123, "Accounting for
Stock-Based Compensation," which will be effective for the Company beginning
June 30, 1996. SFAS No.123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation costs to be measured based on fair value of the equity instrument
awarded. Companies are permitted, however, to continue to apply APB Opinion No.
25, which recognizes compensation costs based on the intrinsic value of the
equity instrument awarded. The Company will continue to apply APB Opinion No. 25
to its stock-based compensation awards to employees and will disclose the
required proforma effect on net income and earnings per share beginning in 1997.
Stock Option Plan - The Company established a stock option plan which
became effective upon the completion of its initial public offering of common
stock. The plan permits the award of options to buy up to 405,000 shares of the
Company's common stock to certain managers and other key employees. On May 15,
1995, a key employee was granted options under the plan to purchase up to 37,500
shares of the Company's common stock. The options were exercised in November
1995 (25,000) and January 1996 (12,500) at $8.67 per share. On September 7,
1995, the Company granted additional options to certain key employees to
purchase an aggregate of 62,400 shares of the Company's common stock. The
options were granted at $10 per share and are exercisable with respect to
one-third of the total shares after one year, an additional one-third of the
shares after two years, and the final one-third of the shares after three years.
The options expire after five years, are incentive stock options, and are
subject to continued employment of the employee. (All amounts have been adjusted
to reflect the 3-for-2 stock split issued on October 6, 1995).
10. Business Combinations and Acquisitions
British Trimmings - On December 22, 1993, the Company acquired all the
outstanding share capital of British Trimmings, for consideration valued at
$4,855,350 (consisting of cash, Company common stock and estimated transaction
expenses) plus the effective assumption of British Trimmings' liabilities, for a
total purchase price of $11,176,268, in a transaction accounted for by the
purchase method of accounting. The balance sheet effect of this transaction was
recorded at December 22, 1993, and the operating results of British Trimmings
for periods after the date of the acquisition are included in the Company's
consolidated income statements.
The purchase price, allocation of purchase price and purchase
accounting adjustments, as the acquisition occurred on December 22, 1993, and
based on information as of that date, (adjusted to reflect the 3-for-2 stock
split), are summarized as follows:
Purchase price:
Cash portion of purchase price $ 3,314,475
Issuance of 173,850 shares of Common Stock at $7.50 per share 1,303,875
Transaction expenses (professional fees, etc.) 237,000
- --------------------------------------------------------------------------------
Total consideration 4,855,350
British Trimmings' liabilities assumed 6,320,918
- --------------------------------------------------------------------------------
Total purchase price $11,176,268
- --------------------------------------------------------------------------------
Allocation of purchase price:
Current assets $ 7,410,606
Property and equipment, net 4,123,111
Deferred tax liability (357,449)
- --------------------------------------------------------------------------------
Total purchase price $11,176,268
- --------------------------------------------------------------------------------
Purchase accounting adjustments:
Book value of British Trimmings' net assets
prior to the acquisition $ 3,703,721
Adjustment of property and equipment to their fair values 1,720,504
Deferred tax liability related to adjustment of equipment
portion only to fair values, ($1,083,180) at 33% which
represents the current United Kingdom corporate tax rate
(no provision is required with respect to the revaluation
of land and buildings because land and building values are
indexed for inflation under UK tax law and therefore indexation
allowances are estimated to be sufficient to eliminate the
deferred tax element which might otherwise be required) (357,449)
Elimination of British Trimmings' historical basis goodwill (211,426)
- ---------------------------------------------------------------------------
Total consideration $ 4,855,350
- ---------------------------------------------------------------------------
The fair value adjustments have been determined by the management of
Conso and British Trimmings based on available information, including real
estate appraisal information prepared by an independent appraiser.
Conso/Graber Canada - On May 13, 1994, the Company acquired the assets
of Conso/Graber Canada for $296,960. The acquisition, substantially of
equipment, was accounted for in accordance with the purchase method of
accounting. The equipment has been relocated from Canada for use at the
Company's already existing locations.
Wendy Cushing Ltd. - On July 1, 1994, British Trimmings acquired 100% of
the share capital of Wendy A. Cushing Ltd. and the remaining 50% of the share
capital of Wendy Cushing Trimmings Ltd. The purchase price was $111,988 of
which $67,386 was paid in cash and the balance to be paid by way of loan
notes over five years.
The Claesson Company - On March 4, 1996, the Company acquired the
assets of The Claesson Company. The purchase price and related acquistion costs
totalled $385,962. The acquistion was accounted for in accordance with the
purchase method of accounting.
11. Foreign Operations
The historical consolidation financial statements include the results
of operations and cash flows of the Company's acquired subsidiary, British
Trimmings, since the date of acquisition on December 22, 1993, and Wendy Cushing
Trimmings since June 1994.
The British Trimmings and Wendy Cushing Trimmings financial information
contained in the historical financial statements has been derived from the
historical financial statements stated in pounds sterling and prepared in
accordance with generally accepted accounting principals in the United States.
These financial statements have been translated into US dollars based on
exchange rates as published in the Wall Street Journal. The balance sheet has
been translated using the exchange rate in effect on June 29, 1996, ($1.552 =
(pound)1.00), July 1, 1995, ($1.5945 = (pound)1.00), and July 2, 1994, ($1.538 =
(pound)1.00), respectively. The statements of operations and cash flows have
been translated using the average of the month end average rates for each
quarter weighted by the income activity in pounds sterling for each quarter for
the fiscal years ended June 29, 1996, ($1.5542 =(pound)1.00) July 1, 1995,
($1.5815 = (pound)1.00), and July 2, 1994, ($1.4926 = (pound)1.00),
respectively.
The following financial information presents the assets and liabilities
for the fiscal years ended June 29, 1996, and July 1, 1995, and gains
attributable to the Company's investment in British Trimmings (including Wendy
Cushing Trimmings) and operations for the fiscal years ended June 29, 1996, July
1, 1995, and July 2, 1994:
<TABLE>
<CAPTION>
June 29, 1996 July 1, 1995
------------------ -----------------------
Conso British Conso British
US Trimmings Total US Trimmings Total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Selected Individual Company Assets and Consolidating Adjustments:
Total Assets $ 36,234 $ 17,210 $ 39,333 $ 16,316
Elimination of intercompany receivable (2,033) - (7,391) -
Intercompany inventory adjustment (159) (358) (111) (375)
Purchase accounting adjustments (4,855) 1,239 (5,410) 1,337
- -----------------------------------------------------------------------------------------------------------------------
Consolidated net assets $ 29,187 $ 18,091 $47,278 $ 26,421 $ 17,278 $43,699
- -----------------------------------------------------------------------------------------------------------------------
Balance sheets (after consolidating adjustments)
Assets $ 29,187 $ 18,091 $47,278 $ 26,421 $ 17,278 $43,699
Liabilities 6,017 10,483 16,500 13,349 6,226 19,575
- -----------------------------------------------------------------------------------------------------------------------
Subtotal 23,170 7,608 30,778 13,072 11,052 24,124
- -----------------------------------------------------------------------------------------------------------------------
Intercompany receivable (payable) 1,117 (1,117) - (4,896) (4,896) -
Investment in British Trimmings 4,855 (4,855) - 4,855 (4,855) -
- -----------------------------------------------------------------------------------------------------------------------
Shareholders' equity $ 29,142 $ 1,636 $30,778 $ 22,823 $ 1,301 $24,124
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
June 29, 1996 July 1, 1995 July 2, 1994
---------------- --------------- ---------------
Conso British Conso British Conso British
US Trimmings Total US Trimmings Total US Trimmings Total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Details of investment and equity in
subsidiary:
Original investment at acquisition date $ 4,855 $ 4,855 $ 4,855
Retained earnings of subsidiary since
acquisition date 1,455 1,007 352
Cumulative translation gain 181 294 112
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment and equity in British
Trimmings $ 6,491 $ 6,156 $ 5,319
- -----------------------------------------------------------------------------------------------------------------------------------
Selected Individual Company Operations
and Consolidating Adjustments:
Total net sales $ 52,757 $ 20,047 $ 41,015 $ 21,088 $ 32,128 $ 9,974
Less adjustment for intercompany sales (1,632) (458) (1,101) (1,381) (66) (297)
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated net sales $ 51,125 $ 19,589 $ 70,714 $ 39,914 $ 19,707 $ 59,621 $ 32,062 $ 9,497 $ 41,559
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income $ 9,047 $ 965 $ 6,193 $ 2,005 $ 4,300 $ 869
Elimination of intercompany transactions (49) 17 (89) (313) (20) (62)
Purchase accounting adjustments -- (128) -- (124) -- (64)
Intercompany currency translation gain 20 -- 24 -- 79 --
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated operating income $ 9,018 $ 854 $ 9,872 $ 6,128 $ 1,568 $ 7,696 $ 4,359 $ 743 $ 5.102
- -----------------------------------------------------------------------------------------------------------------------------------
Operations (after consolidating
adjustments):
Net sales $ 51,125 $ 19,589 $ 70,714 $ 39,914 $ 19,707 $ 59,621 $ 32,062 $ 9,497 $ 41,559
Cost of sales 31,501 13,781 45,282 25,512 13,373 38,885 21,457 6,886 28,343
- -----------------------------------------------------------------------------------------------------------------------------------
Gross margin 19,624 5,808 25,432 14,402 6,334 20,736 10,605 2,611 13,216
Selling, general and
administrative expenses 10,606 4,954 15,560 8,274 4,766 13,040 6,246 1,868 8,114
- -----------------------------------------------------------------------------------------------------------------------------------
Operating income 9,018 854 9,872 6,128 1,568 7,696 4,359 743 5,102
Interest expense, net 106 647 753 274 596 870 512 176 688
- -----------------------------------------------------------------------------------------------------------------------------------
Income before taxes 8,912 207 9,119 5,854 972 6,826 3,847 567 4,414
Income taxes, net 2,917 (241) 2,676 970 317 1,287 804 215 1,019
- -----------------------------------------------------------------------------------------------------------------------------------
Net income $ 5,995 $ 448 $ 6,443 $ 4,884 $ 655 $ 5,539 $ 3,043 $ 352 $ 3,395
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In addition to the operations of British Trimmings, US exports (by Conso US)
constituted additional foreign sales of $3.3 million, $2.7 million, and $2.0
million for the fiscal years ended June 29, 1996, July 1, 1995 and July 2, 1994,
respectively.
The following table sets forth consolidated sales by region:
June 29, 1996 July 1, 1995 July 2, 1994
---------------------------------------------------
(Dollars in thousands)
US $48,006 $38,270 $30,204
UK 16,113 16,108 8,316
Other countries 6,595 5,243 3,039
- ----------------------------------------------------------------------------
Total $70,714 $59,621 $41,559
- ----------------------------------------------------------------------------
12. Supplemental Proforma Data (Unaudited and adjusted to reflect the 3-for-2
stock split)
The proforma net income information reflects the application of
corporate income taxes to the Company's US income before income taxes at an
effective income tax rate of 37%, which represents the estimated combined
federal and state income tax rate. The proforma income taxes have been
calculated in accordance with SFAS No. 109, "Accounting for Income Taxes."
As of July 3, 1993, there were no material temporary differences between the
financial reporting basis of assets and liabilities that would result in a
deferred tax liability or asset.
Proforma net income per share amounts are based on the weighted average
number of shares of common stock outstanding during the period as adjusted for
the increase in outstanding shares in connection with the 25,712 for 1 stock
split, plus the portion of the shares sold by the Company (626,399 shares), at
the offering price of $7.50 per share, less allocable offering expenses and
underwriting discounts (10.6% of proceeds), which would have been necessary to
fund the actual S Corporation distribution ($4.2 million) to the Company's then
sole shareholder.
Supplemental proforma net income per share amounts are based on the
proforma weighted average shares described above and assumes (a) the issuance of
sufficient additional shares (775,541 shares) at the offering price of $7.50 per
share, less allocable offering expenses and underwriting discounts, to fund a
$5.2 million reduction in debt of the Company from the proceeds of the offering,
(b) the assumed reduction in related interest expense at the actual historical
average rate of 7.39% for the fiscal year ended July 2, 1994, and (c) the
resulting income tax effect computed at 37% which represents the combined
federal and state income tax rate.
Year Ended
July 2, 1994
Supplemental proforma net income $2,894,176
- --------------------------------------------------------------------------------
Supplemental proforma net income per share $ .65
- --------------------------------------------------------------------------------
Supplemental proforma weighted average number of shares 4,477,844
- --------------------------------------------------------------------------------
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure
Not Applicable
PART III
Items 10-13
Items 10 through 13 are incorporated herein by reference to the
sections captioned "Principal Shareholders," "Election of Directors," "Executive
Officers," "Compensation Committee Interlocks and Insider Participation,"
"Executive Compensation," "Director Compensation," "Employment Agreements,"
and "Section 16(a) Beneficial Ownership Reporting Compliance" on pages 2 - 11
of the Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held October 15, 1996, which was filed with the Commission
on September 11, 1996.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
List the following documents filed as a part of this report:
1. Financial Statements
The following consolidated financial statements of the Company are
included in response to Item 8 hereof:
Report of Deloitte & Touche, LLP
Report of Grant Thornton
Consolidated Balance Sheets as of June 29, 1996 and July 1, 1995
Consolidated Statements of Operations for fiscal years ended June 29,
1996, July 1, 1995 and July 2, 1994
Consolidated Statements of Shareholders' Equity for the fiscal years
ended July 2, 1994, July 1, 1995 and June 29, 1996.
Consolidated Statements of Cash Flows for the fiscal years ended June
29, 1996, July 1, 1995 and July 2, 1994
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Financial statement schedules are omitted because the information is
either not required or is otherwise included in the Company's Consolidated
Financial Statements or the Notes thereto.
<TABLE>
<CAPTION>
(3) Exhibits
Number Exhibit Description
<S> <C>
3.4 Articles of Incorporation of the Company (1)
3.5 Bylaws of the Company (1)
10.2 Employment Agreement dated December 22, 1993 by and between British
Trimmings and A.W. Laughton (5)
10.3 Employment Agreement dated December 22, 1993 by and between British
Trimmings and C.V. Balakrishnan (5)
10.4 Loan Agreement dated as of May 6, 1994 by and between the Company
and NationsBank of North Carolina, N.A., a national banking
association now known as "NationsBank N.A. (Carolinas)"
("NationsBank") (2)
10.8 Security Agreement dated as of May 6, 1994 by and between the Company and
NationsBank (2)
10.9 Guaranty Agreement dated as of May 6, 1994 given by the Company in favor of
NationsBank (2)
10.10 Mortgage and Security Agreement dated May 3, 1993 by and between
the Company and NationsBank (1)
10.11 First Amendment dated as of April 14, 1994 by and between the
Company and NationsBank to the Mortgage and Security Agreement dated
May 3, 1993 by and between the Company and NationsBank (2)
10.14 Letter Agreement dated August 20, 1992 by and between the Company and
Louis Nichole, Inc. (1)
10.15 Letter Agreement dated January 8, 1993 by and between the Company and
Wesley Mancini Ltd. (1)
10.16 Marketing Agreement dated November 3, 1988 by and between the Company
and F. Schumacher & Co. (1)
10.17 1993 Stock Option Plan (1)
10.18 Loan Facility Agreement dated 22 June 1990 between British Trimmings and
National Westminster Bank PLC (1)
10.19 Advice of Borrowing Terms dated 10 June 1993 from National Westminster
Bank PLC to British Trimmings (1)
10.20 Agreement dated 10 September 1993 between Calver Properties Limited and
British Trimmings (Leek) Limited (1)
10.23 First Amendment dated as of December 1, 1994 to the Loan Agreement
dated as of May 6, 1994 by and between the Company and NationsBank
(3)
10.26 First Amendment dated as of December 1, 1994 to the Security Agreement dated
as of May 6, 1994 by and between the Company and NationsBank (3)
10.27 First Amendment dated as of December 1, 1994 to the Guaranty Agreement
dated as of May 6, 1994 given by the Company in favor of NationsBank (3)
10.28 Second Amendment dated as of February 10, 1995 to the Loan Agreement
dated as of May 6, 1994 by and between the Company and NationsBank
(4)
10.30 Second Amendment dated as of February 10, 1995 to the Security
Agreement dated as of May 6, 1994 by and between the Company and
NationsBank (4)
10.31 Advice of Borrowing Terms of March 31, 1995 (Revision) regarding National
Westminster Bank facility letter of June 22, 1990 (4)
10.32 Third Amendment dated as of June 13, 1995 to the Loan Agreement dated as of
May 6, 1994 by and between the Company and NationsBank (5)
10.34 Third Amendment dated as of June 13, 1995 to the Security Agreement dated as
of May 6, 1994 by and between the Company and NationsBank (5)
10.36 1994 Employee Stock Purchase Plan (6)
10.37 Letter Agreement dated May 12, 1995 by and between the Company and S.
Duane Southerland, Jr. (5)
10.38 Fourth Amendment dated as of November 1, 1995, to the Loan Agreement
dated as of May 6, 1994, by and between the Company and NationsBank
(7)
10.40 Fourth Amendment dated as of November 1, 1995, to the Security
Agreement dated as of May 6, 1994, by and between the Company and
NationsBank (7)
10.41 Second Amendment dated as of November 1, 1995, to the Guaranty
Agreement dated as of May 6, 1994, by and between the Company and
NationsBank (7)
10.42 Fifth Amendment dated as of December 1, 1995, to the Loan Agreement
dated as of May 6, 1994, by and between the Company and NationsBank
(7)
10.43 Estoppel and Modification Agreement dated as of December 1, 1995, by
the Company in favor of NationsBank (7)
10.44 Estoppel and Modification Agreement dated as of December 1, 1995, by
British Trimmings in favor of NationsBank (7)
10.45 Sixth Amendment dated as of March 1, 1996 to the Loan Agreement
dated as of May 6, 1994, by and between the Company and NationsBank
(8)
10.46 Fifth Amendment dated as of March 1, 1996 to the Security Agreement
dated as of May 6, 1994 by and between the Company and NationsBank
(8)
10.47 Third Amendment dated as of March 1, 1996 to the Guaranty Agreement
dated as of May 6, 1994 by and between the Company and NationsBank
(8)
10.48 Promissory Note dated as of March 1, 1996 issued by the Company in
favor of NationsBank in the original principal amount of up to
$10,000,000 (8)
10.49 Promissory Note dated as of February 29, 1996 issued by British
Trimmings Limited in favor of NationsBank in the original principal
amount of up to (pound sign)5,000,000 (8)
10.50 Letter dated January 3, 1996 from the Union of Textile Workers to
British Trimmings
21 Subsidiaries of the Company
23.1 Consents of Deloitte & Touche LLP
23.2 Consent of Grant Thornton
27 Financial Data Schedule (Filed in electronic format only)
Management Contracts and Compensatory
Plans and Arrangements
The foregoing exhibits include the following management contracts and
compensatory plans and arrangements:
10.2 Employment Agreement by and between British Trimmings and A.W. Laughton (5)
10.3 Employment Agreement by and between British Trimmings and C.V.
Balakrishnan (5)
10.17 1993 Stock Option Plan (1)
10.36 1994 Employee Stock Purchase Plan (6)
10.37 Letter Agreement dated May 12, 1995 by and between the Company and S.
Duane Southerland, Jr. (5)
</TABLE>
(1) Incorporated herein by reference to the exhibit designated by the same
number in the Company's Registration Statement on Form SB-2 (Registration
No. 33-71296)
(2) Incorporated herein by reference to the exhibit designated by the same
number in the Company's Annual Report on Form 10-KSB for the fiscal year
ended July 2, 1994
(3) Incorporated herein by reference to the exhibit designated
by the same number in the Company's Quarterly Report on Form 10-QSB for the
quarterly period ended December 31, 1994
(4) Incorporated herein by reference to the exhibit designated
by the same number in the Company's Quarterly Report on Form 10-QSB for the
quarterly period ended April 1, 1995
(5) Incorporated herein by reference to the exhibit designated by the same
number in the Company's Annual Report on Form 10-KSB for the fiscal year
ended July 1, 1995.
(6) Incorporated herein by reference to Exhibit 4 to the Company's Registration
Statement on Form S-8 (Registration No. 33-85518)
(7) Incorporated herein by reference to the exhibit designated by the same
number in the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 30, 1995
(8) Incorporated herein by reference to the exhibit designated by the same
number in the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 30, 1996.
Signatures
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSO PRODUCTS COMPANY
By: /s/ S. Duane Southerland, Jr.
-------------------------------
S. Duane Southerland, Jr.
President and Chief Executive Officer
Dated: September 25, 1996
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
/s/ S. Duane Southerland, Jr. President and Chief Executive Officer September 25, 1996
- -----------------------------------
S. Duane Southerland, Jr. (Principal Executive Officer)
/s/ Gilbert G. Bartell Chief Financial Officer and Treasurer September 25, 1996
- -----------------------------------
Gilbert G. Bartell (Principal Financial Officer)
/s/ David B. Dechant Chief Accounting Officer and September 25, 1996
- -----------------------------------
David B. Dechant Controller
(Principal Accounting Officer)
/s/ J. Cary Findlay Director and September 25, 1996
- -----------------------------------
J. Cary Findlay Chairman of the Board
/s/ Konstance J.K. Findlay Director September 25, 1996
- -------------------------------------
Konstance J.K. Findlay
/s/ Marcus T. Hickman Director September 25, 1996
- -------------------------------------
Marcus T. Hickman
/s/ Antony W. Laughton Director September 25, 1996
- -------------------------------------
Antony W. Laughton
/s/ John H. Maxheim Director September 25, 1996
- -------------------------------------
John H. Maxheim
/s/ James H. Shaw Director September 25, 1996
- ---------------------------------------
James H. Shaw
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
Item 14(a)(3)
FORM 10-K
ANNUAL REPORT
For the Fiscal Year Ended June 29, 1996 Commission File Number 0-22942
CONSO PRODUCTS COMPANY
EXHIBIT INDEX
</TABLE>
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Exhibit Description Numbered Page
- ------ ------------------- -------------
<S> <C>
3.4 Articles of Incorporation of the Company (1) --
3.5 Bylaws of the Company (1) --
10.2 Employment Agreement dated December 22, 1993 by and between British
Trimmings and A.W. Laughton (5) --
10.3 Employment Agreement dated December 22, 1993 by and between British
Trimmings and C.V. Balakrishnan (5) --
10.4 Loan Agreement dated as of May 6, 1994 by and between the Company
and NationsBank of North Carolina, N.A., a national banking association
now known as "NationsBank N.A. (Carolinas)" ("NationsBank") (2) --
10.8 Security Agreement dated as of May 6, 1994 by and between the
Company and NationsBank (2) --
10.9 Guaranty Agreement dated as of May 6, 1994 given by the Company in
favor of NationsBank (2) --
10.10 Mortgage and Security Agreement dated May 3, 1993 by and between
the Company and NationsBank (1) --
10.11 First Amendment dated as of April 14, 1994 by and between the
Company and NationsBank to the Mortgage and Security Agreement
dated May 3, 1993 by and between the Company and NationsBank (2) --
10.14 Letter Agreement dated August 20, 1992 by and between
the Company and Louis Nichole, Inc. (1) --
10.15 Letter Agreement dated January 8, 1993 by and between the Company
and Wesley Mancini Ltd. (1) --
10.16 Marketing Agreement dated November 3, 1988 by and between
the Company and F. Schumacher & Co. (1) --
10.17 1993 Stock Option Plan (1) --
10.18 Loan Facility Agreement dated 22 June 1990 between British Trimmings
and National Westminster Bank PLC (1) --
10.19 Advice of Borrowing Terms dated 10 June 1993 from National
Westminster Bank PLC to British Trimmings (1) --
10.20 Agreement dated 10 September 1993 between Calver Properties Limited
and British Trimmings (Leek) Limited (1) --
10.23 First Amendment dated as of December 1, 1994 to the Loan Agreement
dated as of May 6, 1994 by and between the Company and NationsBank
(3) --
10.26 First Amendment dated as of December 1, 1994 to the Security
Agreement dated as of May 6, 1994 by and between the Company and
NationsBank (3) --
10.27 First Amendment dated as of December 1, 1994 to the Guaranty
Agreement dated as of May 6, 1994 given by the Company in favor of the
Bank (3) --
10.28 Second Amendment dated as of February 10, 1995 to the Loan Agreement
dated as of May 6, 1994 by and between the Company and NationsBank
(4) --
10.30 Second Amendment dated as of February 10, 1995 to the Security
Agreement dated as of May 6, 1994 by and between the Company and
NationsBank (4) --
10.31 Advice of Borrowing Terms of March 31, 1995 (Revision) regarding
National Westminster Bank facility letter of June 22, 1990 (4) --
10.32 Third Amendment dated as of June 13, 1995 to the Loan Agreement dated
as of May 6, 1994 by and between the Company and NationsBank (5) --
10.34 Third Amendment dated as of June 13, 1995 to the Security Agreement
dated as of May 6, 1994 by and between the Company and NationsBank (5) --
10.36 1994 Employee Stock Purchase Plan (6) --
10.37 Letter Agreement dated May 12, 1995 by and between the Company and
S. Duane Southerland, Jr. (5) --
10.38 Fourth Amendment dated as of November 1, 1995, to the Loan
Agreement dated as of May 6, 1994, by and between the Company and
NationsBank (7) --
10.40 Fourth Amendment dated as of November 1, 1995, to the Security
Agreement dated as of May 6, 1994, by and between the Company and
NationsBank (7) --
10.41 Second Amendment dated as of November 1, 1995, to the Guaranty
Agreement dated as of May 6, 1994, by and between the Company and
NationsBank (7) --
10.42 Fifth Amendment dated as of December 1, 1995, to the Loan
Agreement dated as of May 6, 1994, by and between the Company and
NationsBank (7) --
10.43 Estoppel and Modification Agreement dated as of December 1, 1995,
by the Company in favor of NationsBank (7) --
10.44 Estoppel and Modification Agreement dated as of December 1, 1995,
by British Trimmings in favor of NationsBank (7) --
10.45 Sixth Amendment dated as of March 1, 1996 to the Loan Agreement
dated as of May 6, 1994, by and between the Company and
NationsBank (8) --
10.46 Fifth Amendment dated as of March 1, 1996 to the Security
Agreement dated as of May 6, 1994 by and between the Company and
NationsBank (8) --
10.47 Third Amendment dated as of March 1, 1996 to the Guaranty
Agreement dated as of May 6, 1994 by and between the Company and
NationsBank (8) --
10.48 Promissory Note dated as of March 1, 1996 issued by the Company in
favor of NationsBank in the original principal amount of up to
$10,000,000 (8) --
10.49 Promissory Note dated as of February 29, 1996 issued by British
Trimmings in favor of NationsBank in the original
principal amount of up to (pound sign)5,000,000 (8) --
10.50 Letter dated January 3, 1996 from the Union of Textile Workers to
British Trimmings
21 Subsidiaries of the Company
23.1 Consents of Deloitte & Touche LLP
23.2 Consent of Grant Thornton
27 Financial Data Schedule (filed in electronic format only)
Management Contracts and Compensatory Plans and Arrangements
The foregoing exhibits include the following
management contracts and compensatory plans and
arrangements:
10.2 Employment Agreement dated December 22, 1993 by and between British
Trimmings and A.W. Laughton (5) --
10.3 Employment Agreement dated December 22, 1993 by and between British
Trimmings and C.V. Balakrishnan (5) --
10.17 1993 Stock Option Plan (1) --
10.36 1994 Employee Stock Purchase Plan (6) --
10.37 Letter Agreement dated May 12, 1995 by and between the Company and
S. Duane Southerland, Jr. (5) --
</TABLE>
(1) Incorporated herein by reference to the exhibit designated by
the same number in the Company's Registration Statement on Form
SB-2 (Registration No. 33-71296)
(2) Incorporated herein by reference to the exhibit designated by the
same number in the Company's Annual Report on Form 10-KSB for the
fiscal year ended July 2, 1994
(3) Incorporated herein by reference to the exhibit designated by the
same number in the Company's Quarterly Report on Form 10-QSB for
the quarterly period ended December 31, 1994
(4) Incorporated herein by reference to the exhibit designated by the
same number in the Company's Quarterly Report on Form 10-QSB for
the quarterly period ended April 1, 1995
(5) Incorporated herein by reference to the exhibit designated by
the same number in the Company's Annual Report or Form 10-KSB
for the fiscal year ended July 1, 1995.
(6) Incorporated herein by reference to Exhibit 4 to the Company's
Registration Statement on Form S-8 (Registration No. 33-85518)
(7) Incorporated herein by reference to the exhibit designated by the
same number in the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended December 30, 1995.
(8) Incorporated herein by reference to the exhibit designated by
the same number in the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 30, 1996.
Exhibit 10.50
[Letterhead of Union of Textile Workers]
3rd January, 1996
Mr. C. Balakrishnan,
British Trimmings Ltd.
Coronation Street,
STOCKPORT,
Cheshire
Dear Mr. Balakrishnan,
1996 Wages & Conditions
Following the ballot of members, I now confirm acceptance of a 3.6%
increase in basic pay, and a new minimum rate for new starters of (pound
sign)135.00 per 39 hours operative from 2nd January 1996.
Yours sincerely
(signature of General Secretary)
General Secretary
Subsidiaries of the Registrant
State or other
Jurisdiction of
Incorporation
Name or Organization
British Trimmings Limited (1) England
Itatrim Limited (2) England
MacCulloch & Wallis (London) Limited (2) England
Pattern Masters Limited (2) England
Val-Mex, S.A. de C.V. Mexico
Each subsidiary does business under its own name.
_________________________________________________
(1) British Trimmings Limited was acquired by the Registrant on December 22,
1993.
(2) Subsidiary of British Trimmings Limited.
CONSENT OF INDEPENDENT AUDITORS
Conso Products Company
We consent to the incorporation by reference in the Registration Statement
No. 33-85518 of Conso Products Company on Form S-8, pertaining to Conso Products
Company's 1994 Employee Stock Purchase Plan, of our report dated August 14, 1996
appearing in this Annual Report on Form 10-K of Conso Products Company for the
year ended June 29, 1996.
/s/ Deloitte & Touche LLP
Greenville, South Carolina
September 25, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Conso Products Company
We consent to the incorporation by reference in the Registration Statement
No. 33-97146 of Conso Products Company on Form S-8, pertaining to the Conso
Products Company 1993 Stock Option Plan, of our report dated August 14, 1996
appearing in this Annual Report on Form 10-K of Conso Products Company for the
year ended June 29, 1996.
/s/ Deloitte & Touche LLP
Greenville, South Carolina
September 25, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
Conso Products Company
We consent to the incorporation by reference in the Registration Statement
No. 333-1364 of Conso Products Company on Form S-3 of our report dated August
14, 1996 appearing in this Annual Report on Form 10-K of Conso Products Company
for the year ended June 29, 1996.
/s/ Deloitte & Touche LLP
Greenville, South Carolina
September 25, 1996
<PAGE>
<PAGE>
Chartered Accountants Grant Thornton (logo)
The UK Member Firm of
Grant Thornton International
CONSENT OF INDEPENDENT AUDITORS
Conso Products Company
We consent to the incorporation by reference in the Registration Statements of
Conso Products Company on:
[ ] Form S-8 (No. 33-97146, effective September 20, 1995), pertaining to
Conso Products Company's 1993 Stock Option Plan
[ ] Form S-8 (No. 33-85518, effective October 20, 1994), pertaining to
Conso Products Company's 1994 Employee Stock Purchase Plan
[ ] Form S-3 (No. 333-1364, effective February 14, 1996)
of our report dated August 14, 1996 included in the Annual Report on Form 10-K
of Conso Products Company for the fiscal year ended June 29, 1996.
(Signature of Grant Thornton)
GRANT THORNTON
Registered Auditors
Chartered Accountants
Manchester
United Kingdom
September 25, 1996
Heron House
Albert Square
Manchester M60 8GT
Tel 0161 834 5414
Tel 0161 953 0214
Fax 0161 832 6042
Authorised by The Institute of
Chartered Accountants in England
and Wales to carry on investment
business. A list of partners may be
inspected at the above address and
at Grant Thornton House
Euston Square London NW1 2EP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the Company's
audited financial statements for the fiscal year ended June 29, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000914448
<NAME> CONSO
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-02-1995
<PERIOD-END> JUN-29-1996
<CASH> 189,845
<SECURITIES> 0
<RECEIVABLES> 11,580,298
<ALLOWANCES> 327,770
<INVENTORY> 20,064,822
<CURRENT-ASSETS> 33,321,833
<PP&E> 18,966,638
<DEPRECIATION> (6,592,375)
<TOTAL-ASSETS> 47,277,512
<CURRENT-LIABILITIES> 13,860,913
<BONDS> 0
0
0
<COMMON> 16,896,346
<OTHER-SE> 30,778,333
<TOTAL-LIABILITY-AND-EQUITY> 47,277,512
<SALES> 70,713,651
<TOTAL-REVENUES> 70,713,651
<CGS> 45,281,292
<TOTAL-COSTS> 25,432,359
<OTHER-EXPENSES> 15,560,257
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 917,349
<INCOME-PRETAX> 9,119,105
<INCOME-TAX> 2,675,945
<INCOME-CONTINUING> 6,443,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,443,160
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30
</TABLE>
