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 May 2, 1997
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 June 16, 1997 - 8,841,696
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>
TEXFI INDUSTRIES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MAY 2, 1997
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 1, 1996 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 twenty-six
week periods ended May 2, 1997 are not necessarily indicative of the results
that may be expected for the year ended October 31, 1997. The following
consolidated financial statements are included:
Consolidated Statements of Income for the thirteen weeks and twenty-six
weeks ended May 2, 1997 and May 3, 1996
Consolidated Balance Sheets as of May 2, 1997 and November 1, 1996
Consolidated Statements of Cash Flows for the thirteen weeks and twenty-six
weeks ended May 2, 1997 and May 3, 1996
Condensed Notes to Consolidated Financial Statements
1
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
MAY 2, May 3, MAY 2, May 3,
1997 1996 1997 1996
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
NET SALES $ 54,224 $ 44,095 $102,769 $ 88,335
-------- -------- -------- --------
COST AND EXPENSES:
Cost of goods sold 46,783 38,583 88,046 76,755
Selling, general and
administrative 3,930 3,118 7,335 5,892
-------- -------- -------- --------
Total 50,713 41,701 95,381 82,647
-------- -------- -------- --------
OPERATING INCOME 3,511 2,394 7,388 5,688
-------- -------- -------- --------
OTHER EXPENSE (INCOME):
Interest 2,702 2,521 5,223 5,116
Equity in loss of unconsolidated
subsidiary 395 -- 559 --
Other, net (103) (16) 21 (21)
-------- -------- -------- --------
Total 2,994 2,505 5,803 5,095
-------- -------- -------- --------
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 517 (111) 1,585 593
Provision for (Benefit) from
Income Taxes 11 (8) 32 --
-------- -------- -------- --------
NET INCOME (LOSS) BEFORE
DISCONTINUED OPERATIONS 506 (103) 1,553 593
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
operations -- (796) -- (1,076)
Loss from disposal of discontinued
operations -- (75) -- (75)
-------- -------- -------- --------
Total -- (871) -- (1,151)
-------- -------- -------- --------
NET INCOME (LOSS) $ 506 $ (974) $ 1,553 $ (558)
======== ======== ======== ========
NET INCOME (LOSS) PER SHARE:
Net income (loss) from continuing
operations $ .06 $ (.01) $ .18 $ .06
Loss from discontinued
operations -- (.10) -- (.13)
-------- -------- -------- --------
Net loss $ .06 $ (.11) $ .18 $ (.07)
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements on page 5.
2
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(UNAUDITED)
MAY 2, November 1,
1997 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............... $ 2,266 418
Receivables:
Due from factor........................ 42,255 40,885
Trade.................................. 3,146 3,555
Other ................................. 506 130
Inventories .............................. 23,424 22,179
Prepaid Expenses.......................... 2,127 1,301
------- -------
Total................................... 73,724 68,468
PROPERTY, PLANT AND EQUIPMENT - NET ......... 32,283 30,223
PROPERTY, PLANT AND EQUIPMENT HELD FOR
DISPOSAL - NET ............................ 9,063 13,461
OTHER ASSETS ................................ 2,281 2,038
-------- --------
$117,351 $114,190
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt ..... $ 6,655 $ 6,563
Current maturities of sub. debt........... 3,183 3,537
Accounts payable ......................... 30,013 22,182
Other liabilities......................... 3,545 8,625
-------- --------
Total.................................. 43,396 40,907
REVOLVING CREDIT LINE........................ 42,634 38,967
LONG-TERM DEBT .............................. 5,437 9,952
SUBORDINATED DEBENTURES ..................... 36,851 36,943
OTHER LONG-TERM OBLIGATIONS ................. 200 562
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $1.00 par value ............ 8,842 8,735
Additional paid-in capital ............... 25,499 25,186
Accumulated deficit....................... (45,508) (47,062)
-------- -------
Total.................................. (11,167) (13,141)
-------- --------
$117,351 $114,190
======== ========
See Notes to Consolidated Financial Statements on page 5.
3
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
MAY 2, May 3, MAY 2, May 3,
1997 1996 1997 1996
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss) $ 506 $ (974) $ 1,553 $ (558)
Adjustments to reconcile net income
(loss) to net cash (used in) provided
by operating activities:
Equity in loss of unconsolidated
subsidiary 395 -- 559 --
Depreciation & amortization 1,300 2,056 2,549 4,153
Provision for losses on accounts
receivable 7 278 133 438
Loss on sale of property, plant
and equipment (67) 2 (81) 5
Change in operating assets and liabilities:
Accounts receivable (2,823) (39,035) (1,470) (36,635)
Inventories (1,653) (3) (1,245) (1,632)
Prepaid and other assets (1) 359 (604) (141)
Accounts payables and accrued
liabilities 1,274 (2,408) 2,390 (2,443)
-------- -------- -------- --------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (1,062) (39,725) 3,784 (36,813)
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (3,125) (2,130) (6,226) (4,262)
Proceeds from sale-lease back of
property, plant and equipment 1,683 369 4,211 1,963
Proceeds from disposition of property,
plant and equipment 1,667 -- 2,260 --
-------- -------- -------- --------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 225 (1,761) 245 (2,299)
FINANCING ACTIVITIES
Proceeds from long-term debt borrowing -- 19,000 -- 19,000
Net proceeds from Revolver debt
borrowings 6,284 39,871 3,703 39,871
Payments on long-term debt and capital
lease obligations (2,780) (16,659) (4,423) (19,430)
Investment in unconsolidated subsidiary (884) -- (1,318) --
Payments for repurchase of subordinated
debentures (446) (244) (446) (244)
Capitalized loan costs (37) (696) (117) (696)
Proceeds from employee stock plans 420 201 420 201
-------- -------- -------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,557 41,473 (2,181) 38,702
-------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,720 (13) 1,848 (410)
Cash and cash equivalents
at beginning of period 546 350 418 747
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 2,266 $ 337 $ 2,266 $ 337
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements on page 5.
4
<PAGE>
TEXFI INDUSTRIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 2, 1997
1. Details of certain balance sheet captions are as follows (in thousands):
(UNAUDITED)
MAY 2, November 1,
1997 1996
INVENTORIES:
Finished goods ............................. $ 7,052 $ 10,304
Goods in process ........................... 10,680 8,765
Raw materials .............................. 3,990 4,104
Supplies ................................... 3,377 3,337
-------- --------
Total ................................. 25,099 26,510
Less reserves .............................. 1,675 4,331
-------- --------
Inventories-net........................ $ 23,424 $ 22,179
======== ========
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements ................... $ 2,546 $ 2,358
Buildings .................................... 17,877 15,170
Machinery, equipment, etc. ................... 56,359 56,306
Construction in progress ..................... 4,179 2,218
-------- --------
Total ............................... 80,961 76,052
Less accumulated depreciation ................ 48,678 45,829
-------- -------
Property, plant and equipment, net... $ 32,283 $ 30,223
======== ========
LONG-TERM DEBT:
Term loan with variable interest of 10.50% at May 2, 1997 and 8.47% at
November 1,1996, payable in equal monthly installments until balloon payment
due
September 1998........................... $11,255 $ 15,367
Term loans at 6.75%, payable in monthly
installments plus interest through
November 1998............................ 837 1,148
------- -------
Total ................................. 12,092 16,515
Less current maturities ................... 6,655 6,563
------- -------
Due after one year .................... $ 5,437 $ 9,952
======= =======
5
<PAGE>
1. Continued
MAY 2, November 1,
1997 1996
SUBORDINATED DEBENTURES:
Senior Subordinated Debentures,
8 3/4% due August 1, 1999............ $ 34,420 $ 34,420
Subordinated Extendible Debentures,
11%, due April 1, 2000
(Series C)........................... 2,431 2,523
Convertible Senior Subordinated
Debentures, 11-1/4% due October
1, 1997 ............................. 3,183 3,537
--------- --------
Total ....................... 40,034 40,480
Less current maturities............... 3,183 3,537
-------- --------
Due after one year........... $ 36,851 $ 36,943
======== ========
2. Net income per share has been computed using the weighted average number of
common shares and common share equivalents outstanding during the period. The
difference between primary and fully diluted net income per share is not
material for the periods presented.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, EARNINGS PER SHARE, which is required to be adopted for
periods ending after December 15, 1997. Upon adoption, the Company will be
required to change the method currently used to compute earnings per share and
restate all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options, if any, will be
excluded. The impact of Statement No. 128 on the calculation of both the
Company's primary and fully diluted earnings per share for the periods presented
is not expected to be material.
3. At May 2, 1997 shares of common stock were reserved for possible issuance as
follows:
Conversion of 11-1/4% Convertible Senior
Subordinate Debentures ......................... 475,783
Stock options ................................... 858,099
Stock options granted to an entity owned by
certain Company officers........................ 600,000
1990 Executive Stock Purchase Plan .............. 283,992
Directors' Deferred Stock Compensation Plan ..... 74,458
---------
Total .................................. 2,292,332
=========
4. The consolidated statement of operations for the thirteen and twenty-six
weeks ended May 2, 1996 has been restated to reflect the manufacturing
operations of the Company's Kingstree Knit Apparel division as discontinued
operations.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS:
Net sales for the thirteen weeks ended May 2, 1997 increased to
$54,224,000 as compared to $44,095,000 for the thirteen weeks ended May 3, 1996.
This $10,129,000 (23.0%) increase resulted from increased sales of finished
fabrics ($10,329,000), which were partially offset by lower narrow fabrics sales
($200,000). Year-to-date net sales for 1997 totaling $102,769,000 increased
$14,434,000 (16.3%) when compared to sales of $88,335,000 for the same
twenty-six week period in fiscal 1996. This increase reflects increased sales of
$15.8 million at the Company's Blends division, which was offset partially by
decreases in the Company's Narrow Fabrics division of $1.3 million. Second
quarter and year-to-date increases in finished fabrics sales were attributable
to higher demand and shipments for many of this division's synthetic fabrics
which are sold to apparel and specialty markets. Decreases in narrow fabrics
sales resulted from closure of the Company's woven narrow fabrics facility on
November 1, 1996 which offset gains in sales of knitted elastic fabrics totaling
$1.6 million and $1.9 million for the 1997 second quarter and six months,
respectively, when compared to 1996 results.
For the comparable thirteen-week period, cost of goods sold, as a
percentage of net sales, decreased from 87.5% in 1996 to 86.3% in 1997. For the
comparable twenty-six week period, cost of goods sold as a percentage of net
sales decreased from 86.9% in 1996 to 85.7% in 1997. Improvements in both
periods reported are attributed primarily to the Narrow Fabrics division
operations as a result of exiting the woven elastic operations and a better mix
of higher margin knitted elastic products sold.
Selling, general and administrative expenses ("SG&A") increased from
7.1% to 7.2% as a percentage of net sales for the thirteen weeks ended May 2,
1997 when compared to same period a year ago and increased from 6.7% to 7.1% for
the comparable twenty-six week periods. These increases, as a percentage of net
sales, are primarily due to increased distribution costs in order to accommodate
the increased sales volume in addition to expansion into new markets by the
Company's Blends division.
Interest expense increased $181,000 (7.2%) from $2,521,000 during the
second thirteen-week period in 1996 to $2,702,000 in 1997. For the comparable
twenty-six week periods, interest expense increased $107,000 (2.1%) from
$5,116,000 to $5,223,000. These increases resulted from higher floating rates on
debt outstanding which offset debt reductions since the second quarter of 1996.
7
<PAGE>
RESULTS OF OPERATIONS (continued):
The equity in loss of unconsolidated subsidiary of $395,000 in the
second fiscal quarter and $559,000 for the first twenty-six weeks of 1997
represents the Company's share of costs related to the startup of RIVAL, LLC.
RIVAL, LLC., which is jointly owned by the Company and NHL Enterprises, was
created to market and source a branded line of hockey related apparel.
FINANCIAL CONDITION:
The Company's business typically experiences some seasonality during
the fiscal year. This seasonality results from temporary plant shutdowns during
the Christmas/New Year's holiday season as well as greater demand for many of
the Company's products which are used in winter fashions during its third and
fourth fiscal quarters. As a result, sales have generally been lower during the
first half of the Company's fiscal year than in the second half, while working
capital requirements increase in anticipation of higher second half sales.
Working capital is comprised chiefly of inventories and accounts receivable.
At May 2, 1997, working capital equaled $30.3 million, an increase of
$2.7 million from the fiscal year ended November 1, 1996. This increase in
working capital is due primarily to increases in accounts receivable ($1.3
million), inventories ($1.3 million), prepaid expenses ($826,000), and cash and
cash equivalents ($1.8 million) and a decrease in current maturities ($262,000)
which more than offset the increase in accounts payable and other liabilities
($2.8 million).
During the first fiscal half of 1997, operating activities generated
net cash of $3.8 million. This cash was generated as a result of net income of
$1.6 million, the equity in loss of unconsolidated subsidiary of $559,000,
depreciation and amortization of $2.6 million, along with increases in accounts
payables and accrued liabilities of $2.4 million which offset increases in
accounts receivable of $1.5 million, inventories of $1.3 million and prepaid and
other assets of $604,000. Cash flow from operations, $2.3 million in proceeds
from the sale of property, plant and equipment of discontinued operations, $4.2
million from the sale-lease back of property, plant and equipment, net proceeds
from the revolving line of credit of $3.7 million and cash on hand provided
funds to repay long-term debt and debentures of $4.9 million, purchase property,
plant and equipment totaling $6.3 million, and invest $1.3 million in the
unconsolidated subsidiary.
8
<PAGE>
FINANCIAL CONDITION (continued):
On March 15, 1996, the Company entered into a $74.0 million credit
facility (subsequently reduced by amendment to $64.0 million), of which $54.7
million was initially utilized. Net proceeds from the credit facility were
applied toward the previously existing term loans and outstanding factor
advances. The new facility consisted of a $19.0 million term loan, payable in 29
equal monthly installments and a balloon payment in September 1998, and a
revolving credit line which, as amended, cannot exceed $45.0 million during the
life of the facility. The revolving credit line, which expires on the same date
as the term loan's final maturity, replaced the Company's factor advance
arrangements. As of May 2, 1997, funds available through the revolving credit
line approximated $2.9 million. The credit facility is secured by substantially
all of the Company's assets. The credit facility currently provides for the
Company to pay interest on amounts outstanding at the prime rate plus an
applicable margin until 10 business days following the SEC filing of the
Company's second fiscal quarter, at which time provided certain financial ratios
are met, the Company may elect interest rates based upon a 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 of 30, 60,
90 or 180 days.
The facility places limitations on the Company's rental expense,
additional indebtedness, acquisitions, capital expenditures, payment of
subordinated debentures, and sale or disposal of assets. The Company is required
to liquidate within a specified time frame certain assets used in connection
with its previously discontinued operations, maintain a minimum net worth and
comply with certain financial ratios, including current ratio, coverage ratio,
and leverage ratio, as defined by the facility. This facility has been
periodically amended to make the restrictive covenants less restrictive in order
that the Company would remain in compliance with all covenant requirements and
effect certain other changes. As of May 2, 1997, the Company was not in
compliance with the facility's leverage ratio covenant. The facility lenders
have waived the leverage ratio covenant through July 31, 1997 and committed to
an amended credit facility which is expected to be consummated during the
Company's 1997 third fiscal quarter. Among other things, the amended credit
facility is to increase the revolving credit line to $52.0 million, reinstate
fixed rate loans based upon the LIBOR rate plus an applicable margin, and
eliminate the requirement to liquidate assets held for disposal within a
specified time frame.
9
<PAGE>
FINANCIAL CONDITION (continued):
As of May 2, 1997, the Company had outstanding approximately $34.4
million of its Senior Subordinated Debentures due August 1, 1999 ("8-3/4%
Debentures"). The 8-3/4% Debentures, which cannot be called prior to their
maturity date, are unsecured obligations. These debentures 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' (deficit) equity.
The Company is currently prohibited by this covenant from incurring additional
indebtedness other than advances under its revolving credit line and operating
leases. This restriction on the incurrence of additional indebtedness was waived
by debenture holders with respect to the new credit facility. As a condition to
the waiver, the Company executed a Second Supplemental Indenture dated March 15,
1996 which provided that beginning on the last business day of September 1998
and continuing on the last business day of each month thereafter to and
including June 1999, the Company will deposit with the trustee of these
debentures $600,000 less an amount equal to 8-3/4% Debentures repurchased during
the period prior to the monthly payment date. Total deposits, including interest
earned thereon, are to be paid as principal and interest when these debentures
are due.
The Company had $3.2 million of 11-1/4% Convertible Senior Subordinated
Debentures outstanding as of May 2, 1997. These debentures, which are
convertible to common stock at the option of the debenture holders for $6.69 per
share, are redeemable by the Company at face value as of October 1, 1997 and are
classified as a current liability. Under the terms of the governing indenture,
the Company is required to make a sinking fund payment equal to 10% of the
outstanding debenture principal on August 29, 1997.
As of May 2, 1997 the Company has approximately $2.4 million of its
Series C Debentures outstanding. The annual interest rate of these debentures
may be adjusted at the sole discretion of the Company on April 1st of each year
until maturity in the year 2000. The Company set the Series C interest rate at
13.0% for the period April 1, 1997 through March 31, 1998. 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 thereof plus
accrued interest through the date of redemption. During the second quarter of
fiscal 1997, holders submitted bonds totaling $92,000 for redemption as of
April 1.
10
<PAGE>
FINANCIAL CONDITION (continued):
The Company plans to place into service $11.2 million of machinery and
equipment during fiscal 1997. As of the end of the first fiscal half, $6.3
million had been expended on machinery and equipment purchases. This equipment
primarily will increase dyeing and finishing capacity as well as replace older
weaving equipment with new looms in order to improve production speed,
efficiency and product quality and expand styling diversity. Management
anticipates that $8.1 million of the $11.2 million of equipment will be placed
into service through operating leases and thus not included in the Company's
balance sheet.
Management believes cash flows from operations and funds available
under the revolving credit line will provide the Company with sufficient sources
of funds to meet its fiscal 1997 cash needs, and, assuming no significant
deterioration in current market conditions or interest rates, for the
foreseeable future.
Forward Looking Information:
Statements contained in the foregoing discussion and elsewhere in this
report that are not based on historical fact are considered "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on management's present assumptions as to
future trends, and changes in current economic trends, prevailing interest
rates, availability and cost of raw materials, laws affecting the Company's
business and similar factors could affect the validity of such assumptions.
11
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
The Registrant's Annual Meeting of Stockholders was held on March 11, 1997.
The proposals voted upon and the results of voting were as follows:
(1) Election of Class I Directors for a three-year term:
Votes Votes
for Withheld
William L. Remley 7,646,264 594,653
Richard C. Hoffman 7,635,164 605,753
Election of Class II Director for a one-year term:
Votes Votes
for Withheld
Joel J. Karp 7,650,231 590,686
All Class III Directors continue as previously reported.
(2) Proposal to approve amended and restated Nonqualified Stock Option
Plan.
Votes for: 4,247,785
Votes against: 690,402
Votes withheld: 45,582
Broker Non-Vote: 3,257,148
(3) Proposal to approve the 1990 Executive Stock Purchase Plan.
Votes for: 4,197,920
Votes against: 739,559
Votes withheld: 46,290
Broker Non-Vote: 3,257,148
(4) Proposal to approve ratification of Ernst & Young, LLP as independent
auditors for the fiscal year ending October 31, 1997.
Votes for: 8,220,661
Votes against: 13,655
Votes withheld: 6,601
12
<PAGE>
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 Form 8-K were filed during the quarter ended May 2, 1997.
13
<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: June 16, 1997 By: S/Dane L. Vincent
-----------------------
Dane L. Vincent
Chief Financial Officer
and Treasurer
14
<PAGE>
TEXFI INDUSTRIES, INC.
INDEX TO EXHIBITS
*3(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.
*3(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.
*3(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.
*3(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).
*3(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).
*3(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).
*3(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).
*3(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).
*3(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.
1
<PAGE>
*3(b)(1) Bylaws of Registrant, filed as Exhibit 4.6 to Registrant's Form S-8
Registration Statement (No. 33-14697).
*3(b)(2) Amendment to Bylaws of Registrant, filed as Exhibit 4(b)(2) to
Registrant's Form S-2 Registration Statement (No. 33-16794).
*3(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.
*3(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.
*3(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.
*4(a)(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(a)(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(a)(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.
2
<PAGE>
*4(a)(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(a)(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(a)(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(b)(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(c)(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.
*4(c)(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(c)(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(c)(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.
3
<PAGE>
*4(c)(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.
*4(d)(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.
*4(d)(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.
*4(d)(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.
*4(d)(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.
*4(d)(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.
4
<PAGE>
*4(d)(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.
*4(d)(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.
*4(d)(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.
*4(d)(9) Second Amendment dated September 12, 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)(9)
to Registrant's From 10-Q dated August 2, 1996.
*4(d)(10) Third Amendment dated January 30, 1997 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 4(d)(10)
to Registrant's Form 10-K dated January 31, 1997.
4(d)(11) Waiver and Consent Agreement dated June 12, 1997 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.
*10(a)(1) Amended and Restated Nonqualified Stock Option Plan, as adopted by
Registrant's Board of Directors on January 16, 1997 and approved March
11, 1997 at a meeting of Registrant's Stockholders filed as Exhibit
10(a)(1) to Registrant's Form 10-Q dated January 31, 1997.
5
<PAGE>
*10(a)(2) Resolution amending the 1990 Executive Stock Purchase Plan, as adopted
by Registrant's Board of Directors on January 16, 1997 and approved
March 11, 1997 at a meeting of Registrant's Stockholders filed as
Exhibit 10(a)(2)to Registrant's Form 10-Q dated January 31, 1997.
11 Computation of Earnings Per Share
* Incorporated by reference to previous filing.
6
<PAGE>
WAIVER AND CONSENT AGREEMENT
THIS WAIVER AND CONSENT AGREEMENT (the "Agreement") is made and entered
into as of the 12th day of June, 1997 by and among TEXFI INDUSTRIES, INC., a
corporation organized under the laws of Delaware (the "Borrower"), THE LENDERS
signatory hereto (collectively, the "Lenders") and NATIONSBANK, N.A., a national
banking association, as Agent (the "Agent").
STATEMENT OF PURPOSE
The Borrower, the Lenders and the Agent are parties to a certain Credit
Agreement dated as of March 15, 1996 (as heretofore amended and as modified
hereby, the "Credit Agreement"), pursuant to which the Lenders have agreed to
make, and have made, certain Loans to the Borrower. The Borrower has requested
and the Agent and the Lenders have agreed to certain waivers of the terms of the
Credit Agreement on the terms and conditions set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. Capitalized Terms. All capitalized, undefined terms used in this
Agreement shall have the meanings assigned thereto in the Credit Agreement.
2. Waiver and Consent. The Agent and the Lenders hereby waive any Event
of Default resulting from the failure by the Borrower to comply with Section 9.3
(Leverage Ratio) of the Credit Agreement as of the end of the first quarter and
the end of the second quarter of the Borrower's 1997 fiscal year. This waiver
and consent is limited to the extent described in this Paragraph 2 and shall not
be construed to be a waiver, now or hereafter, of any other term of the Credit
Agreement or the Loan Documents.
3. Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Agent the Lenders as follows:
(a) The Borrower has no defenses, offsets or counterclaims against
the Agent or the Lenders relating to the Credit Agreement or the other
Loan Documents.
(b) The Borrower has full power and lawful authority to execute,
deliver and perform this Agreement; and
(c) Upon the effectiveness of this Agreement, no Default or Event of
Default shall exist under the Credit Agreement or other Loan Documents.
4. Conflict of Terms. In the event of the a conflict between the terms
of this Agreement and the Credit Agreement or other Loan Documents, the terms of
this Agreement shall govern.
<PAGE>
5. Costs. The Borrower agrees to pay all reasonable costs and expenses
of the Agent and the Lenders in connection with the preparation, execution and
delivery of this Agreement, including, without limitation, the reasonable fees
and out-of-pocket expenses of special counsel to the Agent and the Lenders
and agrees to save the Agent and the Lenders harmless from any and
all such costs, expenses and liabilities.
6. Counterparts. This Agreement may be executed in separate
counterparts, and said counterparts taken together shall be deemed to constitute
one and the same instrument. An executed copy of this Agreement delivered by
telecopier shall be intended to have the same effect as an originally executed
copy of this Agreement.
7. 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 have caused this instrument to be
executed and delivered by their duly authorized officers on the day and year
first above written.
-2-
<PAGE>
BORROWER:
TEXFI INDUSTRIES, INC.
By: __________________________________
Name:_____________________________
Title:____________________________
AGENT:
NATIONSBANK, N.A.
By: __________________________________
Name:_____________________________
Title:____________________________
-3-
<PAGE>
LENDERS:
NATIONSBANK, N.A.
By: __________________________________
Name:_____________________________
Title:____________________________
MELLON BANK, N.A.
By: __________________________________
Name:_____________________________
Title:____________________________
THE FIRST NATIONAL BANK OF BOSTON
By: __________________________________
Name:_____________________________
Title:____________________________
CORESTATES BANK, N.A.
By: __________________________________
Name:_____________________________
Title:____________________________
-4-
<PAGE>
FLEET BANK, NATIONAL ASSOCIATION
By: __________________________________
Name:_____________________________
Title:____________________________
NATIONAL BANK OF CANADA
By: __________________________________
Name:_____________________________
Title:____________________________
By: __________________________________
Name:_____________________________
Title:____________________________
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
TEXFI INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
MAY 2, May 3, MAY 2, May 3,
1997 1996 1997 1996
---------- ---------- ----------- -----------
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:
<S> <C> <C> <C> <C>
Balance at beginning of period ................. 8,735,491 8,650,690 8,735,491 8,650,690
Deferred compensation........................... 106,205 84,801 102,205 84,801
--------- --------- --------- ---------
Balance at end of period ....................... 8,841,696 8,735,491 8,841,696 8,735,491
========= ========= ========= =========
PRIMARY:
Net income (loss) from continuing operations.... $ 506,000 $( 103,000) $ 1,553,000 $ 593,000
Net loss from discontinued operations........... -- ( 871,000) -- ( 1,151,000)
----------- ----------- ---------- -----------
Net income (loss) applicable to
stockholders ................................. $ 506,000 $( 974,000) $ 1,553,000 $( 558,000)
=========== =========== ============ ============
Weighted average number of shares outstanding:
Common stock outstanding for the period
based on a daily weighted average ........... 8,797,751 8,663,037 8,766,621 8,656,863
Common stock equivalents - outstanding stock
options computed on the treasury stock
method using average market price ........... 46,303 -- 75,479 --
----------- ----------- ------------ ---------
Weighted average number of common and common
equivalent shares outstanding ............... 8,844,054 8,663,037 8,842,100 8,656,863
=========== =========== ============ ===========
Per share amounts:
Net income (loss) from continuing operations $ .06 $ (.01) $ .18 $ .06
Net loss from discontinued operations......... -- (.10) -- ( .13)
---------- ------- ------------ ----------
Net income (loss)........................... $ .06 $ (.11) $ .18 $ ( .07)
========== ======== ============ ==========
FULLY DILUTED:
Net income (loss) from continuing operations.... $ 506,000 $( 103,000) $ 1,553,000 $ 593,000
Net loss from discontinued operations........... -- ( 871,000) -- ( 1,151,000)
----------- ----------- ---------- -----------
Net income (loss) applicable to
stockholders ................................. $ 506,000 $( 974,000) $ 1,553,000 $( 558,000)
=========== ============ ============ =============
Weighted average number of shares outstanding:
Common stock outstanding for the period
based on a daily weighted average ........... 8,797,751 8,663,037 8,766,621 8,656,863
Common stock equivalents - outstanding stock
options computed on the treasury stock
method using average market price ........... 46,303 -- 75,479 --
----------- ----------- ------------ ------------
Weighted average number of common and common
equivalent shares outstanding ............... 8,844,054 8,663,037 8,842,100 8,656,863
----------- ----------- ------------ ------------
Increase in common shares assuming conversion
of the 11-1/4% Convertible Senior Subordinated
Debentures .................................. 492,049 528,647 510,348 528,647
------------ ----------- ------------ -----------
Weighted average number of common and common
equivalent shares outstanding ............... 9,332,753 9,191,684 9,352,448 9,185,511
============ =========== ============ ===========
Per share amounts:
Excluding convertible debenture shares:
Net income (loss) from continuing operations $ .06 $ (.01) $ .18 $ .06
Net loss from discontinued operations......... -- (.10) -- ( .13)
----------- ----------- ------------ -----------
Net income (loss)........................... $ .06 $ (.11) $ .18 $ ( .07)
=========== =========== ============ ===========
Including Convertible Debenture Shares:
Net income (loss) from continuing operations $ .06 $ (.01) $ .19 $ .06
Net loss from discontinued operations......... -- (.10) -- ( .13)
----------- ----------- ------------ -----------
Net income (loss)........................... $ .06 $ (.11) $ .19 $ ( .07)
=========== =========== ============ ===========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> MAY-02-1997
<CASH> 2,266
<SECURITIES> 0
<RECEIVABLES> 47,226
<ALLOWANCES> 1,319
<INVENTORY> 23,424
<CURRENT-ASSETS> 73,724
<PP&E> 107,819
<DEPRECIATION> 66,473
<TOTAL-ASSETS> 117,351
<CURRENT-LIABILITIES> 43,396
<BONDS> 40,034
0
0
<COMMON> 34,341
<OTHER-SE> (45,508)
<TOTAL-LIABILITY-AND-EQUITY> 117,351
<SALES> 102,769
<TOTAL-REVENUES> 102,769
<CGS> 88,046
<TOTAL-COSTS> 95,381
<OTHER-EXPENSES> 580
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,223
<INCOME-PRETAX> 1,585
<INCOME-TAX> 32
<INCOME-CONTINUING> 1,553
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,553
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
