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 1, 1998
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
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TEXFI INDUSTRIES, INC.
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(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.)
1430 Broadway, 13th Floor, New York, New York 10018
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(Address of principal executive offices)
(ZIP Code)
(212) 930-7200
----------------------------------------------------
(Registrant's telephone number, including area code)
Number of shares of Common Stock outstanding
at June 15, 1998 - 8,859,098
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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 1, 1998
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Texfi Industries, Inc. (the Company") has prepared the consolidated
financial statements included herein, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The consolidated balance
sheet as of October 31, 1997 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/A.
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 1, 1998 are not necessarily indicative of the results
that may be expected for the year ended October 30, 1998. The following
consolidated financial statements are included:
Consolidated Statements of Income for the thirteen weeks and twenty-six
weeks ended May 1, 1998 and May 2, 1997
Consolidated Balance Sheets as of May 1, 1998 and October 31, 1997
Consolidated Statements of Cash Flows for the thirteen weeks and
twenty-six weeks ended May 1, 1998 and May 2, 1997
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)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------- ----------------------
May 1, May 2, May 1, May 2,
1998 1997 1998 1997
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales ........................... $ 34,084 $ 54,224 $ 75,860 $ 102,769
----------- ----------- ---------- ----------
Cost and Expenses:
Cost of goods sold ............... 31,583 46,783 68,077 88,046
Selling, general and
administrative ............. 3,155 3,930 6,027 7,335
----------- ----------- ---------- ----------
Total ......................... 34,738 50,713 74,104 95,381
----------- ----------- ---------- ----------
Operating (Loss) Income.............. (654) 3,511 1,756 7,388
----------- ----------- ---------- ----------
Other Expense (Income):
Interest ......................... 2,132 2,702 4,286 5,223
Equity in loss
of joint venture............... -- 395 -- 559
Impairment of note receivable..... -- -- 1,154 --
Other,net......................... (18) (103) (19) 21
----------- ----------- ---------- ----------
Total ......................... 2,114 2,994 5,421 5,803
----------- ----------- ---------- ----------
(Loss) Income before Income Taxes.... (2,768) 517 (3,665) 1,585
Provision for Income Taxes .......... -- 11 -- 32
Net (Loss) Income.................... $ (2,768) $ 506 $ (3,665) $ 1,553
=========== =========== ========== ==========
Net (Loss) Income per Share:
Basic ............................ $ (.31) $ .06 $ (.41) $ .18
=========== =========== ========== ==========
Diluted .......................... $ (.31) $ .06 $ (.41) $ .18
=========== =========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements on page 6.
3
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
May 1, October 31,
1998 1997
---------- ------------
Restated
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............... $ 233 1,434
Receivables:
Due from factor........................ 21,515 35,494
Trade.................................. 6,136 4,486
Other ................................. 690 815
Inventories .............................. 16,902 19,914
Prepaid Expenses.......................... 2,594 1,355
--------- -------
Total................................... 48,070 63,498
PROPERTY, PLANT AND EQUIPMENT - Net ......... 27,238 28,254
PROPERTY, PLANT AND EQUIPMENT HELD FOR
DISPOSAL - Net ............................ 1,290 3,318
OTHER ASSETS ................................ 1,574 1,627
--------- -------
$ 78,172 $ 96,697
========= =======
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt ..... $ 6,183 $ 5,015
Current maturities of sub. debt........... 4,800 1,200
Accounts payable ......................... 22,847 28,110
Other liabilities......................... 2,344 3,037
--------- -------
Total.................................. 36,174 37,362
REVOLVING CREDIT LINE........................ 27,390 33,919
LONG-TERM DEBT .............................. 2,000 5,500
SUBORDINATED DEBENTURES ..................... 31,945 35,631
OTHER LONG-TERM OBLIGATIONS ................. 217 175
COMMON SHAREHOLDERS' DEFICIT:
Common stock, $1.00 par value ............ 8,859 8,859
Additional paid-in capital ............... 25,534 25,534
Accumulated deficit....................... (53,947) (50,283)
--------- -------
Total.................................. (19,554) (15,890)
--------- -------
$ 78,172 $ 96,697
========= =======
</TABLE>
See Notes to Consolidated Financial Statements on page 6.
4
<PAGE>
TEXFI INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
May 1, May 2, May 1, May 2,
1998 1997 1998 1997
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income .................... $ (2,768) $ 506 $ (3,665) $ 1,553
Adjustments to reconcile net (loss)
income to net cash provided by (used
in) operating activities:
Equity in loss of
joint venture................ -- 395 -- 559
Impairment of note receivable... -- -- 1,154 --
Depreciation & amortization .... 1,444 1,300 2,882 2,549
Provision for losses on accounts
receivable....................... 5 7 5 133
Gain on sale of property, plant
and equipment.................... (1) (67) (2) (81)
Change in operating assets and liabilities:
Accounts receivable ............. 4,309 (2,823) 12,449 (1,470)
Inventories ..................... 1,949 (1,653) 3,012 (1,245)
Prepaid and other assets ........ 252 (1) (1,185) (604)
Accounts payables and accrued
liabilities ..................... 956 1,274 (5,914) 2,390
----------- --------- ---------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 6,146 (1,062) 8,736 3,784
INVESTING ACTIVITIES
Purchases of property, plant and
equipment ............................ (533) (3,125) (1,427) (6,226)
Proceeds from sale-lease back of
property, plant and equipment......... -- 1,683 -- 4,211
Proceeds from disposition of property,
plant and equipment................... 539 1,667 2,029 2,260
----------- --------- ---------- ---------
NET CASH PROVIDED BY
INVESTING ACTIVITIES 6 225 602 245
FINANCING ACTIVITIES
Net proceeds from Revolver debt
borrowings............................ (3,890) 6,284 (6,528) 3,703
Payments on long-term debt
obligations........................... (2,167) (2,780) (2,333) (4,423)
Investment in joint venture............ (25) (884) (1,179) (1,318)
Payments for repurchase of subordinated
debentures ........................... (77) (446) (86) (446)
Capitalized loan costs................. (71) (37) (413) (117)
Proceeds from employee stock plans..... -- 420 -- 420
----------- --------- ---------- ---------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (6,230) 2,557 (10,539) (2,181)
----------- --------- ---------- ---------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (78) 1,720 (1,201) 1,848
Cash and cash equivalents
at beginning of period ................ 311 546 1,434 418
----------- --------- ---------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 233 $ 2,266 $ 233 $ 2,266
=========== ========== =========== ==========
</TABLE>
See Notes to Consolidated Financial Statements on page 6.
5
<PAGE>
TEXFI INDUSTRIES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 1, 1998
1. Details of certain balance sheet captions are as follows (in thousands):
May 1, October 31,
1998 1997
---------- -----------
1. INVENTORIES:
Finished goods ............................. $ 3,621 $ 5,225
Goods in process ........................... 8,819 10,092
Raw materials .............................. 2,653 2,845
Supplies ................................... 2,565 2,595
---------- -----------
Total ................................. 17,658 20,757
Less reserves .............................. 756 843
---------- -----------
Inventories-net........................ $ 16,902 $ 19,914
========== ===========
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements ................. $ 2,220 $ 2,220
Buildings .................................. 16,019 16,019
Machinery, equipment, etc. ................. 60,912 59,042
Construction in progress ................... 648 1,143
---------- -----------
Total ................................. 79,799 78,424
Less accumulated depreciation .............. 52,561 50,170
---------- -----------
Property, plant and equipment-net ..... $ 27,238 $ 28,254
========== ===========
LONG-TERM DEBT:
Term loan with variable interest .......... $ 8,000 $ 10,000
Term loans at 6.75%........................ 183 515
---------- -----------
Total ................................. 8,183 10,515
Less current maturities ................... 6,183 5,015
---------- -----------
Due after one year .................... $ 2,000 $ 5,500
========== ===========
SUBORDINATED DEBENTURES:
Senior Subordinated Debentures, 8 3/4%
due August 1, 1999........................ $ 34,391 $ 34,400
Subordinated Extendible Debentures,
11%, due April 1, 2000 (Series C)......... 2,354 2,431
---------- -----------
Total ..................................... 36,745 36,831
Less current maturities................... 4,800 1,200
---------- -----------
Due after one year......................... $ 31,945 $ 35,631
========== ===========
6
<PAGE>
2. Statement of Financial Accounting Standards ("SFAS") 128 "Earnings per
Share" replaced the previously computed primary and fully diluted
earnings per share ("EPS") with basic and diluted EPS. Unlike primary
EPS, basic EPS excludes any dilutive effects of options, warrants, or
convertible securities. Diluted EPS includes the dilutive effect of
such items. The prior period basic EPS has been recalculated to conform
to SFAS 128 provisions with no material change.
3. At May 1, 1998, shares of common stock were reserved for possible
issuance as follows:
Stock options ..................................... 858,099
Stock options granted to an entity owned by
certain Company executive officers............... 1,200,000
1990 Executive Stock Purchase Plan ................ 283,892
Directors' Deferred Stock Compensation Plan ....... 57,153
---------
Total ........................................... 2,399,144
=========
4. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in these financial
statements and accompanying footnotes. Actual results may differ from
those estimates and assumptions.
7
<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 1, 1998 decreased to
$34,084,000 as compared to $54,224,000 for the thirteen weeks ended May 1, 1997.
This $20,140,000 (37.1%) decrease resulted from both lower sales of finished
fabrics ($14.6 million) and the divestiture of the Texfi knitted narrow fabrics
business which generated $5.5 million in net sales in the second quarter of
1997. Year-to-date net sales for 1998 totaling $75,860,000 decreased $26,909,000
(26.2%) when compared to sales of $102,769,000 for the same twenty-six week
period in fiscal 1997. This decrease reflects a combination of reduced sales of
$17.2 million at the Company's Blends division and the divestiture of the
Company's knitted narrow fabrics business of $9.7 million. Second quarter and
year-to-date decreases in finished fabrics sales were attributable to unusually
high imports of competing fabrics and finished apparel from Asia into United
States' markets, specifically the Company's missy and junior wear markets.
For the comparable thirteen-week period, cost of goods sold, as a
percentage of net sales, increased from 86.3% in 1997 to 92.7% in 1998. For the
comparable twenty-six week period, cost of goods sold as a percentage of net
sales increased from 85.7% in 1997 to 89.7% in 1998, as a result of static fixed
costs despite reductions in sales volume.
Selling, general and administrative expenses ("SG&A") increased from
7.2% to 9.3% as a percentage of net sales for the thirteen weeks ended May 1,
1998 when compared to same period a year ago and increased from 7.1% to 7.9% for
the comparable twenty-six week periods. These increases, as a percentage of net
sales, are again primarily due to static fixed costs despite reductions in sales
volume.
8
<PAGE>
Interest expense decreased $566,000 (21.0%) from $2,702,000 during the
second thirteen-week period in 1997 to $2,136,000 in 1998. For the comparable
twenty-six week periods, interest expense decreased $933,000 (17.9%) from
$5,223,000 to $4,286,000. These decreases resulted from a $22.4 million
reduction in total indebtedness during the twelve-month period from May 2, 1997
through May 2, 1998 as well as lower borrowing rates associated with the amended
and restated credit facility.
The 1997 second quarter and year-to-date net income includes $395,000
and $559,000, respectively, equity in loss of joint venture which represented
the Company's 50% participation in Rival Sport, LLC ("Rival") entered into with
NHL Enterprises to market and source a branded line of hockey-related apparel.
As a condition precedent to the Company's amending and restating its credit
facility, the Company was required to divest its interest in Rival and
accordingly, on December 18, 1997, the Company sold its Rival ownership interest
to an entity affiliated with certain Company executive officers in consideration
for the issuance by the buyer to the Company of a secured $4.5 million ten-year
balloon note which bears interest at 5.0% per annum and which requires
prepayments from a portion of cash distributions, if any, that the buyer may
receive from Rival. As of the end of the first quarter of 1998, due to continued
and anticipated future losses at Rival; the Company elected to reserve $4.5
million, the face amount of the note, against its note receivable.
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 that 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 subsequent quarters while
cash requirements increase due to the seasonal timing of certain cash payments.
9
<PAGE>
Financial Condition (continued):
Working capital is comprised chiefly of inventories and accounts
receivable. At May 1, 1998, working capital equaled $11.9 million, a decrease of
$14.2 million from the year ended October 31, 1997. This decrease in working
capital is due primarily to decreases in cash ($1.2 million), accounts
receivable ($12.5 million) and inventories ($3.0 million) and an increase in
current maturities of long-term debt and subordinated debentures ($4.7 million)
which more than offset an increase in prepaid expenses ($1.2 million) and a
decrease in accounts payable and other liabilities ($6.0 million).
During the first two fiscal quarters of 1998, operating activities
generated net cash of $8.7 million. This cash was generated as a result of the
$3.7 million net loss adjusted for impairment of note receivable of $1.1
million, depreciation and amortization of $2.9 million, together with a decrease
in accounts receivable of $12.5 million and inventories of $3.0 million which
offset increases in prepaid and other assets of $1.2 million and decreases in
accounts payable and other liabilities of $5.9 million. Cash flow from
operations, $2.0 million in proceeds from the disposition of property, plant and
equipment and cash on hand provided funds to invest $1.2 million in the joint
venture, repay long-term debt and subordinated debentures of $2.4 million,
purchase property, plant and equipment totaling $1.4 million, pay loan amendment
costs of $413,000 and reduce the revolving line of credit $6.5 million.
On March 15, 1996, the Company entered into a $74.0 million credit
facility. On December 19, 1997, the credit facility was amended and restated to
effect the following changes: (a)extend the term loan to $10.0 million and
revise the related payment schedule to include 16 equal monthly installments of
$500,000 beginning in February 1998 and a $2.0 million balloon payment due May
31, 1999, (b) reduce the revolving credit line to $45.0 million, (c)impose a
Minimum EBITDA and Minimum Adjusted Fixed Charge Coverage Ratio and Minimum
Availability as defined by the facility, and (d)place restrictions on fiscal
year rental expense, additional indebtedness, acquisitions, capital
expenditures, the sale or disposal of fixed assets, and the payment of dividends
or purchase, redemption or distribution on capital stock.
10
<PAGE>
Financial Condition (continued):
The credit facility is secured by substantially all of the Company's
assets. The credit facility provides for the Company to elect interest rates
based upon either a Eurodollar or prime interest rate plus an established
margin. In addition, the Company may elect interest periods ranging from 30 to
180 days depending upon the interest rate election.
As of May 1, 1998, the Company was in violation of the credit
facility's financial ratios and minimum availability requirement. On June 5,
1998, the Company entered into a Forbearance Agreement which provides that
during the forbearance period defined as June 5 through July 24, 1998, the
credit facility lenders will not, solely by reason of the defaults noted above,
exercise any right or remedy available upon default other than those expressly
set forth in the Forbearance Agreement. The Forbearance Agreement (a)reduced the
aggregate revolving credit line to $31.0 million, (b)revised both the minimum
availability requirement and its definition, (c)increased applicable interest
margins by 0.50%, (d)changed the interest payment periods to monthly, and
(e)waived term loan principal payments.
The Forbearance Agreement is conditioned on the deferral of management
fees to an entity owned by certain Company executive officers and the execution
by this entity of a guaranty of secured obligations to the extent of $1.0
million. In consideration, the entity receives from the Company a ten-year
option to purchase 600,000 shares of common stock and an amendment of the
purchase price and option period related to that entity's previous option to
purchase 600,000 shares of common stock.
As of May 1, 1998, funds available through the revolving credit line
after giving effect to the June 5, 1998 Forbearance Agreement, approximated $3.6
million.
11
<PAGE>
Financial Condition (continued):
As of May 1, 1998, 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 but contain covenants that place
limitations on the use of proceeds from disposal of assets and on the incurrence
of additional indebtedness and senior indebtedness (as defined in the indenture)
if such indebtedness would exceed stated ratios of capitalization and earnings
after such incurrence. The debenture definition of indebtedness does not include
revolver credit line borrowings or operating lease obligations. The Company is
currently prohibited from incurring additional indebtedness because of a
violation of the defined limitations. Debenture holders waived this restriction
on the incurrence of additional indebtedness with respect to the March 15, 1996
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 May 1, 1998, $4.8 million of
deposits due are classified as a current liability.
As of May 1, 1998 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% for the period April 1, 1998 through March 31, 1999. 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, 1998 the last day for debenture
holders to exercise their redemption option, Series C holders with aggregate
principal totaling approximately $55,000 had delivered proper notice to redeem
their debenture(s) as of April 1, 1998.
12
<PAGE>
Financial Condition (continued):
The Company plans to place into service $5.3 million of machinery and
equipment during 1998. As of the end of the first half, $1.4 million had been
expended on machinery and equipment purchases. This equipment primarily will
improve dyeing and finishing capabilities 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 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 funds
to meet its 1998 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.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibits to this report are listed in the accompanying index to
exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended May 1, 1998.
14
<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 22, 1998 By:S/Robert P. Ambrosini
-------------------------
Robert P. Ambrosini
Chief Financial Officer
and Executive Vice President
15
<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) 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)(3) 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.
2
<PAGE>
*4(a)(4) 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.
*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.
3
<PAGE>
*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(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.
<PAGE>
*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-Q
dated January 31, 1997.
*4(d)(11) Waiver and Consent Agreement dated June 12, 1997 to the Credit
Agreement dated March 15, 1996 among Registrant, as Borrower,
certain Lenders referred to therein, and NationsBank, N.A., as
Agent, filed as Exhibit 4(d)(11) to Registrant's Form 10-Q for
the fiscal quarter ended August 1, 1997.
*4(d)(12) Fourth Amendment dated June 19, 1997 to the Credit Agreement
dated March 15, 1996 among Registrant, as Borrower, certain
Lenders referred to therein, and NationsBank, N.A., as Agent,
filed as Exhibit 4(d)(12) to Registrant's Form 10-Q filed for
the fiscal quarter ended August 1, 1997.
*4(d)(13) Fifth Amendment dated October 8, 1997 to the Credit Agreement
dated March 15, 1996 among Registrant, as Borrower, certain
Lenders referred to therein, and NationsBank, N.A., as Agent
filed as Exhibit 4(d)(13) to Registrant's Form 10-K filed for
the fiscal year ended October 31, 1997.
5
<PAGE>
*4(d)(14) Amended and Restated Loan and Security Agreement dated
December 19, 1997 to the Credit Agreement dated March 15, 1996
among Registrant, as Borrower, the Financial Institutions
referred to therein, and BankBoston, N.A., as Agent filed as
Exhibit 4(d)(14) to Registrant's Form 10-K for the fiscal year
ended October 31, 1997.
4(d)(15) Forbearance Agreement dated June 5, 1998 among Registrant, as
Borrower, the Financial Institutions referred to therein, and
BankBoston, N.A., as Agent.
11 Computation of Earnings Per Share
* Incorporated by reference to previous filing.
6
[EXECUTION DRAFT]
56408
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT is made as of June 5, 1998 by and among
TEXFI INDUSTRIES, INC., a Delaware corporation (the "Borrower"), BANKBOSTON,
N.A., THE CIT GROUP/COMMERCIAL SERVICES, INC. and NATIONAL BANK OF CANADA (the
"Lenders") and BANKBOSTON, N.A., as the agent (the "Agent") for the Lenders.
Preliminary Statement
The Borrower, the Lenders and the Agent are parties to an Amended and
Restated Loan and Security Agreement dated as of December 19, 1997 (the "Loan
Agreement", terms defined therein and not otherwise defined herein being used
herein as therein defined).
Events of Default have occurred and are continuing under the Loan
Agreement. Specifically, the Loan Agreement requires (1) maintenance of $2
million of Availability at all times, (2) that EBITDA for the first two Fiscal
Quarters of Fiscal Year 1998 (ended May 2, 1998) be at least $7 million and (3)
that the ratio of Adjusted Operating Cash Flow to Total Debt Service for the
first two Fiscal Quarters of Fiscal Year 1998 (ended May 2, 1998) be not less
than 0.80 to 1. Availability was less than $2 million for a period of
approximately 10 days during the month of May 1998; as of the date of this
Agreement, financial statements for the first two Fiscal Quarters of Fiscal Year
1998 submitted to the Agent and the Lenders by the Borrower reflect EBITDA for
such period of $4.73 million and a ratio of Adjusted Operating Cash Flow to
Total Debt Service for such period of 0.51 to 1. The Agent has notified the
Borrower in writing of the foregoing Events of Default. In addition, the
Borrower intends to write off in full the Rival Note and to restate certain of
its financial statements as a result of such write off. Additional Events of
Default may occur solely as a result of such write off and restatement, although
the Borrower does not anticipate any specific additional Events of Default. All
Events of Default referred to in this paragraph, whether existing or potential,
and any continuation or repetition of such Events of Default, are referred to
hereinafter as the "Forbearance Defaults."
The Borrower has requested, and the Lenders and the Agent have agreed,
upon and subject to all of the terms, conditions and provisions of this
Agreement, to forbear for a specified period from exercising the various rights
and remedies available to the Lenders and the Agent when an Event of Default has
occurred and is continuing under the Loan Agreement.
<PAGE>
Accordingly, in consideration of the Loans, the mutual undertakings
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
Section 1. Acknowledgments and Agreements by Borrower. The Borrower
acknowledges and agrees that:
(a) Events of Default have occurred and now exist under the Loan
Documents and are continuing;
(b) The Loan Documents executed and delivered by the Borrower are the
legal, valid and binding obligations of the Borrower, enforceable against it in
accordance with their respective terms;
(c) The Security Interest granted by the Borrower to the Agent in the
Collateral is a duly perfected, first priority Lien, subject only to Permitted
Liens; and
(d) All of the Secured Obligations are absolutely due and owing by the
Borrower to the Lenders and the Agent without any defense, deduction, offset or
counterclaim.
Section 2. Agreement to Forbear. The Agent and the Lenders agree that
during the Forbearance Period (as hereinafter defined) they will not, solely by
reason of the Forbearance Defaults, exercise any right or remedy available to
them upon default by the Borrower, other than as expressly set forth in this
Agreement. Further, during the Forbearance Period the Lenders may continue in
their discretion to make Revolving Credit Loans to the Borrower in accordance
with the provisions of the Loan Agreement except as modified as follows:
(a) In no event shall the aggregate outstanding principal amount of
Revolving Credit Loans exceed $31 million;
(b) The excess of the Borrowing Base plus the amount available to be
drawn under the letter of credit referred to in Section 3(d) over the sum of the
aggregate outstanding principal amount of Revolving Credit Loans plus the
aggregate amount of issued checks of the Borrower not yet presented for payment,
shall be at least $1 million at all times;
(c) Notwithstanding any contrary provision of any notice or other
communication by the Agent to the Borrower prior to the date hereof, interest
shall be payable from and after June 1, 1998 until the end of the Forbearance
Period on all Loans and, to the extent permitted by Applicable Law, on all other
Secured Obligations, at the rate otherwise applicable pursuant to Section 5.1 of
the Loan Agreement, plus 0.50%, payable on demand or, if no demand is made,
monthly on the first day of each month;
2
<PAGE>
(d) No repayments of principal of the Term Loan shall be required to be
made prior to July 24, 1998; and
(e) In addition to the other reports and notices required by the Loan
Agreement, the Borrower shall provide to the Agent (i) before the close of
business on each Business Day, a report of sales and collections for the
preceding Business Day and (ii) not later that Tuesday of each week, a cash
budget for the 90-day period beginning on the preceding Monday including at
least budgeted sales, collections, cash receipts and disbursements, accounts
receivable and accounts payable balances, inventory, and Loan balance and
availability under the Revolving Credit Facility, on a weekly basis, such
reports to be in form satisfactory to the Agent.
"Forbearance Period" means the period beginning on the date hereof and ending on
the earlier of July 24, 1998 and the date on which any Forbearance Condition (as
hereinafter defined) fails or ceases to be satisfied.
Section 3. Forbearance Conditions. The following conditions shall
constitute the "Forbearance Conditions":
(a) The Borrower shall timely perform all of its obligations under this
Agreement;
(b) No Default or Event of Default, other than the Forbearance Defaults
shall occur or be continuing;
(c) No payments shall be made by the Borrower after the date of this
Agreement to Mentmore or any other Affiliate of the Borrower, provided that the
Borrower may reimburse Mentmore for out-of-pocket costs and expenses incurred in
the ordinary course of Mentmore's provision of services to the Borrower, up to a
maximum amount of such reimbursement during the Forbearance Period of $20,000;
(d) On or before June 10, 1998, Mentmore or another Affiliate of the
Borrower acceptable to the Lenders in their reasonable judgment, shall have
executed and delivered a guaranty agreement in form and substance satisfactory
to the Lenders, the Agent and such the guarantor thereunder, guaranteeing the
Secured Obligations to the extent of $1,000,000 and expressly recognizing and
confirming the subrogation rights of such guarantor, and shall have obtained for
the benefit of and delivered to the Agent, a standby letter of credit in the
face amount of $1,000,000 as security for such guaranty, drawings under which
shall be available upon presentation by the Agent to the issuer of such letter
of credit certifying that the Secured Obligations are due and payable and unpaid
after demand upon guarantor at least to the extent of the amount of the
requested drawing, and which shall otherwise be in form acceptable to the Agent;
(e) The Borrower shall, and shall demonstrate to the Agent's
satisfaction from time to time upon request by the Agent that the Borrower does,
timely deduct from the
3
<PAGE>
wages of its employees all payroll taxes and make timely and proper deposits of
all payroll and other "trust fund" taxes;
(f) The Borrower shall have established, as promptly as practicable
after the date hereof, a Lockbox with BankBoston to which payments of certain
Receivable can be deposited;
(g) A comparison of the Borrower's results of operations and financial
condition during the period from May 15, 1998 through any comparison date on or
prior to July 31, 1998 to the business plan dated May 15, 1998 (adjusted for the
increase in the interest rate applicable to the Loans as provided in Section
2(c)) submitted by the Borrower to the Agent and the Lenders (the "Business
Plan") for the same period, shall not result in any material adverse variance;
and
(h) Not later than June 26, 1998, a crisis consultant, turnaround
manager or other similar, independent, qualified professional or firm acceptable
to the Lenders in their reasonable judgment shall have been retained by the
Borrower (including as an independent contractor, at the Borrower's election) to
consult with it as needed and to assist it in fulfilling the Business Plan and
implementing a turnaround plan, including handling creditor relationships.
Section 4. Forbearance Terminated. If any one or more of the
Forbearance Conditions is not satisfied, the agreement of the Lenders and the
Agent to forbear as set forth in Section 2 shall, at the election of the
Required Lenders, terminate without notice to the Borrower, and the Lenders and
the Agent shall thereupon have and may exercise from time to time all of the
remedies available to them under the Loan Documents and Applicable Law by reason
of the existence of continuing Events of Default.
Section 5. Representations and Warranties of Borrower. The Borrower
hereby represents and warrants to the Agent and the Lenders that:
(a) The Borrower has no knowledge of any Defaults or Events of Default
existing under the Loan Documents other than the Forbearance Defaults;
(b) Subject to such existing Events of Default, the representations and
warranties of the Borrower set forth in the Loan Documents are true and correct
in all material respects on the date of this Agreement;
(c) The Borrower has the power and authority and has taken all
necessary steps to authorize it to execute, deliver and perform its obligations
under this Agreement in accordance with its terms, this Agreement has been duly
executed and delivered by the Borrower and is the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms; and
4
<PAGE>
(d) The execution, delivery and performance by the Borrower of this
Agreement does not require any Governmental Approval, violate any Applicable
Law, conflict with or result in a breach of the Borrower's certificate of
incorporation or by-laws, or conflict with or result in a breach of or
constitute a default under any material provisions of any indenture, agreement
or other instrument to which the Borrower is a party or by which the Borrower or
any of its property may be bound or any Governmental Approval applicable to the
Borrower or its property.
Section 6. Application of Proceeds. The Borrower hereby agrees, any
provision of the Loan Agreement or any other Loan Document to the contrary
notwithstanding, that as between the Borrower, on one hand, and the Agent and
the Lenders on the other, the Agent shall have the right to apply and reapply
any and all Collateral, proceeds thereof, other amounts received by the Agent
for application to the Secured Obligations and any property of the Borrower at
any time in the possession of the Agent or any Lender or any Affiliate of the
Agent or any Lender to the payment of the Secured Obligations in any order that
the Agent in its sole and absolute discretion may determine from time to time.
Section 7. Governing Law; General Provisions. (a) This Agreement shall
be governed by and construed in accordance with the laws of the State of Georgia
(without reference to conflict of laws principles).
(b) This Agreement may be executed in any number of copies and by the
parties on separate copies, all of which taken together shall constitute a
single agreement.
(c) Captions of Sections, subsections, schedules or exhibits herein or
attached hereto are for convenience of reference only and shall not be
considered in interpreting or construing any provision of this Agreement and its
attachments.
(d) The parties to this Agreement do not intend to create, and no
provision hereof shall be deemed to have created, any rights in favor of any
Person not a party to this Agreement.
(e) This Agreement may not be amended or otherwise modified except in
writing, signed by the parties to this Agreement.
(f) This Agreement is not intended to be, and it shall not be construed
to be, a novation or accord and satisfaction and, except as expressly modified
hereby, the Loan Agreement and the other Loan Documents remain in full force and
effect and are hereby ratified and confirmed.
Section 8. No Waiver. The Agent and the Lenders acknowledge that the
Borrower has expressed its intention to submit one or more proposals for the
modification of the Borrower's capital structure and the terms of the credit
facilities available under the Loan Agreement. The Agent and the Lenders will
review, but without any obligation or
5
<PAGE>
commitment of any kind to accept, any such reasonable proposal made in writing
and in good faith by the Borrower. None of this Agreement, the forbearance by
the Agent and the Lenders hereunder, the Lenders' continued Revolving Credit
Loans to the Borrower in accordance with the terms of the Loan Agreement and
this Agreement or the Agent's or the Lenders' review of, or discussions or
negotiations with the Borrower or any Affiliate of the Borrower as to, the
potential restructuring of the facilities available under the Loan Agreement are
intended to be, nor are they nor shall they be deemed to be a waiver of or
consent to the Events of Default referred to herein or any other Default or
Event of Default. The Borrower agrees that no Default or Event of Default has
been waived or released, or shall be considered to have been cured by reason of
the Agent and the Lenders entering into this Agreement or performing the terms
hereof, including, without being limited to, forbearing from the exercise of
available remedies and making further Revolving Credit Loans to the Borrower.
Section 9. Release; Waiver of Jury Trial. (a) TO INDUCE THE LENDERS AND
THE AGENT TO ENTER INTO THIS AGREEMENT, THE BORROWER HEREBY RELEASES EACH LENDER
AND THE AGENT, THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND
ASSIGNS, FROM ANY AND ALL CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION AND OTHER
LIABILITIES OF ANY KIND, WHETHER MATURED OR UNMATURED OR CONTINGENT, LIQUIDATED
OR UNLIQUIDATED, AT LAW OR IN EQUITY, THAT THE BORROWER HAS OR HAS HAD AGAINST
ANY LENDER OR THE AGENT.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT.
6
<PAGE>
<TABLE>
<S> <C>
BORROWER:
[Corporate Seal] TEXFI INDUSTRIES, N.A.
Attest:
By: ______________________________________
By: ______________________________ Andrew Parise
Robert P. Ambrosini President and Chief Operations Officer
Executive Vice President and
Chief Financial Officer
AGENT:
BANKBOSTON, N.A.
By: ______________________________________
Christian B. Colson
Managing Director
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
LENDERS:
BANKBOSTON, N.A.
By:
Christian B. Colson
Managing Director
Address:
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Christian B. Colson
Facsimile No.: (770) 393-4166
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
THE CIT GROUP/COMMERCIAL
SERVICES, INC.:
By:________________________________
Name:__________________________
Title:_________________________
Address:
Two First Union Center
P. O. Box 31307
Charlotte, NC 28231-1307
Attn: Keri Wass
Facsimile No.: (704) 339-2910
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
NATIONAL BANK OF CANADA
By:________________________________
Name:__________________________
Title:_________________________
By:________________________________
Name:__________________________
Title:_________________________
Address:
Two First Union Center
Suite 2020
Charlotte, NC 28282
Attn: Charles Collie
Facsimile No.: (704) 335-0570
10
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 11
----------
TEXFI INDUSTRIES, INC.
----------------------
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------- ----------------------
<S> <C> <C> <C> <C>
May 1, May 2, May 1, May 2,
1998 1997 1998 1997
---- ---- ---- ----
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING:
Balance at beginning of period ................. 8,859,098 8,735,491 8,859,098 8,735,491
Deferred compensation........................... -- 106,205 -- 102,205
--------- --------- --------- ---------
Balance at end of period ....................... 8,859,098 8,841,696 8,859,098 8,841,696
========= ========= ========= =========
BASIC:
Net (loss) income .............................. $(2,768,000) $ 506,000 $(3,665,000) $ 1,553,000
=========== =========== =========== ===========
Weighted average number of common
shares outstanding .......................... 8,859,098 8,797,751 8,859,098 8,766,621
========= ========= ========= =========
Per common share amounts:
Net income (loss)........................... $ (.31) $ .06 $ (.41) $ .18
======= ======== ======= ========
DILUTED:
Net (loss) income .............................. $(2,768,000) $ 506,000 $(3,665,000) $ 1,553,000
=========== =========== =========== ===========
Weighted average number of shares outstanding:
Common stock outstanding for the period
based on a daily weighted average ........... 8,859,098 8,797,751 8,859,098 8,766,621
Common stock equivalents - outstanding stock
options computed on the treasury stock
method using average market price ........... -- 31,655 -- 15,828
---------- ---------- ---------- ----------
8,859,098 8,829,406 8,859,098 8,782,449
---------- ---------- ---------- ----------
Increase in common shares assuming conversion
of the 11-1/4% Convertible Senior Subordinated
Debentures .................................. -- 492,049 -- 510,348
---------- ---------- ---------- ----------
Weighted average number of common
shares outstanding .......................... 8,859,098 9,321,455 8,859,098 9,292,797
========== ========== ========== ==========
Per common share amounts:
Excluding convertible debenture shares:
Net (loss) income........................... $ (.31) $ .06 $ (.41) $ .18
======= ======== ======== ========
Including Convertible Debenture Shares:
Net (loss) income........................... $ (.31) $ .05 $ (.41) $ .17
======= ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-30-1998
<PERIOD-END> MAY-01-1998
<CASH> 233
<SECURITIES> 0
<RECEIVABLES> 28,992
<ALLOWANCES> 651
<INVENTORY> 16,902
<CURRENT-ASSETS> 48,070
<PP&E> 79,799
<DEPRECIATION> 52,561
<TOTAL-ASSETS> 78,172
<CURRENT-LIABILITIES> 36,174
<BONDS> 36,745
0
0
<COMMON> 34,393
<OTHER-SE> (53,947)
<TOTAL-LIABILITY-AND-EQUITY> 78,172
<SALES> 75,860
<TOTAL-REVENUES> 75,860
<CGS> 68,077
<TOTAL-COSTS> 74,104
<OTHER-EXPENSES> 1,135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,286
<INCOME-PRETAX> (3,665)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,665)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,665)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
