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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]
For the fiscal year ended June 27, 1998
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.
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(Exact name of registrant as specified in its charter)
Georgia 58-0460470
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
115 East Main Street
Thomaston, Georgia 30286-0004
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(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
---
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of August 27, 1998: Class B Common Stock, $1 Par Value -
$3,139,324 based upon the average bid and ask price of such stock on August 26,
1998, excluding Class B Common Stock owned by officers and directors, some of
whom may be held not to be affiliates.
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The number of shares outstanding (excluding treasury shares) of each of
the registrant's classes of common stock as of August 21, 1997:
<TABLE>
<CAPTION>
Class Number of Shares
----- ----------------
<S> <C>
Class A Common Stock, $1 Par Value 4,909,680
Class B Common Stock, $1 Par Value 1,630,366
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended June 27,
1998 are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual shareholders meeting to
be held October 1, 1998, are incorporated by reference into Part III.
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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 45%, 40% and 15%, respectively, of fiscal 1998 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 market. 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 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 revenue growth from approximately $187 million in fiscal 1988 to
approximately $281 million in fiscal 1998. Net sales per employee have increased
from $76,057 in fiscal 1988 to $128,304 in fiscal 1998, which the Company
believes is among the highest rate in the textile industry.
Since fiscal 1986, the Company has invested over $188 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 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 30286-0004 and its telephone number is (706)
647-7131. On the Internet, the Company's home page may be reached at
http://www.thomastonmills.com.
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.
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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.
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 label, as well as home
furnishings fabrics sold to other manufacturers of home furnishings. The home
furnishings line represented 45% of net sales for fiscal 1998.
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 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 1998, sales of comforters and accessories
accounted for 18% 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 40% of net sales for fiscal 1998. The Company's
principal apparel fabric product is indigo denim, including rigid and stretch
varieties. Denims generally are
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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.
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 15% of net
sales for fiscal 1998. 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 79% 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 facility allows certain operations to be
consolidated in a single plant and has resulted in significantly increased
manufacturing and storage capacity. 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. 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 is focused on 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 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
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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 2,075 active customers, with no one customer constituting over
5% of net sales in fiscal 1998. 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. The New York showroom facility provides
displays of the Company's products. International sales, which constituted 7% of
net sales for fiscal 1998, are handled through the Thomaston office and
commissioned sales agents and distributors in Canada, Europe, the Middle East
and Central and South America.
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.
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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.
BACKLOG
The Company's order backlog decreased 27% to $91.1 million at June 27,
1998 as compared to $124.0 million at June 28, 1997.
INVENTORIES
Inventories at June 27, 1998 and June 28, 1997 were $46,585,000 and
$48,229,000, 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 5.9 times for fiscal year 1998 and 5.6 times for fiscal year 1997.
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) 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.
EMPLOYEES
As of June 27, 1998, the Company had approximately 2,188 full-time
employees, all but 181 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.
EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information regarding the
executive officers of the Company:
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<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Neil H. Hightower...................57 President, Chief Executive Officer
and Director
George H. Hightower, Jr.............49 Executive Vice President - Sales and
Director
H. Stewart Davis....................55 Executive Vice President - Finishing
and Director
Charles F. Eichelberger.............59 Vice President - Greige Manufacturing
James E. Franklin, Jr...............54 Vice President - Industrial Sales
James F. Haygood....................51 Vice President - Apparel Fabric Sales
W. Harrison Hightower, III..........62 Vice President - Administration
Jonathan O. Huff....................57 Vice President - Finishing
Rosser R. Raines....................60 Treasurer and Director
Daniel B. Tripp.....................46 Vice President - Human Resources and
Public Relations
A. William Ott......................42 Vice President - Finance
Robert E. Greer.....................54 Vice President - Engineering
Ronald W. VanHouten.................50 Secretary
Jimmy W. Hall.......................54 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 33 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 24 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 34 years and has served as
Executive Vice President - Finishing since 1986 and as a director since 1981.
Mr. Haygood has been with the Company 26 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 27 years and has served as Vice
President - Industrial Sales since 1989. He served as Manager - Industrial Sales
from 1984 to 1989.
Mr. Eichelberger has been with the Company for 15 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 40 years
and has served as Vice President - Administration since 1976.
Mr. Huff has been with the Company for 24 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 36 years and has served as
Treasurer since 1976 and as a director since 1993.
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Mr. Ott joined the Company May 1, 1998. From June, 1997 until January,
1998 he served as President of the Home Furnishings Division of the Bibb Company
and as CFO of the Bibb Company from 1994 to 1997.
Mr. Tripp has been with the Company for 20 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 26 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 6 years and has served as Vice
President - Engineering since June 1996.
Mr. Hall has been with the Company for 28 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. On September 17,
1998, the Company announced the closing of its Griffin, Georgia production
facility. See "Business -- Manufacturing".
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 baled raw cotton
Thomaston, Georgia and polyester are converted into spun
yarn and woven cloth.
Finishing Plant 846,000 Finishing plant for bleaching and dyeing
Thomaston, Georgia cloth and for sewing and warehousing.
Peerless Mill 524,000 Greige mill in which baled raw cotton
Thomaston, Georgia and polyester are converted in woven
cloth.
Northside Plant 61,000 Sewing plant for fabricating cloth into
Thomaston, Georgia household and recreation products.
Griffin Mill 382,000 Yarn mill in which baled raw cotton and
Griffin, Georgia polyester are converted into yarn.
Pike Plant 83,000 Weaving plant for fabricating into woven
Zebulon, Georgia cloth.
Lakeside Plant 281,000 Sewing plant for fabricating cloth into
Thomaston, Georgia household products.
</TABLE>
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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 27, 1998 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 27, 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
Common Stock Market Prices and Dividends on page 28 of the annual
shareholders report for the year ended June 27, 1998 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 27, 1998 are incorporated herein by reference.
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 on pages 25 thru 27 of the annual shareholders report for the year
ended June 27, 1998 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 27, 1998, are incorporated herein by reference:
Consolidated Balance Sheets - June 27, 1998 and June 28, 1997 - Pages
12 and 13
Consolidated Statements of Shareholders' Equity - fiscal years ended
June 27, 1998, June 28, 1997 and June 29, 1996 - Page 14
Consolidated Statements of Operations - fiscal years ended June 27,
1998, June 28, 1997 and June 29, 1996 - Page 15
11
<PAGE> 12
Consolidated Statements of Cash Flows - fiscal years ended June 27,
1998, June 28, 1997 and June 29, 1996 - Page 16
Notes to Consolidated Financial Statements - June 27, 1998 - Pages 17
thru 24
Quarterly Results of Operations on page 24 of the annual shareholders
report for the year ended June 27, 1998 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 1, 1998. 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.
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 1,
1998 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
1, 1998, 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 1, 1998, 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 a retired partner of 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
12
<PAGE> 13
(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").
*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.
**10.9 Thomaston Mills, Inc. 1997 Stock Option Plan
**11.0 Statement regarding computation of earnings per share.
***13.0 Portions of the 1997 Annual Report mailed to shareholders.
**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.
** Filed herewith.
*** To be filed by amendment.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal 1998 - 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.
13
<PAGE> 14
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, 1998 /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, 1998 Date: September 25, 1998
/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, 1998
Date: September 25, 1998
/s/ William H. Hightower, Jr. /s/ C. Ronald Barfield
- --------------------------------------- -----------------------------
William H. Hightower, Jr. C. Ronald Barfield
Director Director
Date: September 25, 1998 Date: September 25, 1998
14
<PAGE> 15
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 27, 1998
THOMASTON MILLS, INC. AND SUBSIDIARY
THOMASTON, GEORGIA
<PAGE> 16
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 the year ended June 27, 1998 are
incorporated by reference in Item 8:
Consolidated Balance Sheets - June 27, 1998 and June 28, 1997
Consolidated Statements of Shareholders' Equity - fiscal years ended June
27, 1998, June 28, 1997 and June 29, 1996.
Consolidated Statements of Operations - fiscal years ended June 27 1998,
June 28, 1997 and June 29, 1996
Consolidated Statements of cash Flows - fiscal years ended June 27,
1998, June 28, 1997 and June 29, 1996
Notes to Consolidated Financial Statements - June 27, 1998
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> 17
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) Charted to
Balance Charted 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 27, 1998
Allowance for doubtful accounts $500,000 $ 751,566 $ -- $ 380,556 $871,000
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
</TABLE>
Note: Amounts included in Column D are accounts written off during the periods.
<PAGE> 1
EXHIBIT 10.9
THOMASTON MILLS, INC.
1997 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the following terms have the meanings
hereinafter set forth unless the contract clearly indicates to the contrary:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean a Committee designated by the Board, each
member of which shall be a "disinterested person" within the meaning of Rule
16b-3 (or any successor rule or regulation) promulgated under the Securities
Exchange Act of 1934, as amended.
(d) "Common Stock" shall mean either the Class "A" common stock of
the Company, par value $1.00, the Class "B" common stock of the Company, par
value $1.00, or both, as the context may require.
(e) "Company" shall mean Thomaston Mills, Inc., a Georgia
corporation.
(f) "Disabled Person" shall mean an employee of the Company who, as
determined by a licensed physician acceptable to the Committee and evidenced by
a certificate to the Company, is completely unable to engage in his regular
occupation or service to the Company; provided, however, that the determination
of the Committee in its sole discretion as to the classification of an employee
as a Disabled Person shall be final.
(g) "Fair Market Value" shall mean the fair market value of the
Stock as determined by the Committee for the date in question. If at the date
any such Option is granted, a public market shall exist for the Shares but such
Shares are not trading on a national securities exchange in the United States,
then, if the Shares are listed on the National Market List by the National
Association of Securities Dealers, Inc. (the "NASD"), the fair market value
per Share shall not be less than the last sale price for such Shares reflected
on said market list for the date of the granting of such Option, and if the
Shares are not listed on the National Market List of the NASD, then the fair
market value per Share shall be not less than one hundred percent (100%) of the
mean between the bid and asked quotations in the over-the-counter market for
such Shares on the date of the granting of such Option. If there is no bid and
asked quotation for such Shares on the date of the granting of such Option, the
fair market value per Share shall be not
<PAGE> 2
less than one hundred percent (100%) of the mean between the bid and asked
quotations in the over-the counter market for such Shares on the closest date
preceding said date. If the Shares are trading on a national securities
exchange in the United States on the date of the granting of such Option, the
fair market value per Share shall be not less than one hundred percent (100%) of
the mean between the high and low prices at which the Shares shall have been
sold on such national securities exchange on the date of the granting of such
Option. If the Shares are trading on a national securities exchange in the
United States on the date of the granting of the Option but no sales of Shares
occurred thereon on the date of the granting of the Option, the fair market
value per Share shall be not less than one hundred percent (100%) of the mean
between the high and low prices for such Shares on the closest date preceding
the said date of the granting of the Option. If the Shares are traded on more
than one national securities exchange in the United States on the date of the
granting of such Option, the Committee shall determine the principal national
securities exchange for the purpose of determining the fair market value per
Share.
(h) "Incentive Stock Option" shall mean an option to purchase any stock
of the Company or any of its Subsidiaries which complies with and is subject to
the terms, limitations, and conditions of Section 422 of the Code and any
regulations promulgated with respect thereto.
(i) "Nonstatutory Stock Option" shall mean an option to purchase any
stock of the Company or any of its Subsidiaries which does not qualify for
treatment as an Incentive Stock Option under Section 422 of the Code.
(j) "Option" shall mean either an Incentive Stock Option or a
Nonstatutory Stock Option, granted pursuant to the provisions of Article VI
hereof.
(k) "Optionee" shall mean a person to whom an Option has been granted
hereunder.
(l) "Plan" shall mean the Thomaston Mills, Inc. 1997 Stock Option Plan,
the terms of which are set forth herein.
(m) "Predecessor" shall mean any corporation coming within the definition
of the term "predecessor corporation" contained in Treasury Regulations
promulgated under Section 422 of the Code.
(n) "Stock" or "Shares" shall mean the Common Stock of the Company, or,
in the event that the outstanding shares are of a different stock or securities
of the Company or some other corporation, such other stock or securities.
<PAGE> 3
(o) "Stock Option Agreement" shall mean a written document evidencing a
Stock Option grant by the Company to the Optionee under which the Optionee may
purchase Stock under the Plan.
(p) "Subsidiary" shall mean any corporation coming within the definition
of the term "subsidiary corporation" contained in Section 424(f) of the Code.
ARTICLE II
THE PLAN
2.1 Name. This Plan shall be known as the "Thomaston Mills, Inc. 1997
Stock Option Plan."
2.2 Purpose. The purpose of the Plan is to advance the interests of the
Company, its Subsidiaries and its shareholders by affording selected employees
of the Company and its subsidiaries an opportunity to acquire or increase their
proprietary interests in the Company by granting such persons Options to
purchase Stock in the Company, so that Optionees will be provided with an
incentive to achieve the Company's objectives through participation in its
success and growth, and so that Optionees will be encouraged to continue their
employment with or service to the Company or its Subsidiaries.
2.3 Effective Date. The Plan shall become effective on August 12, 1997;
provided, however, that if the Plan is not approved by the holders of a
majority of the shares of Stock of the Company represented at a meeting and
entitled to vote thereon within twelve (12) months before or after the date on
which the Plan is adopted by the Board, the Plan and any Options granted
thereunder shall terminate and become null and void.
2.4 Termination Date. Subject to Section 2.3, the Plan shall terminate
and no further Options shall be granted hereunder upon the tenth (10th)
anniversary of the date on which the Plan is adopted by the Board or the date on
which the Plan is approved by the Company's shareholders, whichever first
occurs.
ARTICLE III
PARTICIPANTS
Employees, including, without limitation, executive personnel and other
officers (including, without limitation, officers who are also directors) of
the Company or its Subsidiaries, shall be eligible for selection as
participants in the Plan. Directors who are not employees shall not be eligible
for selection as participants in the Plan. The Committee may grant Options to
any eligible employee as it may determine from time to time, subject to the
approval of the Board.
<PAGE> 4
ARTICLE IV
ADMINISTRATION
4.1 Duties and Powers of the Committee. The Plan shall be administered
by the Committee. The Committee shall keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it may deem
necessary. Subject to the express provisions of the Plan, the Committee shall
have the discretion and authority to determine to whom from among the eligible
employees an Option will be granted, the time or times at which each Option may
be exercised, the number of shares of Stock subject to each Option and the
terms and conditions of each Stock Option Agreement. Subject to the express
provisions of the Plan, the grant of an Option by the Committee shall be final,
and shall not be the subject of approval by any other party. Subject to the
express provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend and rescind rules and
requirements relating to it, to determine the details and provisions of each
Stock Option Agreement, and to make all other determinations necessary or
advisable in the administration of the Plan, including, without limitation, the
amending or altering of the Plan and any Options granted hereunder as may be
required to comply or conform to any federal, state, or local laws or
regulations. No member of the Committee shall be liable to any person for any
action or determination made in good faith with respect to the Plan or any
Option granted hereunder. The determination of the Committee on the matters
referred to in this Section shall be conclusive.
4.2 Majority Rule. A majority of the members of the Committee shall
constitute a quorum, and any action taken by a majority at a meeting at which a
quorum is present or any action taken without a meeting evidenced by a writing
executed by all members of the Committee shall constitute the action of the
Committee.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to adjustments pursuant to the provisions of
Section 5.2 hereof, the maximum number of shares of Class "A" Stock which may
be issued and sold hereunder shall not exceed 263,988 shares and the maximum
number of shares of Class "B" Stock which may be issued and sold hereunder
shall not exceed 79,420 shares. Shares subject to an Option may be either
authorized but unissued shares or shares issued and reacquired by the Company;
provided, however, that shares of Stock with respect to which an Option has
been exercised shall not again be available for option hereunder. If
outstanding Options granted hereunder shall terminate or expire for any reason
without being wholly exercised, the shares of Stock allocable to any
unexercised portion of such Option may be again subjected to an Option granted
under the Plan.
<PAGE> 5
5.2 ANTIDILUTION. In the event that the outstanding shares of Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of merger,
consolidation, reorganization, recapitalization, reclassification, combination
of shares, stock split and reverse split, stock dividend, split-up, split-off,
exchange of shares, issuance of rights to subscribe or change in capital
structure:
(a) The aggregate number and kind of shares of Stock on which Options may
be granted hereunder shall be adjusted appropriately; and
(b) The rights under outstanding Options granted hereunder, both as to
the manner of subject shares and the Option price, shall be adjusted
appropriately acting in good faith.
The foregoing adjustments and the manner of application thereof shall be
determined solely by the Committee acting in good faith, and any such
adjustment may provide for the elimination of fractional share interests.
Moreover, in the event of any such transaction or event, the Committee may
provide in substitution for any and all outstanding Options such alternative
consideration as it may in good faith determine to be equitable under the
circumstances and may require in connection therewith the surrender of all
Options so replaced. The adjustments required under this Article shall apply to
any successor or successors of the Company and shall be made regardless of the
number or type of successive events requiring adjustments hereunder.
In the event of dissolution or liquidation of the Company or any merger or
combination in which the Company is not a surviving corporation (except a
merger or combination with a corporation wholly owned or controlled by the
Company or its stockholders), if the Committee does not exercise its discretion
to provide alternative consideration to Optionees pursuant to the preceding
paragraph of this Section 5.2, each outstanding Option granted hereunder shall
terminate, but the Optionee shall have the right, immediately prior to such
dissolution, liquidation, merger or combination to exercise his Option, in
whole or in part, to the extent that it shall not have been exercised, without
regard to any installment vesting or exercise provisions.
ARTICLE VI
OPTIONS
6.1 OPTION GRANT. Each Option granted hereunder shall be evidenced by
minutes of a meeting or the written consent of the Committee, and by a written
document evidencing such Stock Option grant dated as of the date of grant and
executed by the Company. As to each grant hereunder, the terms of the Option,
including the Option's duration, time or times of exercise, and exercise price
shall be stated in such document (hereinafter referred to as the "Stock Option
Agreement"). The Stock Option Agreement shall clearly identify whether the
<PAGE> 6
Options granted are Incentive Stock Options or Nonstatutory Stock Options. If
an Incentive Stock Option and a Nonstatutory Stock Option are issued together,
the right of the Optionee to exercise or surrender one such Option shall not be
conditioned on his or her surrender of, or failure to exercise, the other
Option. The terms and conditions of the Option shall be consistent with the
Plan.
6.2 Optionee Limitation. The Committee shall not grant an Incentive
Stock Option to any person if at the time the Incentive Stock Option would be
granted, such person is not an employee of the Company or any of its
Subsidiaries.
6.3 Additional Limitations.
(a) The Committee shall not grant an Incentive Stock Option to any
person who, at the time the Option would be granted, owns or is considered to
own stock representing ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any of its Subsidiaries; provided,
however, that this limitation shall not apply if at the time an Option would be
granted, the Option price is at least one hundred ten percent (110%) of the
Fair Market Value of the Stock subject to the Option and such Option by its
terms would not be exercisable after five (5) years from the date on which the
Option is granted. For purposes of the immediately preceding sentence, a person
shall be considered to own (i) the stock owned directly or indirectly, by or
for his brothers and sisters (whether by the whole or half blood), spouse,
ancestors and lineal descendents; and (ii) the stock owned, directly or
indirectly or for a corporation, partnership, estate, or trust in proportion to
such person's stock interest, partnership interest or beneficial interest
therein.
(b) To the extent that the aggregate Fair Market Value of Stock with
respect to which "incentive stock options" (within the meaning of Section 422
of the Code, but without regard to Section 422(d) of the Code) are exercisable
for the first time by an Optionee during any calendar year (under the Plan and
all other incentive stock option plans of the Company) exceeds $100,000, such
options shall be treated as Nonstatutory Stock Options. The rule set forth in
the preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 6.3(b), the Fair
Market Value of Stock shall be determined as of the time the Option with
respect to such Stock is granted.
(c) Notwithstanding any other provision of the Plan, the maximum number
of Shares for which Options may be granted in the aggregate to any one Optionee
under the Plan in any calendar year shall not exceed 88,000 shares of Class "A"
Common Stock and 27,000 shares of Class "B" Common Stock.
6.4 Option Price. The per share Option Price of the Stock subject to
each Incentive Stock Option shall be equal to the Fair Market Value of the
Stock on the date the Option is granted. The per share Option Price of the
Stock subject to each
<PAGE> 7
Nonstatutory Stock Option shall be equal to the Fair Market Value of the Stock
on the date the Option is granted.
6.5 EXERCISE PERIOD. The period of the exercise of such Option shall be
determined by the Committee, but in no instance shall the exercise period for
an Incentive Stock Option exceed ten (10) years from the date of the grant of
the Option. The Committee shall have the right to accelerate, in whole or in
part, from time to time, conditionally or unconditionally, rights to exercise
any Option granted hereunder.
6.6 OPTION EXERCISE. Options shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the Committee
and reflected in the Stock Option Agreement. The Committee shall have the
authority in its sole discretion to prescribe in any Stock Option Agreement
that the Option may be exercised in installments during the term of the Option.
(a) An Option may be exercised at any time or from time to time during
the term of the Option as to any or all full shares which have become
purchasable under the provisions of the Option, but not at any time as to fewer
than twenty-five (25) shares. The Option price is to be paid in full in cash
upon the exercise of the Option and the Company shall not be required to
deliver certificates for such shares until such payment has been made;
provided, however, that in lieu of cash, an Optionee may, to the extent
permitted by the Stock Option Agreement at the date of grant, exercise his
Option in whole or in part, by tendering to the Company shares of Stock owned
by him and having a Fair Market Value equal to the Option price applicable to
his Option, or a combination of cash and said shares. The holder of an Option
shall not have any of the rights of a stockholder with respect to the shares of
Stock subject to the Option until such shares have been issued or transferred
to him upon the exercise of his Option.
(b) An Option shall be exercised by written notice of exercise of the
Option with respect to a specified number of shares of Stock delivered to the
Company at its principal office, together with payment in full to the Company
in accordance with Section 6.6(a) at its principal office of the amount of the
Option price for the number of shares of Stock with respect to which the Option
is then being exercised. In addition to and at the time of payment of the
Option price, the Optionee shall pay to the Company in cash the full amount of
any federal and state withholding or other employment taxes required by any
government to be withheld or otherwise deducted and paid by the Company in
respect of such exercise or disposition. In lieu thereof, at the discretion of
the Company, the Company shall have the right to withhold the amount of such
taxes from any other sums due or to become due from the Company to the
Optionee, upon such terms and conditions as the Committee shall prescribe.
<PAGE> 8
6.7 Nontransferability of Option. No Option shall be transferred by an
Optionee otherwise than by will or the laws of descent and distribution. During
the lifetime of an Optionee, his Option shall be exercisable only by him.
6.8 Termination of Service. Except as otherwise provided in Section 6.9
hereof, in the event of termination of the employment of an Optionee by the
Company (or, if applicable, a Subsidiary of the Company) for any reason,
including retirement, any Option held by him to the extent not theretofore
exercised, shall forthwith terminate unless the Committee, in its sole
discretion, provides in the Stock Option Agreement that the Option shall be
exercisable after such termination (but only to the extent of the number of
shares with respect to which the Option may be exercised at the date of his
termination of employment), and, provided further, that in no event shall any
Stock Option Agreement provide for the extension of the period during which the
Option may be exercised beyond earlier of (i) the expiration of the period of
exercisability of such Option as specified in the Stock Option Agreement, or
(ii) twelve (12) months from the date of termination.
A termination of employment shall not be deemed to occur by reason of (i)
transfer of an employee from employment by the Company to employment by a
Subsidiary or (ii) transfer of an employee by a Subsidiary of the Company to
employment by the Company or another Subsidiary of the Company. Nothing in the
Plan or in any Option shall confer on any person any right to continue in the
employ of the Company or any of its Subsidiaries, or the right to continue to
serve as a director of the Company, or shall interfere in any way with any
right the Company or any of its Subsidiaries may have to terminate his
employment or his service as a director at any time.
6.9 Death or Disability of Holder of Option. In the event any person
dies or becomes a Disabled Person while he is an employee of the Company, any
Option granted pursuant to the Plan held by him may be exercised (but only to
the extent of the number of shares with respect to which the Option may be
exercised at the time of his disability or death) by him or his legatee or
legatees under his will, or by his personal representative or distributees,
within twelve (12) months following the date of his termination of employment
due to his disability or death, or such shorter period as may be specified in
the Stock Option Agreement, but in no such event after the expiration of the
period of exercisability of such Option as specified in the Stock Option
Agreement.
If an Option granted hereunder shall be exercised by the legal
representative of a deceased, disabled or former employee or by a person who
acquired an Option granted hereunder by bequest or inheritance or by reason of
the death or disability of any employee or former employee, written notice of
such exercise shall be accompanied by a certified copy of letters testamentary
or equivalent proof of the right of such legal representative or other person
to exercise such Option.
<PAGE> 9
ARTICLE VII
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option granted hereunder or
any portion thereof, prior to fulfillment of all of the foregoing conditions:
(a) The admission of such shares to listing on all stock exchanges on
which the Stock is then listed;
(b) The completion of any registration or other qualification of such
shares under any federal or state law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Committee shall in its discretion deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any federal or
state governmental agency which the Committee shall in its sole discretion
determine to be necessary or advisable.
ARTICLE VIII
PURCHASE FOR INVESTMENT
Except as hereafter provided, the Board may require as a condition of
issuance of any Shares pursuant to this Plan that the holder of an Option
granted hereunder shall, upon any exercise thereof, execute and deliver to the
Company a written statement, in form satisfactory to the Company, in which such
holder represents and warrants that such holder is pursuing or acquiring the
Shares acquired thereunder for such holder's own account, for investment only
and not with a view to the resale or distribution thereof, and agrees that any
subsequent resale or distribution of any such Shares shall be made only
pursuant to either (a) a Registration Statement on the appropriate form under
the Securities Act of 1933, as amended (the "Securities Act"), which
Registration Statement has become effective and is current with regard to the
Shares being sold, or (b) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption the holder
shall, prior to any sale or offer of sale of such Shares, if required by the
Company, obtain a prior favorable written opinion, in form and substance
satisfactory to the Company, from counsel for or approved by the Company, as to
the application of such exemption thereto. The foregoing restriction shall not
apply to issuances by the Company so long as the Shares being issued are
registered under the Securities Act and a prospectus in respect thereof is
current.
<PAGE> 10
ARTICLE IX
LEGENDS
The Company may endorse such legend or legends upon the certificates for
Shares issued upon exercise of an Option granted hereunder, and the Committee
may issue such "stop transfer" instructions to its transfer agent in respect of
such Shares, as the Committee, in its discretion, determines to be necessary or
appropriate to (i) prevent a violation of, or to perfect an exemption from, the
registration requirements of the Securities Act, (ii) implement the provisions
of any agreement between the Company and the Optionee or grantee with respect
to such Shares, or (iii) permit the Company to determine the occurrence of a
disqualifying disposition, as described in Section 421(b) of the Code, of
Shares transferred upon the exercise of an Incentive Stock Option granted under
the Plan.
ARTICLE X
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may at any time, upon recommendation of the Committee and
notwithstanding Section 2.4 hereof, terminate the Plan, and may at any time and
from time to time and in any respect amend or modify the Plan; provided,
however that the Board, without approval of the shareholders of the Company,
may not adopt any amendment to the Plan if the amendment would:
(a) Increase the total number of shares of Stock which may be issued
pursuant to the Plan except as contemplated in Section 5.2 hereof;
(b) Materially increase the benefits accruing to participants in the
Plan; or
(c) Materially modify the requirements as to the eligibility for
participation in the Plan.
Except as set forth in Section 5.2, the Board shall not terminate, amend
or modify the Plan in any manner so as to affect the price of the shares of
Stock purchasable pursuant to any Option theretofore granted under the Plan
without the consent of the Optionee or transferee of the Option.
ARTICLE XI
RELATIONSHIP TO OTHER COMPENSATION PLANS
The adoption of the Plan shall not affect any other stock option,
incentive or other compensation plans in effect for the Company or any of its
Subsidiaries, nor shall the adoption of the Plan preclude the Company or any of
its Subsidiaries from
<PAGE> 11
establishing any other forms of incentive or other compensation for employees of
such corporations.
ARTICLE XII
MISCELLANEOUS
12.1 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
12.2 Number and Gender. Whenever used herein, nouns in the singular
shall include the plural, and the masculine pronoun shall include the female
gender.
12.3 Headings. Headings of articles and paragraphs hereof are inserted
for convenience and reference only and constitute no part of the Plan.
12.4 Applicable Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Georgia.
<PAGE> 1
EXHIBIT 11.0
COMPUTATION OF EARNINGS PER SHARE
THOMASTON MILLS, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED PERIOD ENDED
JUNE 27, 1998 JUNE 28, 1997 JUNE 29, 1996
------------- ------------- --------------
<S> <C> <C> <C>
WEIGHTED AVERAGE NUMBER OF SHARES:
Basic 6,540,020 6,539,996 6,537,238
Effect of dilutive securities -
employee stock options 0 0 11,397
------------ ------------- --------------
DILUTED 6,540,020 6,539,996 6,548,635
------------ ------------- --------------
NET INCOME (LOSS) $(11,529,019) (7,647,265) $ 615,282
------------ ------------- --------------
BASIC AND DILUTED NET INCOME (LOSS)
PER SHARE $ (1.76) (1.17) $ 0.09
------------ ------------- --------------
</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 21, 1998, included in the
1998 Annual Report to Shareholders of Thomaston Mill, 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 an 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,
presents 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 21, 1998, 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 27, 1998.
Atlanta, Georgia
September 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-27-1998
<PERIOD-START> JUN-29-1997
<PERIOD-END> JUN-27-1998
<CASH> 1,122
<SECURITIES> 0
<RECEIVABLES> 47,139
<ALLOWANCES> 871
<INVENTORY> 46,585
<CURRENT-ASSETS> 102,807
<PP&E> 251,159
<DEPRECIATION> 168,336
<TOTAL-ASSETS> 190,166
<CURRENT-LIABILITIES> 22,554
<BONDS> 35,917
0
0
<COMMON> 7,494
<OTHER-SE> 78,721
<TOTAL-LIABILITY-AND-EQUITY> 190,166
<SALES> 280,730
<TOTAL-REVENUES> 281,104
<CGS> 273,675
<TOTAL-COSTS> 273,675
<OTHER-EXPENSES> 20,141
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,147
<INCOME-PRETAX> (17,859)
<INCOME-TAX> (6,330)
<INCOME-CONTINUING> (11,529)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,529)
<EPS-PRIMARY> (1.76)
<EPS-DILUTED> (1.76)
</TABLE>
