Item 1. Business.
Texfi Industries, Inc. ("the Company") was incorporated in Delaware in 1963. The Company manufactures and markets a diverse line of textile and apparel products from a variety of raw materials, including natural and synthetic materials. The Company's offices are located at 5400 Glenwood Avenue, Suite 215, Raleigh, North Carolina 27612, telephone (919) 783-4736.
The Company's operations include three divisions: Texfi Blends, Texfi Narrow Fabrics, and Kingstree Knit Apparel. The following discusses each of the Company's three operating divisions and how they contributed to the Company's consolidated 1995 operating performance.
The Texfi Blends Division is the Company's largest division operating three manufacturing facilities which are located in Rocky Mount and Fayetteville, North Carolina and Jefferson, Georgia and combine to provide 845,000 square feet manufacturing facilities. The division's sales and marketing headquarters are in New York City, with branch offices or agents in other major cities throughout the United States and Europe. The Texfi Blends Division contributed 60% of total Company fiscal 1995 sales by manufacturing products made from textured polyester, flame-retardant polyester, and blends of polyester, rayon, and wool. These products are sold worldwide to the menswear, womenswear and childrenswear apparel, uniform, home furnishings, and export markets.
The Kinsgtree Knit Apparel Division operates 676,000 square feet of manufacturing facilities located in Haw River, North Carolina; Andrews, Kingstree, Lane, and Olanta, South Carolina and Midway, Georgia. It has sales offices in Haw River and Charlotte, North Carolina, as well as agents in major cities throughout the United States. This division offers knit apparel made to customer specifications in basic and fashion colors and a broad range of styles and sizes. In addition to basic T-shirts, products include pocket T's, tank tops, fleece tops, as well as hooded, striped, solid-dyed, print, double-collar/double-sleeve, long-sleeve T's. These products are marketed to the branded private label, promotional and garment dyeing markets as well as direct to retailers, screen printers and distributors. Kingstree Knit Apparel also commission knits, dyes and finishes fleece and jersey fabrics for other apparel manufacturers. By emphasizing quality, quick response, innovation and outstanding customer service, the Company believes this division effectively competes in the fast-paced, fashion-oriented private label apparel business. Kingstree Knit Apparel contributed 28% of the Company's fiscal 1995 sales.
The Texfi Narrow Fabrics Division operates 319,000 square feet of manufacturing facilities in Asheboro and Graham, North Carolina. It maintains a sales office in Asheboro, North Carolina and agents in several United States cities. Texfi Narrow Fabrics contributed 12% of total Company fiscal 1995 sales by manufacturing products from polyester, nylon and rubber which are sold domestically to the intimate apparel, insert apparel, medical and automotive markets.
From its inception through 1984, the Company was engaged in manufacturing fabrics made of textured polyester. The decline in consumer demand for polyester knitwear prompted the Company to terminate its knit fabric manufacturing operations in 1984 and restrict production to finished woven fabrics. From 1986 until 1992, the Company's business strategy was to broaden its customer base primarily through the acquisition of other textile operations. These acquisitions allowed the Company to expand its operations into new products such as yarn, greige woven fabrics, narrow fabrics (primarily elasticized) and knitted apparel fabrics (primarily cotton t-shirts). While the Company was able to diversify its products and increase its revenues as a result of these acquisitions, many of these operations proved to be unprofitable and resulted in substantially increased debt.
During the first quarter of 1995, management decided to discontinue operations at its High Point, North Carolina Highland Yarns ("Highland") facility and its Jefferson, Georgia diaper and corduroy facilities. The Company discontinued operations and sold the fixed assets and inventory related to its Marion, North Carolina greige goods operation during the second fiscal quarter of 1995. These discontinuances and dispositions generated $17.5 million in charges which are recorded as a loss from discontinued operations. Because the Highland assets are recorded at the approximate net value expected to be received from liquidation, management does not anticipate any additional future losses related to these discontinued operations. As of November 3, 1995, the Company held $1.5 million in Highland fixed assets which will be disposed of through orderly liquidation during fiscal 1996.
PRODUCT GROUPS
The Company's manufactures three basic product groups:
* woven finished fabrics for the apparel, home furnishings and export markets; * knitted apparel (primarily T-shirts) for the private label and retail markets * narrow knitted and woven fabrics for the intimate apparel and insert apparel markets, as well as automotive accessories and medical applications;
The approximate percentage of total revenue contributed by each of the Company's product groups is as follows:
1995 1994 1993 ------ ------ ------ Woven finished fabrics 60.4 61.9 60.3 Knitted apparel (primarily t-shirts) 27.9 25.6 28.5 Narrow fabrics 11.7 12.5 11.2 ------ ------ ------ 100.0 100.0 100.0 ====== ====== ======
SEASONALITY
During 1995 and 1994, the Company's business exhibited seasonality, primarily due to temporary plant shutdowns during the Christmas/New Year's holiday season. As a result, sales have been and are expected to be lower during the first quarter of the fiscal year while working capital requirements increase in anticipation of higher second quarter sales. Working capital is comprised chiefly of inventories and accounts receivable. Inventories are reported at the lower of cost or market value with cost being determined primarily by the first-in, first-out method. Market value is based on replacement cost or net realizable value, as appropriate. The majority of accounts receivable are due from certain financial institutions with whom the Company has entered into factoring agreements. The Company may be advanced funds in amounts not to exceed 90% of eligible accounts receivables plus 50% of eligible inventories not to exceed a maximum of $10,000,000. All advances have been netted against total factored receivables to comprise part of working capital.
BACKLOG
At November 3, 1995, the Company had a $57,267,000 backlog of orders believed to be firm, as compared to a $61,030,000 backlog at October 28, 1994. The decrease is attributable to the discontinuance and disposition of previously discussed operations. The comparative backlog for the Company's three ongoing operations actually increased from $43,037,000 as of the end of the 1994 fiscal year. The current backlog of orders is expected to be filled prior to the end of fiscal 1996.
CUSTOMERS
In fiscal 1995, the Company's products were sold to more than 1,000 customers, which were primarily domestic manufacturers of apparel and home furnishings, as well as medical suppliers and retailers. Sales to the 10 largest customers represented approximately 24% of total sales, but no one customer accounted for more than 7% of total sales. The Company does not believe that the loss of any one of its customers would have a material adverse effect on the Company.
MARKETING
The Company's products are sold through a sales force of 29 full-time, salaried account executives and 39 independent, commissioned sales representatives who may sell products of other manufacturers, including some competitors of the Company. The Company maintains sales offices in New York City, as well as in Asheboro, Charlotte, and Haw River, North Carolina. The Company's production is determined in large part by customer contracts which are received by its sales force. As part of its marketing effort, the Company continually works to develop new products and processes and improve existing products and processes, but expenditures for these activities are not financially identifiable.
In order to improve its customer service capabilities, the Company has begun utilizing computerized networks with many of its customers in order to provide "quick response" to customer requirements for more competitive product deliveries. By providing these customers with certain direct inventory information, the customers' inventory requirements can be reduced and their inventory carrying costs lowered accordingly.
COMPETITION
The textile and apparel industry is highly competitive with a large number of domestic and foreign manufacturers, none of which dominates the market for any of the Company's product lines. The Company competes on the basis of styling, price, product performance and customer service.
U.S. producers, including the Company, are significantly affected by competition from foreign manufacturers. Rules under the recently enacted General Agreement on Trade and Tariffs ("GATT") would eliminate restrictions on imports of textiles and apparel after a ten-year transition period. The North American Free Trade Agreement ("NAFTA") between the United States, Canada and Mexico has created the world's largest free-trade zone. The Agreement contains safeguards which were sought by the U.S. textile industry, including a rule of origin requirement that products be processed in one of the three countries in order to benefit from NAFTA. There can be no assurance that either NAFTA or GATT will not adversely affect the Company.
Because of the absence of published information regarding sales of competing products by other manufacturers, some of which are privately owned companies or divisions or subsidiaries of large companies, it is not possible to determine precisely the market shares of the Company and its competitors for the Company's various products.
SOURCES OF RAW MATERIALS
The Company purchases from outside suppliers natural and synthetic fibers, rubber, dyes and chemicals for use in its fabric manufacturing operations. The Company purchases virtually all of its textured polyester yarns from the leading independent domestic supplier of such yarns. Fabrics for its apparel manufacturing operations are supplied by the Company's own fabric manufacturing operations. The Company has not experienced a significant shortage of raw materials and believes that such supplies will continue to be available.
EMPLOYEES
As of November 3, 1995, the Company had approximately 3,200 employees with whom it considers its relationship to be good.
RESEARCH AND DEVELOPMENT
Although the Company pursues improvements in the quality, style and performance of its products, research and development expenditures have not accounted for a material portion of the Company's total operating costs.
GOVERNMENTAL REGULATION
The Company believes that it is in substantial compliance with federal, state and local provisions regulating the release of materials into the environment, or otherwise relating to the protection of the environment.
The existence of groundwater contaminants primarily of a type often found in commonly used industrial solvents was discovered at one of the Company's facilities. This facility has not been operated by the Company since 1980 and has been sold to another party. The State of North Carolina has issued a permit to discharge treated groundwater, and treatment systems have been installed to complete groundwater remediation. The Company's cost to monitor and maintain the treatment system will be approximately $54,000 annually until the site is remediated. In addition, there may be other potential environmental conditions at the site to be addressed, and the remedial plan does not cover these conditions; however, management does not believe that the cost of taking corrective action will have a material adverse effect on the Company's financial condition.
The Company has instituted a corporate policy statement on safety and environmental affairs to ensure that the Company and its divisions comply with federal, state and local regulatory standards relating to safety and environmental pollution controls. Included in this policy is a requirement for periodic compliance audits at each of the Company's facilities. The Company believes that costs to be expended now or in the future to ensure compliance with environmental and safety regulations will not have a material adverse impact on the financial condition of the Company.
SEGMENT INFORMATION
Financial information as to industry segments is contained in Note 13 of the Notes to the Consolidated Financial Statements which is included in Item 8 of this document.
Item 2.
Item 2. Properties.
The following table sets forth the location and general character of the principal operating facilities of the Company, which contain approximately 1,840,000 square feet of floor space. All of these plants are in good operating condition and, except as indicated below, owned by the Company. The plants of the Texfi Blends and Texfi Narrow Fabrics Divisions operate three full eight-hour shifts per workday on a five-, six- or seven-day-per-week basis, depending upon market conditions and customer needs. Due to the nature of the production process for the Company's apparel products, its Kingstree Knit Apparel Division sewing plants operate on a single-eight hour shift, 5 day per week basis whereas its Haw River, North Carolina fabric facility operates shifts similar to the other divsions' fabric manufacturing facilities. The Company believes that its facilities are suitable for their present use and that it has adequate production capacity to support anticipated sales growth for fiscal 1996.
Location of Plant Purpose Square Feet
Rocky Mount, NC Weaving, dyeing and finishing 448,000 of synthetic and blended fabrics
Haw River, NC Knitting, dyeing and finishing of 320,000 cotton and cotton-blended fabrics
Fayetteville, NC Weaving, dyeing and finishing of 218,000 polyester fabrics
Graham, NC Manufacturing of woven narrow 204,000 fabrics (primarily elasticized)
Jefferson, GA Yarn spinning and weaving 179,000
Georgetown, SC Knitted apparel distribution 133,000 center
Asheboro, NC Manufacturing of knitted narrow 115,000 fabrics (primarily elasticized)
Olanta, SC Manufacturing of knitted apparel 73,000
Andrews, SC Manufacturing of knitted apparel 65,000
Midway, GA (1) Manufacturing of knitted apparel 50,000
Lane, SC (1) Manufacturing of knitted apparel 20,000
Kingstree, SC(1) Manufacturing of knitted apparel 15,000
(1) Leased facility
Item 3.
Item 3. Legal Proceedings.
The Company is a party as plaintiff or defendant to various legal actions which arose during the normal course of business. In the opinion of management, final disposition of these actions will not have a material effect on the Company's financial condition and results of operations.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 4A. Executive Officers of the Registrant.
All Positions and Offices with Name Age the Registrant Presently Held
Richard L. Kramer 46 Chairman of the Board of Directors William L. Remley 45 Chief Executive Officer, Vice Chairman of the Board of Directors Andrew J. Parise, Jr. 48 President, Chief Operating Officer Dane L. Vincent 39 Chief Financial Officer, Treasurer Gerald A. Rubinfeld 52 President, Texfi Blends Division Michael A. Miller 49 President, Kingstree Knit Apparel Division Donnie K. Cantrell 46 President, Texfi Narrow Fabrics Division Tim L. Courtney 56 Vice President, Administration Thomas M. Gilreath 53 Corporate Controller, Assistant Secretary Braxton Schell 71 Secretary
Mr. Richard L. Kramer was appointed Chairman of the Board of Directors on November 1, 1994. He had previously served as Vice Chairman of the Board of Directors since May 24, 1994. Mr. Kramer is Chairman of Mentmore Holdings Corporation, Chairman of Sunderland Holdings Corp., Chairman of Republic Properties Corporation, Chairman of CPT Holdings, Inc. and Chairman of Weldotron Corp.
Mr. William L. Remley was appointed Chief Executive Officer and Vice Chairman of the Board of Directors on November 1, 1994. He has served as a Director since May 24, 1994. Mr. Remley is President of Mentmore Holdings Corporation, President of CPT Holdings, Inc., President of Sunderland Industrial Holdings Corp., Director of Republic Properties Corporation and President of Weldotron Corporation.
Mr. Andrew J. Parise, Jr. was appointed President and Chief Operating Officer of the Company on November 1, 1994. He previously served as the Ccmpany's Blends Division President from 1992 to 1995 and the division's Executive Vice President from 1990 to 1992. He has been with the Company in various sales and operations positions since 1977.
Mr. Dane L. Vincent was appointed Chief Financial Officer during December 1995 after previously serving as Vice President of Finance and Treasurer from December 1994. Mr. Vincent joined the Company in 1989 as Financial Accounting Manager after a career in public accounting, where he worked for Ernst & Young and other accounting firms.
Mr. Gerald A. Rubinfeld was appointed President of the Blends Division in 1995. He joined the Company in 1984 as the menswear Marketing Manager and held various marketing positions prior to his appointment.
Mr. Michael A. Miller was appointed President of the Kinsgtree Knit Apparel Division in 1992. He served as Executive Vice President and Chief Financial Officer of the Company from 1988 to 1992 and served as the Company's Treasurer from 1981 to 1992. Mr. Miller served as Vice President-Finance of the Company from 1982 to 1988 and as a Director from 1986 to 1992.
Mr. Donnie K. Cantrell was appointed President of the Texfi Narrow Fabrics Division in 1995. He joined the Company as the Vice-President of Marketing in 1990 after a 23 year career with Miliken & Co. Prior to promotion to his current position, Mr. Cantrell was the division's General Manager.
Mr. Tim L. Courtney was appointed Vice President of Administration in 1994. He joined the Company's Lively Knits Division (since disbanded) in 1966 and served in a variety of positions with the Company, including Director of Fiber and Yarn Procurement and VP of Marketing Services for the Blends Division.
Mr. Thomas M. Gilreath was appointed Corporate Controller and Assistant Secretary in 1994. He joined the Company in 1986 after spending more than 20 years in a variety of accounting positions with the Crompton company and with the Bigelow Sanford Carpet Company. Prior to his current position Mr. Gilreath was Vice President/Corporate Controller at the Texfi's Blends Division.
Mr. Braxton Schell, an attorney, is a partner in the Greensboro, North Carolina, law firm of Schell Bray Aycock Abel & Livingston L.L.P., which serves as general counsel to the Company. He has served as Secretary since 1963 and was elected a Director in 1970. He also is a director of Kenan Transport Company and Flagler System, Inc.
Item 4(b). Other Information
Not applicable.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Registrant's Common Stock is traded on the New York Stock Exchange. The approximate number of holders of record as of January 12, 1996 was 1,117.
The following table sets forth the high and low sales prices for the Common Stock on the NYSE composite tape for the period indicated.
Quarter First Second Third Fourth
1995 Fiscal Year: High 3 3-3/8 3-1/8 3-1/8 Low 2-3/8 2-1/2 2-3/4 2-3/8
1994 Fiscal Year: High 5-1/8 4-1/8 3-3/4 3-3/8 Low 3-3/8 3-3/8 2-3/4 2-3/4
The Company did not pay dividends on its Common Stock in either fiscal 1995 or 1994 and does not intend to do so in the foreseeable future.
Item 6.
Item 6. Selected Financial Data.
T E N - Y E A R R E V I E W O F P E R F O R M A N C E
(Dollar amounts in thousands except per share data and the number of employees)
*Per share data has been restated to give effect to a 4-for-3 stock split effective July 23, 1987.
For the years presented, there were no dividends paid to common stockholders.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.
M A N A G E M E N T ' S D I S C U S S I O N A N D A N A L Y S I S O F R E S U L T S O F O P E R A T I O N S A N D F I N A N C I A L C O N D I T I O N
Results of Operations Results of operations for 1994 and 1993 have been restated to reflect the discontinuance of certain operations as follows:
-- The discontinuance of the Company's Highland Mills ("Highland") yarn and Jefferson Mills ("Jefferson") diaper and corduroy fabric production during the Company's first fiscal quarter of 1995, and
-- The discontinuance and sale of the Company's Marion Fabrics ("Marion") greige goods business during the second fiscal quarter of 1995.
Fiscal Year 1995 Compared with Fiscal Year 1994 Net sales for fiscal 1995 increased to $257.5 million from $218.1 million, an increase of $39.4 million or 18%. This increase resulted from improved sales at each of the Company's three divisions: $20.5 million in finished fabrics, $16.0 million in apparel, and $2.9 million in narrow fabrics. The finished fabrics division improved primarily as a result of increased demand and delivery of many of the division's synthetic fabrics to the junior girls, women's wear and export markets. Apparel sales increased primarily as a result of the division's continued emphasis on selling primarily to customers in the "private label" and retail areas of the T-shirt business.
Cost of goods sold ("CGS"), as a percentage of net sales, decreased from 90.1% to 88.8% in 1995. This decrease resulted primarily from a combination of changes in the product mix at the appparel division to products with higher margins and a reduction in volume-related operating costs within both the finished fabrics and narrow fabrics divisions. These improvements were partially offset by increased raw material costs, primarily cotton and synthetic yarns.
Selling, general and administrative expenses ("SG&A") as a percentage of sales decreased from 6.6% in the prior year to 6.3% in 1995. This decrease is primarily a result of the Company's success in keeping the fixed portion of these costs relatively constant (approximately 70% of SG&A is fixed in nature) as the Company increased its 1995 sales volume when compared to 1994.
Financial information as to industry segments is contained in Note 13 of the Notes to the Consolidated Financial Statements.
Interest expense increased $1.4 million during 1995 when compared with 1994 despite the Company reducing total debt and factor advances by approximately $25 million primarily during its second and third fiscal quarters of 1995. Interest expense rose primarily due to increases in the prime rate of interest and other comparable interest rate measures, which occurred throughout late fiscal 1994 and fiscal 1995.
Other income decreased to $22,000 in 1995 as compared to $1.6 million in 1994 which included receipt of approximately $1.5 million for the settlement of a lawsuit.
During fiscal 1995, the Company recorded charges totaling $17.5 million to discontinue its Highland, Jefferson and Marion operations. These charges included a loss on disposal of operations totaling $15.3 million which is comprised of the following: $9.8 million in property, plant and equipment, $3.1 million in accounts and notes receivable, $1.2 million in inventory, and $1.2 million in other various costs. As of the end of fiscal 1995, the Company has disposed of all of the assets and liabilities relating to these discontinued operations except for $1.5 million of net property, plant and equipment at Highland which will be liquidated during fiscal
1996 at a price approximating net book value. These discontinued operations generated $21.8 million in sales, $22.4 million in CGS, and $1.6 million in SG&A during fiscal 1995, as compared to $64.8 million, $66.1 million, $4.9 million and $200,000 of sales, CGS, SG&A, and other expense, respectively, in the prior fiscal year.
As discussed more fully in Note 9 of the Consolidated Financial Statements, as of November 3, 1995, net operating loss carryforwards of approximately $44.8 million remain to offset future taxable income.
Fiscal Year 1994 Compared with Fiscal Year 1993 Net sales for fiscal 1994 decreased to $218.1 million compared to net sales of $237.3 million in 1993. This $19.2 million (8.1%) decrease resulted from the decreased sales of finished fabrics ($24.4 million) which offset increased sales of knit apparel (primarily T-shirts) ($4.5 million) and narrow fabrics ($721,000). The decreased sales of finished fabrics resulted primarily from the continued weakness of the retail market for apparel made from synthetic finished fabrics, primarily polyester and rayon. The increased sales of knit apparel resulted from the Company's change of its product mix from basic T-shirts to more fashion and value-added products as well as improved market conditions in the overall T-shirt market.
CGS, as a percentage of net sales, increased from 89.6% in 1993 to 90.1% in 1994. This increase resulted from a combination of changes in product mix and selling prices, increases in raw material costs, primarily cotton, and other volume-related operating costs, and fixed manufacturing costs increasing as a percentage of sales.
SG&A decreased from 6.9% to 6.6% as a percentage of sales for fiscal 1994 compared with fiscal 1993. This decrease resulted primarily from the Company's efforts to reduce or maintain fixed SG&A expenses, primarily salaries and benefits, at their 1993 levels.
Interest expense increased approximately $523,000 (5.1%) from $10.2 million in 1993 to $10.7 million. This increase resulted primarily from the redemption of $5.1 million of preferred stock with a portion of the proceeds from the issuance of $34.5 million of Senior Subordinated Debentures due August 1, 1999 ("8.75% Debentures") during the fourth quarter of fiscal 1993. In addition, increases in the prime rate of interest from 6% to 7.75% during fiscal 1994 along with corresponding increases in other comparable interest rate measures resulted in increased interest on the Company's variable rate debt and factor advances. These increases offset decreases in interest which resulted from the Company reducing its debt obligations by $7.3 million in 1994 as reflected on the statement of cash flows.
Other income totaled $1.6 million in 1994 as compared to other expense of $2.0 million in 1993. This change was due to nonrecurring charges ($2.1 million) in 1993 and income ($1.5 million) in 1994 for the settlement of various lawsuits.
Capital Resources and Liquidity During 1995 and 1994, the Company's business exhibited seasonality, primarily due to temporary plant shutdowns during the Christmas/New Year's holiday season. As a result, sales have been and are expected to be lower during the first quarter of the fiscal year while working capital requirements increase in anticipation of higher second quarter sales. Working capital is comprised chiefly of accounts receivable and inventory. Traditionally, the Company has maintained financing capacity for working capital and other general corporate purposes under certain factoring agreements and other comparable short-term borrowing arrangements. The Company may be advanced funds in amounts not to exceed 90% of eligible accounts receivable plus 50% of eligible inventories, not to exceed a maximum of $10 million. The amounts reported on the balance sheet as "Due From Factor" represent accounts receivable with factors net of advances. As of November 3, 1995, the Company had approximately $11.0 million of funds available under its factoring arrangements.
As of November 3, 1995, working capital equaled $4.2 million, a decrease of $8 million from the fiscal year ended October 28, 1994. This decrease in working capital is due primarily to decreases in inventory ($14.0 million) and accounts receivable ($1.2 million) which more than offset decreases in current maturities of long-term debt ($3.0 million) and accounts payable ($2.8 million) and increases in property, plant and equipment held for disposal ($1.5 million). Reductions in inventories and accounts receivable resulted primarily from the discontinuance of certain Company operations as previously discussed.
The Company's operating activities generated $13.0 million in net cash during the 1995 fiscal year. Adjustments to the fiscal year net loss of $16.9 million included non-cash transactions of $12.3 million and the net loss on disposition of property, plant and equipment of $9.4 million. In addition, while reductions in inventories, prepaid and other assets provided $14.4 million, increases in receivables and decreases in liabilities required $6.2 million. Cash flows generated by operations when combined with the $9.4 million in net proceeds from the sale of property, plant and equipment were applied to reduce long-term debt and subordinated debentures totaling $20.0 million and purchase property, plant and equipment and intangibles approximating $3.1 million.
During the second quarter of fiscal 1995, the Company sold its discontinued Marion Fabrics greige goods operations for approximately $10.7 million, which included all property, plant and equipment and inventory related to the Marion, N.C. plant. During the fourth quarter of fiscal 1995, the Company incurred an additional $2.0 million loss on discontinued operations, primarily due to default by the purchaser of Marion Fabrics on the $2 million subordinated note received in conjunction with the sale cash proceeds. The note receivable was sold to affiliates of the purchaser for $400,000 after reduction by $330,000 for certain post-closing adjustments.
On October 29, 1990, the Company obtained a $40 million credit facility, which has been fully funded. Borrowings under the credit facility bear interest, at the Company's option, at either prime plus 1% or an alternative rate based upon LIBOR or CD rates. The facility balance outstanding at the end of the 1995 fiscal year totaling $18 million is payable in monthly installments through the end of fiscal 1997. The credit facility places limitations on the Company's rental expense, additional indebtedness, acquisitions, capital expenditures and sale or disposal of assets. The Company is also required to maintain a stated amount of working capital and tangible net worth as well as certain financial ratios, including stated ratios of assets to current liabilities and of earnings to fixed charges. This facility has been periodically amended as follows: (i) to make the restrictive covenants less restrictive in order that the Company would remain in compliance with all covenant requirements, (ii) defer and reduce principal payments to assist the Company in meeting its cash demands, (iii) provide for the applicable interest rate margin on the prime, CD and LIBOR rates of interest to be changed within a certain range based on the ratio of the Company's senior debt plus factor advances to earnings before interest, taxes, depreciation and amoritzation and raise the margin associated with the CD and LIBOR rates of interest, and (iv) effect certain other changes. The Company is in compliance with all of the facility's covenant requirements.
As of November 3, 1995 the Company has approximately $2.7 million of its Series C Debentures outstanding. The annual interest rate of these debentures may be adjusted at the sole discretion of the Company on April 1st of each year until maturity in the year 2000. The Series C Debentures are redeemable on April 1st of each year, in whole or in part, at the option of the holder or the Company for the principal amount thereof plus accrued interest through the date of redemption.
On September 8, 1993, the Company issued $34.5 million in principal amount of Senior Subordinated Debentures due August 1, 1999 ("8 3/4% Debentures"). The 8 3/4% Debentures, which cannot be called prior to their maturity date, are unsecured obligations but contain covenants that place limitations on the use of proceeds from disposal of assets and on the incurrence of additional indebtedness and senior indebtedness (as defined in the indenture) if such indebtedness would exceed stated ratios of capitalization and earnings after such incurrence. Under the most restrictive of these covenants, the Company may not incur additional indebtedness if, after giving effect to such incurrence, the aggregate amount of indebtedness of the Company would
exceed 75% of the sum of all indebtedness and stockholders' equity. Advances under the Company's factoring agreements are not considered indebtedness for the purpose of these covenants. The Company is currently prohibited by this covenant from incurring aditional indebtedness because of the 1995 reduction in common stockholders' equity primarily resulting from the $17.5 million charges to record discontinued operations.
Net proceeds from the issue of the 8 3/4% Debentures was $33.5 million (net $1.0 million issue costs). These funds were used to redeem all outstanding shares of preferred stock ($5.1 million) and all outstanding Series A and Series B Debentures ($8.4 million), repay long-term debt ($8.1 million) and reduce factor advances ($11.9 million).
The Company has significant lease obligations that are classified as operating leases and therefore are not reflected in the balance sheet. The aggregate future minimum lease payments under these leases for their initial or remaining noncancellable terms were $10.7 million as of November 3, 1995, including $3.2 million for fiscal 1996. The Company plans to place into service $7.7 million of machinery and equipment during fiscal 1996. This equipment primarily will increase fabric dyeing and finishing capacity and further automate the inspection process at the Company's finished fabrics division as well as increase knit apparel production sewing capacity. Management anticipates that approximately $7.3 million of the $7.7 million of equipment will be placed into service through a committed operating lease line and thus excluded from the Company's balance sheet.
Management believes cash flows from operations and funds available under factoring agreements will provide the Company with sufficient sources of funds to meet its 1996 cash needs and, assuming no significant deterioration in current market conditions, for the foreseeable future.
Environmental Matters and Litigation In 1992 the Company adopted a corporate policy statement on safety and environmental affairs to ensure that the Company and its divisions comply with all federal, state and local regulatory standards relating to safety and environmental pollution controls. Included in this policy is a requirement for periodic compliance audits at each of the Company's facilities. The Company has addressed and continues to address certain environmental conditions and potential conditions at a former plant site. The Company believes that costs to be expended now or in the future to ensure compliance with environmental and safety regulations will not have a material adverse impact on the financial statements of the Company.
The Company is also involved in various litigation arising during the ordinary course of business. The final resolution of these matters cannot be determined; however, it is management's opinion these matters will not have a material adverse effect on the Company's financial position and future liquidity.
Inflation The Company believes that inflation affects its business to an extent no greater than it affects the textile and apparel industries generally and the economy as a whole.
Item 8.
Item 8. Financial Statements and Supplementary Data.
C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S
For the fiscal years ended November 3, 1995, October 28, 1994 and October 29, (Dollar amounts in thousands except per share data)
See notes to consolidated financial statements.
C O N S O L I D A T E D B A L A N C E S H E E T S
November 3, 1995 and October 28, 1994 (Dollar amounts in thousands)
See notes to consolidated financial statements.
C O N S O L I D A T E D S T A T E M E N T S O F C O M M O N S T O C K H O L D E R S ' E Q U I T Y
For the fiscal years ending November 3, 1995, October 28, 1994 and October 29, (Dollar amounts in thousands)
See notes to consolidated financial statements.
C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S
For the fiscal years ended November 3, 1995, October 28, 1994 and October 29, (Dollar Amounts in thousands)
See notes to consolidated financial statements.
N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
November 3, 1995, October 28, 1994 and October 29, 1993
1. Summary of Significant Accounting Policies
A. Principles of Consolidation The consolidated financial statements include the accounts of the divisions of Texfi Industries, Inc. and one wholly-owned inactive subsidiary (the "Company"). Intercompany transactions and profits and losses have been eliminated.
B. Fiscal Year The Company's operations are based on a fifty-two, fifty-three week fiscal year ending on the Friday closest to October 31. The 1995 fiscal year includes 53 weeks while the 1994 and 1993 fiscal years each consist of 52 weeks.
C. Reclassifications Certain amounts have been reclassified to conform with the 1995 presentation and reflect discontinued operations. There is no effect on net income or common stockholders' equity.
D. Accounts Receivable -- Factored The Company has entered into factoring agreements with several financial institutions whereby it may assign certain receivables generally without recourse as to credit risk. As a result, these factored receivables are shown net of funds borrowed in advance of collection on such sales. The Company may be advanced funds in amounts not to exceed 90% of eligible accounts receivable plus 50% of eligible inventories, not to exceed a maximum of $10 million. Gross factor receivables and advances equaled $51.5 million and $44.5 million, respectively, at November 3, 1995 and $59.2 million and $49.2 million, respectively, at October 28, 1994. Concentration of credit risk is limited due to the large number of customers to which the Company sells its products (no one customer accounted for more than 7% of the Company's 1995 sales or 4% of the Company's 1994 sales) and the use of several factors to assign the invoices for sales to its customers. The Company generally requires no collateral for its accounts receivable. Interest paid on factor advances in 1995, 1994 and 1993 was $4,676,000, $3,150,000 and $3,535,000, respectively.
E. Inventories Inventories are stated at the lower of cost or market value. Cost is determined primarily on the basis of the first-in, first-out method. Market value is based on replacement cost or net realizable value, as appropriate.
F. Property, Plant and Equipment Property, plant and equipment is stated at cost. For financial statement purposes, depreciation is determined primarily by the straight-line method. For income tax purposes, the straight-line and accelerated methods are used. Interest costs incurred in the construction or acquisition of property, plant and equipment are capitalized.
G. Revenue Recognition Sales are recorded upon shipment or designation of specific goods for later shipment at customers' request with related risk of ownership passing to such customers.
H. Income Taxes The Company accounts for income taxes using the liability method. Deferred tax liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted rates which will be in effect when these temporary differences reverse. Deferred tax expense results from the change in the liability accounts for deferred taxes. Investment tax credits are accounted for by the flow-through method as a reduction of federal income tax expense.
I. Amortization of Goodwill Goodwill, which represents the excess of the cost of purchased companies over the fair value of their net assets at dates of acquisition, is being amortized on the straight-line method over 40 years. The carrying value of goodwill is reviewed if the facts and circumstances suggest that goodwill may be impaired. Should this review indicate that goodwill will not be recoverable, the Company would reduce the recorded goodwill by an appropriate amount.
J. Earnings Per Common Share Primary earnings per common share are based on the average number of shares of common stock and common stock equivalents of dilutive stock options outstanding during the year.
Fully diluted earnings per common share are computed assuming conversion of the 11 1/4% Convertible Senior Subordinated Debentures into common stock as of the beginning of the year, and the interest expense thereon, net of income taxes, was added to net income.
K. Discontinued Operations During the first quarter of 1995, the Company discontinued its commodity yarn, corduroy and diaper fabric production. During the second quarter of 1995, the Company discontinued and sold its greige goods manufacturing facility. Operating losses for these operations totaling $6.24 million ($.77 per share) and $2.52 million ($.33 per share), in 1994 and 1993, respectively, have been reclassified in the Consolidated Statements of Operations. As of November 3, 1995, property, plant and equipment related to discontinued operations which will be disposed of by orderly liquidation during the 1996 fiscal year are as follows (in thousands):
During the fourth quarter of 1993, the Company discontinued its retail operations and classified $721,000 of 1993 operating losses as loss from operations of discontinued operations in the Consolidated Statement of Operations.
L. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
2. Inventories
Inventories at November 3, 1995 and October 28, 1994 are summarized as follows:
[CAPTION]
3. Property, Plant and Equipment
Property, plant and equipment at November 3, 1995 and October 28, 1994 consists of the following:
[CAPTION]
4. Long-term Debt, Pledged Assets and Notes Payable
Long-term debt at November 3, 1995 and October 28, 1994 consists of the following:
[CAPTION]
Payments due on long-term debt during each of the five succeeding years and thereafter are listed below:
Certain long-term debt agreements contain various covenants and restrictions, including (a) provisions relating to maintenance of working capital, certain financial ratios, and a specified minimum total of net worth and subordinated debt, as defined, and (b) restrictions on additional borrowings and the purchase, sale and lease of real and personal property.
Interest paid on debt, other than debentures, in 1995, 1994 and 1993 was $2,504,000, $2,885,000, and $3,220,000, respectively.
5. Subordinated Debentures
Debentures outstanding at November 3, 1995 and October 28, 1994 consist of the following:
[CAPTION]
On September 8, 1993, the Company issued $34.5 million in principal amount of Senior Subordinated Debentures due August 1, 1999 ("8 3/4% Debentures"). The 8 3/4% Debentures, which cannot be called prior to their maturity date, are unsecured obligations but contain covenants that place limitations on the use of proceeds from disposal of assets and on the incurrence of additional indebtedness and senior indebtedness (as defined in the indenture) if such indebtedness would exceed stated ratios of capitalization and earnings after such incurrence. Under the most restrictive of these covenants, the Company may not incur additional indebtedness if after giving effect to such incurrence, the aggregate amount of indebtedness of the Company would exceed 75% of the sum of all indebtedness and stockholders' equity. Advances under the Company's factoring agreements are not considered indebtedness for the purpose of these covenants. The Company is currently prohibited by this covenant from incurring additional indebtedness because of the 1995 reduction in common stockholders' equity primarily from the $17.5 million charge to record discontinued operations.
Net proceeds from the issue of the 8 3/4% Debentures totaled $33.5 million (net $1.0 million issue costs). These funds were used to redeem all outstanding shares of preferred stock ($5.1 million) and all outstanding Series A and Series B Debentures ($8.4 million), repay long-term debt ($8.1 million) and reduce factor advances ($11.9 million).
In April 1990, the Company issued $7.1 million in principal amount of Subordinated Extendible Debentures due April 1, 2000, Series C (11%) (the "Series C Debentures") in an underwritten public offering. The annual interest rate of the Series C Debentures may be adjusted at the sole discretion of the Company on April 1, 1995 and on each April 1 thereafter until maturity in 2000. The Company reset the interest rate on the Series C Debentures to 13% for the period April 1, 1995 through March 31, 1996. The Series C Debentures were redeemable on April 1, 1995 and will be redeemable on each April 1 thereafter until maturity, in
whole or in part, at the option of the holder or the Company for the principal amount thereof plus accrued interest through the date of redemption. On April 1, 1995, $4.4 million of Series C Debentures were redeemed at the holders' option.
The 11 1/4% Convertible Senior Subordinated Debentures due October 1, 1997 are convertible at any time prior to maturity into common stock of the Company at $6.69 per share (subject to antidilutive provisions of the indenture). Interest is payable semiannually. The 11 1/4% Debentures are not subject to a sinking fund while the Company maintains a positive, tangible net worth. The payment of the principal and interest on the 11 1/4% Debentures is subordinated in right of payment to the prior payment in full of all senior indebtedness of the Company as defined in the indenture.
Interest paid on subordinated debentures in 1995, 1994 and 1993 was $3,984,000, $3,886,000 and $2,214,000, respectively.
6. Stock Options and Stock Purchase Rights
At November 3, 1995, options to purchase previously unissued shares of common stock were outstanding under stock option plans. Payment for shares purchased upon exercise of an option granted under these plans may be made either in cash or in common stock of the Company.
Information with respect to stock options outstanding is as follows:
Options on 53,390 shares, 239,880 shares and 232,407 shares were exercisable at November 3, 1995, October 28, 1994 and October 29, 1993, respectively. Under the plans, 564,184 shares, 491,611 shares and 378,769 shares of common stock were available for the granting of additional options at November 3, 1995, October 28, 1994 and October 29, 1993, respectively.
Effective July 22, 1988, the Board of Directors of the Company adopted a Rights Agreement and approved the distribution to stockholders of record on August 9, 1988 of one Preferred Share Purchase Right ("Right") for each outstanding share of the Company's common stock. Each Right, when exercisable, generally entitles common stockholders to purchase one one-hundredth of a share of a new series of preferred stock, designated as Series A Junior Participating Preferred Stock, at a price of $30. The Rights will generally be exercisable and transferable apart from the Company's common stock upon acquisition by a person or group of 30% or more of the Company's common stock (amended by the Board of Directors in 1994 to change 15% to 30%), the announcement of a tender offer for 20% or more of the Company's common stock or a determination by the Board of Directors that any holder of 12% or more of the Company's common stock is an "adverse person." The Rights will expire on August 9, 1998, unless such date is extended by the Company's Board of Directors or the Rights are redeemed prior to that time.
7. Common Stockholders' Equity
At November 3, 1995, shares of common stock were reserved for possible issuance as follows:
Primary and fully diluted earnings (loss) per common share have been computed on the basis of weighted average number of shares of common stock and common stock equivalents (when not antidilutive) outstanding as follows:
8. Redeemable Preferred Stock
In October of 1993, the Company redeemed all outstanding shares of its preferred stock and all of the outstanding Series A and Series B Subordinated Debentures with a portion of the net proceeds of its September 8, 1993 issue of 8 3/4% Senior Subordinated Debentures due August 1, 1999 (Note 5).
9. Income Taxes
As of November 3, 1995, the Company had net operating loss carryforwards of $44.8 million for income tax purposes which are available through the year 2010. For financial reporting purposes, a valuation allowance of $15.7 million has been recognized to offset the deferred tax asset related to these carryforwards. The Company has Alternative Minimum Tax credits totaling $377,000 and Investment Tax credits of $29,000 available to reduce income taxes payable in future periods. The Investment Tax credits expire during 1996 through 2001.
Deferred income tax expense results from temporary differences related primarily to net operating loss carryforwards. Significant components of the Company's deferred tax asset as of November 3, 1995 and October 28, 1994 are as follows:
[CAPTION]
Income taxes paid in 1995, 1994 and 1993 were $-0-, $-0-, and $465,000, respectively.
10. Employee Benefit Plans
The Company maintains a defined contribution plan (401(k)) covering substantially all employees who have completed six months of service. The plan requires the Company to match up to $150 per year for each participating employee's contributions. Discretionary Company contributions are determined annually by the Board of Directors based on results of operations. These discretionary contributions may either match employee amounts or represent fixed amounts. The Company contributed approximately $146,000, $215,000, and $304,000 in 1995, 1994 and 1993, respectively.
11. Rental Expense and Lease Obligations
Rental expense is summarized as follows:
[CAPTION]
Future obligations for minimum rentals under operating leases and capital leases that have initial or remaining noncancellable lease terms in excess of one year at November 3, 1995 and rentals to be received under noncancellable subleases are as follows:
Certain operating leases contain renewal options ranging from one to five years and/or contain purchase options, generally approximating fair market value.
12. Contingent Liabilities and Commitments
The Company is involved in various litigation arising during the ordinary course of business. The final outcome of this litigation cannot be determined; however, it is management's opinion that the final resolution of these matters will not have a material adverse effect on the Company's financial position and future liquidity.
13. Industry Segments
The Company operates in two industry segments: the manufacture and sale of textiles and the manufacture and sale of apparel. Within the textile segment, the Company is engaged primarily in the development, production and sale of finished fabrics and elastic narrow fabrics for the home furnishing, automotive, medical and various apparel markets. Within the apparel segment, the Company is engaged principally in the development, production and sale of T-shirts. Sales by these product groups accounted for 60.4%, 11.7%, and 27.9%, respectively, of total 1995 sales; 61.9%, 12.5%, and 25.6%, respectively, of total 1994 sales; and 60.3%, 11.2% and 28.5%, respectively, of total 1993 sales to unaffiliated customers.
The following summarizes certain information on industry segments:
[CAPTION]
(1) Balances for fiscal 1994 and 1993 have been restated to exclude discontinued operations.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
Information with respect to Directors, appearing under the heading "Election of Directors" on pages 5 through 8 of the Registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on March 12, 1996, is incorporated herein by reference. Information regarding executive officers is included as Item 4A in Part I of this document.
Item 11.
Item 11. Executive Compensation.
Information with respect to executive compensation, appearing under the heading "Executive Compensation" on pages 8 through 16 of the Registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on March 12, 1996, is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information with respect to security ownership of certain beneficial owners and management, appearing under the headings "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Management" on pages 1 through 5 of the Registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on March 12, 1996, is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions.
Information with respect to certain relationships and related transactions, appearing under the headings "Employment and Other Related Agreements" and "Certain Transactions" on pages 15 and 16 of the Registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on March 12, 1996, is incorporated herein by reference.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a)(1) and (2) Financial Statements and Schedule
The financial statements and supplemental schedule listed in the accompanying index to financial statements and schedule are filed as part of this document.
(3) Exhibits
Exhibits to this report are listed in the accompanying index to exhibits.
(b) No reports on Form 8-K were filed during the Company's 1995 fourth fiscal quarter.
SIGNATURES
Pursuant to the requirements of Sections 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.
TEXFI INDUSTRIES, INC.
Date: February 1, 1996 By:s/Richard L. Kramer ------------------- Richard L. Kramer Chairman of the Board of Directors
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.
FORM 10-K -- ITEMS 8, 14(a)(1) and (2) and ITEM 14(d)
TEXFI INDUSTRIES, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
I - Report of Independent Auditors Relating to Consolidated Financial Statements and Supplemental Schedule of Texfi Industries, Inc.
II - Valuation and Qualifying Accounts
Other schedules are omitted because of the absence of the conditions under which they are required or because the required information is included in the consolidated financial statements or in the notes thereto.
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Stockholders and Board of Directors Texfi Industries, Inc.
We have audited the accompanying consolidated balance sheets of Texfi Industries, Inc. and subsidiary as of November 3, 1995 and October 28, 1994 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended November 3, 1995. Our audits also included the financial statement schedule listed in the Index as Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Texfi Industries, Inc. and subsidiary at November 3, 1995 and October 28, 1994 and the consolidated results of their operations and their cash flows for each of the three years in the period ended November 3, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
ERNST AND YOUNG LLP
Raleigh, North Carolina December 7, 1995
SCHEDULE II
TEXFI INDUSTRIES, INC. Analysis of Valuation and Qualifying Accounts for the Fiscal Years Ended November 3, 1995, October 28, 1994 and October 29, 1993 (Amounts in thousands)
Fiscal Year 1995 1994 1993 ------ ------ ----- RESERVES DEDUCTED FROM ASSETS TO WHICH THEY APPLY:
Allowance for doubtful accounts and claims: Balance at beginning of year .............. $4,287 $3,616 $1,491
Net additions charged to income: Doubtful accounts........................ 526 384 2,514 Claims and allowances.................... 2,670 2,184 561 ------ ----- ----- 3,196 2,568 3,075 Deductions for accounts written off as uncollectible (net of recoveries) ....... 6,121 1,897 950 ------ ----- -----
Balance at end of year .................... $1,362 $4,287 $3,616 ====== ====== ======
TEXFI INDUSTRIES, INC.
INDEX TO EXHIBITS
*2(a) Asset Purchase Agreement dated as of February 10, 1995, by and between Registrant and Marion, Inc. filed as Exhibit 2(a) to Registrant's Form 8-K Current Report dated March 31, 1995.
*2(b) Amendment to Asset Purchase Agreement dated as of February 10, 1995, filed as Exhibit 2(b) to Registrant's Form 8-K Current Report dated March 31, 1995.
*2(c) Assignment and Assumption of Asset Purchase Agreement dated as of March 31, 1995 by and between Marion, Inc. and Decotech, L.C., filed as Exhibit 2(c) to Registrant's Form 8-K Current Report dated March 31, 1995.
*2(d) Subordinated Promissory Note dated March 31, 1995 from Decotech, L.C. in the principal amount of $2,000,000, filed as Exhibit 2(d) to Registrant's Form 8-K Current Report dated March 31, 1995.
*2(e) Subordinated Promissory Note dated March 31, 1995 from Decotech, L.C. in the principal amount of $300,000 filed as Exhibit 2(e) to Registrant's Form 8-K Current Report dated March 31, 1995.
*2(f) Subordination Agreement dated as of March 31, 1995 by and between BNY Financial Corporation, Decotech, L.C. and Registrant with respect to $2,000,000 promissory note, filed as Exhibit 2(f) to Registrant's Form 8-K Current Report dated March 31, 1995.
*2(g) Subordination Agreement dated as of March 31, 1995 by and between BNY Financial Corporation, Decotech, L.C. and Registrant with respect to $300,000 promissory note, filed as Exhibit 2(g) to Registrant's Form 8-K Current Report dated March 31, 1995.
2(h) Agreement dated as of September 8, 1995 between Registrant and Decotech, L.C.
2(i) Note Purchase Agreement dated as of September 8, 1995 between Registrant, Decotech, L.C. and Deco General Partnership.
*3(a)(1) Restated Certificate of Incorporation of Registrant dated August 13, 1969, filed as Exhibit (3)(a)(1) to Registrant's Form 10-K Annual Report for the fiscal year ended October 31, 1980.
*3(a)(2) Certificate of Amendment of Certificate of Incorporation of Registrant dated March 16, 1972, filed as Exhibit (3)(a)(2)to Registrant's Form 10-K Annual Report for the fiscal year ended October 31, 1980.
*3(a)(3) Certificate of Amendment of Certificate of Incorporation of Registrant dated March 27, 1978, filed as Exhibit (3)(a)(3) to Registrant's Form 10-K Annual Report for the fiscal year ended October 31, 1980.
*3(a)(4) Certificate of Amendment of Certificate of Incorporation of Registrant dated May 19, 1986, filed as Exhibit 4.4 to Registrant's Form S-8 Registration Statement (No. 33-14697).
*3(a)(5) Certificate of Amendment of Certificate of Incorporation of Registrant dated March 20, 1987, filed as Exhibit 4.5 to Registrant's Form S-8 Registration Statement (No. 33-14697).
*3(a)(6) Certificate of Amendment of Certificate of Incorporation of Registrant dated September 28, 1987, filed as Exhibit 4(a)(6) to Registrant's Form S-2 Registration Statement (No. 33-16794).
*3(a)(7) Certificate of Designations of Registrant dated November 20, 1987, filed as Exhibit 4(a)(7) to Registrant's Form S-2 Registration Statement (No. 33-16794).
*3(a)(8) Certificate of Designations of Registrant dated March 8, 1988, filed as Exhibit 4(a)(8) to Registrant's Form S-2 Registration Statement (No. 33-20131).
*3(a)(9) Certificate of Designations of Registrant dated August 4, 1988, filed as Exhibit 4(d)(9) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended July 29, 1988.
*3(b)(1) Bylaws of Registrant, filed as Exhibit 4.6 to Registrant's Form S-8 Registration Statement (No. 33-14697).
*3(b)(2) Amendment to Bylaws of Registrant, filed as Exhibit 4(b)(2) to Registrant's Form S-2 Registration Statement (No. 33-16794).
*3(b)(3) Amendment to Bylaws of Registrant adopted by Registrant's Board of Directors on January 18, 1991, filed as Exhibit 3(b)(3) to Registrant's Form 10-K Annual Report for the fiscal year ended November 2, 1990.
*3(b)(4) Amendment to Bylaws of Registrant adopted by Registrant's Board of Directors on August 31, 1994, filed as Exhibit 4(b)(4) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended July 29, 1994.
*3(b)(5) Amendment to Bylaws of Registrant adopted by Registrant's Board of Directors on September 7, 1994, filed as Exhibit 4(b)(5) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended July 29, 1994.
*4(a)(1) Indenture between Registrant and Rhode Island Hospital Trust National Bank, Trustee, with a copy of Subordinated Debentures due April 1, 1995, Series A, Subordinated Debentures due April 1, 1995, Series B and Subordinated Extendible Debentures due April 1, 2000, Series C attached, filed as Exhibit 4(f) to Registrant's Form S-2 Registration Statement (No. 33-32485).
*4(a)(2) First Supplemental Indenture between Registrant and Rhode Island Hospital Trust National Bank, Trustee, with a revised Subordinated Debenture due April 1, 1995, Series B attached, filed as Exhibit 4 to Registrant's Form 8-K Current Form dated May 16, 1990.
*4(a)(3) Indenture dated October 1, 1991 between Registrant and First National Bank of Boston, Trustee, with copy of 11-1/4% Convertible Senior Subordinated Debenture due October 1, 1997, filed as Exhibit 4(a)(1) to Registrant's Form 10-K Annual Report for the fiscal year ended November 1, 1991.
*4(a)(4) Indenture dated September 8, 1993 between Registrant and First Union National Bank of North Carolina, Trustee, with copy of 8-3/4% Senior Subordinated Debenture due August 1, 1999, filed as Exhibit 4(c)(2) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended July 30, 1993.
*4(b)(1) Specimen Common Stock ($1 par value) certificates, filed as Exhibit 4.01 to Amendment No. 2 to Registrant's Form S-1 Registration Statement (No. 2-41653).
*4(c)(1) Rights Agreement dated July 22, 1988 between Registrant and First Union National Bank of North Carolina, as Rights Agent, filed as Exhibit 1 to Registrant's Form 8-K Current Form dated July 22, 1988.
*4(c)(2) Form of Rights Certificate, filed as Exhibit B to Exhibit 1 to Registrant's Form 8-K Current Form dated July 22, 1988.
*4(c)(3) Amendment to Rights Agreement between Registrant and First Union National Bank of North Carolina dated October 31, 1988, filed as Exhibit 4(e)(3) to Registrant's Form S-2 Registration Statement (No. 33-32485).
*4(c)(4) Second Amendment to Rights Agreement dated May 24, 1994 between Registrant and First Union National Bank of North Carolina, as Rights Agent, filed as Exhibit 4(e)(4) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 29, 1994.
*4(c)(5) Third Amendment to Rights Agreement dated December 16, 1994 between Registrant and First Union National Bank of North Carolina, as Rights Agent, filed as Exhibit 4(c)(5) to Registrant's Form 10-K Annual Report for the fiscal year ended October 28, 1994.
*4(d)(1) Loan Agreement dated October 29, 1990 between Registrant and NCNB National Bank of North Carolina, filed as Exhibit 2(a) to Registrant's Form 8-K Current Form dated November 12, 1990.
*4(d)(2) First Amendment to Loan Agreement dated March 14, 1991 between Registrant and NCNB National Bank of North Carolina, filed as Exhibit 19(a)(1) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended May 3, 1991.
*4(d)(3) Second Amendment to Loan Agreement dated March 28, 1991 between Registrant and NCNB National Bank of North Carolina, filed as Exhibit 19(a)(2) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended May 3, 1991.
*4(d)(4) Third Amendment to Loan Agreement dated May 29, 1991 between Registrant and NCNB National Bank of North Carolina, filed as Exhibit 19(a)(3) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended May 3, 1991.
*4(d)(5) Fourth Amendment to Loan Agreement dated June 14, 1991 between Registrant and NCNB National Bank of North Carolina, filed as Exhibit 19(a)(4) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended May 3, 1991.
*4(d)(6) Fifth Amendment to Loan Agreement dated January 28, 1992 between Registrant and NCNB National Bank of North Carolina, filed as Exhibit 4(e)(6) to Registrant's Form 10-K Annual Report for the fiscal year ended November 1, 1991.
*4(d)(7) Sixth Amendment to Loan Agreement dated November 4, 1992 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina), filed as Exhibit 4(e)(7) to Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1992.
*4(d)(8) Seventh Amendment to Loan Agreement dated December 22, 1992 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina), filed as Exhibit 4(e)(8) to Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1992.
*4(d)(9) Eighth Amendment to Loan Agreement dated August 25, 1993 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina), filed as Exhibit 4(g)(9) to Registrant's Form S-2 Registration Statement (No. 33-66678).
*4(d)(10) Ninth Amendment to Loan Agreement dated October 29, 1993 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina), filed as Exhibit 4(f)(10) to Registrant's Form 10-K Annual Report for the fiscal year ended October 29, 1993.
*4(d)(11) Tenth Amendment to Loan Agreement dated April 28, 1994 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina), filed as Exhibit 4(f)(11) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 29, 1994.
*4(d)(12) Eleventh Amendment to Loan Agreement dated October 28, 1994 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina) filed as Exhibit 4(d)(12) to Registrant's Form 10-K Annual Report for the fiscal year ended October 28, 1994.
*4(d)(13) Twelfth Amendment to Loan Agreement dated January 27, 1995 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina), filed as Exhibit 4(d)(13) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended January 27, 1995.
*4(d)(14) Thirteenth Amendment to Loan Agreement dated April 28, 1995 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina),filed as Exhibit 4(f)(14) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 28, 1995.
*4(d)(15) Fourteenth Amendment to Loan Agreement dated July 28, 1995 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina)filed as Exhibit 4(f)(15) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended July 28, 1995.
4(d)(16) Fifteenth Amendment to Loan Agreement dated November 3, 1995 between Registrant and NationsBank of North Carolina, N.A. (formerly NCNB National Bank of North Carolina).
Management contract or compensatory plan or arrangement (Exhibits 10(a)(1) through 10(a)(23))
*10(a)(1) Supplemental Retirement Agreement dated September 1, 1981 between Registrant and Joseph H. Hamilton, filed as Exhibit 10(b) to Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1981.
*10(a)(2) 1987 Nonqualified Stock Option Plan, as adopted by Registrant's Board of Directors on December 16, 1987 and approved March 8, 1988 at a meeting of Registrant's Stockholders, filed as Exhibit 4(c)(11) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 29, 1988.
*10(a)(3) Form of 1987 Nonqualified Stock Option Agreement, filed as Exhibit 4(c)(12) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 29, 1988.
*10(a)(4) Resolutions amending the 1987 Nonqualified Stock Option Plan, as adopted by Registrant's Board of Directors on January 8, 1991 and Registrant's Stockholders on March 12, 1991, filed as Exhibit 10(a)(9) to Registrant's Form 10-K Annual Report for the fiscal year ended November 1, 1991.
*10(a)(5) Resolutions amending the 1987 Nonqualified Stock Option Plan, as adopted by Registrant's Board of Directors on January 12, 1993 and Registrant's Stockholders on March 9, 1993, filed as Exhibit 19(f) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 30, 1993.
10(a)(6) Resolution amending the 1987 Nonqualified Stock Option Plan, as adopted by Registrant's Board of Directors on September 6, 1995.
10(a)(7) Form of 1987 Nonqualified Stock Option Agreements dated May 18, 1995 between William L. Remley and Andrew J. Parise, Jr. and Registrant.
*10(a)(8) Directors' Deferred Stock Compensation Plan as adopted by Registrant's Board of Directors on July 14, 1989, filed as Exhibit 19 to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended July 28, 1989.
*10(a)(9) Resolutions amending the Directors' Deferred Stock Compensation Plan as adopted by Registrant's Board of Directors on November 30, 1994 and Registrant's Stockholders on March 14, 1995, filed as Exhibit 10(a)(7) to the Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 28, 1995.
10(a)(10) Resolution amending Directors' Deferred Stock Compensation Plan, as adopted by the Directors' Deferred Stock Compensation Committee of Registrant's Board of Directors on September 6, 1995.
*10(a)(11) 1990 Executive Stock Purchase Plan, dated January 9, 1990, filed as Exhibit 4(d)(16) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended February 2, 1990.
*10(a)(12) Resolutions amending the 1990 Executive Stock Purchase Plan, as adopted by Registrant's Board of Directors on March 9, 1993, filed as Exhibit 19(g) to Registrant's Form 10-Q Quarterly Report for the quarter ended April 30, 1993.
10(a)(13) Resolution amending 1990 Executive Stock Purchase Plan, as adopted by Registrant's Board of Directors on September 6, 1995.
*10(a)(14) 1990 Restricted Incentive Stock Plan, dated January 9, 1990, filed as Exhibit 4(d)(17) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended February 2, 1990 (terminated in 1995 except as to previously issued stock).
*10(a)(15) Employment Agreement dated November 1, 1991 between Registrant and L. Terrell Sovey, Jr., filed as Exhibit 10(a)(21) to Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1992.
10(a)(16) Letter Agreement dated March 20, 1995 between Registrant and L. Terrell Sovey, Jr.
*10(a)(17) Employment Agreement dated November 17, 1992 between Registrant and Michael A. Miller, filed as Exhibit 10(a)(26) to Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1992.
*10(a)(18) Amendment to Employment Agreement dated January 29, 1993 between Registrant and Michael A. Miller, filed as Exhibit 19(d) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 30, 1993.
*10(a)(19) Employment Agreement dated October 31, 1994 between Registrant and Andrew J. Parise, Jr., filed as Exhibit 10(a)(23) to Registrant's Form 10-K Annual Report for the fiscal year ended October 28, 1994.
*10(a)(20) Description of Registrant's 1994 Management Incentive Compensation Plan adopted by Registrant's Board of Directors on February 15, 1994, filed as Exhibit 10(a)(24) to Registrant's Form 10-K Annual Report for the year ended October 28, 1994 (terminated as to Messrs. Remley, Parise, Vincent, Courtney and Gilreath in 1995).
*10(a)(21) Description of Registrant's Target Ownership Program adopted by Registrant's Board of Directors on February 15, 1994, filed as Exhibit 10(a)(25) to Registrant's From 10-K Annual Report for the fiscal year ended October 28, 1994 (terminated in 1995).
*10(a)(22) Employment Agreement dated April 1, 1995 between Registrant and William L. Remley, filed as Exhibit 10(a)17 to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 28, 1995.
10(a)(23) Performance Incentive Plan adopted by Registrant's Board of Directors on September 6, 1995.
*10(b)(1) Deed of Trust and Security Agreement dated September 15, 1989 between Elastex, Inc., Eugene M. Anderson, Jr. and BarclaysAmerican/Commercial, Inc., filed as Exhibit 10(e)(4) to Registrant's Form S-2 Registration Statement (No. 33-32485).
*10(b)(2) First Supplement to Deed of Trust dated September 15, 1989 among Elastex, Inc., Eugene M. Anderson, Jr. and BarclaysAmerican Commercial, Inc., filed as Exhibit 10(e)(5) to Registrant's Form S-2 Registration Statement (No. 33-32485).
*10(b)(3) Assignment of Leases and Rents dated September 15, 1989 by Elastex, Inc. in favor of BarclaysAmerican/Commercial, Inc., filed as Exhibit 10(e)(6) to Registrant's Form S-2 Registration Statement (No. 33-32485).
*10(b)(4) Security Agreement (Equipment and Machinery) dated July 24, 1987 by Elastex, Inc. in favor of BarclaysAmerican/ Commercial, Inc., filed as Exhibit 10(e)(7) to Registrant's Form S-2 Registration Statement (No. 33-32485).
*10(b)(5) Amendment to Security Agreement dated September 15, 1989 between Elastex, Inc. and BarclaysAmerican/Commercial, Inc., filed as Exhibit 10(e)(8) to Registrant's Form S-2 Registration Statement (No. 33-32485).
*10(b)(6) Term Loan Agreement dated October 30, 1992 between Registrant and Barclays Commercial Corporation, filed as Exhibit 10(c)(9) to the Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1992.
*10(b)(7) Amendment to Term Loan Agreement dated August 25, 1993 between Registrant and Barclays Commercial Corporation, filed as Exhibit 10(c)(10) to Registrant's Form S-2 Registration Statement (No. 33-66678).
*10(b)(8) Amendment to Term Loan Agreement dated December 29, 1993 between Registrant and Barclays Commercial Corporation, filed as Exhibit 10(b)(11) to Registrant's Form 10-K Annual Report for the fiscal year ended October 29, 1993.
*10(b)(9) Amendment to Term Loan Agreement dated May 25, 1994 between Registrant and The CIT Group/BCC, Inc. (formerly Barclays Commercial Corporation), filed as Exhibit 10(b)(12) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 29, 1994.
*10(b)(10) Amendment to Term Loan Agreement dated October 28, 1994 between Registrant and The CIT Group/BCC, Inc. (formerly Barclays Commercial Corporation), filed as Exhibit 10(b)(13) to Registrant's Form 10-K Annual Report for the fiscal year ended October 28, 1994.
*10(b)(11) Amendment to Term Loan Agreement dated January 27, 1995 between Registrant and The CIT Group/BCC, Inc. (formerly Barclays Commercial Corporation) filed as Exhibit 10(b)(14) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended January 27, 1995.
*10(b)(12) Inventory Security Agreement dated February 1, 1995 between Registrant and The CIT Group/Commercial Services, Inc. (formerly Barclays Commercial Corporation), filed as Exhibit 10(b)(15) to the Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended January 27, 1995.
*10(b)(13) Inventory Security Agreement dated March 31, 1995 between Registrant and The CIT Group/Commercial Services, Inc. (formerly Barclays Commercial Corporation), filed as Exhibit 10(b) (17) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 28, 1995.
*10(b)(14) Amendment to Term Loan Agreement dated April 28, 1995 between Registrant and The CIT Group/BCC, Inc. (formerly Barclays Commercial Corporation), filed as Exhibit 10(b)(15) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 28, 1995.
*10(b)(15) Amendment to Term Loan Agreement dated July 28, 1995 between Registrant and The CIT Group/BCC, Inc. (formerly Barclays Commercial Corporation), filed as Exhibit (10)(a)(1) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended July 28, 1995.
10(b)(16) Amendment to Term Loan Agreement effective November 3, 1995 between Registrant and The CIT Group/BCC, Inc. (formerly Barclays Commercial Corporation).
*10(b)(17) Security Agreement dated October 30, 1992 between Registrant and Barclays Commercial Corporation, filed as Exhibit 10(c)(11) to Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1992.
*10(b)(18) First Supplement to Deed of Trust and Security Agreement dated October 30, 1992 between Registrant and Barclays Commercial Corporation, filed as Exhibit 10(c)(12) to Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1992.
*10(b)(19) Second Supplement to Deed of Trust and Security Agreement dated October 30, 1992 between Registrant and Barclays Commercial Corporation, filed as Exhibit 10(c)(13) to Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1992.
*10(b)(20) Modification of Deed to secure Debt dated October 30, 1992 between Registrant and Barclays Commercial Corporation, filed as Exhibit 10(c)(14) to Registrant's Form 10-K Annual Report for the fiscal year ended October 30, 1992.
*10(b)(21) Master Loan and Security Agreement dated June 1, 1993 between Registrant and BOT Financial Corporation and related Promissory Note dated June 4, 1993 between Registrant and BOT Financial Corporation, filed as Exhibit 19(h) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 30, 1993.
*10(b)(22) Loan Schedule No. 2 to Master Loan and Security Agreement and related Promissory Note and Supplemental Security Agreement dated July 30, 1993 between Registrant and BOT Financial Corporation, filed as Exhibit 10(b)(19) to Registrant's Form 10-K Annual Report for the fiscal year ended October 29, 1993.
*10(b)(23) Loan Schedule No. 3 to Master Loan and Security Agreement and related Promissory Note and Supplemental Security Agreement dated October 29, 1993 between Registrant and BOT Financial Corporation, filed as Exhibit 10(b)(20) to Registrant's Form 10-K Annual Report for the fiscal year ended October 29, 1993.
*10(b)(24) Master Loan and Security Agreement dated June 1, 1993 between Registrant and KeyCorp. Leasing Ltd. and related Promissory Note dated June 4, 1993 between Registrant and KeyCorp. Leasing Ltd., filed as Exhibit 19(i) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 30, 1993.
10(c)(1) Loan Agreement dated October 29, 1990 and Amendments thereto between Registrant and NCNB National Bank of North Carolina, incorporated by reference as Exhibits 4(d)(1) through 4(d)(16) hereto.
*10(c)(2) Future Advance Deed of Trust and Security Agreement (Fayetteville, NC, property) dated October 29, 1990 between Registrant and NCNB National Bank of North Carolina, filed as Exhibit 2(b) to the Registrant's Form 8-K Current Form dated November 12, 1990.
*10(c)(3) Future Advance Deed of Trust and Security Agreement (Rocky Mount, NC property) dated October 29, 1990 between Registrant and NCNB National Bank of North Carolina, filed as Exhibit 2(c) to Registrant's Form 8-K Current Form dated November 12, 1990.
*10(c)(4) Amended and Restated Security Agreement dated May 29, 1991 between Registrant and NCNB National Bank of North Carolina, filed as Exhibit 10(c)(5) to Registrant's Form 10-K Annual Report for the fiscal year ended October 29, 1993.
*10(d)(1) Stock and Option Purchase Agreement dated May 24, 1994 between Registrant and Chadbourne Corporation, filed as Exhibit 10(d)(1) to Registrant's Form 10-Q Quarterly Report for the fiscal quarter ended April 29, 1994.
11 Computation of Earnings Per Share
21 Subsidiary of Registrant
23 Consent of Ernst & Young LLP, Independent Auditors
27 Financial Data Schedule - ----------------------------------
*Incorporated by reference to previous filing.