<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]
For the fiscal year ended June 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 0-1915
THOMASTON MILLS, INC.
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-0460470
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
115 East Main Street
Thomaston, Georgia 30286
---------------------------- ---------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (706) 647-7131
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Class A Common Stock, Par Value $1 Per Share
--------------------------------------------
(Title of Class)
Class B Common Stock, Par Value $1 Per Share
--------------------------------------------
(Title of Class)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
----
<PAGE> 2
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of August 21, 1997: Class B Common Stock, $1 Par Value -
$5,583,960 based upon the average bid and ask price of such stock on August 20,
1997, excluding Class B Common Stock owned by officers and directors, some of
whom may be held not to be affiliates.
The number of shares outstanding (excluding treasury shares) of each of
the registrant's classes of common stock as of August 21, 1997:
Class Number of Shares
----- ----------------
Class A Common Stock, $1 Par Value 4,909,630
Class B Common Stock, $1 Par Value 1,630,366
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended June 28,
1997 are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual shareholders meeting to
be held October 2, 1997, are incorporated by reference into Part III.
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Thomaston Mills, Inc. ("Thomaston Mills" or the "Company") is a
diversified manufacturer and marketer of cotton, synthetic and blended textile
products for the home furnishings, apparel fabrics and industrial products
markets. The Company's home furnishings line includes coordinated sheets,
pillowcases, comforters and related accessories which are marketed under the
Thomaston(R) label primarily through value-based retailers, as well as fabrics
which are sold to other manufacturers of home furnishings. The Company's apparel
fabrics line includes dyed and finished woven fabrics, such as regular and
stretch denim, in a variety of colors and washes which are sold to apparel
manufacturers. The Company's industrial products line includes cotton and
blended yarn for athletic hosiery and other circular knit manufacturers, and
both yarn and fabric for manufacturers of industrial belting and hoses. The
Company's home furnishings, apparel fabrics and industrial products lines
accounted for 47%, 39% and 14%, respectively, of fiscal 1997 net sales.
Thomaston Mills has made significant capital investments to modernize
its manufacturing facilities and to position itself as a low cost provider of
textile products in selected markets. The Company has focused on textile
products which have high value-added manufacturing characteristics. These
products allow the Company to generate improved gross margins and are less labor
intensive and therefore less vulnerable to foreign competition. The Company has
reduced its historical emphasis on its industrial products line and increased
its resource allocation to products in the home furnishings and sales yarn
markets. The Company's investments in technologically advanced equipment have
enabled it to enhance the quality of its products and increase its manufacturing
flexibility and cost efficiency. The Company has maintained a strong equity base
and a low level of debt as compared to many of its competitors that has provided
it with the financial resources to support continued expansion of its business.
The Company's strategic positioning has resulted in significant revenue growth
from approximately $187 million in fiscal 1988 to approximately $286 million in
fiscal 1997. Net sales per employee have increased from $76,057 in fiscal 1988
to $118,262 in fiscal 1997, which the Company believes is among the highest rate
in the textile industry.
Since fiscal 1986, the Company has invested over $178 million, or
approximately 7% of annual net sales, to modernize its equipment. Management
believes that Thomaston Mills has become one of the most technologically
advanced textile manufacturers in the country. The Company intends to maintain
its aggressive capital expenditure policy for the foreseeable future.
The Company is a Georgia corporation which has been in the textile
business continually since 1899. Headquartered in Thomaston, Georgia, the
Company operates seven plants in or near Thomaston, with an aggregate area of
approximately 3 million square feet. The Company markets its products
domestically and internationally through sales offices in Thomaston, Georgia,
New York, New York, Los Angeles, California and through international sales
agents or distributors in Canada, Europe, the Middle East and Central and South
America. The Company's executive offices are located at 115 East Main Street,
P.O. Box 311, Thomaston, Georgia 30286 and its telephone number is (706)
647-7131. On the Internet, the Company's home page may be reached at
http://www.thomastonmills.com.
<PAGE> 4
STRATEGY
Thomaston Mills intends to be the low cost producer in each of its
selected markets. In recent years, the Company has focused its product
development, marketing and manufacturing capabilities on producing value-added
textile products for a broad range of end uses while reducing its emphasis on
the production of labor-intensive products which are more vulnerable to foreign
competition. The Company has particularly focused its product development on its
home furnishings line in recognition of the growing fashion-consciousness of the
American consumer. In this regard, the Company is building on its historical
strength as a manufacturer of sheets and pillowcases by expanding its home
furnishings line with the addition of products such as comforters and
coordinated bedroom sets which have high value-added manufacturing
characteristics and provide favorable gross margins. The Company's apparel
fabrics line is benefiting from the increased fashion orientation of denim. The
Company balances this line by continuing to manufacture and finish other less
fashion sensitive bottomweight fabrics, such as twill, for casual and career
apparel. The Company has repositioned its industrial fabrics product line to
emphasize sales of cotton and blended yarn to athletic hosiery and other
circular knit manufacturers and to decrease its production of lower margin
industrial fabrics.
To become the low cost provider in its selected product lines, the
Company has made substantial capital investments to modernize its facilities.
Substantially all of these expenditures were invested in equipment designed to
improve efficiency in the Company's spinning, weaving, finishing and sewing
facilities. The capital expenditures have increased productivity substantially,
thereby lowering the Company's labor expense as a component of total
manufacturing costs and its vulnerability to import competition. In addition,
modernization of the Company's facilities has improved the quality of the
Company's yarns and fabrics, which has expanded the markets for the Company's
products and reduced the amount of off-goods inventory which must be sold at
lower margins.
The Company has implemented flexible "Just in Time" and "Quick
Response" manufacturing systems along with electronic data interchange (EDI) and
cost control systems, which permit both faster order turnaround for its
customers and better forecasting for the Company. The Company believes that its
long term commitment to capital improvements, maintained despite the weak U.S.
economy and adverse textile industry conditions which prevailed in the late
1980's through mid-1991, has enabled it to become one of the most
technologically advanced and low cost manufacturers in the textile industry.
PRODUCTS AND MARKETS
HOME FURNISHINGS. Thomaston Mills offers a complete line of muslin,
percale and 250-count products for the bedroom, including fashion coordinated
bedding sets and comforters marketed under the Thomaston(R) label, as well as
home furnishings fabrics sold to other manufacturers of home furnishings. The
home furnishings line represented 47% of net sales for fiscal 1997.
The Company markets a coordinated line of products and accessories
which, for any given pattern, may include comforters, sheets and pillowcases,
pillow shams, bedskirts, duvets or comforter covers and window treatments. The
Company offers these products in a wide variety of styles and patterns, from
solid colors to fashion designs. These value-added
<PAGE> 5
products have a greater design sensitivity and fashion orientation and thus
generally command higher prices than traditional white bedding products. The
Company has enhanced its design capabilities through the expansion of its own
design staff and through the use of licenses for proprietary designs. The
Company has also expanded its product offerings to include packaged sets
consisting of flat and fitted sheets, pillowcases and comforters with additional
accessories available. These packaged sets offer convenience to consumers while
providing higher sales and margins both to the Company and retailers. Packaged
sets also help retailers avoid markdowns on unsold accessories.
The Company believes that the comforter market represents an attractive
opportunity to expand its home furnishings line. The Company began producing
comforters in 1990, and, for fiscal 1997, sales of comforters and accessories
accounted for 19% of the Home Furnishings line.
As the Company has broadened and upgraded its line of muslin, percale
and 250-count products, the Company's principal customers have expanded from
regional value-based retailers to include national value-based retailers. The
Company is not a major supplier of products to high-end department stores which
require significantly higher selling and administrative expenses per unit. The
quality and prices of the Company's products are intended to allow its targeted
retailers to achieve high margins while offering a significant value to
customers.
The markets for home furnishings fabrics have been affected by changing
demographics associated with the maturing of consumers born between 1946 and
1964. As this generation has matured, product trends have evolved toward higher
quality products with more diverse styling. The Company believes that the
outlook for printed fabrics is favorable because these fabrics provide a high
fashion appearance at affordable prices. Additionally, demand for U. S. styled
home furnishings products has increased in international markets.
APPAREL FABRICS. Thomaston Mills produces woven fabrics in a variety of
finishes and blends which are sold to apparel manufacturers. The Company's
apparel fabrics line represented 39% of net sales for fiscal 1997. The Company's
principal apparel fabric product is indigo denim, including rigid and stretch
varieties. Denims generally are dyed before the fabric is woven. The result is a
fabric with variations in color that give denim its distinctive appearance.
Fabric styling of denims, which the Company believes to be critical to this
market, involves the creation of a wide array of fabric colors, shades and
patterns in both traditional and innovative weaves. After weaving, fabrics are
processed further in finishing and "washing" operations that produce different
textures and other physical properties. The Company's modern and flexible
manufacturing process allows it to produce a wide variety of denim styles and
finishes, including stretch fabric and washed finishes. The Company believes the
quality of its denim products makes it less susceptible to price competition
from foreign competitors.
The Company has directed its apparel fabrics line toward heavier
"bottomweight" fabrics such as twill and other value-added textiles that the
Company believes are less susceptible to price pressure from foreign
competition. The Company dyes and finishes twill fabric for casual and career
apparel. The Company generally purchases fabric for these products from other
manufacturers.
<PAGE> 6
INDUSTRIAL PRODUCTS. Thomaston Mills produces a variety of cotton and
blended yarns and fabrics which are sold to athletic hosiery and other circular
knit manufacturers for the production of apparel items such as athletic socks
and T-shirts. The Company's industrial products line represented 14% of net
sales for fiscal 1997. Historically, fabrics for industrial end uses were the
largest component of the Company's sales within this product line. As a result
of a substantial repositioning to focus on more profitable markets, sales yarns
now account for approximately 80% of the sales in the industrial products line
while the remainder consists of fabric and yarns for the manufacture of
industrial belts and hoses. Thomaston Mills believes its reputation for quality
gives it a competitive advantage in sales of cotton and blended yarn to the
athletic hosiery market.
MANUFACTURING
Thomaston Mills' seven plants are involved in virtually every major
component of the textile manufacturing process, from spinning and weaving to
dyeing, finishing and sewing. The Company's manufacturing strategy has been to
reduce lead times, minimize inventory levels and maximize flexibility to respond
to changing market conditions. The only major production function not currently
performed by the Company is the printing of fabrics for its home furnishings
line. The Company employs a number of outside printing sources to enhance design
flexibility and to eliminate the fixed costs attendant to maintaining printing
capability.
FACILITIES. The Company's spinning and weaving operations are conducted
at four of the Company's plants. At these facilities, raw material (cotton,
synthetic or blend) is spun into yarn. Through the Company's capital expenditure
program, the Company has installed advanced carding and open-end spinning
machinery which produces quality yarns at higher speeds and requires fewer
operators than ring spinning. The Company has phased out its use of ring
spinning and is fully reliant on open-end and air jet spinning. The Company
believes that it is among the leaders in the textile industry in the use of
modern spinning technology.
The Company's weaving operations are housed in three plants which
contain approximately 575 weaving machines. Through its capital expenditure
program, the Company has replaced its traditional shuttle looms such that 100%
of its weaving capacity currently consists of rapier, air-jet and projectile
weaving machines. These machines are less labor-intensive and weave fabric at
higher speeds with fewer defects than do older weaving methods. In addition,
these modern weaving machines have the capability to produce a variety of widths
and weaves.
Virtually all woven fabric made by the Company is either dyed, finished
or printed from its unfinished or "greige" state. Finishing fabric involves
applying special chemicals and/or resins to a fabric to give it certain
properties, such as soil release, wrinkle-resistant or wash and wear. The
Company's dyeing and finishing facilities include an indigo long-chain dyeing
machine, a continuous dye range and several finishing ranges for dipping and
heat-setting fabrics. While greige fabrics are woven by the Company based on
projected sales, the Company dyes its products or has them printed generally
according to specific customer purchase orders to allow the Company to respond
to market demand. The Company has achieved operating efficiencies and improved
inventory controls as a result. In addition, the Company purchases greige
fabrics and finishes fabrics on a commission basis to achieve higher capacity
utilization of its finishing facilities.
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The Company's sewing strategy has been to modernize its facilities in
order to minimize production costs and cycle times while maximizing design
flexibility and improving quality. The Company's fully automated sewing and
computerized quilting machines offer several advantages over conventional
machines, including faster speed, greater design flexibility, higher quality and
lower production costs.
In March 1994, the Company completed construction of a 242,000 square
feet comforter and bedding accessory manufacturing and distribution facility
which has expanded and consolidated the Company's comforter and bedding
accessory product line. The new facility allows certain operations to be
consolidated in a single plant and has resulted in significantly increased
manufacturing and storage capacity. The Company expects that the automation of
certain warehousing and distribution functions at this facility will enable it
to improve physical control over inventories, reduce order fulfillment lead
times, allow for enhanced levels of service and require fewer employees
dedicated to handling and storage, resulting in cost savings to the Company.
During fiscal 1995, an expansion was begun at the Company's Pike
Division denim weaving facility. This expansion, consisting primarily of
additional state of the art air-jet weaving machines, was completed in the
second quarter of fiscal year 1996 and has resulted in an increase of
approximately twenty percent in denim production capacity.
In the fourth quarter of fiscal year 1996, the Company began an
expansion of its comforter and bedding accessory manufacturing and distribution
facility plus the addition of a new Dye Range. This project, completed in May
1997, was financed with $18,000,000 in Revenue Bonds issued through the
Thomaston-Upson County Industrial Development Authority.
QUALITY AND EFFICIENCY. Thomaston Mills believes that it is among the
industry leaders in quality, particularly in denim weaving. The Company uses a
number of methods to support its quality control, including classroom training
of employees, statistical process quality control, computer-aided product
testing from raw fiber to finished fabric and computer-aided manufacturing
control systems.
The Company also believes that it is an industry leader in customer
service. The Company maintains constant communication between its marketing and
manufacturing operations which allows it to be responsive to a customer's
individual needs. The Company's plants employ computer monitoring and bar code
scanning for product tracking. The Company also follows "Just in Time"
manufacturing techniques to reduce in-process inventories, floor space
requirements and order processing time. The Company emphasizes coordination with
its customers through the industry's "Quick Response" delivery program. The
Company also offers electronic data interchange (EDI) to its customers and
suppliers. In addition, the Company maintains a fleet of trucks and trailers for
rapid delivery to customers in the Southeast.
RAW MATERIALS. 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.
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 at a pre-determined
price, or (2) fixed quantities to be purchased at
<PAGE> 8
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 incur increased cost, to the extent prices thereafter fall.
The Company also purchases greige goods, synthetic fibers, dyes and
chemicals. These raw materials have normally been available in adequate supplies
through a number of suppliers.
SALES AND MARKETING
Thomaston Mills markets its products through 40 sales representatives
to approximately 2,100 active customers, with no one customer constituting over
10% of net sales in fiscal 1997. Domestic sales are made through the Company's
principal sales office in Thomaston, Georgia and branch offices in New York, New
York, and Los Angeles, California. In the fourth quarter of fiscal year 1996,
the Company expanded its New York office at 111 West 40th Street in New York
City. This new sales and showroom facility provides displays of the Company's
products in an area more than triple the square footage of the former New York
location. International sales, which constituted 5% of net sales for fiscal
1997, are handled through the Thomaston office and commissioned sales agents and
distributors in Canada, Europe, the Middle East and Central and South America.
<PAGE> 9
COMPETITION
The domestic textile industry is highly competitive. No one firm
dominates the United States market and many companies compete in limited
segments of the textile market. In recent years, there has been a trend toward
consolidation, financial leverage and capacity reduction in the United States
textile industry. Textile competition is based in varying degrees on price,
product styling and differentiation, flexibility, delivery time, quality and
customer service. The importance of each of these factors depends upon the needs
of particular customers and the particular product. While Thomaston Mills is one
of the smaller companies in certain of its markets, the Company believes it
competes effectively on all levels in each of its selected markets.
Imports of foreign-make textile and apparel products are a significant
source of competition for many sectors of the domestic textile industry. 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
(WTO) as its successor. This agreement was ratified by the United States
Congress and went 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 textiles will be cut by 11.6% over 10 years. A weighted
average tariff for products sold by Thomaston Mills, if imported, would be cut
by 8.8%. 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 latter 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.
Although the WTO agreement may reduce the cost of certain imported
textiles, the Company believes that upgraded technology resulting in increased
productivity and lower costs will enable it to compete in a global market.
The North American Free Trade Agreement ("NAFTA") has been approved by
the United States, Canada and Mexico and became effective January 1, 1994.
Import duties on fibers, yarns, textiles and clothing produced in Canada, Mexico
or the United States and traded among those countries were either eliminated
immediately or phased out over a ten-year period. This duty elimination applies
only to textile and apparel goods made from yarn or fiber produced in Mexico,
Canada or the United States. No assurance can be given regarding the ultimate
effects of NAFTA; however, the Company believes that NAFTA will have a positive
effect on the U. S. textile industry.
The Company has attempted to offset the negative impact of increased
imports and the decline in apparel export sales by focusing on product lines and
markets that are less vulnerable to import penetration. Capital expenditures and
systems improvements have centered on strengthening product and market
diversification strategies and on increasing productivity, lowering costs and
improving quality.
<PAGE> 10
BACKLOG
The Company's order backlog increased 21% to $124.0 million at June 28,
1997 as compared to $102.1 million at June 29, 1996.
INVENTORIES
Inventories at June 28, 1997 and June 29, 1996 were $48,729,000 and
$42,710,000, respectively. The Company closely monitors inventory levels and,
through manufacturing capacity utilization, adjusts these levels in relation to
current and forecasted sales. Total inventory turns on an average annualized
rate were 5.6 times for fiscal year 1997 and 5.9 times for fiscal year 1996.
INTELLECTUAL PROPERTY
The Company owns a registered trademark containing the "Thomaston
Mills" name and spinning wheel design, which it uses as its primary trademark.
In addition, the Company holds various other trademarks and trade names,
including Thomaston(R), RATTLERS(R) and American Mood(R) used in connection with
its business and products, both domestically and internationally. License fees
paid by the Company for the use of designs for home furnishings and apparel
fabric products are insignificant in amount.
GOVERNMENT REGULATION
The Company is subject to various federal, state and local environmental
laws and regulations, particularly the Clean Water Act, the Safe Drinking Water
Act, the Clean Air Act, the Resource Conservation and Recovery Act of 1976
(including amendments relating to underground tanks), the Emergency Planning and
Community Right-to-Know Act of 1986, and the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, all as amended which limit the
discharge, storage, handling and disposal of a variety of substances. The
Company cannot accurately predict at this time the impact of future emission
standards and enforcement practices under the 1990 Clean Air Act Amendments or
the new Stormwater Regulations under the Clean Water Act upon its operations or
capital expenditure requirements.
The Company's operations also are governed by laws and regulations
relating to workplace safety and worker health, principally the Occupational
Safety and Health Administration Act and regulations thereunder which, among
other things, establish cotton dust, formaldehyde, asbestos and noise standards,
and regulate the use of hazardous chemicals in the workplace. The Company uses
resins containing formaldehyde in processing some of its products. Although the
Company does not use asbestos in the manufacture of its products, certain of its
facilities contain asbestos insulation.
The Company believes that it presently complies in all material
respects with applicable environmental, health and safety laws and regulations
and does not believe that future compliance with such existing laws or
regulations will have a material adverse effect on its results of operations or
financial condition.
<PAGE> 11
EMPLOYEES
As of June 28, 1997, the Company had approximately 2,418 full-time
employees, all but 182 of whom are employed at the Company's manufacturing
facilities. None of the Company's employees are covered by a collective
bargaining agreement, and the Company considers its relations with its employees
to be good.
<PAGE> 12
EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information regarding the
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Neil H. Hightower..................................56 President, Chief Executive Officer and Director
George H. Hightower, Jr............................48 Executive Vice President - Sales and Director
H. Stewart Davis...................................54 Executive Vice President - Finishing and Director
Charles F. Eichelberger............................58 Vice President - Greige Manufacturing
James E. Franklin, Jr..............................53 Vice President - Industrial Sales
James F. Haygood...................................50 Vice President - Apparel Fabric Sales
W. Harrison Hightower, III.........................61 Vice President - Administration
Jonathan O. Huff...................................56 Vice President - Finishing
Rosser R. Raines...................................59 Treasurer and Director
Daniel B. Tripp....................................45 Vice President - Human Resources and
Public Relations
Robert E. Greer....................................53 Vice President - Engineering
Ronald W. VanHouten................................49 Secretary
Jimmy W. Hall......................................53 Vice President - Consumer Product Sales
</TABLE>
The Board of Directors currently consists of eleven members. All of the
directors hold their positions until the next succeeding annual meeting or until
their successors are duly elected and qualified. Executive officers of the
Company are elected annually by the Board of Directors and serve at the Board's
discretion. The Company has an Executive Committee which acts on behalf of the
Company's Board of Directors during the intervals between the meetings of the
full Board of Directors in accordance with the policies of the Company, its
Articles of Incorporation and Bylaws and applicable law. Messrs. George H.
Hightower, Neil H. Hightower and William H. Hightower, Jr. together comprise the
Executive Committee.
Mr. Neil H. Hightower has been with the Company for 32 years and has
served as President and Chief Operating Officer since 1984, as President and
Chief Executive Officer since 1986 and as a director since 1980.
Mr. George Hightower, Jr. has been with the Company for 23 years and
has served as Executive Vice President - Sales since 1986 and as a director
since 1981. He is also a director of Thomaston Federal Savings Bank, Thomaston,
Georgia.
Mr. Davis has been with the Company for 33 years and has served as
Executive Vice President - Finishing since 1986 and as a director since 1981.
Mr. Haygood has been with the Company 25 years and has served as Vice
President - Apparel Fabrics Sales since June 1995. He served as Manager -
Apparel Fabric Sales from 1990 to 1995.
Mr. Franklin has been with the Company 26 years and has served as Vice
President - Industrial Sales since 1989. He served as Manager - Industrial Sales
from 1984 to 1989.
<PAGE> 13
Mr. Eichelberger has been with the Company for 14 years and has served
as Vice President - Greige Manufacturing since 1989. He served as Manager -
Thomaston Division from 1983 to 1989.
Mr. W. Harrison Hightower, III has been with the Company for 39 years
and has served as Vice President - Administration since 1976.
Mr. Huff has been with the Company for 23 years and has served as Vice
President - Finishing since 1990. He served as Manager - Finishing Division from
1984 to 1990.
Mr. Raines has been with the Company 35 years and has served as
Treasurer since 1976 and as a director since 1993.
Mr. Tripp has been with the Company for 19 years and has served as Vice
President - Human Resources and Public Relations since 1991. He served as an
Industrial Sales Representative from 1987 to 1991 and as Personnel Manager from
1978 to 1987.
Mr. VanHouten has been with the Company for 25 years and has served as
Secretary since 1992. He served as Assistant Secretary from 1990 to 1992 and
Controller from 1987 to 1990.
Mr. Greer has been with the Company for 5 years and has served as Vice
President - Engineering since June 1996.
Mr. Hall has been with the Company for 27 years and was elected Vice
President - Consumer Product Sales in June, 1997. He served as Manager, Consumer
Product Sales from 1989 until 1997.
Members of the Hightower family have been involved with the Company
since its founding in 1899. The family relationships existing among the current
executive officers and directors are as follows: William H. Hightower, Jr. and
George H. Hightower are brothers; Neil H. Hightower and W. Harrison Hightower,
III, are the sons of William H. Hightower, Jr.; George H. Hightower, Jr. is the
son of George H. Hightower; H. Stewart Davis is the nephew of William H.
Hightower, Jr. and George H. Hightower.
ITEM 2. PROPERTIES
Thomaston Mills owns seven manufacturing facilities located in or near
Thomaston, Georgia with an aggregate area of approximately 3.0 million square
feet. In addition, the Company owns buildings used for its executive offices and
1,300 acres of undeveloped property which is available for use by the Company.
Management believes the properties are in generally good condition and suitable
for the Company's purposes. All of the Company's manufacturing facilities have
appropriate safety features such as sprinkler fire protection. The following
table summarizes certain information regarding the Company's production
facilities.
<TABLE>
<CAPTION>
NAME AND APPROXIMATE
LOCATION SQUARE FEET USE
--------- ----------- ---
<S> <C> <C>
Thomaston Mill 831,000 Greige mill in which
Thomaston, Georgia baled raw cotton
and polyester are
converted into spun
yarn and woven cloth.
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C>
Finishing Plant 846,000 Finishing plant for
Thomaston, Georgia bleaching and dyeing
cloth and for sewing
and warehousing.
Peerless Mill 524,000 Greige mill in which
Thomaston, Georgia baled raw cotton
and polyester are
converted in woven cloth.
Northside Plant 61,000 Sewing plant for
Thomaston, Georgia fabricating cloth into
household and recreation
products.
Griffin Mill 382,000 Yarn mill in which baled
Griffin, Georgia raw cotton and polyester
are converted into yarn.
Pike Plant 83,000 Weaving plant for
Zebulon, Georgia fabricating into woven
cloth.
Lakeside Plant 281,000 Sewing plant for
Thomaston, Georgia fabricating cloth into
household products.
</TABLE>
The Company also leases sales offices in New York, New York and Los
Angeles, California and operates a retail outlet on property which it owns in
Thomaston, Georgia.
ITEM 3. LEGAL PROCEEDINGS
As of August 21, 1997 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 believed to be material to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's shareholders
during the quarter ended June 28, 1997.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
Common Stock Market Prices and Dividends on page 29 of the annual
shareholders report for the year ended June 28, 1997 are incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data on Pages 4 and 5 of the annual shareholders
report for the year ended June 28, 1997 are incorporated herein by reference.
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations and shown on pages 25 thru 27 of the annual shareholders
report for the year ended June 28, 1997 is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the registrant and
its subsidiary, included in the annual shareholders report for the year ended
June 28, 1997, are incorporated herein by reference:
Consolidated Balance Sheets - June 28, 1997 and June 29, 1996 - Pages
12 and 13
Consolidated Statements of Shareholders' Equity - fiscal years ended
June 28, 1997, June 29, 1996 and July 1, 1995 - Page 14
Consolidated Statements of Operations - fiscal years ended June 28,
1997, June 29, 1996 and July 1, 1995 - Page 15
Consolidated Statements of Cash Flows - fiscal years ended June 28,
1997, June 29, 1996 and July 1, 1995 - Page 16
Notes to Consolidated Financial Statements - June 28, 1997 - Pages 17
thru 24
Quarterly Results of Operations on page 24 of the annual shareholders
report for the year ended June 28, 1997 are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors of the Company and compliance with
Section 16 of the Securities Exchange Act of 1934 is incorporated by reference
to pages 4 thru 7 of the registrant's definitive proxy statement for the Annual
Meeting of Shareholders on October 2, 1997. See also Part I above with respect
to information regarding executive officers of the registrant. Such
incorporation by reference shall not be deemed to specifically incorporate by
reference the information referred to in Item 402(a)(8) of Regulation S-K.
<PAGE> 16
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation on pages 7 thru 10 of the
definitive proxy statement for the Annual Meeting of Shareholders on October 2,
1997 is incorporated herein by reference. Such incorporation by reference shall
not be deemed to specifically incorporate by reference the information referred
to in Item 402(a)(8) of Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding beneficial ownership shown on pages 2 thru 6 of
the definitive proxy statement for the Annual Meeting of Shareholders on October
2, 1997, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Information regarding transactions between the Company and directors,
officers and owners on page 12 of the definitive proxy statement for
the Annual Meeting of Shareholders on October 2, 1997, is incorporated
herein by reference.
(b) C. Ronald Barfield, a director of the Company, is a partner in the law
firm Adams, Barfield, Dunaway & Hankinson, which provides legal
services to the Company.
(c) Dom H. Wyant, a director of the Company, is of counsel to the law firm
Jones, Day, Reavis and Pogue, which provides legal services to the
Company.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORT ON FORM 8-K
(a) (1) and (2) The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) Listing of Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
----------- -----------------------
<S> <C>
3.0 Articles of Incorporation, incorporated by reference to
Exhibit 3.0 of Registrant's Annual Report on Form 10-K for the
fiscal year ended June 29, 1991 (the "1991 10-K").
3.1 Bylaws Incorporated by reference to Exhibit 3.2 of
Registrant's Annual Report on Form 10-K for the year ended
July 3, 1993 (the "1993 10-K").
*10.0 Thomaston Mills, Inc. 1988 Stock Option Plan, incorporated by
reference to Exhibit 10.1 of the 1991 10-K.
*10.1 Thomaston Mills, Inc. Amended and Restated 1989 Stock Option
Plan, incorporated by reference to Exhibit 10.2 of the 1991
10-K.
*10.3 Thomaston Mills, Inc. Retirement Plan No. 1 effective as of
July 1,1987, incorporated by reference to Exhibit 10.5 of the
1992 Registrant's Annual Report on Form 10-K for the year
ended June 27, 1992 (the "1992 10-K").
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
<S> <C>
*10.4 Thomaston Mills, Inc. Retirement Plan No. 2 effective as of
July 1, 1987, incorporated by reference to Exhibit 10.6 of the
1992 10-K.
*10.5 Thomaston Mills, Inc. 1992 Stock Option Plan, incorporated by
reference to Exhibit 10.7 of the 1992 10-K.
*10.7 Thomaston Mills, Inc. 1994 Stock Option Plan, incorporated by
reference to Exhibit 10.7 of Registrant's Annual Report on
Form 10-K for the fiscal year ended July 2, 1994 (the "1994
10-K").
*10.8 Thomaston Mills, Inc. Executive Compensation Continuation
Agreement, incorporated by reference to Exhibit 10.8 of the
1994 10-K.
11.0 Statement regarding computation of earnings per share. 13.0
Portions of the 1997 Annual Report mailed to shareholders
incorporated herein by reference.
21.0 Subsidiary of the Company.
23.0 Consent of Independent Auditors.
27.0 Financial Data Schedule (for SEC use only)
</TABLE>
*Management contract or compensatory plan or arrangement required to be
filed as an Exhibit hereto pursuant to Item 14(e) of Form 10-K.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal 1997 - none.
(c) Exhibits - The response to this portion of Item 14 is submitted as a
separate section of this report.
(d) Financial Statement Schedule - The response to this portion of Item 14
is submitted as a separate section of this report.
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 25, 1997 /s/ Neil H. Hightower
------------------------------
Neil H. Hightower
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Rosser R. Raines /s/ H. Stewart Davis
- -------------------------------------- ------------------------------
Rosser R. Raines H. Stewart Davis
Treasurer, Principal Financial Officer, Executive Vice President and
Chief Accounting Officer, and Director Director
Date: September 25, 1997 Date: September 25, 1997
/s/ George H. Hightower, Jr. /s/ George H. Hightower
- -------------------------------------- ------------------------------
George H. Hightower, Jr. George H. Hightower
Executive Vice President and Director
Director Date: September 25, 1997
Date: September 25, 1997
/s/ William H. Hightower, Jr. /s/ C. Ronald Barfield
- -------------------------------------- ------------------------------
William H. Hightower, Jr. C. Ronald Barfield
Director Director
Date: September 25, 1997 Date: September 25, 1997
<PAGE> 19
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1), (2) and (d)
AND
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE
FINANCIAL STATEMENT SCHEDULE
YEAR ENDED JUNE 28, 1997
THOMASTON MILLS, INC. AND SUBSIDIARY
THOMASTON, GEORGIA
<PAGE> 20
FORM 10-K - ITEM 14(a)(1) and (2)
THOMASTON MILLS, INC. AND SUBSIDIARY
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
The following consolidated financial statements and notes thereto of
Thomaston Mills, Inc. and subsidiary included in the annual report of the
registrant to its shareholders for other year ended June 28, 1997 are
incorporated by reference in Item 8:
Consolidated Balance Sheets - June 28, 1997 and June 29, 1996
Consolidated Statements of Shareholder's Equity - fiscal years ended June
28, 1997, June 29, 1996 and July 1, 1995
Consolidated Statements of Cash Flows - fiscal years ended June 28, 1997,
June 29, 1996 and July 1, 1995
Notes to Consolidated Financial Statements - June 28, 1997
Report of Independent Auditors.
The following consolidated financial schedule of Thomaston Mills, Inc. and
subsidiary is included in Item 14(d):
Schedule II - Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
<PAGE> 21
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THOMASTON MILLS, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D Col. E
- ----------------------------------------------------------------------------------------------------------------------------------
Additions
- ----------------------------------------------------------------------------------------------------------------------------------
(2)
(1) Charged to
Balance at Charged to Other
Beginning of Costs and Accounts - Deductions Balance at End
Description Period Expenses Describe Describe of Period
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Period ended June 28, 1997:
Allowance for doubtful accounts $ 415,000 $ 1,180,763 $ -- $ 1,095,763 $ 500,000
Period ended June 29, 1996:
Allowance for doubtful accounts $ 415,000 $ 115,611 $ -- $ 115,611 $ 415,000
Period ended July 1, 1995:
Allowance for doubtful accounts $ 415,000 $ 28,586 $ -- $ 28,586 $ 415,000
</TABLE>
Note: Amounts included in column D are accounts written off during the periods.
<PAGE> 1
EXHIBIT 11.0
COMPUTATION OF EARNINGS PER SHARE
THOMASTON MILLS, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 28, 1997 JUNE 29, 1996 JULY 01, 1995
------------- ------------- -------------
<S> <C> <C> <C>
PRIMARY
Weighted average shares outstanding 6,539,996 6,537,238 6,532,817
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 0 11,517 0
------------- ------------- -------------
TOTAL 6,539,996 6,548,755 6,532,817
------------- ------------- -------------
NET INCOME(LOSS) $ (7,647,265) 615,282 $ 3,373,496
============= ============= =============
NET INCOME PER SHARE (LOSS) $ (1.17) 0.09 $ 0.52
============= ============= =============
</TABLE>
<PAGE> 1
EXHIBIT 21.0
SUBSIDIARY OF THE COMPANY
The Company has one subsidiary, Thomaston Mills, FSC Inc., incorporated
under the laws of the U.S. Virgin Islands.
<PAGE> 1
EXHIBIT 23.0
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Thomaston Mills, Inc. of our report dated August 11, 1997, included in the
1997 Annual Report to Shareholders of Thomaston Mills, Inc.
Our audits also included the financial statement schedule of Thomaston Mills,
Inc. listed in Item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express and opinion based on
our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1994 Stock Option Plan, the 1992 Stock Option
Plan, the Amended and Restated 1989 Stock Option Plan, and the 1988 Stock
Option Plan of Thomaston Mills, Inc. of our report dated August 11, 1997, with
respect to the consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph with respect to
the financial statement schedule included in this Annual Report (Form 10-K) for
the year ended June 28, 1997.
/s/ ERNST & YOUNG LLP
Atlanta, Georgia
September 23, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> JUN-28-1997
<EXCHANGE-RATE> 1
<CASH> 1,886
<SECURITIES> 0
<RECEIVABLES> 50,640
<ALLOWANCES> 500
<INVENTORY> 48,729
<CURRENT-ASSETS> 105,750
<PP&E> 247,506
<DEPRECIATION> 158,133
<TOTAL-ASSETS> 197,697
<CURRENT-LIABILITIES> 27,623
<BONDS> 35,917
7,494
0
<COMMON> 0
<OTHER-SE> 91,967
<TOTAL-LIABILITY-AND-EQUITY> 197,697
<SALES> 285,958
<TOTAL-REVENUES> 286,411
<CGS> 273,058
<TOTAL-COSTS> 273,058
<OTHER-EXPENSES> 22,304
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,453
<INCOME-PRETAX> (12,404)
<INCOME-TAX> (4,757)
<INCOME-CONTINUING> (7,647)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,647)
<EPS-PRIMARY> (1.17)
<EPS-DILUTED> (1.17)
</TABLE>
