<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 1, 1995 Commission File No. 0-1915
THOMASTON MILLS, INC.
- --------------------------------------------------------------------------------
GEORGIA 58-0460470
- ------------------------------------- ------------------------------------
(State or other jurisdiction of) (I.R.S. Employer Identification No.)
115 East Main Street, P.O. Box 311, Thomaston, Georgia 30286
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (706) 647-7131.
---------------
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the close of the period covered by this report.
Class A Common Stock $1 Par Value - 5,620,518 Shares including 721,688
Treasury Shares
Class B Common Stock $1 Par Value - 1,873,506 Shares including 243,140
Treasury Shares
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 for the past 90 days.
Yes X No
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<PAGE> 2
INDEX
THOMASTON MILLS, INC. AND SUBSIDIARY
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets -- April 1, 1995
and July 2, 1994.
Condensed consolidated statements of income -- three months
ended April 1, 1995 and three months ended April 2, 1994;
and nine months ended April 1, 1995 and nine months ended
April 2, 1994.
Condensed consolidated statements of changes in cash flows --
nine months ended April 1, 1995 and nine months ended
April 2, 1994.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to vote of Security Holders
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
Page 2 of 11
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
THOMASTON MILLS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
($000 omitted)
APR. 1, 1995 JULY 1, 1994
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash & cash equivalents $ 978 $ 1,110
Accounts receivable, less allowance of
$415,000 at both dates 42,181 56,157
Inventories--Note B 45,215 36,502
Prepaid expenses 1,343 914
----------- ----------
TOTAL CURRENT ASSETS 89,717 94,683
PROPERTY, PLANT AND EQUIPMENT 218,248 206,632
Less allowances for depreciation 133,555 122,632
----------- ----------
84,693 84,000
OTHER ASSETS 702 649
----------- ----------
$ 175,112 $ 179,332
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 10,044 $ 12,567
Accrued liabilities 7,360 5,868
Federal and State income taxes 777 1,760
Current portion capital lease obligations 416 416
Current portion of long term debt 1,081 1,807
----------- ----------
TOTAL CURRENT LIABILITIES $ 19,678 $ 22,418
OBLIGATIONS UNDER CAPITAL LEASE -
LESS CURRENT PORTION 1,450 1,752
LONG TERM DEBT 38,309 39,495
DEFERRED INCOME TAXES 6,571 6,571
OTHER LIABILITIES 119 68
SHAREHOLDERS' EQUITY
Class A Common Stock--5,620,518 shares
outstanding including 721,688 treasury
shares 5,621 5,621
Class B Common Stock--1,873,506 shares
outstanding including 243,140 treasury
shares 1,874 1,874
Additional paid-in capital 8,824 8,807
Retained earnings 98,148 97,861
----------- ----------
114,467 114,163
Less treasury stock - at cost 5,482 5,135
----------- ----------
108,985 109,028
----------- ----------
$ 175,112 $ 179,332
=========== ==========
</TABLE>
NOTE: The Balance Sheet at July 2, 1994 has been
derived from the Audited Financial Statements at that
date. See Note to Condensed Financial Statements.
Page 3 of 11
<PAGE> 4
THOMASTON MILLS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
APRIL 1, 1995 APRIL 2, 1994 APRIL 1, 1995 APRIL 2, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 66,290,490 $ 66,780,389 $ 201,896,772 $ 194,058,466
Cost of Sales 58,841,940 58,863,838 183,018,297 168,835,562
--------------- -------------- ---------------- --------------
7,448,550 7,916,551 18,878,475 25,222,904
Selling, administrative
and general expenses 4,933,691 4,663,450 14,243,713 13,607,477
--------------- -------------- ---------------- --------------
2,514,859 3,253,101 4,634,762 11,615,427
Other income 75,620 71,955 300,991 337,692
--------------- -------------- ---------------- --------------
2,590,479 3,325,056 4,935,753 11,953,119
Interest expense 783,318 415,581 2,232,266 1,226,385
--------------- -------------- ---------------- --------------
Income before
income taxes 1,807,161 2,909,475 2,703,487 10,726,734
Provision for income
taxes 697,565 1,134,694 1,043,546 4,325,448
--------------- -------------- ---------------- --------------
Net income $ 1,109,596 $ 1,774,781 $ 1,659,941 $ 6,401,286
=============== ============== ================ ==============
Average Number
of Shares 6,430,541 6,574,560 6,506,705 6,577,433
Data Per Share:
Net income $ 0.170 $ 0.270 $ 0.260 $ 0.970
Dividends paid $ 0.070 $ 0.065 $ 0.210 $ 0.195
=============== ============== ================ ==============
</TABLE>
Page 4 of 11
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
APRIL 1, 1995 APRIL 02, 1994
----------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,659,941 $ 6,401,286
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 11,393,219 9,522,188
Gain on sale of property, plant
and equipment (23,875) (111,056)
Provision for deferred income taxes 0 148,717
Changes in operating assets and
liabilities:
Accounts receivable 13,976,473 2,867,643
Inventories (8,712,491) (6,390,547)
Other assets (482,000) (515,662)
Accounts payable and Accrued expenses (1,964,350) 284,803
------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 15,846,917 12,207,372
INVESTING ACTIVITIES
Purchases of property, plant and equipment (12,157,537) (18,330,799)
Proceeds from sales of property, plant
and equipment 95,259 114,550
------------- -------------
NET CASH USED IN INVESTING
ACTIVITIES (12,062,278) (18,216,249)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit
and long-term debt 8,500,000 10,000,000
Principal payments on revolving lines of
credit, long-term debt and capital
lease obligations (10,713,069) (3,569,910)
Purchase of Treasury Stock (391,875) 0
Exercise of stock options 61,000 61,000
Cash dividends paid (1,372,251) (1,275,337)
------------- -------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (3,916,195) 5,215,753
------------- -------------
INCREASE IN CASH AND
CASH EQUIVALENT (131,556) (793,124)
Cash and cash equivalents at beginning
of period 1,109,975 1,369,545
------------- -------------
Cash and cash equivalents at end
of period $ 978,419 $ 576,421
============= =============
</TABLE>
Page 5 of 11
<PAGE> 6
THOMASTON MILLS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
APRIL 1, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do no include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended April 1, 1995, are not necessarily indicative of the results that
may be expected for the year ended July 1, 1995. Certain Fiscal 1994 balances
have been reclassified to conform with the Fiscal 1995 classifications. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report for the year ended
July 2, 1994.
NOTE B -- INVENTORIES
The components of inventory consist of the following:
($000 omitted)
April 1, 1995 July 2, 1994
------------- ------------
Raw Materials $ 8,529 $ 7,946
Work in process 17,963 17,497
Finished products 18,723 11,059
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$ 45,215 $ 36,502
Note: Through July 2, 1994 the Company accounted for the cotton, polyester,
labor and overhead components of raw materials, work in process and finished
goods at the lower of cost, determined under the LIFO method of accounting, or
market. Purchased cloth and yarn and certain supplies inventories were
accounted for at the lower of cost, determined under the FIFO method of
accounting, or market. In the first quarter of 1995, the Company changed to
the LIFO method of accounting for purchased cloth and yarn. This change will
result in better matching of revenues and expenses and will conform
substantially all manufacturing inventories to the LIFO method. The cumulative
effect of this change is not determinable. The effect of this change was to
decrease net income for the quarter and thirty-nine weeks by approximately
$148,000 ($.02 per share) and $443,000 ($.07 per share) respectively. In
connection with this change, the Company conformed the manner of applying the
LIFO method for its cotton and polyester inventories to the dollar value
method. Management believes the effect of this change was not significant.
During the quarter, the Company revised its estimate of the raw material annual
inflation rate used to calculate LIFO inventories. This change in estimate had
the effect of increasing cost of sales by $130,000 ($.01 per share of net
income) for the quarter. The LIFO reserve increased by $731,000 and $1,564,000
for the quarter and nine months ended April 1, 1995.
Page 6 of 11
<PAGE> 7
THOMASTON MILLS, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Sales for the third fiscal quarter ended April 1, 1995 decreased 0.7% to
$66,290,490 as compared to third quarter sales last fiscal year of $66,780,389.
For the nine months ended April 1, 1995, sales were $201,896,772, reflecting a
4.0% increase over sales of $194,058,466 for the nine months ended April 2,
1994. The number of units sold decreased 4.9% for the most recent quarter and
increased 4.8% for the most recent nine-month period. Third quarter fiscal
year 1995 decreases in units sold were partially offset by a 4.3% increase in
product mix average sales value per unit. For the nine months ended April 1,
1995, product mix average sales value per unit declined 0.8%. Higher selling
prices on Industrial Products and Home Furnishings shipments during the third
quarter fiscal year 1995 were not sufficient to offset decreased selling prices
for the first two quarters of this fiscal year.
Cost of sales for the third quarter ended April 1, 1995 were about the same as
cost of sales for third quarter last fiscal year; however, on a per unit basis,
cost of sales increased 5.1% for third quarter fiscal year 1995 as compared to
third quarter fiscal year 1994. For the nine months ended April 1, 1995 cost
of sales on a per unit basis increased 3.4% as compared to the nine-month
period ended April 2, 1994. Cost of sales on a per unit basis increased
primarily as a result of raw material (principally cotton) price increases of
27.7% for the quarter and 14.3% for the nine months as compared to last fiscal
year. As a result of the raw material price increases, the Company changed its
estimate of raw material prices used to calculate LIFO inventories. This
change in estimate had the effect of increasing the LIFO reserve by $731,000
and $1,564,000 for the quarter and nine months ended April 1, 1995.
Gross profit margin was 11.2% of sales for third quarter and 9.4% for the nine
months. Gross profit margin for the comparable periods last year was 11.9% for
the quarter and 13.0% for the nine months.
Selling, general and administrative expenses as a percentage of sales were 7.4%
for the third quarter of this fiscal year as compared to 7.0% for the third
quarter last year. Total selling, general and administrative expenses for the
nine-month period ended April 1, 1995, were 7.1% of sales as compared to 7.0%
of sales for the first nine months last year.
Interest expense increased $367,737 to $783,318 for the third fiscal quarter
this year compared to $415,581 for the third fiscal quarter last year. For the
first nine months of this fiscal year as compared to the first nine months of
last fiscal year, interest expense increased $1,005,881 to $2,232,266. This
increase in interest expense is related to the required capitalization last
year of interest costs associated with the construction of the Company's new
Lakeside comforter and accessory plant.
Page 7 of 11
<PAGE> 8
The provision for income taxes as a percent of taxable income decreased as a
result of the tax rate changes imposed last fiscal year by the Revenue
Reconciliation Act of 1993. The change in tax rates, applied to current
earnings and the Company's deferred tax accounts for the first nine months of
fiscal year 1994, resulted in an effective tax rate of 40.3% of taxable income
as compared to a tax rate of 38.6% of taxable income for the first nine months
of fiscal year 1995.
Net income for the third quarter this year was $1,109,596 or $.17 per share as
compared to $1,774,781 or $.27 per share for the third quarter last year. For
the nine months ended April 1, 1995, the Company earned $1,659,941 or $.26 per
share compared to $6,401,286 or $.98 per share for the nine months ended April
2, 1994. Net income continues to be affected by raw material costs increasing
faster than the price for textile products and lower capacity utilization.
In December 1993, 117 countries reached an agreement under the General
Agreement on Tariffs and Trade that would cover new areas of trade, further cut
tariffs and strengthen multilateral free-trade rules by creating a World Trade
Organization as its successor. This agreement has been ratified by the United
States Congress and is scheduled to go into effect on July 1, 1995. As part of
this new agreement, the Multifiber Arrangement (MFA) under which textile and
apparel trade had been controlled, will be phased out along with its import
quotas over a 10-year period. Tariffs on imported textiles will be cut by 11.6
percent over 10 years. The Company estimates that the weighted average tariff
on imported textile products of the type sold by the Company would be reduced
by 8.8 percent over this period. Under the agreement, quotas on the least
sensitive import products will be phased out over the first five years and
quotas on the most sensitive import products will not be affected until the
later part of the ten-year period.
The WTO agreement contains some provisions which may have a favorable impact on
the textile industry. An assembly rule of origin amendment makes it illegal
for a non-WTO member country to assemble garments from pieces cut in a member
country, and then export the garments as originating in the country where they
were cut. Additionally, the agreement preserves the authority of the President
of the United States to control imports from non-WTO countries such as Taiwan
or China.
The Company believes that upgraded technology resulting in increased
productivity and lower costs will enable it to compete in a global market.
The Company's primary raw material is cotton. As a commodity, cotton is traded
on established markets and periodically experiences price fluctuations. The
Company monitors the cotton market and buys its cotton from brokers. The
Company has not had and does not anticipate any material difficulty in
obtaining cotton.
As a result of increased world demand, higher cotton prices are expected
throughout the current fiscal year. The Company generally attempts to pass
these increased cotton prices along to its customers in the form of price
increases for its products to the extent market conditions permit. However,
through the third quarter, raw material prices have increased faster than the
prices received for finished products.
Page 8 of 11
<PAGE> 9
In order to assure a continuous supply of cotton, the Company enters into
cotton purchase contracts for several months in advance of delivery which
either provide for (1) fixed quantities to be purchased as a pre-determined
price, or (2) fixed quantities to be purchased at a price to be determined (at
a later date). When the Company sells its product to its customers, the cost
of cotton under existing cotton purchase contracts is taken into account in
calculating the price for the Company's product. The Company generally
attempts to match product sales contracts with fixed price cotton purchase
contracts and uses market price cotton contracts to anticipate future needs and
subsequent product sales contracts. Accordingly, fluctuations in the market
value of cotton do not generally affect the pricing or profitability of
existing sales contracts, but would affect subsequent sales contracts. To the
extent prices are sometimes fixed in advance of shipment, the Company may
benefit from its investment in cotton, to the extent prices thereafter rise, or
suffer losses, to the extent prices thereafter fall.
LIQUIDITY AND CAPITAL RESOURCES
At April 1, 1995, working capital was $70,039,557 as compared to $65,786,493 at
April 2, 1994. The ratio of Current Assets to Current Liabilities was 4.56:1
at April 1, 1995 and 4.33:1 at April 2, 1994.
Cash provided by operating activities amounted to $15,846,917 for the most
recent nine months. Cash provided by operating activities was the principal
source of funds for this nine-month period.
The Company's primary use of funds during the first nine months of fiscal year
1995 was $12,062,278 in purchases of property, plant and equipment. For the
first nine months of last fiscal year, the Company invested $18,216,249 in
purchases of property, plant and equipment. Plans are underway to invest in
additional equipment in order to increase denim production by twenty per cent
by the second quarter of next fiscal year. To finance the expansion of the
denim production, the Company on April 5, 1995 entered into an agreement with
the Development Authority of Pike County, Georgia to issue $3,700,000 in
Tax-Exempt Adjustable Mode Industrial Development Revenue Bonds. Interest on
these bonds will be paid quarterly beginning July 1, 1995. The maturity date
of the bond issue is April 2005.
During the second quarter of this fiscal year, the Company revised and expanded
its revolving credit agreement which provides for unsecured borrowings up to
$24,000,000. At April 1, 1995, an additional $5,500,000 was available under
this agreement.
Page 9 of 11
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(a) As of April 1, 1995, there were no material pending legal
proceedings, other than routine litigation incidental to its
business, to which the Company was a party or to which any
property of the Company was subject. Such routine legal
proceedings are not Pbelieved to be material to the Company.
(b) Not applicable
ITEM 2. CHANGE IN SECURITIES
(a) (b) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) (b) Not applicable.
ITEM 4. OTHER INFORMATION
Not applicable.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
13.1 Quarterly Report to Shareholders dated April 1, 1995.
27.0 Financial Data Schedule (for SEC purposes only)
(b) The Company did not file any reports on Form 8-K during the
three months ended April 1, 1995.
Page 10 of 11
<PAGE> 11
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.
Thomaston Mills, Inc.
Neil H. Hightower
-----------------------------
Neil H. Hightower
President and Chief
Date: May 9, 1995 Executive Officer
---------------
Rosser R. Raines
-----------------------------
Rosser R. Raines
Treasurer-Principal Financial
Date: May 9, 1995 Officer
---------------
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE THOMASTON MILLS, INC. COMPANY FOR THE QUARTER ENDED
MARCH 31, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-01-1995
<CASH> 978
<SECURITIES> 0
<RECEIVABLES> 41,766
<ALLOWANCES> 415
<INVENTORY> 45,215
<CURRENT-ASSETS> 89,717
<PP&E> 218,248
<DEPRECIATION> 133,555
<TOTAL-ASSETS> 175,112
<CURRENT-LIABILITIES> 19,678
<BONDS> 19,809
<COMMON> 7,494
0
0
<OTHER-SE> 101,491
<TOTAL-LIABILITY-AND-EQUITY> 175,112
<SALES> 201,897
<TOTAL-REVENUES> 202,198
<CGS> 183,018
<TOTAL-COSTS> 183,018
<OTHER-EXPENSES> 14,244
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,232
<INCOME-PRETAX> 2,703
<INCOME-TAX> 1,043
<INCOME-CONTINUING> 1,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,660
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
