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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 JULY 1, 2000
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 Number)
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. Yes [X] No [ ].
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The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 14, 2000: Class B Common Stock, $1 Par Value --
$910,379 based upon the average bid and ask price of such stock on September 14,
2000, 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 September 14, 2000:
<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 July 1, 2000
are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual shareholders meeting to be
held October 5, 2000, are incorporated by reference into Part III.
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TABLE OF CONTENTS
PART I
Item 1. Business
General
Strategy
Products and Markets
Sales and Marketing
Competition
Backlog
Inventories
Intellectual Property
Government Regulation
Employees
Executive Officers of Registrant
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Item 14. Exhibits, Financial Statement Schedules, and Report on Form 8-K
SIGNATURES
INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
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PART I
ITEM 1. BUSINESS
GENERAL
Thomaston Mills, Inc. ("Thomaston Mills" or the "Company") is a
manufacturer, finisher and marketer of cotton, synthetic and blended textile
products for the home furnishings and apparel piece-dyed 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. The home furnishings line also includes sheets,
pillow cases, and bedspreads which are marketed through hospitality and health
care distributors, as well as fabrics which are sold to other manufacturers of
home furnishings. The Company's apparel piece-dyed line includes dyed and
finished woven fabrics in a variety of colors and washes which are sold to
apparel manufacturers.
Prior to 1999, the Company's business included the manufacturing and
finishing of regular and stretch denim which were sold to apparel manufacturers
and cotton and blended yarn for athletic hosiery and other circular knit
manufacturers, and both yarn and fabric for manufacturers of industrial belting
and hoses.
In the fourth quarter of fiscal 1999, the Company began a comprehensive
restructuring of the Company's operations and businesses with a view towards
enhancing and focusing on the Company's operations which management believes
present the best future profitability and growth potential. As a result of
completing the assessment of various strategic alternatives, the Company
concluded that discontinuing its denim and industrial yarn operations, which
have been unprofitable in recent years, was in the best interest of the Company.
In conjunction with the exit of these businesses, the Company's balance sheet at
July 1, 2000 included assets held for sale in the amount of $4,476,000. Proceeds
from the sale of these assets will be applied against outstanding term loan
obligations.
The Company has concluded that it will focus on the manufacturing and
marketing of home furnishings as well as dyeing and finishing fabrics for casual
and career apparel. The Company believes that these operations offer the most
viable opportunity for improving future profitability. The Company completed a
personnel and operational realignment of these businesses which it believes will
improve their future profit margins.
The Company is a Georgia corporation which has been in the textile
business continually since 1899. Headquartered in Thomaston, Georgia, the
Company's continuing operations include three plants in Thomaston, with an
aggregate area of approximately 1.8 million square feet. The Company markets its
products domestically and internationally through sales offices in Thomaston,
Georgia, New York, New York 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.thomaston.com.
STRATEGY
Thomaston Mills intends to be a 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 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 piece-dyed operations finish and dye
fabrics, such as twill, for casual and career apparel.
To become a 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
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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 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. In 1999 and 2000, the Company made substantial investments in a new
supply chain management system in its home furnishings line to improve shipment
performance and reduce inventory investment.
PRODUCTS AND MARKETS
Home Furnishings. Thomaston Mills offers a complete line of muslin,
percale and premium thread-count products for the bedroom, including fashion
coordinated complete bed ensembles and comforters marketed under the Thomaston
label, as well as home furnishings fabrics sold to other manufacturers of home
furnishings.
The Company markets a coordinated line of products and accessories
which, for any given pattern, may include comforters, sheets and pillowcases,
pillow shams, bed skirts, 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 and complete bed ensemble
markets represent an attractive opportunity to expand its home furnishings line.
The Company began producing comforters in 1990, and, for fiscal 2000, sales of
comforters, accessories and complete bed ensembles accounted for 34% of the Home
Furnishings line.
As the Company has broadened and upgraded its line of muslin, percale
and premium thread-count products, the Company's principal customers served have
expanded from regional value-based retailers to include national value-based
retailers. The Company is not a major supplier of designer-licensed 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.
Apparel Fabrics. The Company's apparel fabrics line involves the
finishing and dyeing of heavier "bottom weight" 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 purchases fabric for these products
from other manufacturers.
Manufacturing. Thomaston Mills' three 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
functions not currently performed by the Company are the printing of fabrics for
its home furnishings line and the manufacture of greige goods for its piece-dyed
apparel fabrics 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 for its home
furnishings line are conducted at the Company's Peerless plant. At this
facility, raw material (cotton, synthetic or blend) is spun into yarn.
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Through its capital expenditure program, the Company has installed
advanced carding and spinning machinery which require fewer operators in the
high-speed production of quality yarns. The Company has phased out its use of
ring and open-end spinning and is fully reliant on air jet spinning technology.
The Company believes that it is among the leaders in the textile industry in the
use of modern spinning equipment.
The Company's weaving operation is also housed at its Peerless facility
and contains approximately 409 weaving machines. As a result of its capital
expenditure program, the Company's weaving capacity currently consists of
high-speed 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 or purchased 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 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 or forecasts 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.
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 allowed certain operations to be
consolidated in a single plant and resulted in significantly increased
manufacturing and storage capacity. Automation of certain warehousing and
distribution functions at this facility has improved physical control over
inventories, reduced order fulfillment lead times, allowed for enhanced levels
of service and required fewer employees dedicated to handling and storage,
resulting in cost savings to the Company.
In fiscal 1997, the Company expanded its comforter and bedding
accessory manufacturing and distribution facility and added a new Dye Range.
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 1999 and 2000, the Company made
substantial investments in a new supply chain management system in its home
furnishings line to improve shipment performance and reduce inventory
investment.
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.
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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 predetermined
price, or (2) fixed quantities to be purchased at a price to be determined (at a
later date). When the Company sells its product to its customers, the cost of
cotton under existing cotton purchase contracts is taken into account in
calculating the price for the Company's product. The Company generally attempts
to match product sales contracts with fixed price cotton purchase contracts and
uses market price cotton contracts to anticipate future needs and subsequent
product sales contracts. Accordingly, fluctuations in the market value of cotton
do not generally affect the pricing or profitability of existing sales
contracts, but would affect subsequent sales contracts. To the extent prices are
sometimes fixed in advance of shipment, the Company may benefit from its
investment in cotton, to the extent prices thereafter rise, or 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 supply
levels through a number of suppliers.
SALES AND MARKETING
Thomaston Mills markets its products through 23 sales representatives
to approximately 900 active customers. No single customer's net sales exceeded
10% of the Company's consolidated net sales in 2000. Domestic sales are made
through the Company's principal sales office in Thomaston, Georgia and a branch
office in New York, New York. The New York showroom facility provides displays
of the Company's products. International sales, which constituted 4.6% of net
sales in fiscal 2000, inclusive of sales from both continuing and discontinued
operations, 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.
Imports of foreign-made 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. 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. China is currently negotiating its membership application with
the WTO, and if the application is accepted and China is admitted to the WTO,
the Chinese market share of apparel imports is expected to increase
significantly over the phase-in period.
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.
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The North American Free Trade Agreement ("NAFTA") was 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.
The recently enacted amendment to the Caribbean Basin Economic Recovery
Act accords, for a specified transition period, the same preferential tariff and
quota treatment given certain textile and apparel articles imported from NAFTA
countries to such articles that are imported from certain Caribbean countries.
In order to qualify for the preferential tariff and quota treatment, however,
apparel goods that are shipped back to the United States must be sewn in
eligible Caribbean countries using U.S. yarn and fabrics. The Company believes
that this new legislation will allow it to compete favorably with Asian
countries for market share in the apparel area.
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 was $89,000,000 at July 1, 2000.
INVENTORIES
Inventories at July 1, 2000 and July 3, 1999 were $37,236,000 and
$40,371,000, respectively. The Company closely monitors inventory levels and,
through manufacturing capacity utilization, adjusts these levels in relation to
current and forecasted sales.
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 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.
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EMPLOYEES
As of September 14, 2000, the Company had approximately 1,679 full-time
employees, all but 111 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:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Neil H. Hightower 59 President, Chief Executive Officer and Director
George H. Hightower, Jr. 51 Executive Vice President and Director
President, Apparel Fabrics Division
H. Stewart Davis 57 Executive Vice President and Director
President, Consumer Products Division
William C. James 56 Vice President -- Consumer Products Manufacturing &
Operations
James F. Haygood 53 Vice President -- Apparel Fabric Sales
Jonathan O. Huff 59 Vice President -- Apparel Fabric Finishing
Daniel B. Tripp 48 Vice President -- Human Resources and
Public Relations
A. William Ott 44 Treasurer and Chief Financial Officer
Ronald W. VanHouten 52 Corporate Secretary
Robert B. Dale 53 Vice President -- Consumer Products Sales
</TABLE>
The Board of Directors currently consists of ten 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.
Mr. Neil H. Hightower has been with the Company for 35 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 26 years and
has served as Executive Vice President since 1986, President of the Apparel
Fabrics Division since 1998, 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 36 years and has served as
Executive Vice President since 1986, President of the Consumer Products division
since 1998, and as a director since 1981.
Mr. Haygood has been with the Company 28 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. Huff has been with the Company for 28 years and has served as Vice
President -- Finishing since 1990. He served as Manager -- Finishing Division
from 1984 to 1990.
Mr. Ott joined the Company May 1, 1998, and has been Treasurer and CFO
since October 1998. From June 1997 until January 1998, he served as President of
the Home Furnishings Division of The Bibb Company, which merged with Dan River
Inc. in 1998, and as CFO of The Bibb Company from 1994 to 1997.
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Mr. Tripp has been with the Company for 22 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 28 years and has served as
Secretary since 1992. He served as Assistant Secretary from 1990 to 1992 and
Controller from 1987 to 1990.
Mr. Dale joined the Company in January 1999 as Vice President of Sales
and Marketing for the Consumer Products Division. From June 1998 through
September 1998, Mr. Dale was Vice President, Marketing and Strategic Accounts,
Apparel/Home Division for Guilford, Inc. From 1995 to 1997, Mr. Dale was
Division President for Glenoit Mills, Inc., a textile manufacturer. From 1970 to
1995 he was Division President and Corporate Officer for Fieldcrest Cannon,
Inc., a furniture coverings and textile bath products manufacturer.
Mr. James joined the Company in October 1998. He served as Vice
President of Manufacturing for Leshner Mills, now known as Pillowtex Corp., for
11 years prior to joining the Company.
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: George H. Hightower, Jr. is the
son of George H. Hightower. Neil H. Hightower and H. Stewart Davis are the
nephews of George H. Hightower.
ITEM 2. PROPERTIES
Thomaston Mills operates three manufacturing facilities located in
Thomaston, Georgia with an aggregate area of approximately 1.8 million square
feet. The Company also owns four vacant manufacturing facilities with an
aggregate area of approximately 1.3 million square feet which previously housed
operations which have been discontinued. These vacant facilities are currently
listed for sale. In addition, the Company owns buildings used for its executive
offices and approximately 200 acres of undeveloped property which is available
for use by the Company. 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>
APPROXIMATE
NAME AND LOCATION SQUARE FEET USE
-------------------------- ----------- -------------------------------------------
<S> <C> <C>
Peerless Mill 524,000 Greige mill in which baled raw cotton
Thomaston, Georgia and polyester are converted in woven cloth.
Finishing and Sewing Plant 846,000 Finishing plant for bleaching and dyeing
Thomaston, Georgia cloth and for sewing and warehousing.
Lakeside Plant 433,000 Sewing plant for fabricating cloth into
Thomaston, Georgia household products.
</TABLE>
The Company also leases a sales offices in New York, New York and
operates a retail outlet on property it owns in Thomaston, Georgia.
ITEM 3. LEGAL PROCEEDINGS
As of September 14, 2000, 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 July 1, 2000.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Common Stock Market Prices and Dividends on pages 26 and 27 of the
annual shareholders report for the year ended July 1, 2000 are incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data on Page 4 and 5 of the annual shareholders
report for the year ended July 1, 2000, 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 22 thru 25 of the annual shareholders report for the year
ended July 1, 2000, 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
July 1, 2000, are incorporated herein by reference:
Consolidated Balance Sheets -- July 1, 2000 and July 3, 1999 -- Pages 6
and 7
Consolidated Statements of Shareholders' Equity -- fiscal years ended
July 1, 2000, July 3, 1999 and June 27, 1998 -- Page 8
Consolidated Statements of Operations -- fiscal years ended July 1,
2000, July 3, 1999 and June 27, 1998 -Page 9
Consolidated Statements of Cash Flows -- fiscal years ended July 1,
2000, July 3, 1999 and June 27, 1998 -Page 10
Notes to Consolidated Financial Statements -- July 1, 2000 -- Pages 11
thru 21
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 5 thru 7 of the registrant's definitive proxy statement for the Annual
Meeting of Shareholders on October 5, 2000. 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 5,
2000 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.
8
<PAGE> 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding beneficial ownership shown on pages 2 thru 4 of
the definitive proxy statement for the Annual Meeting of Shareholders on October
5, 2000, 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 5, 2000, 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.
9
<PAGE> 13
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> <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").
4.1 -- Warrantholders Rights Agreement, dated as of July 26, 1999, between the Company,
Wachovia Bank, N.A., SunTrust Bank, Atlanta and Bank of America,N.A.,incorporated
by reference to Exhibit 4.1 of the 1999 10-K.
4.2 -- Warrants to purchase shares of Class A and Class B voting stock of the Company to
Wachovia Bank, N.A., SunTrust Bank, Atlanta and Bank of America, N.A., each dated
July 23, 1999, incorporated by reference to Exhibit 4.2 of the 1999 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. Senior Executive Management and Directors Incentive Plan,
incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K,
dated February 2, 2000.
10.8.1* -- Thomaston Mills, Inc. Senior Executive Management and Directors Incentive Plan,
incorporated by reference to Exhibit 10.1 of Registrant's Current Report on Form 8-K,
dated February 2, 2000.
10.9* -- Thomaston Mills, Inc. 1997 Stock Option Plan, incorporated by reference to Exhibit 10.9
of the Registrant's amendment to its 1997 10-K.
10.10 -- Amended and Restated Credit and Security Agreement, dated as of July 27, 1999, (the
"Amended and Restated Credit and Security Agreement") among the Company, its
subsidiary, Bank of America, N.A., SunTrust Bank, Atlanta and Wachovia Bank, N.A., as
lenders; SunTrust Bank, Atlanta, as agent; Wachovia Bank, N.A., as agent; and SunTrust
Equitable Securities Corporation, as arranger and lead manager, as amended by that
certain First Amendment to Amended and Restated Credit and Security Agreement, dated
as of September 10, 1999, incorporated by reference to Exhibit 10.10 of the 1999 10-K.
10.10.1** -- Second Amendment to Amended and Restated Credit and Security Agreement,
dated as of September 1, 2000.
10.11 -- Pledge Agreement, dated as of July 23, 1999, made by the Company in favor of
Wachovia Bank, N.A., as collateral agent, incorporated by reference to Exhibit 10.11 of
the 1999 10-K.
10.12 -- $75,000,000 Loan and Security Agreement among the Company, the financial institutions
named therein, as lenders, Foothill Capital Corporation, as agent, and Foothill Capital
Corporation and General Electric Capital Corporation, as co-agents, dated as of July 27,
1999, incorporated by reference to Exhibit 10.12 of the 1999 10-K.
10.12.1** -- Waiver and Consent dated as of September 16, 1999, Second Waiver and Amendment dated as
of December 31, 1999, Third Waiver and Amendment dated as of February 9,
2000, Fourth Waiver and Amendment dated as of May 31, 2000, Fifth Waiver and
Amendment dated as of September 12, 2000 and Sixth Waiver and Amendment dated as
of September 12, 2000 to the Loan and Security Agreement dated as of July 27, 1999
among Thomaston Mills, Inc., as Borrower, the lenders part, thereto, Foothill Capital
Corporation and General Electric Capital Corporation, as Co-Agents, and Foothill Capital
Corporation, as Agent.
</TABLE>
10
<PAGE> 14
<TABLE>
<S> <C> <C>
10.13 -- Patent Security Agreement, dated as of July 27, 1999, made by the Company in favor of
Foothill Capital Corporation, as agent for the co-agents and lenders, incorporated by
reference to Exhibit 10.13 of the 1999 10-K.
10.14 -- Trademark Security Agreement, dated as of July 27, 1999, made by the Company to
Foothill Corporation, as agent for the lender group, incorporated by reference to Exhibit
10.14 of the 1999 10-K.
10.15 -- Loan Agreement, dated May 31, 2000, by and between the Company and WebBank,
incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form
8-K, dated May 31, 2000.
13.0** -- 2000 Annual Report mailed to shareholders.
21.0 -- Subsidiary of the Company, incorporated by reference to Exhibit 21.0 of the 1999 10-K.
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) or Form 10-K.
** Filed herewith.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal 2000 --
one.
(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.
11
<PAGE> 15
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.
By: /s/ NEIL H. HIGHTOWER
----------------------------------------
Neil H. Hightower
President, Chief Executive Officer and
Director
Date: September 18, 2000
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------------- -------------------------------------------- ----------------
<S> <C> <C>
/s/ A. WILLIAM OTT Treasurer, Chief Financial Officer and Chief September 18, 2000
--------------------------------- Accounting Officer
A. William Ott
/s/ GEORGE H. HIGHTOWER Director September 18, 2000
---------------------------------
George H. Hightower
/s/ H. STEWART DAVIS Executive Vice President and Director September 18, 2000
---------------------------------
H. Stewart Davis
/s/ GEORGE H. HIGHTOWER, JR. Executive Vice President and Director September 18, 2000
---------------------------------
George H. Hightower, Jr.
/s/ THOMAS D. ADAMS, JR. Director September 18, 2000
---------------------------------
Thomas D. Adams, Jr.
/s/ C. RONALD BARFIELD Director September 18, 2000
---------------------------------
C. Ronald Barfield
</TABLE>
12
<PAGE> 16
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 JULY 1, 2000
THOMASTON MILLS, INC. AND SUBSIDIARY
Thomaston, Georgia
13
<PAGE> 17
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 July 1, 2000 are incorporated
by reference in Item 8:
Consolidated Balance Sheets -- July 1, 2000 and July 3, 1999
Consolidated Statements of Shareholders' Equity -- fiscal years ended
July 1, 2000, July 3, 1999 and June 27, 1998.
Consolidated Statements of Operations -- fiscal years ended July 1,
2000, July 3, 1999 and June 27, 1998
Consolidated Statements of Cash Flows -- fiscal years ended July 1,
2000, July 3, 1999 and June 27, 1998
Notes to Consolidated Financial Statements -- July 1, 2000
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.
14
<PAGE> 18
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 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 July 1, 2000 $950,000 $ 42,858 $ (387,104)(a) $ (15,246) $621,000
Allowance for doubtful
accounts
Period ended July 3, 1999 $871,010 $225,949 $ 387,104(a) $ 534,063 $950,000
Allowance for doubtful
accounts
Period ended June 27, 1998 $500,000 $751,566 $ 0 $ 380,556 $871,010
Allowance for doubtful
accounts
</TABLE>
---------------
Note: Amounts included in column D are accounts written off during the periods.
(a) Amounts established as reserve for discontinued operations; utilized during
the period ended July 1, 2000.
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------------------------------- ---------- -------------------------- ---------- ----------
(ADDITIONS)
(2)
(1) CHARGED TO
BALANCE 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 July 1, 2000
Provision to reduce
inventories to net realizable
value $1,078,377 $ 136,921 $ 0 $ 0 $1,215,298
Period ended July 3, 1999
Provision to reduce
inventories to net realizable
value $2,458,292 $ 0 $ 0 $1,379,915 $1,078,377
Period ended June 27, 1998
Provision to reduce
inventories to net realizable
value $ 0 $2,458,292 $ 0 $ 0 $2,458,292
</TABLE>
---------------
Note: Amounts included in column D are accounts written off during the periods.
15
