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 January 31, 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 March 17 , 1997 - 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
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TEXFI INDUSTRIES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JANUARY 31, 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 period ended
January 31, 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 ended January
31, 1997 and February 2, 1996
Consolidated Balance Sheets as of January 31, 1997 and November 1, 1996
Consolidated Statements of Cash Flows for the thirteen weeks ended
January 31, 1997 and February 2, 1996
Condensed Notes to Consolidated Financial Statements
2
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TEXFI INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
THIRTEEN WEEKS ENDED
JANUARY 31, February 2,
1997 1996
NET SALES ........................... $ 48,545 $ 44,240
COST AND EXPENSES:
Cost of goods sold ................ 41,263 38,172
Selling, general and admin. ....... 3,555 2,774
---------- ----------
Total ........................... 44,818 40,946
---------- ----------
OPERATING INCOME .................... 3,727 3,294
OTHER EXPENSE (INCOME):
Interest .......................... 2,521 2,595
Equity in loss of unconsolidated
subsidiary ...................... 164 --
Other, net ........................ (26) (5)
---------- ----------
Total ........................... 2,659 2,590
---------- ----------
NET INCOME FROM CONTINUING
OPERATIONS........................... 1,068 704
DISCONTINUED OPERATIONS-LOSS FROM
OPERATIONS........................ -- (280)
----------- ---------
INCOME BEFORE INCOME TAXES............ 1,068 424
PROVISION FOR INCOME TAXES........... 21 8
--------- ---------
NET INCOME .......................... $ 1,047 $ 416
========== ==========
NET INCOME (LOSS) PER SHARE:
Net income from continuing
operations......................... $ .12 $ .08
Loss from discontinued operations.. -- (.03)
----------- ----------
Net income ........................ $ .12 $ .05
=========== ==========
See Notes to Consolidated Financial Statements on page 6.
3
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TEXFI INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(UNAUDITED)
JANUARY 31, November 1,
1997 1996
----------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............... $ 546 418
Receivables:
Due from factor........................ 38,393 40,885
Trade.................................. 4,321 3,555
Other ................................. 377 130
Inventories .............................. 21,771 22,179
Prepaid Expenses.......................... 1,865 1,301
------- -------
Total................................... 67,273 68,468
PROPERTY, PLANT AND EQUIPMENT - NET ......... 29,730 30,223
PROPERTY, PLANT AND EQUIPMENT HELD FOR
DISPOSAL - NET ............................ 12,882 13,461
OTHER ASSETS ................................ 2,244 2,038
-------- --------
$112,129 $114,190
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ..... $ 6,643 $ 6,563
Current maturities of sub. debt........... 3,537 3,537
Accounts payable ......................... 26,438 22,182
Other liabilities......................... 5,470 8,625
-------- --------
Total.................................. 42,088 40,907
REVOLVING CREDIT LINE........................ 36,386 38,967
LONG-TERM DEBT .............................. 8,229 9,952
SUBORDINATED DEBENTURES ..................... 36,943 36,943
OTHER LONG-TERM OBLIGATIONS ................. 577 562
COMMON STOCKHOLDERS' (DEFICIT) EQUITY:
Common stock, $1.00 par value ............ 8,735 8,735
Additional paid-in capital ............... 25,186 25,186
Accumulated deficit....................... (46,015) (47,062)
-------- -------
Total.................................. (12,094) (13,141)
-------- --------
$112,129 $114,190
See Notes to Consolidated Financial Statements on page 6.
4
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TEXFI INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
THIRTEEN WEEKS ENDED
JAN. 31, Feb. 2,
1997 1996
------- ------
OPERATING ACTIVITIES
Net income ..................................... $ 1,047 $ 416
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in loss of unconsolidated subsidiary... 164 --
Depreciation & amortization .................. 1,249 2,097
Provision for losses on accounts receivable .. 126 160
(Gain) loss on disposition of property,
plant and equipment......................... (14) 3
Change in operating assets and liabilities:
Accounts receivable ........................ 1,353 2,400
Inventories ................................ 408 (1,629)
Prepaid and other assets ................... (603) (500)
Accounts payables and accrued liabilities .. 1,116 (35)
------ -------
NET CASH PROVIDED BY OPERATING ACTIVITIES......... 4,846 2,912
------ -------
INVESTING ACTIVITIES
Purchases of property, plant and equipment ..... (3,101) (2,132)
Proceeds from sale of property, plant and
equipment..................................... 3,121 1,594
------ -------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES .......................... 20 (538)
------ -------
FINANCING ACTIVITIES
Payments on long-term debt and capital lease
obligations .................................. (1,643) (2,771)
Net payments on revolving credit line.......... (2,581) --
Investment in unconsolidated subsidiary........ (434) --
Capitalized loan costs......................... (80) --
------- ------
NET CASH USED IN FINANCING ACTIVITIES ............ (4,738) (2,771)
------- -------
INCREASE (DECREASE)IN CASH AND CASH EQUIVALENTS .. 128 (397)
Cash and cash equivalents at beginning of period . 418 747
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ... $ 546 $ 350
======== =======
See Notes to Consolidated Financial Statements on page 6.
5
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TEXFI INDUSTRIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
1. Details of certain balance sheet captions are as follows (in thousands):
JANUARY 31, November 1,
1997 1996
1. INVENTORIES:
Finished goods ............................. $ 9,784 $ 10,304
Goods in process ........................... 8,776 8,765
Raw materials .............................. 3,585 4,104
Supplies ................................... 3,451 3,337
-------- --------
Total ................................. 25,596 26,510
Less reserves .............................. 3,825 4,331
-------- --------
Inventories-net........................ $ 21,771 $ 22,179
======== ========
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements ................. $ 2,358 $ 2,358
Buildings .................................. 15,170 15,170
Machinery, equipment, etc. ................. 56,359 56,306
Construction in progress ................... 2,738 2,218
-------- --------
Total ................................. 76,625 76,052
Less accumulated depreciation .............. 46,895 45,829
-------- --------
Property, plant and equipment-net ..... $ 29,730 $ 30,223
======== ========
LONG-TERM DEBT:
Term loan with variable interest of 8.50%
at January 31, 1997 and 8.47% at
November 1,1996, payable in equal monthly
installments until balloon payment due
September 1998........................... $13,878 $ 15,367
Term loans at 6.75%, payable in monthly
installments plus interest through
November 1998............................ 994 1,148
------- -------
Total ................................. 14,872 16,515
Less current maturities ................... 6,643 6,563
------- -------
Due after one year .................... $ 8,229 $ 9,952
======= =======
6
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1. Continued
JANUARY 31, 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)... 2,523 2,523
Convertible Senior Subordinated
Debentures, 11-1/4% due October
1, 1997 ............................ 3,537 3,537
-------- --------
Total ............................... 40,480 40,480
Less current maturities............. 3,537 3,537
-------- --------
Due after one year................... $ 36,943 $ 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.
3. At January 31, 1997, shares of common stock were reserved for
possible issuance as follows:
Conversion of 11-1/4% Convertible Senior Subordinated
Debentures ..................................... 528,647
Stock options ..................................... 858,099
Stock options granted to an entity owned by
certain Company officers....................... 600,000
1990 Executive Stock Purchase Plan ................ 101,764
Directors' Deferred Stock Compensation Plan ....... 162,791
-------
Total ........................................... 2,251,301
=========
4. The consolidated statement of operations for the thirteen
weeks ended February 2, 1996 has been restated to reflect the
manufacturing operations of the Company's Kingstree Knit Apparel
division as discontinued operations.
7
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Net sales from continuing operations for the thirteen weeks ended
January 31, 1997 increased to $48,545,000 as compared to net sales of
$44,240,000 for the thirteen weeks ended February 2, 1996. This $4,305,000
(9.7%) increase resulted from higher finished fabric sales ($5,450,000), which
were partially offset by reduced sales at the Narrow Fabrics division
($1,145,000) caused by the closure of this division's woven narrow fabrics
operations.
For the comparable thirteen-week period, cost of goods sold, as a
percentage of net sales from continuing operations, decreased 1.3% from 86.3% in
1996 to 85.0% in 1997. The first quarter 1997 improvement was due primarily to
the Company's ongoing reengineering program to streamline its manufacturing
costs via equipment modernization and reduced process cycle times as well as the
Company's efforts to move towards production of higher priced goods.
Selling, general and administrative expenses ("SG&A") increased from
6.3% to 7.3% as a percentage of net sales from continuing operations for the
thirteen weeks ended January 31, 1997 as compared to the same period in 1996.
The increase was primarily due to the Company's expansion into new markets and a
larger infrastructure needed to accommodate the Company's higher sales volume.
Interest expense for the first fiscal quarter of 1997 remained
consistent with the 1996 first fiscal quarter.
The 1997 first quarter includes a $164,000 equity loss of
unconsolidated subsidiary which represents the Company's 50% participation in a
previously announced joint venture with NHL Enterprises to market and source a
branded line of hockey-related apparel.
During the first quarter of 1996, the Company recorded a $280,000 loss
from the operations of its Kingstree Knit Apparel division which was
discontinued during the fourth quarter of fiscal 1996.
8
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Financial Condition:
During 1997 and 1996, the Company's business exhibited seasonality,
primarily due to temporary plant shutdowns during the Christmas/New Year's
holiday season. As a result, sales have generally been lower in the first
quarter of the fiscal year than in subsequent quarters while working capital
requirements increase in anticipation of higher second quarter sales. Working
capital is comprised chiefly of inventories and accounts receivable.
At January 31, 1997, working capital equaled $25.2 million, a decrease of
$2.4 million from the fiscal year ended November 1, 1996. This decrease in
working capital is due primarily to decreases in accounts receivable ($1.5
million) and inventories (408,000) and an increase in accounts payable and other
liabilities ($1.1 million) which more than offset increases in cash and cash
equivalents ($128,000) and prepaid expenses ($564,000).
During the first fiscal quarter of 1997, operating activities generated
net cash of $4.9 million. This cash was generated as a result of the $1.0
million net income, equity in loss of unconsolidated susidiary of $164,000,
depreciation and amortization of $1.3 million and the provision for losses on
accounts receivable of $126,000, together with a decrease in accounts receivable
of $1.4 million and inventories of $408,000 and an increase in accounts payable
and accrued liabilities of $1.1 million which offset increases in prepaid and
other assets of $603,000. Cash flow from operations, $3.1 million in proceeds
from the sale of property, plant and equipment and cash on hand provided funds
to repay long-term debt of $1.6 million, purchase property, plant and equipment
totaling $3.1 million, and reduce the revolving line of credit $2.6 million.
The Company had $3.5 million of 11-1/4% Convertible Senior Subordinated
Debentures outstanding as of January 31, 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 two sinking fund payments equal to 10% of the
outstanding debenture principal at February 28, 1997 and August 31, 1997,
respectively.
9
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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 January 31, 1997, funds available through the revolving
credit line approximated $10.2 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 end of the
Company's second fiscal quarter, at which time, if certain financial conditions
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 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 January 31, 1997, the Company was in compliance with all of the facility's
covenant requirements.
10
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Financial Condition (continued):
As of January 31, 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. 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.
As of January 31, 1997 the Company has approximately $2.5 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% 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. As of March 13, 1997 the last
day for debenture holders to exercise their redemption option, Series C holders
with aggregate principal totaling $92,000 had delivered proper notice to redeem
their debenture(s) as of April 1, 1997.
11
<PAGE>
Financial Condition (continued):
The Company plans to place into service $10.6 million of machinery and
equipment during fiscal 1997. As of the end of the first fiscal quarter, $3.1
million had been expended on machinery and equipment purchases. This equipment
primarily will increase dyeing 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
substantially all of the $10.6 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.
12
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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 Form 8-K were filed during the quarter ended January 31,
1997.
13
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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: March 17, 1997 By:S/Dane L. Vincent
Dane L. Vincent
Chief Financial Officer
and Treasurer
14
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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
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*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.
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.
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.
11 Computation of Earnings Per Share
* Incorporated by reference to previous filing.
5
<PAGE>
TEXFI INDUSTRIES, INC.
Amended and Restated Nonqualified Stock Option Plan
(As Amended Effective 1/16/97)
1. Purpose. The purpose of this Amended and Restated Nonqualified
Stock Option Plan (the "Plan") is to provide a means by which certain key
employees (including officers who are also key employees) of TEXFI INDUSTRIES,
INC. (the "Company"), or any subsidiary of the Company as defined in Section 14
of the Plan (a "Subsidiary"), may be given an opportunity to purchase Common
Stock of the Company. The Plan is intended to advance the interests of the
Company by providing key employees to whom options are granted with additional
incentive to advance the success of the Company and to continue in the employ
of the Company or a Subsidiary. Options granted under the Plan are not
intended to be Incentive Stock Options, as defined in Section 422A of the
Internal Revenue Code.
2. Term of the Plan. The term of this Plan shall be from December 16,
1987, through December 15, 2002. No option shall be granted after December 15,
2002, but options theretofore granted may extend beyond that date.
3. Stock Subject to Option. Options granted under the Plan shall be
for the purchase of not more than an aggregate of 1,100,000 shares of Common
Stock of the Company, subject to adjustment as provided in Section 12 hereof.
The total number of shares that may be issued to any one person under the Plan
shall not exceed 275,000 shares of Common Stock, subject to adjustment as
provided in Section 12 hereof. Shares subject to options may be authorized and
unissued shares or previously issued shares which have been acquired by the
Company and are held in its treasury. Shares subject to options which terminate
or expire prior to exercise shall be available for further option grant
hereunder.
4. Administration of the Plan. The Plan shall be administered by a
committee of the Board of Directors, consisting of two or more persons appointed
from time to time by the Board from among its members (the "Committee"). Each
member of the committee shall be both a "Non-Employee Director" within the
meaning of Rule 16b-3 of the Rules under the Securities Exchange Act of 1934,
as amended, and an "outside director" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended. The Committee shall from time to
time grant the options to the extent and on the terms and conditions it deems
advisable to such eligible persons (as defined in Section 5 below) and for such
number of shares as the Committee shall determine consistent with the provisions
of the Plan. Options granted under the Plan shall be evidenced by agreements
in such form as the Committee may from time to time approve. The Committee
shall have power to interpret the Plan and any agreement evidencing options
granted hereunder, to make regulations for carrying out its purpose and to make
other determinations in connection with its administration, all of which shall
be final and conclusive.
5. Eligibility. Options shall be granted only to persons who are key
employees (including officers who are also key employees) of the Company or a
Subsidiary.
<PAGE>
6. Terms and Conditions of Options. Options granted under the Plan
shall be subject to the following terms and conditions, and such other terms
and conditions not inconsistent with the Plan as the Committee shall determine
to be appropriate:
(a) Number of Shares. Each option shall specify the number of
shares that may be purchased upon exercise of the option, subject to
the provisions of Section 12 below.
(b) Exercise Price. The exercise price shall be determined by the
Committee, but in no event shall it be less than 100% of the fair
market value of the Common Stock of the Company at the time the option
is granted.
(c) Option Period. The period of an option shall not exceed 10
years from the date of grant.
(d) Exercise of Option. Except as otherwise provided in this Plan,
or in the applicable option agreement, each option will be exercisable
in cumulative installments as follows:
(i) The Optionee may purchase up to one-fourth (1/4) of the
total optioned shares at any time after one year from the
date of grant and prior to the termination of the option.
(ii) The Optionee may purchase up to an additional one-fourth
(1/4) of the total optioned shares at any time after two
years from the date of grant and prior to the termination
of the option.
(iii) The Optionee may purchase up to an additional one-fourth
(1/4) of the total optioned shares at any time after three
years from the date of grant and prior to the termination of
the option.
(iv) The Optionee may purchase up to an additional one-fourth
(1/4) of the total optioned shares at any time after four
years from the date of grant and prior to the termination of
the option.
A person electing to exercise an option shall give written notice to
the Company, as specified by the Committee, of his election and of the number of
shares he has elected to purchase, such notice to be accompanied by documents as
may be required by the Committee, and shall at the time of such exercise tender
the purchase price of the shares he has elected to purchase (payment to be in
the form provided in Section 7). If the notice of election to exercise is given
by the executor or administrator of a deceased participant, or by the person or
persons to whom the option has been transferred by the participant's will or the
applicable laws of descent and distribution, the Company shall be under no
obligation to deliver the shares pursuant to such exercise unless and until the
Company
<PAGE>
shall be satisfied that the person or persons giving notice is or are entitled
to exercise the option.
7. Payment for and Delivery of Shares. Payment for shares purchased
upon exercise of an option granted under the Plan must be made in full at the
time of exercise. Payment may be in cash, by certified check or in Common Stock
of the Company. Fair market value of Common Stock for this purpose shall be
determined by the Board. The Company shall not be obligated to deliver any
shares upon the exercise of an option unless and until, in the opinion of
the Company's counsel, all applicable federal, state and other laws and
regulations have been complied with, nor, in the event the outstanding Common
Stock is at the time listed upon any stock exchange, unless and until the shares
to be delivered have been listed or authorized to be added to the list upon
official notice of issuance upon such exchange, not unless and until all other
legal matters in connection with the issuance and delivery of shares have been
approved by the Company's counsel. Without limiting the generality of the
foregoing, the Company may require from the Participant or other person
purchasing shares of Common Stock under the Plan such investment representation
or such agreement, if any, as counsel for the Company may consider necessary in
order to comply with the Securities Act of 1933, may impose upon certificates
evidencing the shares a restrictive legend and place a stop transfer order with
its transfer agent, and may require that the Participant or such other person
agree that any sale of the shares will be made only on one or more specified
stock exchanges or in such other manner as is permitted by the Committee and
that he will notify the Company when he makes any disposition of the shares
whether by sale, gift or otherwise.
8. Nontransferability of Options. No option may be transferred by the
Participant otherwise than by will or by the laws of descent and distribution
and, during the Participant's lifetime, the option may be exercised only by him.
9. Termination of Employment. Except as otherwise provided in this
Plan, or in the applicable option agreement, if the employment of a Participant
terminates for any reason other than death or his retirement with the consent of
the Company, all options held by the Participant shall expire and may not
thereafter be exercised. For purposes of this Section 9, the employment
relationship in respect of options held by a Participant shall be treated as
continuing intact while the Participant is on military leave, sick leave or
other bona fide leave of absence (such as temporary employment with the
Government) if the period of such leave does not exceed 90 days, or, if longer,
so long as the Participant's right to reemployment with the Company is
guaranteed either by statute or by contract. Where the period of leave exceeds
90 days and where the Participant's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship shall be deemed to
have terminated on the ninety-first day of such leave. Anything herein to the
contrary notwithstanding, unless the applicable option agreement provides
otherwise, if the employment of a Participant terminates more than four years
after the grant of an option to him, other than due to a "termination for
cause," he may exercise such option within 30 days of such termination.
Except as so exercised, such option shall expire at the end of such period. In
no event, however, may any option be exercised after the expiration of ten years
from the date of grant of such option. For the purpose of the Plan,
"termination for cause" shall mean (i)
<PAGE>
termination due to (a) willful or gross neglect of duties for which employed, or
(b) willful misconduct in the performance of such duties, in each such instance
so as to cause material harm to the Company or the Subsidiary by which he is
employed, all of such facts to be determined in good faith by the Committee,
(ii) termination due to the Participant's committing fraud, misappropriation or
embezzlement in the performance of his duties as an employee of the Company or
a Subsidiary, or (iii) termination due to the Participant's committing any
felony for which he is convicted and which, as determined in good faith by the
Committee, constitutes a crime involving moral turpitude and results in material
harm to the Company or the Subsidiary by which he is employed.
10. Death. Except as otherwise provided in the applicable option
agreement, if a Participant dies at a time when he is holding an option as to
which he has not fully exercised his right to purchase shares, then at any time
or times within such period after his death not to exceed 12 months as may be
provided in the option agreement, such option may be exercised, as to all or
any of the shares which the Participant was entitled to purchase under the
option immediately prior to his death, by his executor or administrator or the
person or persons to whom the option is transferred by will or the applicable
laws of descent and distribution, and except as so exercised such option shall
expire at the end of such period. In no event, however, may any option be
exercised after the expiration of ten years from the date of grant of such
option.
11. Retirement. Except as otherwise provided in the applicable option
agreement, if a Participant retires from service with the consent of the
Company at a time when he is entitled to exercise an option, then at any time or
times within 90 days after his retirement he may exercise such option as to all
or any of the shares which he was entitled to purchase under the option
immediately prior to his retirement. Except as so exercised, such option shall
expire at the end of such period. In no event, however, may any option be
exercised after the expiration of 10 years from the date of grant of such
option. The Committee shall have authority to determine whether or not
a Participant has retired from service and its determination shall be
binding on all concerned. In the sole discretion of the Committee, a
transfer of employment to an affiliate of the Company other than a
Subsidiary (the latter type of transfer not constituting a termination
of employment for purposes of the Plan) may be deemed to be a
retirement from service with the consent of the Company for purposes of
this Section 11 so as to entitle the Participant to exercise an
option within 90 days after such transfer.
12. Changes in Stock. In the event of a stock dividend, split-up or
combination of shares, recapitalization or merger in which the Company is the
surviving corporation or other similar capital change, the number and kind of
shares of stock or securities of the company to be subject to the Plan and to
options then outstanding or to be granted thereunder, the maximum number of
shares of stock or securities which may be issued on the exercise of options
granted under the Plan, the option price and other relevant provisions shall be
appropriately adjusted by the Committee, whose determination shall be binding on
all persons. In the event of a consolidation or a merger in which the Company
is not the surviving corporation, or any other merger in which the stockholders
of the Company exchange their shares of stock in the Company for stock of
another corporation, or in the event of complete liquidation of the Company, or
in
<PAGE>
the case of a tender offer approved by the Board of Directors, all outstanding
options shall thereupon terminate, provided that the Committee may, prior to the
effective date of any such transaction, either (i) make all outstanding options
immediately exercisable or (ii) arrange to have the surviving corporation grant
to the Participants replacement options on terms which the Committee shall
determine to be fair and reasonable.
13. Rights as a Shareholder. The Participant shall have no rights as a
shareholder with respect to any shares of Common Stock of the Company held under
option until the date of issuance of the stock certificates to him for such
shares.
14. Subsidiary. For purposes of the Plan, Subsidiary shall mean any
corporation more than 50 percent of total combined voting power of all classes
of stock of which is owned, directly or indirectly, by the Company.
15. Employment Rights. Neither the adoption of the Plan nor the granting
of any option hereunder shall be deemed to confer upon any employee of the
Company or any Subsidiary the right to continued employment with the Company or
any Subsidiary, or to interfere in any way with the right of the Company or any
Subsidiary to terminate the employment of any employee at any time.
16. Amendments. The Board may at any time or times amend the Plan or
amend any outstanding option or options for the purpose of satisfying the
requirements of any changes in applicable laws or regulations or for any other
purpose which may at the time be permitted by law; provided that (except to the
extent permitted under Section 12) no such amendment shall, without the approval
of the stockholders of the Company (a) increase the maximum number of shares
available under the Plan, (b) reduce the minimum exercise price of options below
the price provided for in Section 6(b), (c) extend the time within which options
may be exercised, or (d) change the designation of the persons eligible to
receive options under the Plan. No amendment shall adversely affect the right
of any Participant without his consent.
17. Termination. The Board may terminate the Plan at any time prior to
its scheduled expiration date but no such termination shall adversely affect the
rights of any Participant (without his consent) under any option theretofore
granted.
18. Effective Date. The effective date of the original 1987 Nonqualified
Stock Option Plan was December 16, 1987. The effective date of this Amended and
Restated Nonqualified Stock Option Plan is January 16, 1997, subject to approval
hereof by the stockholders of the Company.
<PAGE>
TEXFI INDUSTRIES, INC.
BOARD OF DIRECTORS RESOLUTIONS CONCERNING
1990 EXECUTIVE STOCK PURCHASE PLAN
January 16, 1997
WHEREAS, the corporation's 1990 Executive Stock Purchase Plan (the
"Plan"), provides that the maximum number of shares of the corporation's
Common Stock that may be purchased pursuant to the Plan is 300,000 shares; and
WHEREAS, 198,236 shares of Common Stock have previously been purchased
upon exercise of options granted under the Plan and, as a result, only 101,764
shares of Common Stock are currently available for options that may be granted
under the Plan; and
WHEREAS, to give it added flexibility in attracting key employees and
in providing key employees additional incentive to continue as employees of the
corporation or a subsidiary of the corporation, the Board of Directors desires
to increase, by 200,000 shares, the aggregate number of shares of Common Stock
that may be purchased pursuant to the Plan; and
WHEREAS, a technical amendment to the Plan is necessary in order to
conform to Rule 16b-3 of the Securities and Exchange Commission, as recently
amended; now, therefore, it is
RESOLVED, that Section 2 of the Plan is hereby amended in its entirety
to read as follows:
2. Administration. The Plan shall be administered by a
Committee of the Board of Directors, consisting of two or more
persons appointed from time to time by the Board from among its
members (the "Committee"). Each member of the Committee shall be a
"Non-Employee Director" within the meaning of Rule 16b-3 of
the Rules under the Securities Exchange Act of 1934, as amended.
The interpretation and construction by the Committee of the Plan or
of any option or subscription agreement hereunder shall be final.
No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any
option or subscription agreement hereunder.
RESOLVED, that, subject to stockholder approval thereof, the Plan be
and hereby is amended to increase, by a total of 200,000 shares, the
aggregate number of shares of Common Stock that may be purchased
pursuant to the Plan.
FURTHER RESOLVED, that this amendment to the Plan shall be submitted
to the stockholders of the corporation at the next annual meeting of
the corporation's stockholders, with the recommendation of the Board
of Directors that it be approved.
<PAGE>
FURTHER RESOLVED, that, subject to stockholder approval of the
amendment to the Plan, the corporation be and hereby is authorized
and directed to register the additional shares that may be purchased
pursuant to such plan by filing a Registration Statement on Form S-8
with the Securities and Exchange Commission, and the proper officers
of the corporation be and hereby are authorized and directed to take
such action as they deem necessary or desirable in connection with
such registration.
FURTHER RESOLVED, that, subject to stockholder approval of the
amendment to the Plan, the additional shares of Common Stock of the
corporation which are issuable pursuant to the Plan shall be listed
on the New York Stock Exchange and the proper officers of the
corporation are hereby authorized and directed to make application to
the New York Stock Exchange for the listing of such shares, to take
all necessary actions to perfect such listing application with the
New York Stock Exchange, and to execute any application, agreement or
document required under the rules of the New York Stock Exchange.
FURTHER RESOLVED, that, subject to stockholder approval of the
amendment to the Plan, the proper officers of the corporation are
hereby authorized and directed to deliver any and all instruments and
documents and do any and all such acts or things as they or any of
them may deem necessary or advisable to carry out fully the purposes
of the foregoing resolutions.
<PAGE>
EXHIBIT 11
TEXFI INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
THIRTEEN WEEKS ENDED
JANUARY 31, February 2,
1997 1996
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:
Balance at beginning and end of period ......... 8,735,491 8,650,690
Restricted Stock Forfeitures.................... -- --
----------- -----------
Balance at end of period ..................... 8,735,491 8,650,690
=========== ===========
PRIMARY:
Net income from continuing operations........... $ 1,047,000 $ 704,000
Net loss from discontinued operations........... -- (280,000)
------------ -----------
Net income ..................................... $ 1,047,000 $ 424,000
============ ===========
Weighted average number of shares outstanding:
Common stock outstanding for the period
based on a daily weighted average ........... 8,735,491 8,650,690
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
=========== ===========
Per common share amounts:
Net income from continuing operations......... $ .12 $ .08
Net loss from discontinued operations....... -- (.03)
---------- ----------
Net income (loss)......................... $ .12 $ .05
========== ===========
FULLY DILUTED:
Net income from continuing operations......... $ 1,153,000 $ 704,000
Net loss from discontinued operations......... -- (280,000)
---------- -----------
Net income ................................... $ 1,153,000 $ 424,000
=========== ===========
Weighted average number of shares outstanding:
Common stock outstanding for the period based
on a daily weighted average .................. 8,735,491 8,650,690
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
Increase in common shares assuming conversion
of the 11-1/4% Convertible Senior Subordinated
Debentures ................................... 528,647 548,647
----------- ----------
Weighted average number of common and common
equivalent shares outstanding .................... 9,264,138 9,199,337
=========== ===========
Per common share amounts:
Excluding convertible debenture shares:
Net income from continuing operations....... $ .12 $ .08
Net loss from discontinued operations....... -- (.03)
---------- ---------
Net income ............................... $ .12 $ .05
=========== ==========
Including Convertible Debenture Shares:
Net income from continuing operations....... $ .12 $ .08
Net loss from discontinued operations....... -- (.03)
---------- --------
Net income ............................... $ .12 $ .05
=========== ==========
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 546
<SECURITIES> 0
<RECEIVABLES> 44,643
<ALLOWANCES> 1,552
<INVENTORY> 21,771
<CURRENT-ASSETS> 67,273
<PP&E> 76,625
<DEPRECIATION> 46,895
<TOTAL-ASSETS> 112,129
<CURRENT-LIABILITIES> 42,088
<BONDS> 36,943
0
0
<COMMON> 33,921
<OTHER-SE> (46,015)
<TOTAL-LIABILITY-AND-EQUITY> 112,129
<SALES> 48,545
<TOTAL-REVENUES> 48,545
<CGS> 41,263
<TOTAL-COSTS> 44,818
<OTHER-EXPENSES> 138
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,521
<INCOME-PRETAX> 1,068
<INCOME-TAX> 21
<INCOME-CONTINUING> 1,047
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 1,047
<EPS-PRIMARY> .12
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