<PAGE> 1
TO OUR SHAREHOLDERS
[PICTURE]
Neil H. Hightower
President & Chief Executive Officer
The year just ended was a year of change for Thomaston Mills, Inc. The
textile industry in the United States is operating in a new global environment,
and our company is adjusting to this new environment.
Sales from continuing operations were $167,133,000, which was down
slightly from the year before. Consumer products sales increased $5,042,000 for
the year, and apparel fabrics sales were down $6,282,000.
EBITDA (earnings before interest, taxes, depreciation, amortization and
other non-cash charges) from continuing operations was $9,227,000 for the year
compared to $(76,000) the year before. There was a $20,041,000 improvement in
EBITDA for the year when discontinued operations are included in the comparison.
Total debt decreased by $2,148,000 during the year. There is still much work to
be done, but we are moving in the right direction.
The theme at Thomaston Mills this past year and looking ahead is
"CHANGE." The Company has changed from a diversified textile company into a
focused consumer products and apparel fabrics company. Last year the Company
exited the denim, sales yarn and industrial markets. These businesses needed
capital investment, and it was determined that capital could be put to better
use supporting the consumer products and apparel businesses.
Employment was reduced from 2,300 to 1,600. Departments were combined,
and in some cases eliminated. The entire culture of the Company is being changed
to include a casual dress code. The objective of all of this change is obviously
to reposition the Company for the future and return it to profitability.
Important relationships have been formed with solid customers in both
consumer products and apparel. We will be working with these customers to
strengthen our business in the coming year. There is much potential to improve
margins through better capacity utilization.
ORGANIZATION
Our new organization is now focused along product and customer lines and is
working well. Our key positions are filled with talented executives, and all
1,600 people are committed to turning the Company into a profitable enterprise.
FINANCES
Our new lenders have been supportive of our efforts to strengthen the Company.
The Company closed a $10 million 20-year loan that is partially guaranteed by
the Department of Agriculture. The proceeds of this loan were used to refinance
debt for a longer term and lowered the Company's debt service requirements. The
savings in interest expense will be very helpful to the Company going forward.
INTERNATIONAL TRADE
With the advent of NAFTA (North American Free Trade Agreement) and the WTO
(World Trade Organization), it is clear that to survive and prosper, Thomaston
Mills must be able to compete on a global
2 Thomaston Mills
<PAGE> 2
basis. The Company is being reconfigured to accomplish this goal. Where we can
automate and compete, we will manufacture domestically. When it is to our
advantage and our customers' advantage to use an imported product, then we will
source from foreign suppliers. We do not expect this strategy to impact our
current manufacturing facilities.
In the Apparel area, the new CBI (Caribbean Basin Initiative)
legislation will create an advantage for U.S. made apparel fabrics sewn in the
Caribbean. This legislation should be helpful to U.S. mills in capturing market
share from Asia with U.S. fabrics sewn into the garments in the Caribbean and
shipped into the U.S. duty free.
CAPITAL EXPENDITURES
Capital expenditures for the year just ended were $3,484,000. These funds were
primarily used for additional automated sewing equipment, electrical substation
improvements at the Peerless Division, new boilers for the Peerless Division and
general repair of buildings and equipment. Capital expenditures have been
reduced for obvious reasons, but it is important to note that in the last six
years, the Company has made capital improvements of over $57 million relating to
continuing operations. Because of this, Thomaston Mills is one of the most
modern textile companies in the country.
[PICTURE]
George H. Hightower, Jr.
Corporate Executive Vice President and
President - Apparel Fabrics Division
[PICTURE]
H. Stewart Davis
Corporate Executive Vice President
and President - Consumer Products
Division
SUPPLY CHAIN MANAGEMENT
This past year we continued to hone our supply chain management skills and
implement the system changes begun the year before. Our goal is to give our
customers the best possible service, with on time delivery, while at the same
time improving inventory turns. We have made good progress, and these systems
will continue to have a high priority.
OUTLOOK
Thomaston Mills is operating in a challenging textile market. The Asian
financial crisis that has caused tremendous disruption appears to be abating. We
have, however, experienced some slowness in releasing goods from our retail
customers. This slowness should be temporary provided our U.S. economy
experiences the soft landing being engineered by the Federal Reserve. Long term
we are optimistic that we are making the necessary changes to make Thomaston
Mills a strong, viable company. We have 1,600 people focused on making that
objective a reality, and that is a very powerful force.
Sincerely,
/s/ Neil H. Hightower
Neil H. Hightower
President and Chief Executive Officer
September 14, 2000
Thomaston Mills 3
<PAGE> 3
FIVE YEAR SUMMARY
Thomaston Mills, Inc. and Subsidiary
<TABLE>
<CAPTION>
FISCAL YEARS 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Thousands of Dollars - for the years ended
Net sales $ 167,113 $ 168,353 $ 199,314 $ 195,124 $ 176,017
Income (loss) from continuing operations
before income taxes (benefit) (10,264) (20,840) (13,634) (9,313) (327)
Income taxes (benefit) from continuing operations 407 (3,539) (4,833) (3,572) (111)
Income (loss) from continuing operations (10,671) (17,301) (8,801) (5,741) (216)
Income (loss) from discontinued operations (3,971) (24,469) (2,728) (1,906) 831
Net income (loss) (14,642) (41,770) (11,529) (7,647) 615
Net income (loss) from continuing operations
as percentage of net sales (6.39)% (10.28)% (4.42)% (2.94)% (.12)%
Cash dividends -- 245 1,717 1,962 1,912
Depreciation and amortization 10,678 16,708 16,878 17,296 16,331
Capital expenditures 3,484 4,038 10,334 16,049 17,900
-----------------------------------------------------------------------------------------------------------------------------------
PER SHARE OF COMMON STOCK
Income (loss) from continuing operations -- basic $ (1.63) $ (2.65) $ (1.34) $ (.88) $ (.03)
Income (loss) from continuing operations -- diluted (1.63) (2.65) (1.34) (.88) (.03)
Income (loss) from discontinued operations -- basic (0.61) (3.74) (.42) (.29) .12
Income (loss) from discontinued operations -- diluted (0.61) (3.74) (.42) (.29) .12
Net income (loss) -- basic (2.24) (6.39) (1.76) (1.17) .09
Net income (loss) -- diluted (2.24) (6.39) (1.76) (1.17) .09
Cash dividends -- .0375 .2625 .3000 .2925
Shareholders' equity 4.80 6.76 13.18 15.21 16.68
-----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION
Thousands of Dollars -- at end of year
Total assets $ 131,411 $ 148,421 $ 188,435 $ 197,197 $ 189,459
Inventories at replacement cost 44,183 49,362 58,725 63,451 55,791
Less LIFO reserve (6,947) (8,991) (12,140) (15,222) (13,081)
Inventories at LIFO cost 37,236 40,371 46,585 48,229 42,710
Property, plant and equipment - net 46,234 51,660 82,823 89,373 90,623
Long-term debt and capital lease obligations 30,440 26,351 73,629 64,017 47,551
(Revolving credit amounts due in 2004) 34,525 41,308 -- -- --
Shareholders' equity 31,420 44,200 86,215 99,461 109,070
===================================================================================================================================
</TABLE>
4 Thomaston Mills
<PAGE> 4
CONTENTS
<TABLE>
<S> <C>
CONSOLIDATED BALANCE SHEETS ....................................... 6
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY ................... 8
CONSOLIDATED STATEMENTS OF OPERATIONS ............................. 9
CONSOLIDATED STATEMENTS OF CASH FLOWS ............................. 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................ 11
REPORT OF INDEPENDENT AUDITORS .................................... 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ................. 22
CONDITION AND RESULTS OF OPERATIONS
DIRECTORS AND OFFICERS ............................................ 26
SHAREHOLDER INFORMATION ........................................... 27
</TABLE>
Thomaston Mills 5
<PAGE> 5
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
JULY 1, 2000 JULY 3, 1999
------------------------------
<S> <C> <C>
ASSETS Current assets:
Cash and cash equivalents $ 1,415 $ 353
Trade accounts receivable less allowance of
$621 in 2000 and $950 in 1999 29,218 35,237
Inventories 37,236 40,371
Prepaid expenses and other current assets 573 1,038
------------------------------
Total current assets 68,442 76,999
Property, plant and equipment:
Land and improvements 4,583 4,546
Buildings and improvements 38,170 38,170
Machinery, equipment and fixtures 127,847 123,623
------------------------------
170,600 166,339
Less allowances for depreciation
and amortization 124,366 114,679
46,234 51,660
Assets held for sale 5,628 10,709
Deferred income taxes 2,709 3,116
Other assets 8,398 5,937
------------------------------
Total assets $131,411 $148,421
==============================
</TABLE>
6 Thomaston Mills
<PAGE> 6
<TABLE>
<CAPTION>
JULY 1, 2000 JULY 3, 1999
------------------------------
<S> <C> <C>
LIABILITIES AND
SHAREHOLDERS' EQUITY Current liabilities:
Trade accounts payable $ 19,857 $ 17,950
Salaries and wages 857 674
Withholding and payroll taxes 631 303
Local taxes 538 801
Accrued interest 473 672
Other current liabilities 7,034 5,287
Current portion of long-term debt 4,147 4,000
Revolving credit 34,525 41,308
Reserve for discontinued operations -- 5,533
------------------------------
Total current liabilities 68,062 76,528
Long-term debt, less current portion 29,876 25,388
Capital lease obligations, less current portion 564 963
Other liabilities 1,489 1,342
Shareholders' equity:
Class A Common Stock -- $1 par; 30,000,000 shares
authorized; 5,620,518 shares outstanding
including 710,838 treasury
shares in 2000 and 1999 5,621 5,621
Class B Common Stock -- $1 par; 10,000,000
shares authorized; 1,873,506 shares
outstanding including 243,140 treasury
shares in 2000 and 1999 1,873 1,873
Additional paid-in capital 10,766 8,904
Retained earnings 18,580 33,222
------------------------------
36,840 49,620
Less treasury stock -- at cost 5,420 5,420
------------------------------
31,420 44,200
------------------------------
Total liabilities and shareholders' equity $131,411 $148,421
==============================
</TABLE>
See accompanying notes
Thomaston Mills 7
<PAGE> 7
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL
COMMON COMMON PAID-IN RETAINED TREASURY
STOCK STOCK CAPITAL EARNINGS STOCK TOTAL
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE JUNE 28, 1997 $ 5,621 $ 1,873 $ 8,904 $ 88,483 $ (5,420) $ 99,461
Net loss for the year -- -- -- (11,529) -- (11,529)
Cash dividends on common stock,
$.2625 per share -- -- -- (1,717) -- (1,717)
----------------------------------------------------------------------------------
BALANCE JUNE 27, 1998 5,621 1,873 8,904 75,237 (5,420) 86,215
Net loss for the year -- -- -- (41,770) -- (41,770)
Cash dividends on common stock,
$.0375 per share -- -- -- (245) -- (245)
----------------------------------------------------------------------------------
BALANCE JULY 3, 1999 5,621 1,873 8,904 33,222 (5,420) 44,200
Net loss for the year -- -- -- (14,642) -- (14,642)
Issuance of warrants for
common shares -- -- 1,862 -- -- 1,862
----------------------------------------------------------------------------------
BALANCE JULY 1, 2000 $ 5,621 $ 1,873 $ 10,766 $ 18,580 $ (5,420) $ 31,420
==================================================================================
</TABLE>
See accompanying notes
8 Thomaston Mills
<PAGE> 8
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
<TABLE>
<CAPTION>
FIFTY-TWO WEEK FIFTY-THREE WEEK FIFTY-TWO WEEK
PERIOD ENDED PERIOD ENDED PERIOD ENDED
JULY 1, 2000 JULY 3, 1999 JUNE 27, 1998
-----------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 167,113 $ 168,353 $ 199,314
Cost of sales 153,493 166,260 192,598
-----------------------------------------------------------------
Gross profit 13,620 2,093 6,716
Selling, general and
administrative expenses 15,065 16,491 15,577
-----------------------------------------------------------------
Operating loss (1,445) (14,398) (8,861)
Interest expense 8,813 7,366 5,147
Amortization of credit agreement fees 687 2,023 --
Other income, net 681 2,947 374
-----------------------------------------------------------------
Loss from continuing operations before
income tax provision (benefit) (10,264) (20,840) (13,634)
Provision (benefit) for income taxes 407 (3,539) (4,833)
-----------------------------------------------------------------
Loss from continuing operations (10,671) (17,301) (8,801)
Discontinued operations:
Loss from discontinued operations -- (11,801) (2,728)
Loss on disposal of discontinued operations
including losses during the phase out period (3,971) (12,668) --
-----------------------------------------------------------------
(3,971) (24,469) (2,728)
-----------------------------------------------------------------
Net loss $ (14,642) $ (41,770) $ (11,529)
=================================================================
Weighted average number of basic and
diluted shares 6,540,046 6,540,020 6,540,020
=================================================================
Basic and diluted net loss per share:
Continuing operations $ (1.63) $ (2.65) $ (1.34)
Discontinued operations (.61) (3.74) (.42)
-----------------------------------------------------------------
Net loss $ (2.24) $ (6.39) $ (1.76)
=================================================================
</TABLE>
See accompanying notes
Thomaston Mills 9
<PAGE> 9
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
FIFTY-TWO WEEK FIFTY-THREE WEEK FIFTY-TWO WEEK
PERIOD ENDED PERIOD ENDED PERIOD ENDED
JULY 1, 2000 JULY 3, 1999 JUNE 27, 1998
---------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES Net loss $ (14,642) $ (41,770) $ (11,529)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 10,678 16,708 16,878
Loss (gain) on sales of property,
plant and equipment 10 (2,855) (63)
Deferred income tax provision
(benefit) 407 (3,006) (4,112)
Write-down of assets held for sale 3,200 9,627 --
Changes in operating assets and
liabilities:
Accounts receivable 6,019 11,031 3,872
Inventories 3,135 6,214 1,644
Prepaid expenses and other assets (1,583) (2,377) (806)
Accounts payable 1,907 6,145 (4,255)
Accrued expenses and other
liabilities 1,943 (152) (8)
Reserve for discontinued
operations (5,533) 5,533 --
---------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,541 5,098 1,621
INVESTING ACTIVITIES Purchases of property, plant and
equipment (3,484) (4,038) (10,334)
Less capital lease obligations incurred -- -- 664
---------------------------------------------------------
Cash used for property, plant and
equipment (3,484) (4,038) (9,670)
Proceeds from sales of property,
plant and equipment -- 3,034 68
---------------------------------------------------------
Proceeds from sales of assets held
for sale 1,552 -- --
---------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,932) (1,004) (9,602)
FINANCING ACTIVITIES Proceeds from revolving lines of
credit and long-term debt 83,644 10,765 12,664
Less capital lease obligations incurred -- -- (664)
---------------------------------------------------------
Cash proceeds from borrowings 83,644 10,765 12,000
Principal payments on revolving
lines of credit, long-term debt
and capital lease obligations (86,191) (15,383) (3,066)
Cash dividends paid -- (245) (1,717)
---------------------------------------------------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (2,547) (4,863) 7,217
---------------------------------------------------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,062 (769) (764)
Cash and cash equivalents at
beginning of period 353 1,122 1,886
---------------------------------------------------------
Cash and cash equivalents at end
of period $ 1,415 $ 353 $ 1,122
=========================================================
</TABLE>
See accompanying notes
10 Thomaston Mills
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Thomaston Mills, Inc. and Subsidiary, (the "Company") manufactures and
markets home furnishing fabrics including sheets, pillowcases,
comforters and related accessories as well as fabrics which are sold to
other manufacturers of home furnishings. The Company also dyes and
finishes fabric for casual and career apparel which is marketed to
clothing manufacturers. These products are marketed both domestically
and internationally.
MANAGEMENT PLANS
The Company reported a net loss of $14,642,000 for the fiscal year
ended July 1, 2000 which includes a loss of $3,971,000 relating to the
denim and industrial yarn operations which were discontinued in
1999. This compares to a net loss of $41,770,000 and $11,529,000 in the
fiscal years ending July 3, 1999 and June 27, 1998, which include
losses of $24,469,000 and $2,728,000, respectively, relating to the
denim and industrial yarn operations.
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 are believed to present the best future profitability and growth
potential. As a result of completing the assessment of various
strategic alternatives, the Company concluded that discontinuing the
Company's denim and industrial yarn operations was in the best interest
of the Company.
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 has completed a personnel and
operational realignment of these businesses to improve their future
profit margins.
As a result of these actions, the Company increased its gross
profit from continuing operations to $13,620,000 for the fiscal year
ending July 1, 2000 as compared to $2,093,000 and $6,716,000 for the
fiscal years ending July 3, 1999 and June 27, 1998, respectively.
Additionally, the Company reduced its selling, general and
administrative expenses from continuing operations to $15,065,000 for
fiscal year ending July 1, 2000 as compared to $16,491,000 and
$15,577,000 for the fiscal years ending July 3, 1999 and June 27, 1998,
respectively. The Company believes improvements in gross profit along
with reductions in selling, general and administrative expenses may
occur from continued improvement in plant productivity and capacity
utilization as well as continued cost reductions.
The Company also believes reduction of debt with proceeds from
the sale of assets held for sale along with more favorable terms for
its outstanding borrowings can reduce future interest expense. During
the year ending July 1, 2000, the Company sold $1,552,000 of assets
held for sale and replaced a portion of its outstanding borrowings with
a new promissory note with a lower effective interest rate. The Company
believes these actions will assist in reducing interest expense in
future years. The Company continues to actively market its assets held
for sale and to seek more favorable terms for its outstanding
borrowings.
The Company believes that the initiatives discussed above will
result in improved margins and future profitability; however, such
plans require management to make estimates and assumptions regarding
future operations. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiary. All significant intercompany accounts and
transactions have been eliminated.
CASH EQUIVALENTS
The Company defines cash equivalents as all highly liquid investments
with a maturity of three months or less when purchased.
RESTRICTED CASH
Restricted cash represents funds held on deposit with a bank pursuant
to a debt agreement. These amounts, aggregating $2,045,000 at July
3, 1999, are classified as "other assets" for financial statement
purposes, and on July 27, 1999 were used to repay outstanding
borrowings. There was no restricted cash at July 1, 2000.
ACCOUNTS RECEIVABLE
The Company manufactures and sells textile products to companies in
diversified industries. The Company performs periodic credit
evaluations of its customers' financial condition and generally does
not require collateral. Receivables generally are due within 45 days.
INVENTORIES
Inventories are stated at the lower of cost or market. With the
exception of certain supplies, which are valued at the first-in,
first-out (FIFO) method, inventory cost is determined using the
last-in, first-out (LIFO) method. The Company uses the LIFO method of
inventory valuation because it results in a better matching of current
costs and revenues.
Thomaston Mills 11
<PAGE> 11
ASSETS HELD FOR SALE
Assets held for sale represent real estate and equipment that the
Company has decided to dispose of. These assets are recorded at the
lower of cost or estimated net realizable value as required by
Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" or Accounting Principles Board Opinion, (APB) No. 30,
"Reporting the Results of Operations Discontinued Events and
Extraordinary Items," as appropriate.
OTHER ASSETS
Other assets include the costs, incurred during the application
development phase of computer software developed and obtained for
internal use, that were capitalized in accordance with SOP 98-1
"Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use."
COTTON PURCHASE CONTRACTS
The Company's primary raw material is cotton. Cotton is traded on
established markets and periodically experiences price fluctuations. In
order to assure a continuous supply of cotton, the Company enters into
cotton purchase contracts for several months in advance of delivery
that 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). To the extent prices are sometimes
fixed in advance of shipment, the Company may benefit from its cotton
purchase contracts to the extent prices thereafter rise, or incur
increased cost to the extent prices thereafter fall. Any benefit or
additional costs incurred as a result of these contracts are deferred
and subsequently recognized in operations as cost of goods sold in the
same period the products are sold to its customers.
REVENUE RECOGNITION
In general, the Company recognizes revenue on product sales when the
units are shipped.
NET LOSS PER SHARE
Basic and diluted net loss per share is computed by dividing net loss
by the weighted-average number of shares outstanding. Common equivalent
shares for outstanding options and warrants of 1,438,372, 880,503, and
647,221 for 2000, 1999, and 1998, respectively, were not included in
the computation of net loss per share because there was a net loss
and/or the exercise price of the options was greater than the average
market price of the common shares and therefore, the effect would be
antidilutive.
USE OF ESTIMATES
The preparation of the financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ significantly from those estimates.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued SFAS No. 133,
"Accounting for Derivative Instruments and for Hedging Activities."
SFAS No. 133, which is effective for all fiscal quarters for all fiscal
years beginning after June 15, 2000, will provide a comprehensive
standard for the recognition and measurement of derivatives and hedging
activities. SFAS No. 133 requires all derivatives to be recorded on the
balance sheet at fair value and establishes "special accounting" for
the different types of hedges. Though the accounting treatment and
criteria for each type of hedge is unique, they all result in
recognizing offsetting changes in value or cash flows of both the hedge
and the hedged item in earnings in the same period. Changes in the fair
value of derivatives that do not meet the hedge criteria are included
in earnings in the same period of the change. The Company plans to
adopt SFAS No. 133 in the first quarter of fiscal year 2001. The
adoption of SFAS No. 133 is not anticipated to have a significant
impact on the Company's consolidated financial statements.
STOCK-BASED COMPENSATION PLANS
The Company has elected to follow APB No. 25, "Accounting for Stock
Issued to Employees" and related interpretations, in accounting for its
employee stock options and adopted the disclosure-only provisions of
SFAS No. 123, "Accounting for Stock Based Compensation" (SFAS 123). The
Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the
date of grant and, accordingly, recognizes no compensation expense for
the stock option grants.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated on the basis of cost. The
Company provides depreciation for financial reporting over the
estimated useful lives of fixed assets principally using the
straight-line method. The range of useful lives of buildings,
improvements and boilers are 15 - 39 years and production machinery,
equipment and fixtures are 3 - 11 years.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash
equivalents, trade accounts receivable, trade accounts payable,
revolving credit and long-term debt. These financial instruments are
stated at cost which approximates fair value.
12 Thomaston Mills
<PAGE> 12
RECLASSIFICATIONS
Certain reclassifications were made to the 1999 consolidated financial
statements in order to conform to the 2000 presentation.
NOTE 2 DISCONTINUED OPERATIONS
In June 1999, the Company made the decision to discontinue the denim
and industrial yarn operations, which had been unprofitable in recent
years. These operations have been treated as discontinued operations in
the July 1, 2000 and prior consolidated financial statements.
The pre-tax loss on the disposal of these operations is
$3,971,000 during the year ended July 1, 2000. This loss provides for
the additional write-down of assets held for sale and the stand-by
costs associated with the assets held for sale. The Company recorded
this additional write-down as a result of obtaining more recent
valuation information during the fourth quarter of 2000. A valuation
allowance has been established to offset any estimated tax benefits
resulting from these losses. Management closed these operations on or
before September 1, 1999.
For the year ended July 3, 1999, the pre-tax loss on the
disposal of these operations was $12,668,000 which included
approximately $3,216,000 for operating results through the expected
date of closing. This loss provided for the write-down of assets
(consisting principally of trade accounts receivable, inventory and
property, plant and equipment) to their net realizable values and
accruals for anticipated losses and costs (consisting principally of
losses on cotton contracts and severance expenses). A valuation
allowance has been established to offset the estimated tax benefits.
Discontinued operations include management's best estimates of
the amounts expected to be realized from the assets. The amounts the
Company will ultimately realize could differ materially in the near
term from the amounts assumed in arriving at the loss on disposal.
The results of operations for the denim and industrial yarn
business have been classified as loss from discontinued operations as
follows (in thousands):
<TABLE>
<CAPTION>
FIFTY-TWO WEEK FIFTY-THREE WEEK FIFTY-TWO WEEK
YEAR ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED
JULY 1, 2000 JULY 3, 1999 JUNE 27, 1998
---------------------------------------------------
<S> <C> <C> <C>
Revenues $ -- $ 48,550 $ 81,416
Cost of sales -- 55,040 81,077
---------------------------------------------------
Gross profit (loss) -- (6,490) 339
Other expenses, net -- 5,311 4,564
---------------------------------------------------
Loss before income tax benefit -- (11,801) (4,225)
Income tax (benefit) -- -- (1,497)
---------------------------------------------------
Loss from discontinued operations $ -- $(11,801) $ (2,728)
===================================================
</TABLE>
The assets of the discontinued operations are as follows (in
thousands):
<TABLE>
<CAPTION>
JULY 1, 2000 JULY 3, 1999
------------------------------
<S> <C> <C>
Trade accounts receivable $ 243 $ 8,195
Inventories 11 9,022
Assets held for sale 4,476 9,554
------------------------------
$ 4,730 $ 26,771
==============================
</TABLE>
NOTE 3 INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
JULY 1, 2000 JULY 3, 1999
------------------------------
<S> <C> <C>
Raw materials and supplies $ 3,936 $ 5,304
Work in process 18,946 24,245
Finished goods 21,301 19,813
LIFO reserve (6,947) (8,991)
------------------------------
$ 37,236 $ 40,371
==============================
</TABLE>
Thomaston Mills 13
<PAGE> 13
During 2000 and 1999, the Company recorded a decrement in the LIFO
reserve as a result of a reduction in inventory quantities and change
in product mix. The effect of this decrement was to decrease the net
loss from continuing operations by $911,000 and $3,149,000, in 2000 and
1999 respectively.
NOTE 4 LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
JULY 1, JULY 3,
2000 1999
-------------------------
<S> <C> <C>
Revolving credit agreement advances are payable on
July 27, 2004 with interest at the Reference Rate plus 1%
or the Euro dollar rate plus 3.25% $ 34,525 $ 41,308
Tranche A term loan payable in monthly payments of
$333 through July 27, 2004 with interest at the Reference
Rate plus 1.75% or the Euro dollar rate plus 3.75% 11,814 --
Promissory note payable in monthly payments of $103
beginning July 1, 2000 through May 31, 2020 with interest
payable at the prime rate plus 1.5% 9,991 --
Term loan payable in full on July 27, 2004 and bears interest
accrued at a rate of 20% of which the Euro dollar rate
plus 3.5% or the Base Rate plus 1.5% is payable monthly
and the remainder is payable at maturity 7,065 --
Tranche B term loan payable on July 27, 2004 and bears
interest at 18.5% of which 15% is payable monthly
and 3.5% is payable upon maturity 5,153 --
Industrial revenue bonds payable with floating
interest rates ranging up to 65% of the prime
interest rate, collateralized -- 19,388
Senior note payable in nine annual principal payments
of $1,667 beginning December 16, 1996 with interest
payments due semi-annually at a rate of 7.94% -- 10,000
-------------------------
68,548 70,696
Less amounts due within one year 4,147 4,000
Less revolving credit agreement 34,525 41,308
-------------------------
$ 29,876 $ 25,388
=========================
</TABLE>
On July 27, 1999, the Company entered into a Loan and Security
Agreement (the Loan Agreement) which provides for borrowings under a
Tranche A term loan payable, Tranche B term loan payable and revolving
advances.
Revolving advances are limited to the lesser of $70,000,000 or
a specified percentage of certain accounts receivable and inventory as
defined in the Loan Agreement. At July 1, 2000, $34,525,000 was
outstanding and $1,602,000 was available for borrowing under the
revolving advances provisions. The revolving advances bear interest at
the Reference Rate plus 1% or the Euro dollar rate plus 3.25%. The
revolving advances are payable on July 27, 2004 and provide for an
early termination penalty as specified in the Loan Agreement. The
revolving advances are reduced by collections made through a lockbox
arrangement required under the terms and conditions of the Loan
Agreement.
On July 27, 1999, the Company entered into an Amended and
Restated Credit and Security Agreement (the Credit Agreement) which
reduced the existing borrowings to $15,000,000. Interest accrued at a
rate of 15% increasing at the rate of 1% per month to a rate of 20%
effective January 1, 2000. Interest is payable at the Euro dollar rate
plus 3.5% or the Base Rate plus 1.5%. The difference in the interest
accrued and the interest paid is added to the balance of the
borrowings. Borrowings under the Credit Agreement are due July 27,
2004, unless repaid prior to that date. In connection with the Credit
Agreement, the Company issued to the lenders warrants to purchase 10%
of the fully diluted Class A and Class B common shares (approximately
742,000 shares at July 27, 1999) as defined, for nominal consideration.
The warrants are exercisable after December 31, 1999 through
14 Thomaston Mills
<PAGE> 14
December 31, 2004. The value assigned to the warrants, $1,862,000, is
based upon their estimated fair value which was determined using
valuation models.
On May 31, 2000, the Company entered into a Promissory Note
with a bank in the amount of $10,000,000. Interest is paid monthly at a
rate equal to the Prime Rate plus 1.5%. Borrowings under the Promissory
Note are payable monthly beginning July 1, 2000 thru May 31, 2020,
unless repaid prior to that date.
Borrowings under the Loan Agreement, Credit Agreement and
Promissory Note are secured by all assets and properties of the
Company. The Loan Agreement, the Credit Agreement, and the Promissory
Note contain various restrictions relating to, among other things,
maintaining a certain level of tangible net worth, a minimum current
ratio, a minimum debt to equity ratio, attainment of certain amounts of
earnings before interest, taxes, depreciation and amortization and
restrictions on capital expenditures.
On September 12, 2000, the Company obtained waivers for
certain financial covenants as to which the Company was not in
compliance as of May 31, 2000 and July 1, 2000. On September 12, 2000,
the Company also obtained an amendment that established certain
financial covenants covering the period ending June 30, 2001.
Maturities of long term debt during the next five years,
excluding the revolving credit agreement, are $4,147,000 in 2001,
$4,164,000 in 2002, $3,997,000 in 2003, $204,000 in 2004, $12,444,000
in 2005, and $9,067,000 thereafter.
Cash payments for interest were $7,205,000, $6,655,000, and
$5,122,000 in 2000, 1999, and 1998, respectively. Interest capitalized
was $130,000 in 2000, $0 in 1999, and $0 in 1998, respectively.
The difference between amounts paid for interest expense and
the stated interest rate on certain debt instruments is added to the
outstanding debt. This amount was $1,376,000 at July 1, 2000. There
were no such amounts included in outstanding debt at July 3, 1999.
The fair value of the Company's long term debt is estimated to
approximate its carrying amount based on the variable nature of the
Company's interest rates.
NOTE 5 SHAREHOLDERS' EQUITY
PREFERRED STOCK
There are 600,000 authorized shares of Preferred Stock ($100 par
value), none of which were outstanding at July 1,2000.
COMMON STOCK
The Class A Common Stock does not have voting rights except to
the extent provided by law. The Class B Common Stock has full voting
rights. Each share of Class A Common Stock is entitled to dividends at
least equal to the per share dividends declared on the Class B Common
Stock.
STOCK OPTIONS
The Company currently has three stock option plans which
provide, at July 1, 2000, for the issuance of options to acquire
713,988 shares of Class A Common Stock and 319,240 shares of Class B
Common Stock. Options awarded under these plans are granted at market
value on the date of grant and generally vest at a rate of 20% per
year.
The Company applies APB 25 and related interpretations in
accounting for its employee stock option plans. Accordingly, no
compensation expense has been recognized for these stock option plans.
If compensation expense for the stock option plans had been determined
based on the fair value at the grant dates for awards under the plans,
consistent with the alternative method set forth under SFAS 123, the
Company's net (loss), basic and diluted net (loss) per share would have
been as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 2000 1999 1998
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net (loss)
As reported $(14,642) $(41,770) $(11,529)
Pro forma $(14,646) $(42,158) $(11,702)
Basic and diluted net (loss) per share
As reported $ (2.24) $ (6.39) $ (1.76)
Pro forma $ (2.24) $ (6.45) $ (1.79)
</TABLE>
The fair value for these options, in accordance with SFAS 123,
was estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted-average assumptions for 2000,
1999 and 1998: risk-free interest rates of 6.50%, 5.69%, and 5.38%; a
dividend yield of 0.00%, 1.06% and 3.00%, volatility factors of the
expected market price of the Company's Class A Common Stock of 0.39,
0.38 and 0.35; and Class B Common Stock of 0.00,0.00 and 0.33; and a
weighted average expected life of the options of five years.
The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options which have no vesting
restrictions and which are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions,
including the expected stock price volatility. Because the Company's
Thomaston Mills 15
<PAGE> 15
employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock
options.
The effects of applying SFAS 123 in the above pro forma
disclosure may not be indicative of future results.
A summary of the Company's stock option activity and related
information follows:
<TABLE>
<CAPTION>
FIFTY-THREE WEEK FIFTY-TWO WEEK FIFTY-TWO WEEK
PERIOD ENDED PERIOD ENDED PERIOD ENDED
JULY 1, 2000 JULY 3, 1999 JUNE 27, 1998
---------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stock options
outstanding at
beginning of year 853,090 $ 12.78 906,840 $ 12.74 610,620 $ 14.98
Options granted 83,500 1.72 5,000 4.15 343,420 8.59
Options exercised -- -- -- -- (50) 8.50
Options expired (16,520) 9.37 -- -- (4,000) 6.25
Options forfeited (152,790) 11.28 (58,750) 11.39 (43,150) 12.07
---------------------------------------------------------------------------------------
Stock options
outstanding at
end of year 767,280 $ 11.94 853,090 $ 12.78 906,840 $ 12.74
=======================================================================================
Exercisable at end
of year 613,774 $ 13.32 619,719 $ 14.10 485,534 $ 14.41
=======================================================================================
Weighted-average
fair value of options
granted during the year $ 0.77 $ 1.59 $ 2.51
======== ======== ========
</TABLE>
The following table summarizes information about stock options at July
1, 2000:
<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS EXERCISABLE STOCK OPTIONS
------------------------------------------------------------------ -----------------------------
WEIGHTED-AVERAGE WEIGHTED-
RANGE OF REMAINING WEIGHTED-AVERAGE AVERAGE
EXERCISE PRICES SHARES CONTRACTUAL LIFE EXERCISE PRICE SHARES EXERCISE PRICE
------------------------------------------------------------------ -----------------------------
<S> <C> <C> <C> <C> <C>
$16.00 16,000 2.13 years $ 16.00 16,000 $ 16.00
$17.25 to $17.88 264,000 4.12 years $ 17.53 264,000 $ 17.53
$13.25 to $13.63 128,400 5.18 years $ 13.35 128,400 $ 13.35
$10.50 21,660 6.90 years $ 10.50 17,520 $ 10.50
$8.50 to $9.00 239,220 7.32 years $ 8.67 145,854 $ 8.67
$ 8.50 6,000 7.83 years $ 8.50 3,600 $ 8.50
$ 7.50 8,000 7.92 years $ 7.50 4,800 $ 7.50
$ 4.25 2,000 8.17 years $ 4.25 800 $ 4.25
$ 3.25 500 8.28 years $ 3.25 200 $ 3.25
$ 1.22 5,000 9.59 years $ 1.22 2,000 $ 1.22
$ 1.75 76,500 9.63 years $ 1.75 30,600 $ 1.75
</TABLE>
NOTE 6 INCOME TAXES
Income tax expense (benefit) from continuing and discontinued
operations consisted of the following (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
--------------------------------------------
<S> <C> <C> <C>
Federal $ -- $ (533) $(2,042)
State -- -- (176)
Deferred (5,514) (17,817) (4,112)
Change in valuation reserve 5,921 14,811 --
--------------------------------------------
$ 407 $ (3,539) $(6,330)
============================================
</TABLE>
16 Thomaston Mills
<PAGE> 16
Significant components of the Company's deferred income tax liabilities
and assets were as follows (in thousands):
<TABLE>
<CAPTION>
JULY 1, JULY 3,
2000 1999
---------------------------
<S> <C> <C>
Deferred income tax liabilities:
Property, plant and equipment $ 4,565 $ 5,109
Inventory 446 446
Employee and retiree benefits 551 254
Other 26 67
---------------------------
Total deferred income tax liabilities 5,588 5,876
Deferred income tax assets:
Employee and retiree benefits 1,045 1,379
Alternative minimum tax 284 284
Inventory 717 668
Reserve for discontinued operations -- 2,158
Operating loss carryforward 21,014 14,866
Bad debt allowances 242 195
Property plant and equipment 5,176 3,764
Other 551 489
---------------------------
Total deferred income tax assets 29,029 23,803
---------------------------
Net deferred income tax assets before valuation reserve 23,441 17,297
Valuation reserve (20,732) (14,811)
---------------------------
Net deferred income tax asset $ 2,709 $ 3,116
===========================
</TABLE>
At July 1, 2000 the Company had net operating loss carryforwards
("NOL's") of approximately $53,864,000 for income tax purposes. If not
utilized, $8,700,000 of such carryforwards will begin to expire in the
year 2013, while $45,164,000 of such carryforwards will begin to expire
in the year 2019.
The reasons for the differences between total income tax
expense (benefit) and the amount computed by applying the statutory
Federal income tax rate to (loss) before income taxes were as follows
(in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
----------------------------------------------
<S> <C> <C> <C>
Benefit at statutory rates $ (4,840) $(15,405) $ (6,072)
State income tax benefit, net of
Federal tax benefit (483) (2,321) (371)
Change in valuation reserve 5,921 14,811 --
Adjustment of estimated
tax liabilities for prior years -- (533) 157
Other items (191) (91) (44)
----------------------------------------------
$ 407 $ (3,539) $ (6,330)
==============================================
</TABLE>
Cash payments for income taxes were $34,000, $56,000 and $13,000 in
2000, 1999 and 1998, respectively. Income tax refunds were
$0, $3,316,000 and $2,402,000 in 2000, 1999 and 1998, respectively.
NOTE 7 PENSION PLANS
Thomaston Mills, Inc. has noncontributory defined benefit pension plans
covering substantially all employees. Benefits are based on the
employee's average earnings for the last five full calendar years of
employment for Pension Plan No. 1. For Pension Plan No. 2, benefits are
based on years of service. The Company's funding policy is to
contribute annually such amounts as are necessary to provide assets
sufficient to meet the benefits to be paid to the plans' members and to
keep the plans actuarially sound. Contributions are intended to provide
not only for benefits attributed to service to date but also for
benefits expected to be earned in the future.
The Company offers a limited number of postretirement
benefits, primarily health care, to early retirees who have satisfied
certain minimum service requirements. Statement of Financial Accounting
Standards No. 106, which requires accrual accounting for postretirement
benefits, was adopted in 1993 and the Company has elected to recognize
the transition obligation of such adoption over a period of twenty
years.
Thomaston Mills 17
<PAGE> 17
Summarized information on the Company's pension and other
postretirement benefits is as follows (in thousands):
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
2000 1999 2000 1999
--------------------------------------------------------
<S> <C> <C> <C> <C>
RECONCILIATION OF BENEFIT OBLIGATION:
Net benefit obligation at beginning of year $ 34,535 $ 37,100 $ 1,896 $ 1,739
Service cost 564 885 180 137
Interest cost 2,630 2,589 161 127
Plan participants' contributions -- -- 202 130
Actuarial (gain) (2,073) (3,638) (4) (34)
Benefits paid (3,128) (2,411) (443) (203)
--------------------------------------------------------
Net benefit obligation at end of year $ 32,528 $ 34,535 $ 1,992 $ 1,896
========================================================
RECONCILIATION OF FAIR VALUE OF PLAN ASSETS:
Fair value of plan assets at beginning of year $ 41,608 $ 41,065
Actual return on plan assets 3,712 2,621
Employer contributions 467 333
Gross benefits paid (3,128) (2,411)
------------------------
Fair value of plan assets at end of year $ 42,659 $ 41,608
========================
FUNDED STATUS
Funded status at end of year 10,131 7,073 (1,992) (1,896)
Unrecognized net actuarial gain (11,041) (9,030) (1,016) (1,371)
Unamortized prior service cost 2,093 1,923 -- --
Unrecognized net transition obligation 4 26 1,540 1,850
--------------------------------------------------------
Net amount recognized at end of year $ 1,187 $ (8) $ (1,468) $ (1,417)
========================================================
</TABLE>
The amounts recognized in the consolidated balance sheets consist of
(in thousands):
<TABLE>
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
--------------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------
<S> <C> <C> <C> <C>
Prepaid benefit cost $ 2,645 $ 2,409 $ -- $ --
Accrued benefit cost (1,458) (2,417) (1,468) (1,417)
--------------------------------------------------------
Net amount recognized at end of year $ 1,187 $ (8) $ (1,468) $ (1,417)
========================================================
<CAPTION>
OTHER POSTRETIREMENT
PENSION BENEFITS BENEFITS
--------------------------------------------------------
2000 1999 2000 1999
--------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted-average assumptions as of June 30:
Discount rate 8.25% 7.75% 8.25% 7.75%
Expected return on plan assets 8.50% 8.50% -- --
Rate of compensation increase 3.00% 3.00% 3.00% 3.00%
Health care cost trend on covered charges -- -- 4.75% 4.75%
</TABLE>
18 Thomaston Mills
<PAGE> 18
The amounts shown below represent the components of the net periodic
benefit (income) cost (in thousands):
<TABLE>
<CAPTION>
PENSION BENEFITS
2000 1999 1998
--------------------------------------------
<S> <C> <C> <C>
Service cost $ 564 $ 885 $ 791
Interest cost 2,630 2,589 2,644
Expected return on plan assets (3,388) (3,422) (3,003)
Amortization of unrecognized amounts
Transition (asset) (14) (2) (2)
Prior service cost 276 241 241
Actuarial (gain) (277) (200) (197)
--------------------------------------------
Benefit (income) cost $ (209) $ 91 $ 474
============================================
<CAPTION>
OTHER POSTRETIREMENT BENEFITS
2000 1999 1998
--------------------------------------------
<S> <C> <C> <C>
Service cost $ 180 $ 137 $ 137
Interest cost 161 127 158
Amortization of unrecognized amounts
Transition liability 132 142 142
Actuarial (gain) (126) (79) (62)
Curtailment charge
Transition obligation 178 -- --
Reduction in obligation (197) -- --
--------------------------------------------
Benefit cost $ 328 $ 327 $ 375
============================================
</TABLE>
The assumed health care cost trend rate has a significant effect on the
amounts reported. A one percentage point change in the assumed health
care cost trend rate would have the following effects:
<TABLE>
<CAPTION>
2000
------
<S> <C>
Effect of a one percentage point increase in assumed
health care cost trend:
On total service and interest cost components $ 36
On postretirement benefit obligation 173
Effect of one percentage point decrease in assumed
health care trend:
On total service and interest cost components (32)
On postretirement benefit obligation (153)
</TABLE>
Substantially all of the plans' assets are invested in corporate and
governmental bonds, common stocks, commingled trust investment funds
and temporary investments. Assets of the plans included approximately
$129,000 and $257,000 of Thomaston Mills, Inc. Class A Common Stock and
Class B Common Stock at July 1, 2000 and July 3, 1999, respectively.
The plans held 120,166 shares of Thomaston Mills, Inc. Class A Common
Stock and Class B Common Stock at July 1, 2000. These shares earned no
dividends during the year.
NOTE 8 COMMITMENTS
The Company leases building facilities under an operating lease. The
lease payments under the lease increase periodically as stipulated in
the lease agreement. At July 1, 2000, future minimum lease payments for
the operating lease are $662,000 in 2001; $680,000 in 2002; $680,000 in
2003, $680,000 in 2004, $680,000 in 2005 and $4,003,000 in total
thereafter.
Thomaston Mills 19
<PAGE> 19
NOTE 9 SEGMENT INFORMATION
The Company has two reportable segments in its continuing operations:
Consumer Products and Apparel Fabrics. Each reportable segment is
organized around product similarities. The Consumer Products segment
manufactures and sells a complete line of muslin, percale, and premium
threadcount products for the bedroom, including fashion-coordinated
bedding sets and comforters marketed under the Thomaston label, and
offers home furnishing fabrics for sale to other manufacturers of home
furnishings. The Apparel Fabrics line is directed toward dyeing and
finishing heavier fabrics such as twill and other value-added fabrics.
The profit performance measure for the Company's segments is
defined as Internal EBIT (earnings before interest and taxes). The
aggregate of Internal EBIT for the reportable segments differs from the
Company's consolidated earnings before interest and taxes by costs that
are deemed to be non-operating in nature. Allocations of corporate and
administrative expenses are used in the determination of segment profit
performance.
<TABLE>
<CAPTION>
NET SALES-EXTERNAL CUSTOMERS PROFIT PERFORMANCE
2000 1999 1998 2000 1999 1998
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reportable segments:
Consumer products $112,074 $107,032 $130,050 $ (1,712) $ (9,540) $ (6,489)
Apparel fabrics 55,039 61,321 69,264 267 (4,858) (2,372)
-------------------------------------------------------------------------------------
Segment total $167,113 $168,353 $199,314 (1,445) (14,398) (8,861)
======================================
Interest 8,813 7,366 5,147
Other non-segment (income)
expense 6 (924) (374)
----------------------------------------
Consolidated loss before
taxes from continuing
operations $(10,264) $(20,840) $(13,634)
========================================
<CAPTION>
CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION
2000 1999 1998 2000 1999 1998
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reportable segments:
Consumer products $ 2,978 $ 2,586 $ 6,202 $ 7,413 $ 10,384 $ 7,169
Apparel fabrics 506 598 1,458 3,265 3,014 5,003
Discontinued operations -- 854 2,010 -- 3,310 4,706
-------------------------------------------------------------------------------------
Total $ 3,484 $ 4,038 $ 9,670 $ 10,678 $ 16,708 $ 16,878
=====================================================================================
</TABLE>
ASSETS USED IN PERFORMANCE MEASUREMENT
<TABLE>
<CAPTION>
2000 1999
------------------------
<S> <C> <C>
Reportable segments:
Consumer products $ 82,367 $ 79,649
Apparel fabrics 29,024 29,648
------------------------
Assets in performance measurement 111,391 109,297
Assets not in segment measurements:
Other operating assets 15,290 12,353
Assets of discontinued operations 4,730 26,771
------------------------
Total Consolidated Assets $131,411 $148,421
========================
</TABLE>
No single customer's net sales exceeded 10% of the Company's
consolidated net sales in 2000. Net sales to one customer were 11% of
the Company's consolidated net sales in 1999, inclusive of sales from
both continuing and discontinued operations. Net sales to a single
customer in fiscal year 1998 did not exceed 10% of consolidated net
sales. Substantially all of the Company's sales were to domestic
customers and all assets are domestically based for the period
presented.
20 Thomaston Mills
<PAGE> 20
NOTE 10 QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Net adjustments made in the fourth quarter of 2000, excluding the
discontinued operations increased the net loss by approximately
$757,000 ($0.12 per share) and in the fourth quarter of 1999 increased
the net loss by approximately $1,060,000 ($0.16 per share). The 2000
and 1999 adjustments related primarily to LIFO inventory quantities at
year end being different from original projections and changes in the
estimates of certain accruals.
Adjustments made in the fourth quarter of 2000 related to
discontinued operations increased the net loss by $3,200,000 ($0.49 per
share). This adjustment reduced the carrying value of assets held for
sale as a result of obtaining more recent valuation information during
the fourth quarter.
During the fourth quarter of 1999, the Company discontinued
its denim and industrial yarn operations. As a result, the Company
recognized $14,918,000 ($3.55 per share) in the fourth quarter due to
losses on disposal of discontinued operations including losses during
the phase out period. See Note 2 for details.
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Thomaston Mills, Inc.
We have audited the accompanying consolidated balance sheets of
Thomaston Mills, Inc. and Subsidiary as of July 1, 2000 and July 3,
1999, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the
period ended July 1, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Thomaston Mills, Inc. and Subsidiary at July 1, 2000 and July 3,
1999, and the consolidated results of their operations and their cash
for each of the three years in the period ended July 1, 2000, in
conformity with accounting principles generally accepted in the United
States.
Atlanta, Georgia
September 12, 2000 /s/ Ernest & Young LLP
Thomaston Mills 21
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company reported a net loss of $14,642,000 for the fiscal year
ended July 1, 2000 after recording a loss of $3,971,000 relating to
discontinuing the denim and industrial yarn operations. This compares to a net
loss of $41,770,000 and $11,529,000 in the fiscal years ending July 3, 1999 and
June 27, 1998, respectively, which include losses of $24,469,000 and $2,728,000,
respectively, relating to the denim and industrial yarn operations.
In the fourth quarter of fiscal 1999, the Company began a comprehensive
restructuring of its 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 the Company's denim and industrial yarn operations, which
historically had been unprofitable, was in the best interest of the Company.
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 has completed
a personnel and operational realignment of these businesses to improve their
future profit margins.
As a result of these actions, the Company increased its gross profit
from continuing operations to $13,620,000 for the fiscal year ending July 1,
2000 as compared to $2,093,000 and $6,716,000 for the fiscal years ending July
3, 1999 and June 27, 1998, respectively.
Additionally, the Company reduced its selling, general and
administrative expenses from continuing operations to $15,065,000 for the fiscal
year ending July 1, 2000 as compared to $16,491,000 and $15,577,000 for the
fiscal years ending July 3, 1999 and June 27, 1998, respectively. The Company
believes marginal improvements in gross profit along with marginal reductions in
selling, general and administrative expenses may occur from continued
improvement in plant productivity and capacity utilization as well as continued
cost reductions.
The Company also believes the sale of assets held for sale along with
more favorable terms for its outstanding borrowings can reduce interest expense.
During the year ending July 1, 2000, the Company sold $1,552,000 of assets held
for sale and replaced a portion of its outstanding borrowings with a new
promissory note with a lower effective interest rate. The Company believes that
these actions will assist in reducing interest expense in future years. The
Company continues to actively market its assets held for sale and to seek more
favorable terms for its outstanding borrowings.
RESULTS OF OPERATIONS
FISCAL YEAR 2000 COMPARED TO 1999
In the fourth quarter of 1999, Thomaston Mills made the decision to discontinue
the denim and industrial yarn operations. These operations had been unprofitable
in recent years and management believed they offered limited upside potential.
As a result of these actions, the Company reported a loss from discontinued
operations of $3,971,000 in fiscal year 2000 (52 weeks) and $24,469,000 in
fiscal year 1999 (53 weeks). The loss from discontinued operations in fiscal
year 2000 was the result of an additional write-down of assets held for sale and
the stand-by costs associated with the assets held for sale. The loss from
discontinued operations in fiscal year 1999 included loss from the discontinued
businesses of $11,801,000 and an estimated loss on disposal of $12,668,000.
Results for the Company's continuing operations reflected sales of
$167,113,000 for 2000 compared to sales of $168,353,000 for 1999. Sales in the
Consumer Products Division increased 4.7% from $107,032,000 in 1999 to
$112,074,000 in 2000. In the Apparel Fabrics area, a shift in customer demand
from heavier, bottom-weight, cotton fabrics to lighter-weight, blended fabrics
resulted in a sales decrease of 10.2% from $61,321,000 in 1999 to $55,039,000 in
2000.
Gross profit as a percentage of sales increased to 8.2% in 2000
compared to 1.2% in 1999. Improved manufacturing capacity utilization, improved
plant productivity and decreases in raw material costs have contributed to the
improvement in gross profit.
Selling, general and administrative expenses decreased from $16,491,000
in 1999 to $15,065,000 in 2000. The Company's realignment of its operations,
which began in the fourth quarter of fiscal year 1999, has resulted in
reductions in certain selling, general and administrative expenses. Improvements
have also been realized in the cost of bringing new product samples to the
market. Interest costs and the amortization of credit agreement fees totaled
$9,500,000 in 2000 compared to $9,389,000 in 1999, due to increased interest
rates and fees associated with the Company's refinancing of its loan agreements.
Other income for 2000 was $681,000, which consisted primarily of sales of
surplus land and equipment.
Although the Company recorded a pre-tax loss from continuing operations
for fiscal year 2000, an income tax expense of $407,000 was also recorded in
2000. This expense is the result of a reduction in the estimated future tax
benefit based on changes in the Company's tax planning strategies. In fiscal
year 1999, the Company recorded an income tax benefit of $3,539,000. This future
anticipated benefit was recorded based on tax planning strategies as to the
realization of the deferred tax benefit. Additional tax benefits have not been
recorded as a result of the Company's operating loss carry forward position.
Loss from continuing operations was $10,671,000, or $1.63 per basic and
diluted share in 2000 and $17,301,000, or $2.65 per basic and diluted share in
1999.
FISCAL YEAR 1999 COMPARED TO 1998
The comparison of fiscal year 1999 (53 weeks) to 1998 (52 weeks) reflects
restatement for discontinued operations.
The Company's aforementioned discontinuation of the denim and
industrial yarn operations resulted in a loss from discontinued operations of
$24,469,000 which included losses from the discontinued businesses of
$11,801,000 and an estimated loss on
22 Thomaston Mills
<PAGE> 22
disposal of $12,668,000. The estimated loss on disposal of these operations
includes approximately $3,216,000 for operating results from the date of the
decision to dispose of the business (June 1999) through the date of disposal.
The loss on disposal also provides for write-down of assets (consisting
principally of trade accounts receivable, inventory and property, plant and
equipment) to their net realizable values and accruals for anticipated losses
and costs (consisting principally of losses on cotton contracts and severance
expenses).
A valuation allowance has been established to offset the estimated tax
benefits on losses from discontinued operations.
Results for the Company's continuing operations reflected sales of
$168,353,000 for 1999 compared to sales of $199,314,000 for 1998. Depressed
market demand for greige goods and finished fabrics sold through the Company's
Consumer Products Division contributed to the sales decline. Sales were also
impacted by the sale in 1998 of the Company's Rattlers Brand Division.
Gross profit as a percentage of sales was 1.2% in 1999 compared to 3.4%
in 1998. Raw material price decreases were more than offset by low manufacturing
capacity utilization as a result of fewer sales and continued efforts to control
inventory.
Selling, general and administrative expenses increased from $15,577,000
in 1998 to $16,491,000 in 1999. Interest costs and the amortization of credit
agreement fees totaled $9,389,000 in 1999 compared to interest costs of
$5,147,000 in 1998, due to increased interest rates and fees associated with the
Company's refinancing of its loan agreements. Other income for 1999 was
$2,947,000 which consisted primarily of sales of surplus land.
The Company recorded an income tax benefit of $3,539,000 in 1999. This
future anticipated benefit was recorded based on tax planning strategies as to
the realization of the deferred tax benefit. Additional tax benefits have not
been recorded as a result of the Company's operating loss carry forward
position. Income tax benefits were recorded in 1998 as the Company had the
ability to carry back substantially all of the income tax loss to prior years.
Loss from continuing operations was $17,301,000,or $2.65 per basic and
diluted share in 1999 and $8,801,000, or $1.34 per basic and diluted share in
1998.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided cash of $5,541,000 for 2000 and $5,098,000 for
1999. Net cash used in investing activities amounted to $1,932,000 in 2000
compared to $1,004,000 in 1999. During 2000 and 1999, capital expenditures were
reduced due to the Company's restructuring of its operations. Financing
activities used cash of $2,547,000 in 2000 and $4,863,000 in 1999 as a result of
net repayments of indebtedness in both years.
On July 27, 1999, the Company entered into a new Loan and Security
Agreement (the Loan Agreement) which provides for borrowing as follows:
- Revolving advances equal to the lesser of $70,000,000 or a specified
percentage of certain accounts receivable and inventory as defined in the Loan
Agreement. At July 1, 2000, $34,525,000 was outstanding and $1,602,000 was
available for borrowing under the revolving advances provisions. The revolving
advances bear interest at the Reference Rate plus 1% or the Euro-dollar Rate
plus 3.25%. The revolving advances are payable on July 27, 2004 and provide for
an early termination penalty as specified in the Loan Agreement. The revolving
advances are reduced by collections made through a lock box arrangement required
under the terms and conditions of the Loan Agreement.
- Tranche A Term Loan of $20,000,000 is payable in monthly installments
of $333,333 beginning August 1, 1999 and bears interest at the Reference Rate
plus 1.75% or the Euro-dollar Rate plus 3.75%.
- Tranche B Term Loan of $5,000,000 is due July 27, 2004 and bears
interest at 18.5%, of which 15% is payable currently and 3.5% per annum is
payable on the maturity date.
Borrowings under this Loan Agreement were used to reduce the existing
Credit and Security Agreement to $15,000,000 as discussed below and to repay the
senior notes payable and industrial revenue bonds.
On July 27, 1999 the Company entered into an Amended and Restated
Credit and Security Agreement (the Credit Agreement) which reduced the existing
borrowings to $15,000,000. Interest is accrued at a rate of 15% increasing at
the rate of 1% per month to a rate of 20% effective January 1, 2000. Interest is
payable at the Euro-dollar Rate plus 3.5% or the Base Rate plus 1.5%. The
difference in the interest accrued and the interest paid is added to the balance
of the borrowings. Borrowings under the Credit Agreement are due July 27, 2004,
unless repaid prior to that date.
On May 31, 2000, the Company entered into a Promissory Note with a bank
in the amount of $10,000,000. Interest is paid monthly at a rate equal to the
Prime Rate plus 1.5%. Borrowings under the Promissory Note are payable monthly
beginning July 1, 2000 thru May 31, 2020, unless repaid prior to that date.
Borrowings under this Promissory Note were used to reduce the amount outstanding
under the Credit Agreement by $9,043,000 and to repay $525,000 of the balance
outstanding under the Loan Agreement.
Borrowings under the Loan Agreement, Credit Agreement and Promissory
Note are secured by all assets and properties of the Company. The Loan
Agreement, the Credit Agreement, and the Promissory Note contain various
restrictions relating to, among other things, maintaining a certain level of
tangible net worth, a minimum current ratio, a minimum debt to equity ratio,
attainment of certain amounts of earnings before interest, taxes, depreciation
and amortization and restrictions on capital expenditures. Capital expenditures
for fiscal year 2001 are not projected to exceed $4,000,000.
Thomaston Mills 23
<PAGE> 23
On September 12, 2000, the Company obtained waivers for certain financial
covenants as to which the Company was not in compliance as of May 31,2000 and
July 1, 2000. On September 12, 2000, the Company also obtained an amendment
that established certain financial covenants covering the period ending
June 30, 2001. The Company believes it will be in compliance with these
financial covenants based on the Company's anticipated performance and the
current market conditions. There can be no assurance that the Company will be
able to comply with these covenants in the future, and if the Company is unable
to comply with these covenants, there can be no assurance that the Company's
creditors will provide any additional waivers or amendments with respect to any
such non-compliance.
A breach of any of the covenants contained in the Company's Loan
Agreement, Credit Agreement or Promissory Note could result in a default or
event of default under the terms of these credit facilities. Upon the occurrence
of an event of default, the Company's lenders would not be obligated to make
additional advances under the credit facility that is in default; would be
entitled to declare all amounts outstanding under the credit facilities in
default, including accrued interest or other obligations, to be immediately due
and payable; would have the rights to block payment on substantially all of the
Company's other long-term debt; would be entitled to proceed against the
collateral granted to them to secure the applicable debt. In these
circumstances, cross defaults could occur making substantially all of the
Company's other long-term debt due, in which event the Company cannot be certain
that its assets would be sufficient to repay in full all of its long-term debt.
Based upon current and anticipated levels of operations, management
anticipates that its cash flow from operations, together with amounts available
under its current borrowings, will be adequate to meet its anticipated cash
requirements in the foreseeable future. In the event that cash flows and
available borrowings are not sufficient to meet future cash requirements, the
Company may be required to seek additional or alternative financing. There can
be no assurances that additional financing would be available or, if available,
offered on terms acceptable to the Company.
WARRANTS TO LENDERS
The Company has issued warrants to its lenders in connection with the Credit
Agreement. The warrants permit the lenders to purchase Class A and Class B
common shares of the Company for nominal consideration. The warrants are
currently exercisable and may be exercised through December 31, 2004. Although
the lenders have not indicated to the Company that they intend to exercise the
warrants, if they elect to exercise all of their warrants, the lenders would
receive an interest equal to 10% of the outstanding equity of the Company in
each class, on a fully diluted basis.
ASSETS HELD FOR SALE
The Company's management intends to utilize the proceeds from the sale of the
assets held for sale to reduce outstanding term loan obligations. Management
believes, based on current appraisals, that $5,628,000 could be realized from
the sale of these assets, including $4,476,000 from the assets related to
discontinued operations. However, actual results could differ significantly from
these estimates.
INVENTORIES
Inventories at July 1, 2000 and July 3, 1999 were $37,236,000 and $40,371,000,
respectively. During 2000, the Company has continued a concentrated effort to
optimize inventory levels and to identify and sell (or allow for future sale)
certain inventory items considered slow-moving or off-quality.
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board has issued SFAS No. 133, "Accounting
for Derivative Instruments and for Hedging Activities." SFAS No. 133, which is
effective for all fiscal quarters for all fiscal years beginning after June 15,
2000, will provide a comprehensive standard for the recognition and
measurement of derivatives and hedging activities. SFAS No. 133 requires all
derivatives to be recorded on the balance sheet at fair value and establishes
"special accounting" for the different types of hedges. Though the accounting
treatment and criteria for each type of hedge is unique, they all result in
recognizing offsetting changes in value or cash flows of both the hedge and the
hedged item in earnings in the same period. Changes in the fair value of
derivatives that do not meet the hedge criteria are included in earnings in the
same period of the change. The Company plans to adopt SFAS No. 133 in the first
quarter of fiscal year 2001. The adoption of SFAS No. 133 is not anticipated to
have a significant impact on the Company's consolidated financial statements.
INTEREST RATE RISK MANAGEMENT
The Company is exposed to changes in interest rates due to its financial
position. Based on the Company's floating rate debt outstanding as of July 1,
2000, a 100 basis point increase in market rates would increase interest
expense and increase net loss before income taxes by approximately $565,000.
The amount was determined by calculating the effect of the hypothetical
interest rate on the Company's floating rate debt.
The fair market value of long-term fixed interest rate debt is also
subject to interest rate risk. Generally, the fair market value of fixed
interest rate debt will increase as interest rates decline and decrease as
interest rates rise. The estimated fair value of the Company's total long-term
fixed-rate debt at July 1, 2000 approximated its carrying value. A hypothetical
100 basis point decrease in the prevailing interest rates would result in an
increase in fair value of total long-term debt by approximately $327,000.
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
24 Thomaston Mills
<PAGE> 24
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. To the extent prices are sometimes fixed in advance of
shipment, the Company may benefit from its cotton purchase contracts to the
extent prices thereafter rise, or incur increased cost to the extent prices
thereafter fall.
INTERNATIONAL TRADE
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 an average of 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.
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 North
American Free Trade Agreement (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 State 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.
YEAR 2000
In 1996, the Company established a task force to address and assess Year 2000
(Y2K) compliance for the Company's computer systems and software applications,
manufacturing facilities and suppliers providing both goods and services. The
Company did not experience any significant malfunctions or errors in its
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, the Company does not expect any significant
impact to its on-going business as a result of the Y2K issue. However, it is
possible that the full impact of the date change, which was of concern due to
computer programs that use two digits instead of four digits to define years,
has not been fully recognized. For example, it is possible that Y2K or similar
issues may occur with billing, payroll, or financial closings at month,
quarterly or year end. The Company believes that any such problems are likely to
be minor and correctable. In addition, the Company could still be negatively
impacted if its customers or suppliers are adversely affected by the Y2K or
similar issues. The Company currently is not aware of any significant Y2K or
similar problems that have arisen for its customers and suppliers.
The Company estimates that it has incurred approximately $450,000 in
cost related to the Y2K project, all of which has been expensed and funded
through operating cash flows.
FORWARD-LOOKING STATEMENTS
Certain of the above statements contained herein under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements express or
implied by such forward-looking statements. Such factors include, among other
things, business conditions, volatility of commodities markets, ability to
control operating costs, developing successful new products and maintaining
effective pricing and promotion of its products. Additionally, there can be no
assurance that the Company (i) will have access to financial capital in the
future or that it can obtain such capital on terms that are favorable to the
Company or otherwise reasonably acceptable to it, or (ii) will be able to
generate profits from, or continue the growth of, the lines of businesses and
operations that the Company has retained subsequent to its restructuring
efforts. A failure by the Company to obtain capital in the future on terms that
are favorable to it or a failure by the Company to generate profits from, or
grow, its remaining business lines may have a material adverse effect on the
Company's business, financial condition or results of operations.
Thomaston Mills 25
<PAGE> 25
DIRECTORS & OFFICERS
DIRECTORS
Thomas D. Adams, Jr., 1976(1)
President, Adams-Harvey and Associates,
Thomaston, Georgia
C. Ronald Barfield, 1989(1)
Partner, Adams, Barfield, Dunaway & Hankinson,
Attorneys, Thomaston, Georgia
Archie H. Davis, 1993(1)
President and Chief Executive Officer
The Savannah Bank, N.A., Savannah, Georgia
H. Stewart Davis, 1981
Executive Vice President of the Company
George H. Hightower, 1945
Formerly Chairman of the Board of the Company, Retired
George H. Hightower, Jr., 1981
Executive Vice President of the Company
Neil H. Hightower, 1980
President and Chief Executive Officer of the Company
Rosser R. Raines, 1993
Formerly Treasurer of the Company, Retired
Dr. Jerry M. Williamson, 1981(1)
President, Gordon College, University System of Georgia,
Barnesville, Georgia
Dom H. Wyant, 1983(1)
Partner, Retired, Jones, Day, Reavis & Pogue, Attorneys,
Atlanta, Georgia
(1) Member of Audit Committee
OFFICERS
Neil H. Hightower, 1966
President and Chief Executive Officer
H. Stewart Davis, 1971
Corporate Executive Vice President and
President - Consumer Products Division
George H. Hightower, Jr., 1977
Corporate Executive Vice President and
President - Apparel Fabrics Division
Robert B. Dale, 1999
Vice President - Consumer Products Sales
James F. Haygood, Jr., 1995
Vice President - Apparel Fabric Sales
Jonathan O. Huff, 1990
Vice President - Apparel Fabric Finishing
William C. James, 1999
Vice President - Consumer Products Manufacturing
and Operations
A. William Ott, 1998
Treasurer and Chief Financial Officer
Daniel B. Tripp, 1991
Vice President - Human Resources and
Public Relations
Ronald W. VanHouten, 1990
Corporate Secretary
Note: Dates after names indicate year first elected as Director or Officer.
The high and low sales prices and cash dividends per share were as follows:
<TABLE>
<CAPTION>
COMMON STOCK PRICES CASH DIVIDENDS PER SHARE
CLASS A CLASS B CLASS A CLASS B
HIGH LOW HIGH LOW
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1999
First Quarter $ 7.00 $ 3.75 $ 6.75 $ 3.75 $ .0325 $ .0375
Second Quarter 5.00 1.88 3.75 1.50 -- --
Third Quarter 4.00 2.00 4.75 2.25 -- --
Fourth Quarter 3.56 2.00 3.56 2.00 -- --
----------------------------------------------------------------------------------------------------------------------------
Fiscal 2000
First Quarter $ 2.63 $ 1.63 $ 2.75 $ 1.50 $ -- $ --
Second Quarter 2.50 1.00 2.38 1.06 -- --
Third Quarter 2.00 1.00 2.00 1.13 -- --
Fourth Quarter 1.75 .88 1.25 1.13 -- --
</TABLE>
26 Thomaston Mills
<PAGE> 26
SHAREHOLDER INFORMATION
MARKET INFORMATION ON COMPANY'S COMMON STOCK
Thomaston Mills Class A Common Stock, is traded on the Nasdaq Small Cap Market
under ticker symbol TMST-A. Thomaston Mills Class B Common Stock, is traded on
the NASDAQ Small Cap Market with the ticker symbol TMST-B. Market makers in
Thomaston Mills stock at the end of the year were as follows:
Knight Secs, LP, Jersey City
Sharpe Capital, Inc., New York
Spear, Leeds & Kellogg/ECN, New York
The Robinson-Humphrey Company, Inc., Atlanta
Wachovia Securities, Inc., Charlotte
DIVIDEND INFORMATION
The Class A Common Stock is entitled to dividends equal to dividends, when
declared, on the Class B Common Stock.
FORM 10-K
A copy of the Company's Form 10-K, as filed with the Securities and Exchange
Commission, will be available in October and will be furnished to shareholders
upon request.
TRANSFER AGENT & DIVIDEND DISBURSING AGENT
First Union National Bank, Corporate Trust Department in Charlotte, NC is the
transfer agent and dividend disbursing agent of Thomaston Mills Common Stock.
Notices regarding change of address, and inquiries regarding lost dividend
checks, lost or stolen stock certificates and transfers of stocks, other than a
purchase and sale which must be handled through a broker, should be addressed to
the First Union National Bank, ATTN: Shareholder Customer Service, 1525 West
W.T. Harris Blvd, 3C3, Charlotte, NC 28288-1153.
APPROXIMATE NUMBER OF SHAREHOLDERS OF RECORD
Class A Common Stock 790
Class B Common Stock 275
ANNUAL MEETING
The annual meeting of the shareholders of the Company will be held at the
Employee Relations Office of the Company, 207 East Gordon Street, Thomaston,
Georgia at 11:00 a.m., Thursday, October 5, 2000.
SHAREHOLDERS INFORMATION CONTACT
Mr. Ronald W. VanHouten, Corporate Secretary
Thomaston Mills, Inc.
P.O. Box 311
Thomaston, Georgia 30286
Phone (706) 647-7131
Fax (706) 646-5094
Internet Address
http://www.thomaston.com
MISSION STATEMENT
THE MANAGEMENT OF THOMASTON MILLS, INC. IS COMMITTED TO THE TEXTILE BUSINESS,
TO OUR CUSTOMERS AND TO OUR EMPLOYEES. TO THIS END, WE HAVE ESTABLISHED A
SET OF TEN KEY OBJECTIVES WHICH WE MUST STRIVE TO ACHIEVE, BOTH AS
INDIVIDUALS AND AS A COMPANY.
- To demonstrate the highest ethical standards in all dealings with our
customers and suppliers.
- To assure that the quality of every product we sell is better than our
customers request.
- To provide a level of service to our customers that allows them to be
competitive and profitable.
- To be fair in our dealings with every employee at all times.
- To provide adequate wages and fringe benefits for Thomaston Mills'
employees.
- To encourage open communications among all our employees at every level
of the organization.
- To insist that every Thomaston Mills employee achieves the high
standards of individual performance necessary to be competitive.
- To be a good corporate citizen in each community where we operate.
- To invest in plant and equipment to keep Thomaston Mills competitive in
our chosen markets.
- To consistently earn a profit so that Thomaston Mills can continue to
fulfill these objectives and be a rewarding investment for the
shareholders of the Company.
Thomaston Mills 27
