FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number - 1-6797
TEXFI INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-0795032
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5400 Glenwood Avenue, Suite 215, Raleigh, North Carolina 27612
(Address of principal executive offices)
(ZIP Code)
(919) 783-4736
(Registrant's telephone number, including area code)
Number of shares of Common Stock outstanding
at September 13, 1996 - 8,735,491
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
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED AUGUST 2, 1996
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The consolidated financial statements included herein have been
prepared by Texfi Industries, Inc. (the "Company"), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. The
consolidated balance sheet as of November 3, 1995 has been taken from the
audited financial statements as of that date. Certain information and note
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's latest Annual Report on Form 10-K.
The consolidated financial statements included herein reflect all
adjustments (none of which are other than normal recurring accruals) which are,
in the opinion of management, necessary for a fair presentation of the
information included. Operating results for the thirteen-week and thirty-nine
week periods ended August 2, 1996 are not necessarily indicative of the results
that may be expected for the year ended November 1, 1996. The following
consolidated financial statements are included:
Consolidated Statements of Income for the thirteen weeks and
thirty-nine weeks ended August 2, 1996 and July 28, 1995
Consolidated Balance Sheets as of August 2, 1996 and November 3, 1995
Consolidated Statements of Cash Flows for the thirteen weeks and
thirty-nine weeks ended August 2, 1996 and July 28, 1995
Condensed Notes to Consolidated Financial Statements
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
AUGUST 2, July 28, AUGUST 2, July 28,
1996 1995 1996 1995
---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
NET SALES ........................... $ 59,457 $ 65,187 $ 176,300 $ 181,528
---------- ---------- ---------- ----------
COST AND EXPENSES:
Cost of goods sold ............... 52,745 57,559 155,955 159,810
Selling, general and admin. ...... 5,319 4,466 14,285 13,074
---------- ---------- ---------- ---------
Total ......................... 58,064 62,025 170,240 172,884
---------- ---------- ---------- ---------
OPERATING INCOME..................... 1,393 3,162 6,060 8,644
---------- ---------- ---------- ---------
OTHER EXPENSE (INCOME):
Interest ......................... 2,573 2,853 7,748 9,038
Other, net ....................... 77 (3) 127 (7)
---------- ---------- ---------- ----------
Total ......................... 2,650 2,850 7,875 9,031
---------- ---------- ---------- ----------
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS .......................... (1,257) 312 (1,815) (387)
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
operations........................ -- -- -- (2,219)
Loss from disposal of discontinued
operations........................ -- -- -- (13,326)
---------- ----------- ---------- ----------
Total.......................... -- -- -- (15,545)
---------- ----------- ---------- ----------
Income (Loss) before Income Taxes.... (1,257) 312 (1,815) (15,932)
Provision for Income Taxes........... -- -- -- --
NET INCOME (LOSS).................... $ (1,257) $ 312 $ (1,815) $ (15,932)
========== ========== =========== =========
NET INCOME (LOSS) PER SHARE:
Net income (loss) from continuing
operations .................... $ (.14) $ .04 $(.21) $ (.04)
Loss from discontinued
operations .................... -- -- -- (1.80)
---------- ---------- ---------- ----------
Net income (loss)................. $(.14) $ .04 $(.21) $(1.84)
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements on page 6.
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(UNAUDITED)
AUGUST 2, November 3,
1996 1995
---------- -------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .............. $ 401 747
Receivables:
Trade ............................... 4,220 1,958
Due from factor ..................... 42,877 6,971
Other ............................... 108 244
Inventories ............................ 27,553 28,092
Prepaid expenses ....................... 1,976 2,077
Property, plant and equipment held for
disposal - net....................... 450 1,513
--------- --------
Total................................ 77,585 41,602
PROPERTY, PLANT AND EQUIPMENT - NET ...... 48,180 50,514
OTHER ASSETS ............................. 4,115 3,929
-------- ---------
$129,880 $ 96,045
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ... $ 6,635 $ 8,452
Accounts payable ....................... 21,352 22,742
Other liabilities ...................... 5,421 6,144
Federal and state income taxes ......... 70 70
-------- --------
Total................................ 33,478 37,408
LONG-TERM DEBT ............................ 11,951 12,471
REVOLVING CREDIT LOAN...................... 40,783 --
SUBORDINATED DEBENTURES ................... 40,480 40,724
OTHER LONG-TERM OBLIGATIONS ............... 564 1,205
COMMON STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value .......... 8,735 8,651
Additional paid-in capital ............. 25,186 25,069
Retained earnings ...................... (31,297) (29,483)
-------- --------
Total............................... 2,624 4,237
-------- ---------
$129,880 $ 96,045
======== ========
See Notes to Consolidated Financial Statements on page 6.
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
AUGUST 2, July 28, AUGUST 2, July 28,
1996 1995 1996 1995
--------- --------- -------- ------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income .................... $ (1,257) $ 312 $ (1,815) $(15,932)
Adjustments to reconcile net (loss)
income to net cash (used in) provided
by operating activities:
Depreciation & amortization .... 2,127 2,246 6,280 7,376
Provision for losses on accounts
receivable....................... 392 (744) 830 456
Loss on sale of property, plant
and equipment.................... (1) 51 4 7,609
Changes in operating assets and liabilities:
Accounts receivable ............. (2,227) (2,591) (38,862) 144
Inventories ..................... 2,171 513 539 9,759
Prepaid and other assets ........ 141 (337) -- (971)
Accounts payables and accrued
liabilities ..................... (311) 3,311 (2,754) 2,357
-------- ------ ------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 1,035 2,761 (35,778) 10,798
INVESTING ACTIVITIES
Purchases of property, plant and
equipment ............................ (1,710) (1,116) (5,972) (3,162)
Proceeds from sale of property, plant
and equipment......................... 1.633 2,773 3,596 9,293
--------- ------- ------- -------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (77) 1,657 (2,376) 6,131
FINANCING ACTIVITIES
Proceeds from long-term debt borrowing. -- -- 19,000 --
Proceeds (payments) from Revolver debt
borrowings............................ 912 -- 40,783 --
Payments on long-term debt and capital
lease obligations..................... (1,699) (4,533) (21,129) (13,857)
Payments for repurchase of subordinated
debentures ........................... -- -- (244) (4,393)
Capitalized loan costs................. (107) -- (803) --
Proceeds from employee stock plans..... -- -- 201 --
Restricted Stock Forfeitures........... -- -- -- (32)
------- ------- ------- ------
NET CASH (USED IN)PROVIDED BY
FINANCING ACTIVITIES (894) (4,533) 37,808 (18,282)
------- ------- ------- -------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 64 (115) (346) (1,353)
Cash and cash equivalents
at beginning of period ................ 337 230 747 1,468
--------- -------- ------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 401 $ 115 $ 401 $ 115
======== ======== ======= =========
</TABLE>
See Notes to Consolidated Financial Statements on page 6.
<PAGE>
TEXFI INDUSTRIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 2, 1996
1. Details of certain balance sheet captions are as follows (in thousands):
(UNAUDITED)
AUGUST 2, November 3,
1996 1995
INVENTORIES:
Finished goods .......................... $ 11,541 $ 10,919
Goods in process ........................ 9,419 10,261
Raw materials ........................... 4,309 4,160
Supplies ................................ 2,284 2,752
-------- ---------
Total .............................. $ 27,553 $ 28,092
======== ==========
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements .............. $ 2,842 $ 2,841
Buildings ............................... 23,182 23,099
Machinery, equipment, etc. .............. 81,986 83,531
Leasehold improvements .................. 64 64
Construction in progress ................ 2,531 772
-------- ----------
Total .............................. 110,605 110,307
Less accumulated depreciation ........... 62,425 59,793
-------- ---------
Property, plant and equipment, net.. $ 48,180 $ 50,514
======== ==========
LONG-TERM DEBT:
Term loan at average 8.07% variable interest, payable in equal monthly
installments through balloon payment
due September 1998....................... $ 17,000 $ --
Term loan at 8.4202% .................. -- 17,998
Term loan at 6.75%, payable in monthly
installments including interest through
November 1998............................ 1,300 1,800
Capitalized leases, principally at prime,
payable in monthly installments through
2009 .................................... 286 505
Term loan at prime plus 1% ............... -- 620
-------- ------
Total ............................... 18,586 20,923
Less current maturities ................. 6,635 8,452
-------- ---------
Due after one year . ............. $ 11,951 $ 12,471
========= ========
<PAGE>
1. Continued
AUGUST 2, November 3,
1996 1995
SUBORDINATED DEBENTURES:
Senior Subordinated Debentures,
8 3/4% due August 1, 1999....... $ 34,420 $ 34,430
Subordinated Extendible Debentures,
11%, due April 1, 2000
(Series C)...................... 2,523 2,757
Convertible Senior Subordinated
Debentures, 11-1/4% due October
1, 1997 ........................ 3,537 3,537
--------- --------
Total....................... $ 40,480 $ 40,724
=========== ========
2. Primary earnings (loss) per common share are based on the average number of
shares of common stock and common stock equivalents of dilutive stock options
outstanding during the applicable period.
Fully diluted earnings (loss) per common share are computed assuming
conversion of the 11-1/4% Convertible Senior Subordinated Debentures into common
stock as of the beginning of the applicable period, and the applicable period's
interest expense thereon, net of income taxes, was added to net income (loss)
for the applicable period.
3. At August 2, 1996, shares of common stock were reserved for possible
issuance as follows:
Conversion of 11-1/4% Convertible Senior
Subordinate Debentures ......................... 528,647
Stock options................................... 858,099
Stock options granted to Chadbourne Corporation.. 600,000
1990 Executive Stock Purchase Plan .............. 101,764
Directors' Deferred Stock Compensation Plan ..... 162,791
---------
Total ...................................... 2,251,301
=========
4. Certain amounts have been reclassified to conform with 1996
presentation and reflect discontinued operations. There is no effect on either
net income or common stockholders' equity.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS:
Net sales for the third quarter of the 1996 fiscal year decreased to
$59,457,000 as compared to $65,187,000 for the third quarter of 1995. This
decrease of $5,730,000 (8.8%) resulted from decreased sales at both the
Kingstree Knit Apparel division of $7,442,000 (45.2%) and Texfi Narrow Fabrics
division of $706,000 (9.9%) which more than offset an increase in sales at the
Texfi Blends division of $2,418,000 (5.8%). Net sales for the first nine months
of fiscal 1996 decreased $5,228,000 (2.9%) to $176,300,000 when compared to
sales of $181,528,000 for the same nine month period in fiscal 1995. For fiscal
1996, the Company's Texfi Blends division recorded increased sales of
$12,952,000 (12%), which were entirely offset by decreases in the Kingstree Knit
Apparel division of $13,518,000 (26.5%) and the Texfi Narrow Fabrics division of
$4,661,000 (21.1%).
Cost of goods sold, as a percentage of net sales, increased during the
third quarter of fiscal 1996 to 88.7% as compared to 88.3% during the third
quarter of fiscal 1995. For the first nine months of fiscal 1996, cost of goods
sold, as a percentage of net sales, increased to 88.5% compared to 88.0% for a
comparable period in 1995. The increase in the cost of goods sold percentage for
fiscal 1996 was attributable to lower gross margins at the Kingstree Knit
Apparel division which resulted primarily from fixed manufacturing costs which
could not be absorbed due to the low volume of sales as well as lower selling
prices for some of the division's products.
Selling, general and administrative expenses ("SG&A"), as a percentage
of sales, increased during the third quarter of fiscal 1996 to 8.9% when
compared with 6.9% for the third quarter of 1995. For the first nine months of
fiscal 1996, SG&A costs increased to 8.1% of sales compared to 7.2% of sales for
the same period in 1995. The increase in these SG&A costs as a percentage of
sales was due mainly to the inability of the Kingstree Knit Apparel division to
absorb its fixed SG&A costs as its sales volume declined and to a lesser extent
to increased selling costs at the Texfi Blends division as it expanded into new
markets.
<PAGE>
Interest expense decreased $280,000 (9.8%) during the third quarter of
fiscal 1996 to $2,573,000 as compared to $2,853,000 for the same period of 1995.
For the first nine month period of fiscal 1996, interest expense decreased
$1,290,000 (14.3%) from $9,038,000 to $7,748,000 for the same period in 1995.
These decreases resulted primarily from lower interest rates and to a lesser
degree reduced long-term debt obligations since July 28, 1995.
The 1995 nine month period net losses were impacted by a charge of
$15,545,000 related to the discontinuance of its Highland Yarn operations,
Jefferson diaper and corduroy production, and Marion Fabrics greige goods
operations.
Financial Condition:
After adjusting the net loss of $1.8 million incurred during the first
nine months of fiscal 1996 for non-cash items, operations generated cash of
approximately $5.3 million. This consisted of the $1.8 million net loss being
adjusted to a cash basis for depreciation and amortization ($6.3 million) and
the provision for losses on accounts receivable ($830,000), neither of which
required cash. Changes in operating assets and liabilities which required
approximately $41.2 million of cash when combined with cash generated from
operations of $5.3 million, resulted in operating activities using net cash of
$35.8 million. Changes in operating assets and liabilities consisted of
increases in accounts receivable ($38.4 million) and decreases in accounts
payable and accrued liabilities ($2.8 million) which were only partially offset
by decreases in inventory ($539,000). Accounts receivable increased as a result
of the $44.5 million payoff of factor advances, which had been previously netted
against accounts receivable. This payoff of factor advances originated from the
proceeds of debt borrowings and more than offset the changes in accounts
receivable due to routine operations, a decrease of $5.6 million. The net
proceeds from the credit facility, including Revolver advances since the
original March 15, 1996 closing ($59.0 million), and sales of property, plant
and equipment ($3.6 million), as well as cash on hand, provided the funds used
by operations, repaid long-term debt and subordinated debentures ($21.4 million)
and purchased equipment ($6.0 million).
<PAGE>
Working capital is comprised chiefly of inventories and accounts
receivable. Until negotiation of the credit facility discussed below, the
Company had maintained financing capacity for working capital and other general
corporate purposes under certain factoring agreements and other comparable
short-term borrowing arrangements. The amount reported on the November 3, 1995
balance sheet as "Due from Factor" represents accounts receivable with factors
net of funds advanced against eligible factor accounts receivable and
inventories.
At August 2, 1996, working capital equaled $44.1 million, an increase
of $39.9 million from the fiscal year ended November 3, 1995. This increase in
working capital is due primarily to the $44.5 million pay-off of factor advances
along with decreases in accounts payable and other liabilities ($2.1 million)
and current maturities of long-term debt ($1.9 million) which more than offset
decreases in cash ($346,000), accounts receivable, excluding factor advances
($6.4 million), inventory ($539,000), and property, plant and equipment held for
disposal ($1.0 million).
On March 15, 1996, the Company entered into a $74 million credit
facility. Net proceeds from the credit facility were applied towards the
previously existing term loans and outstanding factor advances. The new facility
consists of a $19 million term loan, payable in 30 equal monthly installments of
$500,000 and a balloon payment of $4.5 million in September 1998, and a
revolving credit line which can not exceed $54 million during the life of the
facility. As of August 2, 1996, funds available through the revolving credit
line approximated $7.9 million. The credit facility replaced the factor advances
with a revolving debt arrangement which expires on the same date as the term
loan's final maturity. The credit facility is secured by substantially all of
the Company's assets. The credit facility provides for the Company to elect
interest rates based upon either a CD, LIBOR or prime interest rate plus
applicable margin. The applicable margin is adjusted each fiscal year based upon
the Company's leverage ratio as defined in the credit facility. In addition, the
Company may elect interest periods ranging from 30 to 180 days depending upon
the various interest rate. As of August 2, 1996, the average interest rate for
the various elections held by the Company approximated 8.07% per annum. The
facility places limitations on the Company's rental expense, additional
indebtedness, acquisitions, capital expenditures, and sale or disposal of
assets. The Company is required to maintain a minimum net worth, as well as, to
comply with certain financial ratios, including current ratio, coverage ratio,
and leverage ratio, as defined by the facility. Some of the credit facility
covenants have been amended as of the end of third quarter 1996 to make them
less restrictive. The Company is currently in compliance with all of the
facility's covenants.
<PAGE>
On September 8, 1993, the Company issued $34.5 million in principal
amount of Senior Subordinated Debentures due August 1, 1999 ("8-3/4%
Debentures"). The annual interest rate of these debentures is 8.75%, payable
semiannually on August 1 and February 1. The 8-3/4% Debentures, which cannot be
called prior to their maturity date, are unsecured obligations but contain
covenants that place limitations on the use of proceeds from disposal of assets
and on the incurrence of additional indebtedness and senior indebtedness (as
defined in the indenture) if such indebtedness would exceed stated ratios of
capitalization and earnings after such incurrence. Under the most restrictive of
these covenants, the Company may not incur additional indebtedness if, after
giving effect to such incurrence, the aggregate amount of indebtedness of the
Company would exceed 75% of the sum of all indebtedness and stockholders'
equity. The Company is currently prohibited by this covenant from incurring
additional indebtedness.
As of August 2, 1996 the Company has approximately $2.5 million of its
Series C Debentures outstanding. The annual interest rate on these debentures
may be adjusted at the sole discretion of the Company on April 1st of each year
until maturity in the year 2000. On March 1, 1996, the Company set the Series C
interest rate at 13% for the period April 1, 1996 through March 31, 1997. The
Series C Debentures are redeemable on April 1st of each year, in whole or in
part, at the option of the holder or the Company for the principal amount
The Company plans to place into service $7.7 million of machinery and
equipment during fiscal 1996. As of the end of the third fiscal quarter, $6.0
million had been expended on machinery and equipment purchases. This equipment
primarily will increase fabric dyeing and finishing capacity as well as increase
knit apparel production sewing capacity. Management anticipates that
approximately $7.3 million of the $7.7 million of equipment will be placed into
service through a committed operating lease line which will not be reflected in
the Company's balance sheet.
Management believes cash flows from operations and funds available
through its revolving credit arrangement will provide the Company with
sufficient sources of funds to meet its 1996 cash needs and assuming no
significant deterioration in market conditions, for the foreseeable future.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibits to this report are listed in the accompanying index
to exhibits.
(b) Reports on Form 8-K
No reports on From 8-K were filed during the quarter
ended August 2, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEXFI INDUSTRIES, INC.
(Registrant)
Date: September 16, 1996 By:S/Dane L. Vincent
-----------------
Dane L. Vincent
Chief Financial Officer
and Treasurer
<PAGE>
TEXFI INDUSTRIES, INC.
INDEX TO EXHIBITS
*2(a)(1) Credit agreement dated as of March 15, 1996 among Registrant,
as Borrower, certain Lenders referred to therein, NationsBank,
N.A., as Agent, and NationsBanc Commercial Corporation, as
Disbursing Agent, filed as Exhibit 2(a)(1) to Registrant's
Form 8-K Current Report as of March 15, 1996.
*2(a)(2) Security Agreement dated as of March 15, 1996 between
Registrant, as Grantor, and NationsBank, N.A., as Agent for
certain Lenders referred to therein, and NationsBanc
Commercial Corporation, as Disbursing Agent, filed as Exhibit
2(a)(2) to Registrant's Form 8-K Current Report as of March
15, 1996.
*2(a)(3) Form of Deed of Trust and Security Agreement (North
Carolina property) dated as of March 15, 1996 between
Registrant, as Grantor, TIM, Inc., as Trustee, and
NationsBank, N.A., as Beneficiary and Agent for certain
Lenders referred to therein, and NationsBanc Commercial
Corporation, as Disbursing Agent, filed as Exhibit 2(a)(3) to
Registrant's Form 8-K Current Report as of March 15, 1996.
*2(a)(4) Form of Mortgage and Security Agreement (South Carolina
property) dated as of March 15, 1996 between Registrant, as
Grantor, and NationsBank, N.A., as Beneficiary and Agent for
certain Lenders referred to therein, and NationsBanc
Commercial Corporation, as Disbursing Agent, filed as Exhibit
2(a)(4) to Registrant's Form 8-K Current Report as of March
15, 1996.
*2(a)(5) Deed to Secure Debt and Security Agreement (Georgia
property) dated as of March 15, 1996 between Registrant, as
Grantor, and NationsBank, N.A., as Beneficiary and Agent for
certain Lenders referred to therein, and NationsBanc
Commercial Corporation, as Disbursing Agent, filed as Exhibit
2(a)(5) to Registrant's Form 8-K Current Report as of March
15, 1996.
<PAGE>
*2(a)(6) Form of Assignment of Factoring Proceeds dated as of
March 15, 1996, filed as Exhibit 2(a)(6) to Registrant's Form
8-K Current Report as of March 15, 1996.
*2(a)(7) First Amendment dated May 10, 1996 to the Credit
Agreement dated as of March 15, 1996 among Registrant, as
Borrower, certain Lenders referred to therein, NationsBank,
N.A., as Agent, and NationsBanc Commercial Corporation, as
Disbursing Agent, filed as Exhibit 2(a)(7) to Registrant's
Form 10-Q dated May 3, 1996.
*2(a)(8) Waiver Agreement dated June 14, 1996 to the Credit
Agreement dated as of March 15, 1996 among Registrant, as
Borrower. certain Lenders, referred to therein, NationsBank,
N.A., as Agent, and NationsBanc Commercial Corporation, as
Disbursing Agent, filed as Exhibit 2(a) (8) to Registrant's
Form 10-Q dated May 3, 1996.
2(a)(9) Second Amendment dated September 13, 1996 to the Credit
Agreement dated as of March 15, 1996 among Registrant, as
Borrower, certain Lenders referred to therein, NationsBank,
N.A., as Agent, and NationsBanc Commercial Corporation, as
Disbursing Agent.
*4(a)(1) Restated Certificate of Incorporation of Registrant
dated August 13, 1969, filed as Exhibit (3)(a)(1) to
Registrant's Form 10-K Annual Report for the fiscal year ended
October 31, 1980.
*4(a)(2) Certificate of Amendment of Certificate of
Incorporation of Registrant dated March 16, 1972, filed as
Exhibit (3)(a)(2) to Registrant's Form 10-K Annual Report for
the fiscal year ended October 31, 1980.
*4(a)(3) Certificate of Amendment of Certificate of
Incorporation of Registrant dated March 27, 1978, filed as
Exhibit (3)(a)(3) to Registrant's Form 10-K Annual Report for
the fiscal year ended October 31, 1980.
*4(a)(4) Certificate of Amendment of Certificate of
Incorporation of Registrant dated May 19, 1986, filed as
Exhibit 4.4 to Registrant's Form S-8 Registration Statement
(No. 33-14697).
<PAGE>
*4(a)(5) Certificate of Amendment of Certificate of Incorporation of
Registrant dated March 20, 1987, filed as Exhibit 4.5 to
Registrant's Form S-8 Registration Statement (No. 33-14697).
*4(a)(6) Certificate of Amendment of Certificate of Incorporation of
Registrant dated September 28, 1987, filed as Exhibit 4(a)(6)
to Registrant's Form S-2 Registration Statement (No.
33-16794).
*4(a)(7) Certificate of Designations of Registrant dated November 20,
1987, filed as Exhibit 4(a)(7) to Registrant's Form S-2
Registration Statement (No. 33-16794).
*4(a)(8) Certificate of Designations of Registrant dated March 8,1988
filed as Exhibit 4(a)(8) to Registrant's Form S-2 Registration
Statement (No. 33-20131).
*4(a)(9) Certificate of Designations of Registrant dated August 4,
1988, filed as Exhibit 4(d)(9) to Registrant's Form 10-Q
Quarterly Report for the fiscal quarter ended July 29, 1988.
*4(b)(1) Bylaws of Registrant, filed as Exhibit 4.6 to Registrant's
Form S-8 Registration Statement (No. 33-14697).
*4(b)(2) Amendment to Bylaws of Registrant, filed as Exhibit 4(b)(2)
to Registrant's Form S-2 Registration Statement (No.
33-16794).
*4(b)(3) Amendment to Bylaws of Registrant adopted by Registrant's
Board of Directors on January 18, 1991, filed as Exhibit
3(b)(3) to Registrant's Form 10-K Annual Report for the fiscal
year ended November 2, 1990.
*4(b)(4) Amendment to Bylaws of Registrant adopted by Registrant's
Board of Directors on August 31, 1994, filed as Exhibit
4(b)(4) to Registrant's Form 10-Q Quarterly Report for the
fiscal quarter ended July 29, 1994.
*4(b)(5) Amendment to Bylaws of Registrant adopted by Registrant's
Board of Directors on September 7, 1994, filed as Exhibit
4(b)(5) to Registrant's Form 10-Q Quarterly Report for the
fiscal quarter ended July 29, 1994.
<PAGE>
*4(c)(1) Indenture between Registrant and Rhode Island Hospital Trust
National Bank, Trustee, with a copy of Subordinated Debentures
due April 1, 1995, Series A, Subordinated Debentures due April
1, 1995, Series B and Subordinated Extendible Debentures due
April 1, 2000, Series C attached, filed as Exhibit 4(f) to
Registrant's Form S-2 Registration Statement (No. 33-32485).
*4(c)(2) First Supplemental Indenture between Registrant and Rhode
Island Hospital Trust National Bank, Trustee, with a revised
Subordinated Debenture due April 1, 1995, Series B attached,
filed as Exhibit 4 to Registrant's Form 8-K Current Form dated
May 16, 1990.
*4(c)(3) Indenture dated October 1, 1991 between Registrant and The
First National Bank of Boston, Trustee, with copy of 11-1/4%
Convertible Senior Subordinated Debenture due October 1, 1997,
filed as Exhibit 4(a)(1) to Registrant's Form 10-K Annual
Report for the fiscal year ended November 1, 1991.
*4(c)(4) Indenture dated September 8, 1993 between Registrant and The
First Union National Bank of North Carolina, Trustee, with
copy of 8-3/4% Senior Subordinated Debenture due August 1,
1999, filed as Exhibit 4(c)(2) to Registrant's Form 10-Q
Quarterly Report for the fiscal quarter ended July 30, 1993.
*4(c)(5) First Supplemental Indenture dated as of March 10,
1995, between Registrant and First Union National Bank of
North Carolina, as Trustee, filed as Exhibit 4(a)(1) to
Registrant's Form 8-K Current Report as of March 15, 1996.
*4(c)(6) Second Supplemental Indenture dated as of March 15,
1996, between Registrant and First Union National Bank of
North Carolina, as Trustee, filed as Exhibit 4(a)(2) to
Registrant's Form 8-K Current Report as of March 15, 1996.
*4(d)(1) Specimen Common Stock ($1 par value) certificates, filed as
Exhibit 4.01 to Amendment No. 2 to Registrant's Form S-1
Registration Statement (No. 2-41653).
*4(e)(1) Rights Agreement dated July 22, 1988 between Registrant and
The First Union National Bank of North Carolina, as Rights
Agent, filed as Exhibit 1 to Registrant's Form 8-K Current
Form dated July 22, 1988.
<PAGE>
*4(e)(2) Form of Rights Certificate, filed as Exhibit B to Exhibit 1 to
Registrant's Form 8-K Current Form dated July 22, 1988.
*4(e)(3) Amendment to Rights Agreement between Registrant and The
First Union National Bank of North Carolina dated October 31,
1988, filed as Exhibit 4(e)(3) to Registrant's Form S-2
Registration Statement (No. 33-32485).
*4(e)(4) Second Amendment to Rights Agreement dated May 24, 1994
between Registrant and The First Union National Bank of North
Carolina, as Rights Agent, filed as Exhibit 4(e)(4) to
Registrant's Form 10-Q Quarterly Report for the fiscal quarter
ended April 29, 1994.
*4(e)(5) Third Amendment to Rights Agreement dated December 16, 1994
between Registrant and The First Union National Bank of North
Carolina, as Rights Agent, filed as Exhibit 4(c)(5) to
Registrant's Form 10-K Annual Report for the fiscal year ended
October 28, 1994.
11 Computation of Earnings Per Share
* Incorporated by reference to previous filing.
<PAGE>
<PAGE>
SECOND AMENDMENT
THIS SECOND AMENDMENT (the "Amendment"), to the Credit Agreement
referred to below is entered into as of the 12th day of September, 1996, by and
among TEXFI INDUSTRIES, INC., a corporation organized under the laws of Delaware
(the "Borrower"), THE LENDERS SIGNATORY HERETO (collectively, the "Lenders"),
NATIONSBANK, N.A., a national banking association, as Agent, and NATIONSBANC
COMMERCIAL CORPORATION, as Disbursing Agent (collectively, the "Agents").
STATEMENT OF PURPOSE
The Borrower, the Lenders and the Agents are parties to a certain
Credit Agreement dated as of March 15, 1996 (as heretofore amended hereby and as
further amended or modified hereby, the "Credit Agreement"), pursuant to which
the Lenders have agreed to make, and have made, certain Loans to the Borrower.
The Borrower, the Lenders and the Agents have agreed to amend the Credit
Agreement upon the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto hereby agree as follows:
I. AMENDMENTS.
1. Section 3.3 of the Credit Agreement is hereby amended to provide
that the Net Proceeds in the aggregate amount of $144,580 realized by the
Borrower from the Asset Sales with respect to assets constituting a part of the
Borrower's former Highland Yarn Mills facility located in High Point, North
Carolina sold during the period from March 15, 1996 through July 2, 1996 shall,
in accordance with Section 3.5(c) of the Credit Agreement, be applied to reduce
each of the twenty-five (25) remaining principal installments due on the Term
Loan by the sum of $5,783.20. Accordingly, the first twenty-four (24) of such
remaining monthly installments shall be in the amount of $494,216.80 each, and
the last installment shall be in the amount of $4,494,216.80 or such other
principal amount as shall then remain unpaid under the Term Loan.
2. Subsection 3.5(c) of the Credit Agreement is hereby amended
by deleting the same in its entirety and inserting in lieu thereof the
following:
(c) Manner of Application. Each mandatory repayment
under this Section 3.5 shall be applied to the principal
installments due on the Term Loan on a pro rata basis, except
that mandatory repayments under this Section 3.5 with respect
to Asset Sales of assets constituting a part of the Borrower's
former Highland Yarn Mills facility in High Point, North
Carolina occurring after July 2, 1996 shall be applied to the
last principal
<PAGE>
installment due on the Term Loan. Each such repayment shall be
accompanied by accrued interest on the amount prepaid and by
any payment required under Section 4.8 hereof.
3. Section 9.2 of the Credit Agreement is hereby amended by
deleting the same in its entirety and inserting in lieu thereof the following:
Coverage Ratio. Permit the Coverage Ratio to be less than the
following ratios as of the date indicated:
Ratio Applicable Date
.8 to 1.0 At the end of the third quarter of
Borrower's 1996 fiscal year.
.7 to 1.0 At the end of the fourth quarter of
Borrower's 1996 fiscal year.
1.1 to 1.0 At the end of each quarter of
Borrower's 1997 fiscal year.
1.25 to 1.0 At the end of the first quarter of
Borrower's 1998 fiscal year and
at the end of each fiscal quarter
thereafter.
4. Section 9.3 of the Credit Agreement is hereby amended by
deleting the same in its entirety and inserting in lieu thereof the following:
Leverage Ratio. Permit the Leverage Ratio to exceed the following
ratios as of the date indicated:
Ratio Applicable Date
5.60 to 1.0 At the end of the third quarter of
Borrower's 1996 fiscal year.
6.40 to 1.0 At the end of the fourth quarter of
Borrower's 1996 fiscal year.
4.50 to 1.0 At the end of the first quarter of
Borrower's 1997 fiscal year.
- 2 -
<PAGE>
4.0 to 1.0 At the end of the second quarter
of Borrower's 1997 fiscal year.
4.0 to 1.0 At the end of the third quarter of
Borrower's 1997 fiscal year.
3.5 to 1.0 At the end of the fourth quarter of
Borrower's 1997 fiscal year and
at the end of each fiscal quarter
thereafter.
5. Section 9.4 of the Credit Agreement is hereby amended by
deleting the same in its entirety and inserting in lieu thereof the following:
Minimum Net Worth. Permit Consolidated Net Worth to be less than
$2,575,000 as of the end of the third quarter of Borrower's 1996 fiscal
year, $1,600,000 as of the end of the fourth quarter of Borrower's 1996
fiscal year and as of any date thereafter, an amount equal to the sum
of (x) $4,000,000 plus (y) fifty percent (50%) of Consolidated Net
Income (if positive) of the Borrower and its Subsidiaries for each
fiscal quarter occurring after the Closing Date plus (z) one hundred
percent (100%) of the aggregate Net Proceeds of any issuance or
offering of capital stock received by the Borrower or any of its
Subsidiaries after the Closing Date.
6. Section 11.2(b) is hereby amended by deleting the word
"Disbursing" from the first and second sentences thereof.
7. Disbursing Agent. The Credit Agreement is hereby amended to provide
that neither the joinder in nor the consent of the Disbursing Agent to any
further amendment of the Credit Agreement or of any other Loan Document or to
the release of any Collateral under the Security Documents shall hereafter be
required; provided, that the Disbursing Agent's sole obligation under the Credit
Agreement shall be the computation of the Borrowing Base in the manner provided
in Section 2.2(c) of the Credit Agreement. Notwithstanding the foregoing, the
provisions of Article 12 of the Credit Agreement shall continue in effect for
the Disbursing Agent's benefit in respect of any actions taken or omitted to be
taken by it while acting as Disbursing Agent prior to or after the effectiveness
of this Amendment.
II. RELEASE OF EQUIPMENT.
1. Highland Yarns. The Lenders hereby authorize the Agent to
execute and deliver all documents reasonably required to release the Lien of
the Lenders in the equipment of the Borrower more particularly described on
Schedule A attached hereto and incorporated herein by
- 3 -
<PAGE>
reference, which equipment consists of assets no longer necessary or
usable in the business of the Borrower or its Subsidiaries.
2. Sale/Leaseback. The Lenders hereby consent to the release of the
equipment to be sold to and leased back from NationsCredit Commercial
Corporation, which equipment is more particularly described on Schedule B
attached hereto and incorporated herein by reference, and authorize the Agent to
execute and deliver all documents reasonably required to release the Lien of the
Lenders in such equipment. By its execution of this Amendment, the Borrower
confirms that the equipment described on Schedule B attached hereto was
purchased by the Borrower on the dates set forth on Schedule B.
III. CONFIRMATION; CONDITIONS TO EFFECTIVENESS.
1. Representations and Warranties. In order to induce the Lenders and
the Agents to execute this Amendment, the Borrower hereby confirms that each
representation and warranty made by it under the Loan Documents is true and
correct as of the date hereof and that after giving effect to this Amendment, no
Default or Event of Default exists under the Credit Agreement. The Borrower
hereby represents and warrants that as of the date hereof there are no claims or
offsets against or defenses or counterclaims to its obligations under the Credit
Agreement or any other Loan Document.
2. Conditions to Effectiveness. This Amendment shall become
effective upon completion of the following conditions to the satisfaction of
the Agents:
(a) receipt by the Agent of an originally executed copy of this
Amendment; and
(b) receipt by the Agent of any other document or instrument
reasonably requested by it in connection with the execution of
this Amendment; and
(c) receipt by the Agent of the Amendment fee in the amount of
$89,375 to be shared by the Lenders pro rata in accordance
with their respective Commitment Percentages.
IV. GENERAL PROVISIONS.
1. Limited Amendment. Except as expressly amended herein, the Credit
Agreement and each other Loan Document shall continue to be, and shall remain,
in full force and effect. This Amendment shall not be deemed (i) to be a waiver
of, or consent to, or a modification or amendment of, any other term or
condition of the Credit Agreement or (ii) to prejudice any other right or rights
which the Agents or any Lender may now have or may have in the future under or
in connection with the Credit Agreement or the Loan Documents
or any of the instruments or
- 4 -
<PAGE>
agreements referred to therein, as the same may be amended or modified from time
to time.
2. Counterparts. This Amendment may be executed by one or more
of the parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
3. Definitions. All capitalized terms used and not defined
herein shall have the meanings given thereto in the Credit Agreement.
4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NORTH CAROLINA.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
BORROWER:
TEXFI INDUSTRIES, INC.
By: /s/
Name:
Title:
LENDERS:
NATIONSBANK, N.A.
By: /s/
Name:
Title:
- 5 -
<PAGE>
MELLON BANK, N.A.
By: /s/
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By: /s/
Name:
Title:
CORESTATES BANK, N.A.
By: /s/
Name:
Title:
FLEET BANK, NATIONAL ASSOCIATION
By:
Name:
Title:
- 6 -
<PAGE>
NATIONAL BANK OF CANADA
By: /s/
Name:
Title:
By: /s/
Name:
Title:
AGENT:
NATIONSBANK, N.A.
By: /s/
Name:
Title:
DISBURSING AGENT:
NationsBanc Commercial Corporation
By: /s/
Name:
Title:
- 7 -
<PAGE>
SCHEDULE A
To
Second Amendment
by and among
Texfi Industries, Inc.,
the Lenders Signatory Hereto,
NationsBank, N.A. and
NationsBanc Commercial Corporation
Dated September ___, 1996
EQUIPMENT
<PAGE>
SCHEDULE B
To
Second Amendment
by and among
Texfi Industries, Inc.,
the Lenders Signatory Hereto,
NationsBank, N.A. and
NationsBanc Commercial Corporation
Dated September ___, 1996
EQUIPMENT
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
TEXFI INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
AUGUST 2, July 28, AUGUST 2, July 28,
1996 1995 1996 1995
---------- ---------- ------------ -------
<S> <C> <C> <C> <C>
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:
Balance at beginning of period ................. 8,735,491 8,650,690 8,650,690 8,652,621
Stock options exercised......................... -- -- -- --
Deferred compensation.......................... -- -- 84,801 3,069
Restricted stock forfeitures.................... -- -- -- (5,000)
Sale of treasury stock.......................... -- -- -- --
---------- ----------- ------------ ---------
Balance at end of period ..................... 8,735,491 8,650,690 8,735,491 8,650,690
========== =========== ============ =========
PRIMARY:
Net income (loss) from continuing operations.... $(1,257,000) $ 312,000 $ (1,815,000) $ (387,000)
Net loss from discontinued operations........... -- -- -- (15,545,000)
----------- ----------- ------------ -----------
Net income (loss) applicable to common
stockholders ................................. $(1,257,000) $ 312,000 $ (1,815,000) $(15,932,000)
============ =========== ============ ============
Weighted average number of shares outstanding:
Common stock outstanding for the period
based on a daily weighted average ........... 8,735,491 8,650,690 8,683,073 8,652,019
Common stock equivalents - outstanding stock
options computed on the treasury stock
method using average market price ........... -- -- -- --
----------- ----------- ------------ -------
Weighted average number of common and common
equivalent shares outstanding ............... 8,735,491 8,650,690 8,683,073 8,652,019
=========== =========== ============= ===========
Per common share amounts:
Net income (loss) from continuing operations $ (.14) $ .04 $ (.21) $ (.04)
Net loss from discontinued operations..... -- -- -- (1.80)
---------- --------- --------- ----------
Net income (loss)......................... $ (.14) $ .04 $ (.21) $ (1.84)
========== ======== ========= ==========
FULLY DILUTED:
Net income (loss) from continuing operations....$(1,257,000) $ 312,000 $ (1,815,000) $ (387,000)
Net loss from discontinued operations........... -- -- -- (15,545,000)
------------ ------------ ------------- ------------
Net income (loss) applicable to common
stockholders .................................$(1,257,000) $ 312,000 $ (1,815,000) $(15,932,000)
============ ============ ============- ============
Weighted average number of shares outstanding:
Common stock outstanding for the period based
on a daily weighted average .................. 8,735,491 8,650,690 8,683,073 8,652,019
Common stock equivalents - outstanding stock
options computed on the treasury stock method
by using end-of-period market prices in lieu
of average market prices .................... -- -- -- --
----------- ----------- ------------- -------
8,735,491 8,650,690 8,683,073 8,652,019
Increase in common shares assuming conversion
of the 11-1/4% Convertible Senior Subordinated
Debentures .................................. -- -- -- --
----------- ------------ ----------- ------
Weighted average number of common and common
equivalent shares outstanding ................... 8,735,491 8,650,690 8,683,073 8,652,019
=========== ============ =========== ===========
Per common share amounts: Excluding convertible debenture shares:
Net income (loss) from continuing operations $ (.14) $ .04 $ (.21) $ (.04)
Net loss from discontinued operations....... -- -- -- (1.80)
------ ------ ------- -----
Net income (loss)......................... $ (.14) $ .04 $ (.21) $(1.84)
======= ====== ====== ======
Including Convertible Debenture Shares:
Net income (loss) from continuing operations $ (.14) $ .04 $ (.21) $ (.04)
Net loss from discontinued operations....... -- -- -- (1.80)
----- ------ ------- -------
Net income (loss)......................... $ (.14) $ .04 $ (.21) $(1.84)
======= ====== ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-01-1996
<PERIOD-START> MAY-04-1996
<PERIOD-END> AUG-02-1996
<CASH> 401
<SECURITIES> 0
<RECEIVABLES> 48,385
<ALLOWANCES> 1,180
<INVENTORY> 27,553
<CURRENT-ASSETS> 77,585
<PP&E> 110,605
<DEPRECIATION> 62,425
<TOTAL-ASSETS> 129,880
<CURRENT-LIABILITIES> 33,478
<BONDS> 40,480
0
0
<COMMON> 33,921
<OTHER-SE> (31,297)
<TOTAL-LIABILITY-AND-EQUITY> 129,880
<SALES> 176,300
<TOTAL-REVENUES> 176,300
<CGS> 155,955
<TOTAL-COSTS> 170,240
<OTHER-EXPENSES> 127
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,748
<INCOME-PRETAX> (1,815)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,815)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,815)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
