SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 29, 1994.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6761
COLLINS & AIKMAN GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-1954600
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
8320 UNIVERSITY EXECUTIVE PARK, SUITE 102
CHARLOTTE, NORTH CAROLINA 28262
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (704)
548-2350
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
$2.50 Convertible Preferred Stock, Series A American Stock Exchange
15% Subordinated Notes due 1995 American Stock Exchange
Pacific Stock Exchange*
11 3/8% Usable Subordinated Debentures due 1997 American Stock Exchange
Pacific Stock Exchange*
7 1/2%/10% Debentures due 2005 American Stock Exchange
Pacific Stock Exchange*
11 7/8% Senior Subordinated Debentures due 2001 American Stock Exchange
* Collins & Aikman Group, Inc. has applied to the Securities and Exchange Commission
("Commission") to have its debt securities removed from listing on the Pacific Stock
Exchange ("PSE"). The PSE did not object to such application, which is currently pending
before the Commission.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the $2.50 Convertible Preferred Stock, Series
A held by nonaffiliates of the Registrant (based upon the closing price on the
American Stock Exchange on May 2, 1994) was approximately $42,900,000.
As of May 2, 1994, the number of outstanding shares of the Registrant's
common stock, $0.10 par value, was 47,808,123 shares. Since April 13, 1989, all
shares have been held by Collins & Aikman Holdings Corporation (formerly WCI
Holdings Corporation).
DOCUMENTS INCORPORATED BY REFERENCE: NONE
COLLINS & AIKMAN GROUP INC. AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT INDEX
Item 1. Business, page 1.
Item 2. Properties, page 6.
Item 3. Legal Proceedings, page 6.
Item 4. Submission of Matters to a Vote of Security Holders, page 9.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters, page 9.
Item 6. Selected Financial Data, page 10.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, page 11.
Item 8. Financial Statements and Supplementary Data, page 17.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure, page 17.
Item 10. Directors and Executive Officers of the Registrant, page 18.
Item 11. Executive Compensation, page 21.
Item 12. Security Ownership of Certain Beneficial Owners and Management, page 30.
Item 13. Certain Relationships and Related Transactions, page 32.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K, page 33.
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PART I
ITEM 1. BUSINESS
Collins & Aikman Group, Inc. ("Group" or the "Company") (formerly Wickes
Companies, Inc.) was incorporated in Delaware on March 17, 1971, and is the
successor to a Michigan corporation called The Wickes Corporation, whose
earliest predecessor company was established in 1854.
On October 25, 1988, Group, Collins & Aikman Holdings II Corporation
("Holdings II") (formerly WCI Holdings II Corporation) and Collins & Aikman
Holdings Corporation ("Holdings") (formerly WCI Holdings Corporation) entered
into an Amended and Restated Agreement and Plan of Merger (the "Merger
Agreement"). Pursuant to the Merger Agreement, Holdings acquired approximately
80% of the outstanding shares of the Company's common stock, par value $.01 per
share (the "Common Stock") on December 8, 1988 following a tender offer. On
April 13, 1989, a subsidiary of Holdings merged with and into Group (the
"Merger"), and Group became a direct wholly owned subsidiary of Holdings.
Holdings II and Holdings were formed for the purpose of acquiring the entire
equity interest in Group. Holdings II is a Delaware corporation jointly owned by
Blackstone Capital Partners L.P., a Delaware limited partnership ("Blackstone
Partners"), and Wasserstein Perella Partners, L.P., a Delaware limited
partnership ("WP Partners"), and their respective affiliates.
Since the acquisition of Group by Holdings (the "1988 Acquisition"), the
Company has divested 27 businesses for approximately $1,643 million. By the end
of 1993, the Company had streamlined its operations into its three existing
business segments. See Notes 4 and 16 to Consolidated Financial Statements.
The Company is a leader in each of its three business segments: Automotive
Products, the largest supplier of interior trim products to the North American
automotive industry; Interior Furnishings, the largest manufacturer of
residential upholstery fabrics in the U.S.; and Wallcoverings, the largest
producer of residential wallcoverings in the U.S. For certain financial
information regarding the Company's business segments, see Note 16 to
Consolidated Financial Statements and "ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
All references to a year with respect to the Company refer to the fiscal
year of the Company which ends on the last Saturday of January of the following
year.
AUTOMOTIVE PRODUCTS
GENERAL
The Company is a leading designer and manufacturer of automotive products
with 1993 net sales in this segment of $677.9 million. Automotive Products
supplies four major interior trim products -- automotive seat fabric
("bodycloth"), molded floor carpets, accessory floor mats and luggage
compartment liner -- and convertible top stacks. Automotive Products had 1993
net sales in these product lines of $537.8 million. Automotive Products has
supplied interior trim products to the automotive industry for over 60 years.
While some interior trim suppliers have sales volumes equivalent to or greater
than that of the Company in a single product line, management believes that the
Company sells a wider variety of interior trim products, has products on more
vehicle lines and has a broader, more uniform sales penetration at foreign owned
North American automotive production and assembly facilities ("Transplants") and
U. S. automotive equipment manufacturers (together with Transplants, "OEMs")
than any of its competitors.
The Company's sales are dependent on certain significant automotive
customers. Sales to General Motors Corporation accounted for more than 10% of
the Company's net sales in each of 1993, 1992 and 1991, and sales to Chrysler
Corporation accounted for approximately 10% of the Company's net sales in each
of 1993 and 1992.
Automotive industry demand historically has been influenced by both
cyclical factors and long-term growth trends. During the last three decades, the
stock of U.S. light vehicles (passenger cars, pickups, mini vans and sports
utility vehicles) grew at a 3.2% compound annual rate, and at a 2.4% compound
annual rate since 1980. Since nearly all of the historic growth in the stock of
light vehicles has been associated with increases in the
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driving age population and real per capita income, the Company anticipates that
the fleet of light vehicles will continue to grow at rates consistent with these
factors.
Annual new car and truck sales historically have been cyclical. In the most
recent cycle, U.S. light vehicle sales declined from an average of 15.4 million
units per year in 1986-1988 to a low of 12.3 million units in 1991. Since late
1993, however, U.S. light vehicles sales have accelerated strongly, reflecting
what management believes to be the early phase of a cyclical upturn. Cyclical
upturns in the auto cycle generally have lasted three to five years.
PRODUCTS
Automotive Products manufactures five principal products: automotive seat
fabric, molded floor carpets, accessory floor mats, luggage compartment trim and
convertible top stacks. Automotive Products also produces a variety of other
automotive and nonautomotive products.
AUTOMOTIVE SEAT FABRIC. Automotive Products manufactures a wide variety of
bodycloth, including flat-wovens, velvets and knits. Automotive Products also
laminates foam to bodycloth. In 1993, 1992 and 1991, Automotive Products had net
sales of bodycloth of $218.4 million, $191.1 million and $189.8 million,
respectively.
MOLDED FLOOR CARPETS. Molded floor carpets includes polyethylene,
barrier-backed and molded urethane underlay carpet. In the Company's automotive
molded floor product line, it has developed a "foam-in-place" process to provide
floor carpeting with enhanced acoustical and fit characteristics, resulting in a
substantial gain in unit selling prices. In 1993, 1992 and 1991 net sales of
molded floor carpets were $180.5 million, $173.1 million and $161.9 million,
respectively.
ACCESSORY FLOOR MATS. Automotive Products produces carpeted automotive
accessory floor mats for both North American produced vehicles and imported
vehicles. In 1993, management estimates that approximately 63% of all vehicles
produced in North America included accessory mats as original equipment.
LUGGAGE COMPARTMENT TRIM. Luggage compartment trim includes one-piece
molded trunk systems and assemblies, wheelhouse covers, seatbacks, tireboard
covers, center pan mats and other trunk trim products.
CONVERTIBLE TOP STACKS. Automotive Products designs, manufactures and
distributes convertible top stacks through its Dura Convertible Systems
division ("Dura"). In October 1993, Dura began shipping its "Top-in-a-Box"
product for Ford Motor Company's redesigned Mustang vehicle.
OTHER. Automotive Products also produces a variety of other auto products,
including die cuts for automotive interior trim applications, convertible power
train units, headliner fabric, and roll goods for export and domestic
consumption. Small volumes of certain products, such as residential floor mats,
casket and tie linings and sliver knits, are sold to other commercial and
industrial markets.
COMPETITION
The automotive supply business is highly competitive. The primary
competitor in bodycloth is Milliken & Company. The primary competitors in molded
floor carpet are Masland Corporation and JPS Automotive Products Corp. In
accessory floor mats, the Company competes primarily against Pretty Products
Company. Automotive Products' primary competitors in luggage compartment trim
are Masland Corporation and Gates Corporation. In convertible top stacks,
Automotive Products competes primarily against American Sunroof Corporation.
The Company principally competes for new business at the design stage of
new models and upon the redesign of existing models. The Company is vulnerable
to a decrease in demand for the models that generate the most sales for the
Company, a failure to obtain purchase orders for new or redesigned models and
pricing pressure from the major automotive companies.
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FACILITIES
Automotive Products has 34 manufacturing, warehouse and other facilities
located in the U.S., Canada and Mexico aggregating approximately 5.9 million
square feet. The majority of these facilities are located in North Carolina,
Ohio and Michigan and in Ontario and Quebec, Canada. Approximately 90% of the
total square footage of these facilities is owned and the remainder is leased.
Many facilities are strategically located to provide just-in-time ("JIT")
inventory delivery to the Company's customers.
INTERIOR FURNISHINGS
Interior Furnishings designs and manufactures residential and commercial
upholstery fabrics through its Decorative Fabrics group and high-end specified
contract floorcoverings through its Floorcoverings group. In 1993, the Interior
Furnishings segment had net sales of $407.2 million.
DECORATIVE FABRICS
GENERAL. Interior Furnishings' Decorative Fabrics group is the largest
designer and manufacturer of upholstery fabrics in the U.S. The Decorative
Fabrics group had 1993 net sales of $313.6 million. Decorative Fabrics strives
to be the preferred supplier of middle to high-end flat-woven upholstery fabrics
to furniture manufacturers and fabric distributors. This group's primary
division, Mastercraft, is the leading manufacturer of flat-woven upholstery
fabrics. Management believes that Mastercraft has substantially more Jacquard
looms and styling capacity dedicated to upholstery fabrics, and offers more
patterns (approximately 14,000) in a greater range of price points than any of
its competitors. The breadth and size of Mastercraft's manufacturing and design
capabilities provide it with exceptional flexibility to respond to changing
customer demands and to develop innovative product offerings. In order to
accommodate anticipated growth, the Company recently initiated a plan to invest
$85 million in Mastercraft between 1994 and 1998. Investment is targeted toward
the purchase of high-speed looms to increase capacity and productivity, new
electronic jacquard heads to reduce pattern changeover times, and computer
monitoring systems to provide information about the manufacturing processes and
to improve quality, productivity and capacity.
The three primary types of upholstery fabric are flat-wovens, velvets and
prints. Flat-woven fabrics are made in two major styles: Jacquard, which is
produced on high-speed computerized looms capable of weaving intricate designs
into the fabric, and Dobby, a plain fabric produced on standard looms. Demand
for upholstery fabric generally varies with economic conditions, particularly
sales of new and existing homes, and is directly associated with sales of
upholstered furniture at the retail level. Shifts in consumer taste can also
affect demand for upholstery fabric.
PRODUCTS. Decorative Fabrics' four operating divisions are Mastercraft,
Cavel, Warner and Greeff. Mastercraft and Cavel design and manufacture
Jacquards, velvets and other woven fabrics for the furniture, interior design,
commercial, recreational vehicle and industrial markets. Greeff and Warner
design and distribute high-end designer fabrics to interior designers and
specialty retailers in the U.S. and the U.K., respectively.
Decorative Fabrics had net sales of flat-woven products in 1993, 1992 and
1991 of $268.9 million, $254.7 million and $214.5 million, respectively.
CUSTOMERS. Decorative Fabrics is a primary supplier to virtually all major
furniture manufacturers in the U.S., including La-Z-Boy, Ethan Allen,
Thomasville, Flexsteel, Bassett, Broyhill, Baker, Henredon, Rowe and Robert
Allen. Due to the breadth of its product offerings, strong design capabilities
and superior customer service, the Company has developed close relationships
with many of Decorative Fabrics' over 1,000 customers.
Nearly all of Decorative Fabrics' products are made to customer order. This
reduces the amount of raw material and finished goods inventory required and
greatly reduces product returns, all of which improve profit margins.
COMPETITION. The U.S. upholstery fabrics market is highly competitive.
Manufacturers compete on the basis of design, quality, price and customer
service. Decorative Fabrics' primary competitors include Quaker Fabric
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Corporation, Culp, Inc., Joan Fabrics Corp. and the Burlington House Upholstery
Division of Burlington Industries, Inc.
FACILITIES. Mastercraft operates four weaving plants and one finishing
plant in North Carolina aggregating 1.1 million square feet, of which
approximately 93% is owned and the remainder is leased. Cavel shares
manufacturing capacity with Automotive Products at three plants in Roxboro,
North Carolina. Greeff and Warner are designers and distributors, subcontracting
all manufacturing.
FLOORCOVERINGS
GENERAL. The Floorcoverings group of the Interior Furnishings segment is a
leading producer of high-end specified contract carpeting products for
institutional and commercial customers. In 1993 Floorcoverings had net sales of
$93.6 million. Its principal products are six-foot wide rolls and modular carpet
tiles. Floorcoverings produces virtually no product for inventory or for
commodity markets.
Since 1990, Floorcoverings has repositioned its product offerings, shedding
those products in which it lacked either a low-cost position or proprietary
product advantage. By focusing on areas of competitive advantage, Floorcoverings
has prospered, notwithstanding a significant downturn in commercial construction
and renovation, and increased its average selling price per square yard by over
13%.
Management estimates that 70% of the Company's floorcoverings business is
based on renovation rather than new construction projects. Historically,
renovation activity has been significantly less cyclical than new construction.
Also, approximately 60% of Floorcoverings' 1993 net sales were to institutional
customers such as government, healthcare, and education facilities rather than
to commercial market customers. Management believes that government, healthcare
and educational customers are stable growth sectors.
PRODUCTS. Floorcoverings' key competitive advantage in its principal
products, six-foot wide rolls and modular carpet tiles, is its patented
Powerbond RS(Register mark) adhesive technology, which has 14 years of patent
protection remaining. Because the Powerbond RS(Register mark) system does not
use wet adhesives, it permits the installation of floorcoverings directly on
floor surfaces, including existing carpeting, with substantially reduced labor
costs and without the fumes of conventional wet adhesives. This allows for less
disruptive and less time-consuming installation and, for this reason, is
particularly attractive to institutions such as schools and hospitals. In
addition to reducing installation downtime for customers to as little as one
day, management believes Floorcoverings' product exhibits demonstrably superior
durability and cleaning characteristics ideally suited for high-traffic areas
such as airline terminals and customers such as Discovery Zone and Blockbuster.
COMPETITION. The commercial carpet industry is highly competitive, and
several of Floorcoverings' competitors have substantially greater commercial
carpet sales in the commodity segments of the industry, segments in which
Floorcoverings does not compete. Floorcoverings' niche products have demanding
specifications and generally cannot be manufactured using the equipment which
currently supplies most of the industry's commodity products. The Company's
primary competitors are Interface, Milliken & Company, Mohawk Industries and
Shaw Industries, Inc.
FACILITIES. Floorcoverings owns and operates four facilities in Dalton,
Georgia aggregating approximately 630,000 square feet.
WALLCOVERINGS
GENERAL
Wallcoverings, which operates under the name "Imperial", is a leading
manufacturer and distributor of a full range of wallcoverings for the
residential and commercial sectors of the wallcoverings market with 1993 net
sales of $220.4 million. It is the only producer of wallcoverings in the U.S.
that is fully integrated from paper production through design and distribution.
In addition, management believes that Imperial has a competitive advantage due
to its extensive in-house design expertise and licensing arrangements, its low
cost, vertically-integrated manufacturing capability, and its advanced customer
ordering and service network.
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The wallcoverings industry experienced significant and consistent growth
from the early 1980s through 1987. This growth resulted in part from increases
in new construction starts and existing home sales, which peaked in 1986 to
1987. In addition, a one-time surge in demand created a new industry-wide layer
of inventory as a result of the rapid growth of large in-stock retailers.
Between 1983 and 1987, the industry's physical shipment volume increased from
137 million to 200 million rolls of wallpaper per year, a 9.9% annual growth
rate. Between 1987 and 1990, the industry underwent a contraction, with volume
declining dramatically from 200 million rolls in 1987 to 174 million rolls in
1990, a 4.5% annual decline. This resulted from a slowdown in the overall
economy, particularly in the housing market, coupled with a reduction in
inventory by overstocked retailers. From 1991 to 1993, the industry's physical
shipment volume increased at a compound annual growth rate of 3.0%.
The wallcoverings market can generally be divided into the residential and
commercial sectors with the residential sector being the larger of the two
sectors. Demand for wallcoverings is primarily influenced by levels of
construction, renovation and remodeling. In addition to these cyclical factors,
shifts in consumer taste between wallpaper and paint can be a factor. The two
primary distribution channels within the residential sector of the wallcoverings
market are independent retailers ("dealers") and retail chains.
The industry contraction of the late 1980s and early 1990s left Imperial
with unutilized manufacturing capacity, an oversized distribution network and
excess product offerings. Between 1989 and 1992, Imperial implemented a
comprehensive downsizing program designed to bring Imperial's high fixed-cost
structure into better alignment with the changed industry environment. Imperial
closed 22 showrooms and 12 warehouses and reduced fixed costs by nearly 15%.
Imperial also substantially reduced the annual introduction rate of new
collections and virtually eliminated its use of independent distributors in
favor of exclusive captive distribution. This restructuring program improved
manufacturing efficiencies, but it adversely affected sales and led to a
reduction in shelf space and market share. As a result, Imperial's sales
declined during 1992 and into 1993, despite what management now believes to have
been a moderate upturn in industry conditions.
A new management team installed in February 1993 determined that the
reduction in new collections had been too severe. Accordingly, in late 1993,
management instituted a second restructuring program to bolster its new product
introduction rate through aggressive product design efforts. This product line
renewal led to 62 collections being introduced in 1993 and 70 collections being
planned for introduction in 1994, compared to 45 in 1992. Management is also
broadening its selection of in-stock programs and improving its order
fulfillment capabilities.
PRODUCTS
Management believes Imperial has maintained its leading market position due
to its competitive edge in color and design. Its in-house studio of
approximately 35 artists represents a major strategic investment by Imperial
which is supplemented by an active licensing program under which Imperial
licenses proven designs from well-known designers. Imperial is continuously
introducing new designs and color concepts that supplement its already vast
library.
Imperial offers a large number of well-known brand names, including
Imperial, United, Sterling Prints, Katzenbach & Warren, Greeff, Albert Van Luit
and Plexus. In addition to these in-house brands, Imperial licenses a number of
well-known brand names, including Gear, Laura Ashley, Pfaltzgraff, Croscill,
Mario Buatta, David and Dash, Louis Nichole, Clarence House and Carlton Varney,
for which it converts home furnishing designs into wallcovering designs.
Imperial also distributes the lines of John Wilman, Great Britain's largest
wallcoverings designer and manufacturer.
In recent years, there has been increasing demand for wallcoverings
coordinated with decorative accessories such as window treatments, bedding,
upholstery fabric and other textile products. To satisfy this demand from
upscale home furnishings customers, Imperial provides fabrics, which it
generally purchases outside the Company, that are coordinated with its
wallcovering designs. Some of these fabrics are supplied by the Mastercraft and
Greeff divisions of the Company.
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CUSTOMERS
Dealers and chains account for the largest portion of Imperial's customer
base. Management believes that the Company has the leading share in each of
these distribution channels. Management believes that Imperial has the most
extensive dealer network in the U.S., selling to approximately 15,000 dealers.
Imperial also sells to many of the leading chains in the country, including Home
Depot, Lowes, Sears, Sherwin Williams and Target.
COMPETITION
Competition in the wallcoverings industry is based on design, price and
customer service. Imperial's principal competitors are Borden, GenCorp, F.S.
Schumacher and Seabrook Wallcoverings.
FACILITIES
Imperial operates five manufacturing facilities in the United States and
three in Canada, as well as three distribution centers in the United States
aggregating 1.5 million square feet. Of this amount approximately 82% is owned
and the remainder is leased, including the three U.S. distribution centers.
RAW MATERIALS
Raw materials and other supplies used in the Company's operations are
normally available from a variety of competing suppliers. The loss of a single
or few suppliers would not have a material adverse effect on the Company.
ENVIRONMENTAL MATTERS
See "ITEM 3. LEGAL PROCEEDINGS -- Environmental Proceedings" and "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- ENVIRONMENTAL MATTERS."
EMPLOYEES
As of January 29, 1994, the Company's subsidiaries employed approximately
12,000 persons on a full-time or full-time equivalent basis. Approximately 2,200
of such employees are represented by labor unions. Management believes that the
Company's relations with its employees and with the unions that represent
certain of them are good.
ITEM 2. PROPERTIES
For information concerning the principal physical properties of Group and
its various operating divisions, see "ITEM 1. BUSINESS."
ITEM 3. LEGAL PROCEEDINGS
Except as described below, Group and its subsidiaries are not a party to
any material pending legal proceedings, other than ordinary routine litigation
incidental to their businesses.
PREFERRED STOCK REDEMPTION LITIGATION. On August 2, 1991, a Fifth
Consolidated Amended Complaint was filed in IN RE IVAN F. BOESKY SECURITIES
LITIGATION (the "BOESKY action"), a multi-district litigation pending for pre-
trial purposes in the United States District Court for the Southern District of
New York. In essence, the complaint is an amalgam of numerous class action and
individual claims against a variety of defendants relating principally to the
activities of, among others, Ivan F. Boesky, Drexel Burnham Lambert Incorporated
and Michael R. Milken. Among other things, the complaint alleges that these
defendants and various named associates, along with Group and certain former
officers and directors of Group, conspired to manipulate the price of the Common
Stock in April 1986 for the purpose of triggering a redemption of outstanding
preferred stock of Group issued in an April 24, 1985 public offering (the
"Preferred Stock"). The complaint alleges claims for compensatory and punitive
damages in unspecified amounts against Group and the individual Group-related
defendants for fraud
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and deceit, breach of fiduciary duty, unjust enrichment and violations of
Section 25400 of the California Corporations Code. It does so on behalf of a
certified class of persons and entities who, during the period of April 23, 1986
through June 2, 1986 redeemed, converted or sold shares of the Preferred Stock.
The complaint also alleges numerous other claims not involving Group or its
former officers and directors. The factual allegations in the complaint
involving Group are substantially similar to the allegations set forth in CITRON
V. WICKES COMPANIES, INC., ET AL., AND WEINBERGER V. WICKES COMPANIES, INC., ET
AL., two actions previously filed in the Superior Court of the State of
California for the County of Los Angeles which have been stayed in favor of the
BOESKY action.
PREFERRED STOCK LITIGATION. On or about October 27, 1992, suit was filed in
the United States District Court for the Central District of California against
Holdings, Group and nine current or former officers and directors of Holdings
and/or Group. The complaint, as amended, brought on behalf of a purported class
of purchasers of preferred stock of Holdings and Group, alleged Federal
securities law violations, state common law fraud and negligent
misrepresentation in various Holdings and Group Forms 10-K and 10-Q issued
during the period from December 1990 to December 1992. The complaint sought
unspecified damages and costs. On January 3, 1994, the Court approved a
Stipulation of Settlement pursuant to which Group agreed, in full settlement of
the lawsuit, to make certain disclosures concerning the 11 7/8% Securities (as
hereinafter defined) in certain of its Annual Report on Form 10-K and Quarterly
Report on Form 10-Q filings and, under certain circumstances, a press release.
In addition, Group reimbursed plaintiffs' counsel for attorneys' fees and
expenses of $200,000.
POF ARBITRATION. On or about May 26, 1992, Advanced Development &
Engineering Centre ("ADEC"), a division of an indirect subsidiary of Group,
filed a request for arbitration with the International Chamber of Commerce
seeking a resolution of ADEC's dispute with the Pakistan Ordnance Factories
Board ("POF") concerning ADEC's installation of a munitions facility in Pakistan
for a purchase price of $26.5 million. ADEC alleges that POF violated the
contract, among other things, by refusing to permit completion of a production
run, which would have entitled ADEC to receive $2.65 million, the remaining
unpaid portion of the purchase price under the contract. On August 6, 1992, POF
filed a reply and counterclaim alleging that as a result of ADEC's alleged
breach of the contract, POF's entire investment in the munitions facility was a
loss. POF claims damages in excess of $30 million.
DERIVATIVE LITIGATION. On or about March 19, 1993, a complaint was filed in
the Supreme Court of the State of New York, County of New York, against Group,
Blackstone Management Partners L.P. ("Blackstone Management"), Blackstone
Partners, WP Partners (together with Blackstone Partners, "the Partners"),
Wasserstein Perella & Co., Inc. ("WP & Co.") and six current or former directors
and/or officers of Group, captioned GLINERT V. COLLINS & AIKMAN GROUP, INC., ET
AL. That complaint, and an amendment dated April 13, 1994, alleged that the
plaintiff brought the action derivatively on behalf of Group. Plaintiff alleged
that the payment of certain fees by Group to its affiliates constitutes unfair
self-dealing, a waste and spoilation of Group's assets and breach of contract.
Plaintiff sought to have the defendants account to Group for any profits of
Blackstone Management and WP & Co. and for any damages to Group as a result of
the transactions alleged in the complaint. Plaintiff also sought to have a
permanent injunction entered prohibiting the further payment of certain fees by
Group to Blackstone Management and WP & Co. On April 13, 1994, plaintiff and
defendants entered into a stipulation of settlement in full settlement of the
lawsuit, and on April 28, 1994, the court entered a scheduling order calling
for, among other things, a hearing on the final approval of the settlement on
June 9, 1994. If the settlement is approved by the Court, after notice and a
hearing, the Company, Blackstone Management and WP & Co. shall enter into an
agreement relating to the provision of certain management, consulting and
financial services to the Company (including services to be rendered for the
$2.5 million in combined fees paid annually to each of Blackstone Management and
WP & Co. and transactional services to be billed based on specified formulas).
The Company shall appoint an ombudsman to review annually and challenge (if
warranted) payments, and disputes shall be resolved by an arbitrator-expert. To
the extent fees are paid to Blackstone Management, WP & Co. and their affiliates
in the future in accordance with that agreement, such fees shall not be subject
to objection or challenge by the Company or any preferred holder. The agreement
also provides for a deferral or cessation of certain fees under certain
circumstances. As part of the settlement, the Company on behalf of all the
defendants shall pay plaintiffs' counsel fees and expenses as awarded by the
Court up to $225,000.
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In the opinion of the Company's management based on the facts presently
known to it, the ultimate outcome of any of these legal proceedings will not
have a material effect on the Company's consolidated financial condition or
future results of operations.
ENVIRONMENTAL PROCEEDINGS
DOUGLAS, MICHIGAN. On January 4, 1991, a complaint was filed in the Circuit
Court for Allegan County, Michigan, captioned HAWORTH, INC. V. WICKES
MANUFACTURING COMPANY (the "HAWORTH action"), in which Haworth, Inc. ("Haworth")
alleges that predecessors of Wickes Manufacturing released environmental
contaminants on property, now owned by Haworth, located in the Village of
Douglas, Michigan. Haworth seeks a declaratory judgment that Wickes
Manufacturing is liable for the alleged contamination of the site,
indemnification for any costs incurred or to be incurred in connection with the
alleged contamination, an affirmative injunction requiring Wickes Manufacturing
to implement response actions at the site, damages in connection with alleged
diminution in value of the subject property, and other damages, interest, and
costs, all in unspecified amounts. Wickes Manufacturing has filed counterclaims
against Haworth. On June 28, 1993, the Court entered an order granting Wickes
Manufacturing's motion for summary disposition dismissing all of Haworth's
claims against Wickes Manufacturing. On July 19, 1993, Haworth appealed the
Court's order granting Wickes Manufacturing's motion for summary disposition. On
October 22, 1993, a complaint was filed in the United States District Court for
the Western District of Michigan, captioned HAWORTH, INC. V. WICKES
MANUFACTURING COMPANY AND PARAMOUNT COMMUNICATIONS, INC. (the "Second HAWORTH
action"). In the Second HAWORTH action, Haworth alleges federal and state law
claims with respect to Wickes Manufacturing and Paramount Communications Inc.
that are factually similar to the state law claims alleged in the HAWORTH
action, and Haworth seeks relief similar to the relief it seeks in the HAWORTH
action. The Michigan Department of Natural Resources, by letter dated December
20, 1989, notified Wickes Manufacturing pursuant to the Michigan Environmental
Response Act that Wickes Manufacturing is potentially responsible for
undertaking investigation and response actions to address contamination at the
site involved in the HAWORTH action and its possible effect on the water supply
of the Village of Douglas.
NORTH SMITHFIELD, RHODE ISLAND. On May 23, 1988, a complaint was filed in
the United States District Court for the District of Rhode Island, captioned
UNITED STATES V. KAYSER-ROTH CORPORATION AND HYDRO-MANUFACTURING, INC. (the
"STAMINA MILLS action"), in which the United States sought to recover response
costs under The Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") from Group's former Kayser-Roth Corporation subsidiary
("Kayser-Roth") and others in connection with a site formerly operated by
Stamina Mills, Inc., a former subsidiary of Kayser-Roth, in North Smithfield,
Rhode Island. In January 1990, the District Court held Kayser-Roth liable under
CERCLA for all past and future response costs. By Amended Administrative Order
issued June 4, 1991, the EPA directed Kayser-Roth to implement the remedies set
forth in its Record of Decision issued September 18, 1990. Since the beginning
of fiscal 1990 to date, Kayser-Roth has paid approximately $2.9 million for past
response costs, prejudgment interest and remediation. Kayser-Roth is in the
process of complying with the remainder of the order. Group has agreed to
indemnify Kayser-Roth with respect to this matter.
On March 14, 1991, Hydro-Manufacturing, Inc. ("Hydro") filed a complaint in
the Providence County Superior Court for the State of Rhode Island captioned
HYDRO-MANUFACTURING, INC. V. KAYSER-ROTH CORPORATION, alleging, among other
things, that Hydro was compelled to submit to a Consent Decree in the STAMINA
MILLS action whereby it agreed to transfer the site to the United States in
order to limit Hydro's liability. Group has agreed to indemnify Kayser-Roth with
respect to this matter. In this action, Hydro sought to recover from Kayser-Roth
the alleged diminution in the site's value resulting from the site's
contamination, legal fees and costs incurred in defending the STAMINA MILLS
action, punitive damages, and other damages, interest and costs, all in
unspecified amounts. On July 21, 1992, the Court entered an order dismissing the
litigation. Hydro appealed the dismissal of the case to the Rhode Island Supreme
Court. On April 19, 1994, the Rhode Island Supreme Court affirmed the lower
court's order dismissing the litigation.
MISCELLANEOUS ENVIRONMENTAL MATTERS. In addition to the judicial and
administrative proceedings listed above, the Company also is legally or
contractually responsible or alleged to be responsible for the investigation
8
and remediation of contamination at various other sites. It also has received
notices that it is a potentially responsible party ("PRP") in a number of
proceedings. It is a normal risk of operating a manufacturing business that
liability may be incurred for investigating and remediating on-site and off-site
contamination. The Company is currently engaged in investigation or remediation
at certain sites. These sites include, among others, the following: a site
adjacent to a facility formerly operated by Wickes Manufacturing's former Bohn
Heat Transfer division located at Beardstown, Illinois; a site formerly owned
and operated by Wickes Manufacturing's alleged former Daybrook Ottawa division
located at Bowling Green, Ohio; a site owned and formerly operated by Group
located at Elmira, California; the Beaunit Corporation Superfund Site located
near Fountain Inn, South Carolina; the Butterworth Landfill Superfund Site
located at Grand Rapids, Michigan; the Distler farm landfill site located at
Jefferson County, Kentucky; a site owned and formerly operated by Wickes
Manufacturing's former Mechanical Components division located at Mancelona,
Michigan; the Jadco Hughes Superfund Site located at North Belmont, North
Carolina; the former Albert Van Luit plant site owned by a Group subsidiary
located in North Hollywood, California; and the Stringfellow Superfund Site
located at Riverside County, California. In the last three fiscal years, Group
has paid approximately $5.5 million in the aggregate (excluding amounts paid in
connection with the Stamina Mills action disclosed above) in connection with its
various environmental sites. The majority of such costs have been incurred in
connection with the Elmira, California and North Hollywood, California sites.
In addition to the environmental sites and proceedings listed above, the
Company is and has been a party or PRP at other sites and involved in other
proceedings from time to time. It is difficult to estimate the total cost of
investigation and remediation due to various factors including incomplete
information regarding particular sites and other PRP's, uncertainty regarding
the extent of environmental problems and the Company's share, if any, of
liability for such problems, the selection of alternative compliance approaches,
the complexity of environmental laws and regulations and changes in cleanup
standards and techniques. When it has been possible to provide reasonable
estimates of the Company's liability with respect to environmental sites,
provisions have been made in accordance with generally accepted accounting
principles. However, there can be no assurance that the Company has identified
or properly assessed all potential environmental liability arising from the
activities or properties of the Company, its present and former subsidiaries and
their corporate predecessors. As of January 29, 1994, the Company has
established reserves of approximately $30.8 million for the estimated future
costs related to all its known environmental sites. In the opinion of
management, based on the facts presently known to it, the environmental costs
and contingencies will not have a material adverse effect on the Company's
consolidated financial condition or results of operations.
Group is seeking insurance coverage for a portion of the defense costs and
liability it has incurred and may incur in connection with the environmental
proceedings described above. Coverage issues have not been resolved. There can
be no assurance that any coverage will be provided.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There no longer is a trading market for the Common Stock. Upon the
consummation of the Merger on April 13, 1989, Holdings became the sole owner of
all the Common Stock of Group.
Group's bank loan agreements and indentures governing outstanding debt
restrict the payment of dividends on its Common Stock. Since January 26, 1991,
no dividends could be paid by Group to Holdings under the most restrictive
provisions in the existing debt agreements of Group. Under these provisions,
which are contained in the indenture, as amended, (the "11 7/8% Indenture"),
pursuant to which the Company's 11 7/8% Senior Subordinated Debentures due 2001
(the "11 7/8% Securities") as of January 29, 1994, Group would have needed to
earn an additional $866 million of consolidated net income (as defined in the
11 7/8% Indenture, as amended), in order to eliminate the deficit in its
dividend capacity (assuming no change in the other factors used to determine
Group's
9
dividend capacity). Accordingly, Group does not expect to be permitted to pay
dividends on its Common Stock during fiscal 1994 or in the foreseeable future
beyond fiscal 1994, so long as the 11 7/8% Securities are outstanding. See "ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and Note 9 to Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
for the Company at and for each of the five fiscal years indicated. The
statements of operations and balance sheet data have been restated to reflect
discontinued operations (see Note 4 to Consolidated Financial Statements). As a
result of an acquisition in 1991, and the recognition of a cumulative adjustment
in 1991 to adopt the accrual basis of accounting for postretirement benefits
(see Notes 1 and 11 to Consolidated Financial Statements), the financial
information set forth below is not comparable for the periods presented and
should not be considered indicative of current or future operations or income.
The following financial information should be read in conjunction with
"ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" and the Consolidated Financial Statements and notes thereto
appearing elsewhere herein.
1993 1992 (A) 1991 1990 1989
(IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA
Net sales.................................. $1,305,517 $1,277,500 $1,184,316 $1,232,403 $1,276,442
Loss from continuing operations before
income taxes (b)......................... (165,078) (39,105) (43,722) (46,069) (95,259)
Loss from continuing operations after
income taxes............................. (176,692) (41,404) (59,570) (64,042) (100,193)
Income (loss) before extraordinary
items.................................... (292,291) (271,253) (93,901) (130,830) 66,348
Net income (loss)(c)....................... (292,291) (271,253) (170,515) (91,625) 233,858
BALANCE SHEET DATA (AT FISCAL YEAR END)
Working capital............................ $ 319,730 $ 325,375 $ 174,580 $ 235,382 $ 351,791
Total assets............................... 1,540,210 1,813,181 2,000,595 2,132,644 2,561,954
Short-term debt (d)........................ 29,711 70,433 55,643 14,091 8,428
Long-term obligations and redeemable
preferred stock (e)...................... 733,580 784,850 776,404 836,559 1,041,650
Stockholder's equity....................... 210,344 489,274 773,281 950,929 1,083,581
(a) 1992 included fifty-three weeks.
(b) 1992 and 1990 include restructuring costs of $10.0 million and $17.3
million, respectively. 1989 includes restructuring costs of $16.2 million.
1993 includes a goodwill write-down of $144.8 million and a $26.7 million
charge related to the Holdings 1993 Employee Stock Option Plan.
(c) 1991 net loss is after the cumulative effect of the change in accounting
principle for other postretirement benefits, net of tax of $0, of $87.6
million.
(d) Includes notes payable, current maturities of long-term debt and current
portion of capital lease obligations.
(e) Long-term obligations includes long-term debt and noncurrent portion of
capital lease obligations.
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with "ITEM 6.
SELECTED FINANCIAL DATA" and the Consolidated Financial Statements of the
Company and the notes thereto, included elsewhere in this Form 10-K.
RECENT DEVELOPMENTS
On April 19, 1994, the Company's parent, Holdings, as part of a proposed
recapitalization (the "Recapitalization"), filed a registration statement on
Form S-2 covering the issuance by Holdings in a public offering of 20,000,000
shares of Holdings common stock.
The Recapitalization, if effected, would result in (i) the defeasance and
redemption or prepayment of substantially all outstanding debt of Holdings and
its subsidiaries including the Company and (ii) the redemption of all
outstanding preferred stock of the Company and Holdings. The sources of capital
for the Recapitalization are proceeds of the public offering, cash on hand and
amounts to be available under certain proposed new credit facilities (the "New
Credit Facilities"). The New Credit Facilities will consist of (i) a Closing
Date Term Loan Facility in an aggregate principal amount of $475 million with a
term of eight years, (ii) a Delayed Draw Term Loan Facility in an aggregate
principal of $25 million with a term of eight years and (iii) a Revolving
Facility in an aggregate principal amount of up to $275 million with a term of
seven years. These facilities will include various restrictive covenants
including maintenance of EBITDA (i.e. earnings before interest, taxes,
depreciation and amortization) and interest coverage ratios, leverage and
liquidity tests and various other restrictive covenants which are typical for
such facilities.
In connection with the Recapitalization, Holdings II, currently the sole
common stockholder of Holdings, will be merged into Holdings and Holdings will
change its name to Collins & Aikman Corporation. Concurrently, the Company will
be merged into its wholly-owned subsidiary, Collins & Aikman Corporation ("C&A
Co."), which will change its name to C&A Products Co.
GENERAL
After the 1988 Acquisition, the Company implemented a restructuring plan
designed to focus on certain businesses in which it enjoyed a competitive
advantage and to eliminate unnecessary corporate overhead. The Company divested
27 business units which in 1988 contributed 73% of net sales. The aggregate
proceeds from these divestitures were $1,643 million, and enabled the Company to
reduce total indebtedness from $1,862 million at October 29, 1988 to $763.1
million at the end of 1993. In addition, the Company reduced and consolidated
corporate staffs. Throughout this period, the Company made substantial
investments to enhance the competitive position of its three continuing business
segments and to strengthen its position as a low-cost producer.
The Company's continuing business segments consist of Automotive Products,
Interior Furnishings and Wallcoverings. The Company's 1993 net sales were
$1,305.5 million, with approximately $677.9 million (51.9%) in Automotive
Products, $407.2 million (31.2%) in Interior Furnishings, and $220.4 million
(16.9%) in Wallcoverings.
The industries in which the Company competes are cyclical. Automotive
Products is influenced by the level of North American vehicle production.
Interior Furnishings is primarily influenced by the level of residential,
institutional and commercial construction and renovation. Wallcoverings is also
influenced by levels of construction and renovation and by the trends in home
remodeling.
During 1993, the Company disposed of several businesses and reclassified
one subsidiary as a continuing business. Accordingly, the Company's 1993
financial statements reflect (i) the sale of the Company's Engineering Group,
(ii) the disposition of substantially all of the assets, and the settlement of
substantially all the current liabilities, of the Company's Builders Emporium
division ("Builders Emporium"), (iii) the sale of Kayser-Roth, and (iv) the
decision to retain Dura. The results of the Engineering Group, Builders Emporium
and Kayser-Roth are classified as discontinued operations for all periods. The
results of Dura are now classified in Automotive Products and prior reporting
periods have been restated to reflect Dura as a continuing operation. As
11
a result of the foregoing, this discussion is not comparable to the previous
discussions of the Company's operations. See Note 4 to Consolidated Financial
Statements.
The Company reclassified its industry segments during 1993 to realign its
products based on primary customer groups. Businesses related to the automotive
industry which were part of the Company's former Specialty Textiles segment have
been reclassified as Automotive Products. The decorative fabrics and
floorcoverings businesses have been reclassified as Interior Furnishings.
Previously, the floorcovering business was part of the Specialty Textiles
segment. Wallcoverings' products, which were previously part of the Home
Furnishing segment, have been reclassified as Wallcoverings. Industry segment
information has been restated for the years 1992 and 1991. See Note 16 to the
Consolidated Financial Statements.
The Company does not believe that inflation has had a material impact on
sales or income during the three years ended January 29, 1994.
1993 COMPARED TO 1992
NET SALES
Net sales increased 2.2% to $1,305.5 million in 1993 (a 52-week year) from
$1,277.5 million in 1992 (a 53-week year). The overall increase in net sales
reflected improvement in Automotive Products and Interior Furnishings offset by
a decrease in net sales at Wallcoverings.
Automotive Products' net sales increased 5.3% in 1993 to $677.9 million.
Net sales growth increased, primarily during the second half of 1993, due to a
number of factors. First, growth in the North American vehicle build accelerated
due in part to increased production by the Transplants. Second, the Company won
placement of its products on a number of new and existing vehicle lines in 1993.
Third, the Company continued to benefit from increasing sales content per
vehicle. These factors were offset by decreased demand for product for certain
key models in the second quarter due to OEM production downtime during model
changeovers.
Interior Furnishings' net sales increased 3.9% in 1993 to $407.2 million.
The increase in net sales was attributable to an industry-wide strengthening of
furniture sales in 1993 (somewhat offset by an industry-wide decline in sales
volume during the second quarter of 1993) and increased sales of the Company's
patented Powerbond RS(Register mark) floorcovering products. Net sales increased
by 5.6% at both Mastercraft, which represents 66.0% of Interior Furnishings'
sales, and Floorcoverings due largely to volume increases.
Wallcoverings' net sales decreased 8.9% in 1993 to $220.4 million. The
decrease in sales was due primarily to the consolidation of certain product
distribution channels and to Wallcoverings' downsizing program. In the fourth
quarter, management responded to these reduced sales by aggressively rebuilding
dealer shelf space. As a result, sample book placements in the dealer market
increased.
OPERATING EXPENSES
Total operating expenses were $1,386.4 million and $1,229.5 million in 1993
and 1992, respectively, including $38.8 million ($26.7 million of which was a
one-time charge related to the Holdings 1993 Employee Stock Option Plan (the
"1993 Plan")) and $24.0 million of unallocated corporate expenses, respectively.
Operating expenses allocated to the Company's three business segments totaled
$1,347.6 million and $1,205.5 million in 1993 and 1992, respectively. These
operating expenses in 1993 included certain non-recurring charges relating to
(i) the write-down of goodwill in the amount of $144.8 million in the quarter
ended October 30, 1993 and (ii) postretirement medical plan costs, which were
$4.7 million higher, on an annual basis, than expected in future periods due to
changes in plan provisions which became effective April 1, 1994. Operating
expenses in 1992 included (i) $10.0 million of charges relating to
Wallcoverings' downsizing program and (ii) postretirement medical plan costs,
which were $5.0 million higher, on an annual basis, than expected in future
periods due to changes in plan provisions which became effective April 1, 1994.
See Notes 2 and 3 to the Consolidated Financial Statements.
Excluding the goodwill write-down in 1993 and the restructuring charges in
1992, operating expenses allocated to the segments were $1,202.8 million or
92.1% of sales in 1993 compared to $1,195.5 million or 93.6% of
12
sales in 1992. This 1.5 percentage point improvement is the result of the
allocation of fixed costs over a larger sales volume, improved manufacturing
productivity, and continuing cost reduction initiatives at both the operating
and corporate level.
At the end of the third quarter of 1993, the Company recorded a
restructuring charge of $24.0 million, principally related to the write-down of
certain surplus or under-utilized assets of the Automotive Products and
Wallcoverings segments and to provide for the obsolescence of certain
manufacturing processes as a result of shifts in customer demand. During the
fourth quarter of 1993 management reevaluated its plan to restructure these
manufacturing facilities. Based on changes in product mix and underlying
improvement in certain of the Company's businesses, management has concluded
that the assets and facilities identified previously can be utilized at a level
of production that would not result in the impairment of the asset values.
Accordingly, in the fourth quarter of 1993 management has revised its estimate
and reversed these charges.
INTEREST EXPENSE
Interest expense for continuing operations, net of interest income of $4.3
million in 1993 and $4.0 million in 1992, decreased to $84.2 million during 1993
compared to $87.1 million in 1992. Interest expense, including amounts allocated
to discontinued operations and excluding interest income, decreased to $107.9
million during 1993 compared to $114.4 million in 1992. The decrease in interest
expense was due to the additional week in 1992 and a reduction in the Company's
weighted average cost of borrowings.
INCOME TAXES
In 1993 income taxes of $11.6 million consisted primarily of foreign and
state taxes. This amount compared with $2.3 million in 1992.
DISCONTINUED OPERATIONS
The Company's loss from discontinued operations was $115.6 million for 1993
and $229.8 million for 1992, including losses on disposals of $111.1 million and
$184.0 million, respectively.
The 1993 loss is primarily attributable to the $109.3 million additional
charge arising from the Company's determination as of the end of the second
quarter of 1993 that it would be unable to sell Builders Emporium as an ongoing
entity. The 1992 loss reflected primarily the expected loss on the anticipated
sale of Builders Emporium.
NET INCOME
The combined effect of the foregoing resulted in a net loss of $292.3
million in 1993 compared to a net loss of $271.3 million in the prior year.
1992 COMPARED TO 1991
NET SALES
Net sales increased 7.9% to $1,277.5 million in 1992 (a 53-week year) from
$1,184.3 million in 1991 (a 52-week year).
Automotive Products' net sales increased 5.5% to $643.8 million in 1992
from $610.3 million in 1991, reflecting the impact of a modest increase in the
North American vehicle build as well as an improvement in Automotive Products'
product mix. The molded carpet product line experienced the largest net sales
increase.
Interior Furnishings' net sales increased 16.3% to $391.8 million in 1992
from $336.8 million in 1991 principally due to two factors. First, 1992 net
sales reflected the full year impact of the acquisition of Doblin, a
manufacturer of high-end Jacquard fabric, in the third quarter of 1991, as well
as substantial incremental net sales volume from, the full utilization of excess
Doblin manufacturing capacity. Second, Floorcoverings' net sales increased
17.7%, which was primarily attributable to restyled product offerings.
13
Wallcoverings' net sales increased 2.0% to $241.9 million in 1992 from
$237.2 million in 1991. The net sales increase reflected a combination of two
offsetting factors. During the first quarter of 1992, the Company benefited from
the increase in industry demand for wallcoverings. However, this increase was
offset by reduced sales due primarily to Wallcoverings' efforts during 1992 to
consolidate certain distribution channels and its downsizing program.
OPERATING EXPENSES
Total operating expenses were $1,229.5 million and $1,140.4 million in 1992
and 1991, respectively, including $24.0 million and $25.8 million of unallocated
corporate expenses. Operating expenses allocated to the Company's three business
segments totaled $1,205.5 million and $1,114.5 million in 1992 and 1991,
respectively. Operating expenses in 1992 included $10.0 million of restructuring
costs. Prior to these charges, 1992 operating expenses allocated to the segments
were $1,195.5 million or 93.6% of sales, versus $1,114.5 million or 94.1% of
sales in 1991, representing a .5 percentage point improvement.
RESTRUCTURING CHARGES
In 1992, the Company reevaluated the distribution methods as well as
certain manufacturing and product lines in Wallcoverings. This reevaluation
resulted in a restructuring charge of $10.0 million for the closure of certain
manufacturing facilities. Of this amount, $2.7 million related to asset
write-downs and $7.3 million related to the consolidation of Wallcoverings'
operations.
INTEREST EXPENSE
Interest expense for continuing operations, net of interest income of $4.0
million in 1992 and $6.9 million in 1991, decreased to $87.1 million during 1992
compared to $ 87.7 million in 1991. Interest expense, including amounts
allocated to discontinued operations and excluding interest income, decreased to
$114.4 million during 1992 compared to $119.6 million in 1991 principally as a
result of the reduction in the Company's weighted average cost of borrowings.
INCOME TAXES
The Company's 1992 income taxes of $2.3 million consisted primarily of
foreign and state taxes. In 1991, income taxes of $15.8 million consisted of
foreign and state taxes of $11.6 million and Federal income taxes of $4.2
million.
DISCONTINUED OPERATIONS
As previously discussed, loss from discontinued operations, net of taxes
and including loss on disposals, was $229.8 million in 1992 compared to the loss
from discontinued operations of $34.3 million in 1991. The 1992 loss primarily
reflected the expected loss on the anticipated sale of Builders Emporium. The
1991 loss was attributable to the discontinuation of the remaining businesses of
Wickes Manufacturing.
EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING
Gain on early retirement of indebtedness, net of taxes, was $10.9 million
in 1991. See Note 9 to the Consolidated Financial Statements.
The cumulative effect on prior years of the change in accounting for
postretirement benefits other than pensions was $87.6 million in 1991. See Note
11 to the Consolidated Financial Statements.
NET INCOME
The combined effect of the foregoing resulted in a net loss of $271.3
million in 1992 compared to a net loss of $170.5 million in 1991.
14
LIQUIDITY AND CAPITAL RESOURCES
At January 29, 1994, the Company had cash and cash equivalents totaling
$78.4 million compared to $80.1 million at January 30, 1993. Included in cash
and cash equivalents at January 29, 1994 was $8.6 million held by C&A Co. On
April 27, 1994, Group received cash proceeds of $71.2 million, including accrued
interest, from the repayment of the Kayser-Roth note referred to below.
The Company's principal uses of liquidity for the next several years will
be to fund principal and interest payments on its indebtedness, working capital
and capital expenditures. The Company makes capital expenditures on a recurring
basis for replacement and improvements. As of January 29, 1994, the Company had
approximately $43.0 million in outstanding capital commitments. During 1994, the
Company anticipates capital expenditures will exceed the annual expenditures
made by its continuing businesses during 1993, 1992 and 1991, which were $44.9
million, $38.2 million and $38.9 million, respectively. This increase is due
primarily to the acquisition of additional machinery and equipment to expand the
productive capacity of Decorative Fabrics' Mastercraft division, as well as
ongoing capital expenditures in each of the Company's three segments.
The Company has significant obligations relating to postretirement,
casualty, environmental, lease and other liabilities of discontinued operations.
Management anticipates that the net cash requirements of its discontinued
operations will be approximately $20.9 million during 1994. However, it is
possible that the actual net cash requirements of the Company's discontinued
operations could differ materially from management's estimates. Management
believes that such needs can be adequately funded in 1994 by net cash provided
by operating activities and by borrowings under bank credit facilities.
From time to time, the Company evaluates acquisitions. In 1991 the Company
acquired the Doblin Fabrics Division of Springs Industries. The Company expects
to fund any future acquisitions with net cash provided by operating activities,
borrowings under bank credit facilities or the issuance of securities.
Net cash provided by the operating activities of the Company's continuing
operations in 1993 was $28.0 million. If the Recapitalization is effected, the
Company expects to have approximately $660.7 million of
outstanding indebtedness and unused borrowing availability of approximately
$121.3 million under the New Credit Facilities after giving effect to the
Recapitalization. Management believes that, if the Recapitalization is effected,
borrowings under the New Credit Facilities together with cash generated from
operations will provide sufficient liquidity to meet cash requirements through
1994 and into the foreseeable future.
As part of the Recapitalization as proposed, all the outstanding public
debt and preferred stock of the Company and its subsidiaries would be defeased
and redeemed. In addition, the C&A Co. Credit Agreement described below would be
terminated and all borrowings thereunder would be prepaid.
If the Recapitalization is not successful, management believes that the
Company has sufficient liquidity to meet its cash requirements through 1994 and
into 1995. To meet long-term cash requirements, the Company will require
alternative financing or proceeds from asset sales. There can be no assurance as
to the timing of any such financing or asset sales or the proceeds the Company
could realize therefrom. Restrictions in existing debt agreements of the Company
could limit the ability of the Company to effect future financings and asset
sales.
Since January 26, 1991, no additional cash dividends to Holdings have been
permitted under the most restrictive provisions in the existing debt agreements
of the Company. Under these provisions, which are contained in the 11 7/8%
Indenture, as of January 29, 1994, Group would have needed to earn an additional
$866.0 million of consolidated net income (as defined in the 11 7/8% Indenture)
in order to eliminate the deficit in its dividend capacity (assuming no change
in the other factors used to determine the Company's dividend capacity).
As of January 29, 1994, the Company had total outstanding long-term
indebtedness of $759.3 million (including the current portion of $25.9 million)
at varying interest rates between 5% and 15% per annum. Annual cash interest
expense on that indebtedness in 1994 will be approximately $87.2 million. At the
end of 1992 and 1991, the Company had total outstanding indebtedness of $860.8
million and $859.2 million, respectively. Cash interest paid during 1993, 1992
and 1991 was approximately $101.5 million, $102.5 million and $112.6 million,
respectively.
15
The maturities of long-term debt of the Company during 1994, 1995 and 1996
are $25.9 million, $170.9 million and $63.3 million, respectively. See Note 9 to
Consolidated Financial Statements. Under the terms of the 11 7/8% Indenture, the
Company is required to redeem $138 million aggregate principal amount of 11 7/8%
Securities on each June 1 from 1993 through 2000 ("Mandatory Redemptions") and
to repay the remaining outstanding 11 7/8% Securities at maturity on June 1,
2001. Under the terms of the 11 7/8% Indenture, if Adjusted Net Worth (as such
term is defined in the 11 7/8% Indenture) is equal to or less than $700 million
on the last day of any fiscal quarter (the "Minimum Equity Test"), the Company
would be required to begin on the last day of the second fiscal quarter
thereafter (unless the Minimum Equity Test is satisfied at the end of the
intervening fiscal quarter) semi-annual redemptions ("Accelerated Redemptions")
of $138 million aggregate principal amount of 11 7/8% Securities until all the
11 7/8% Securities are redeemed or until the Minimum Equity Test is again
satisfied. The Company can reduce its obligation to make any cash Mandatory
Redemption or Accelerated Redemption payment through the application of
previously redeemed or purchased and canceled 11 7/8% Securities as permitted by
the Indenture. The Company has previously delivered for cancellation $1,033
million in aggregate principal amount of 11 7/8% Securities, which are available
for such purpose. The Company satisfied the Minimum Equity Test at the end of
fiscal 1993. On that date, Adjusted Net Worth was $753.7 million. If the Company
had not satisfied the Minimum Equity Test at that date and did not subsequently
satisfy such test, the first cash redemption payment (after giving effect to
credits for previously acquired 11 7/8% Securities) would be required at the end
of the fiscal quarter ending January 1997. By comparison, if the Company
continues to satisfy the Minimum Equity Test at all times or cures any failure
of such test prior to any accelerated cash redemption payment becoming due, no
cash redemption payment will be required until June 1, 2000.
During 1993, the Company sold Kayser-Roth for approximately $170 million
(subject to post-closing purchase price adjustment), including a $70 million
senior unsecured bridge note. A portion of the proceeds were used to repay $66
million of borrowings under a Kayser-Roth credit facility. The Company's
Engineering Group, which was discontinued in 1992, was sold during 1993 for
approximately $51 million. Additionally, the Company has nearly completed the
disposition of the real estate, inventory and other assets of its Builders
Emporium home improvement retail chain which the Company discontinued at the end
of 1992. During 1993, the Company used cash from the aforementioned sources and
new borrowings of $76.1 million to repay $179.9 million of outstanding
indebtedness. During 1992 and 1991, the Company expended $54.4 million and
$182.8 million, respectively, for the reduction of indebtedness while incurring
new indebtedness of $60.1 million and $157.6 million, respectively. On April 27,
1994, the Kayser-Roth note was repaid with accrued interest. The Company intends
to use these cash proceeds of $71.2 million for general corporate purposes,
including possibly the repurchase of a portion of its 15% Subordinated Notes due
1995 or other debt in open market or privately negotiated transactions.
The Company's C&A Co. subsidiary consummated a $225 million credit
agreement with a syndicate of banks on May 22, 1991 that expires on May 15, 1998
(the "C&A Co. Credit Agreement"). In 1993, C&A Co. made net principal repayments
under the C&A Co. Credit Agreement of $54 million and paid Group dividends
aggregating $30 million. Availability under the C&A Co. Credit Agreement is
determined monthly based upon C&A Co.'s receivables balance. The C&A Co. Credit
Agreement permits C&A Co. to pay additional dividends to Group only if C&A Co.
satisfies a minimum liquidity requirement of $25 million and then limits the
amount of total dividends to $175 million plus 90% (or 100% if certain specified
ratios are met) of C&A Co.'s net income (excluding the impact of Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions") subsequent to April 27, 1991. As of January 29,
1994, an additional $54.8 million was available to C&A Co. under the C&A Co.
Credit Agreement. Although, as of that date, approximately $56 million of
additional dividends could be paid to Group under the dividend restriction in
the C&A Co. Credit Agreement, other financial covenants in the C&A Co. Credit
Agreement would limit the amount of dividends to approximately $47 million. C&A
Co. and its subsidiaries are separate corporate entities and the assets of C&A
Co. and its subsidiaries are available first and foremost to satisfy the claims
of the creditors of C&A Co. and such subsidiaries. At January 29, 1994,
receivables and fixed assets pledged as collateral under the C&A Co. Credit
Agreement aggregated approximately $168 million and $104 million, respectively.
16
The Company's Canadian subsidiaries have a bank demand line of credit that
made available to them approximately $8.5 million at January 29, 1994, of which
approximately $5.8 million was outstanding as of that date.
The Company's Board of Directors has authorized expenditures for the
voluntary repurchase from time to time of Group's outstanding publicly traded
debt securities. During 1991, the Company repurchased publicly traded debt
securities with a face value of approximately $160 million. The principal source
of funds for the repurchase of publicly traded debt in 1991 was net proceeds
from borrowings under the C&A Co. Credit Agreement. There were no repurchases of
publicly traded debt during 1992 or 1993. Repurchases of publicly traded debt
may be made from time to time through open market or privately negotiated
transactions. The Company expects to fund any such additional repurchases out of
the proceeds of the Kayser-Roth note referred to above, cash from operating
activities or borrowings under existing or new lines of credit. Such repurchases
may occur prior to the consummation of the proposed Recapitalization (which, if
effected as proposed, would result in the defeasance and redemption of such
debt) or at any other time, depending on market conditions, available cash and
other factors that the Board of Directors of Group in its sole discretion deems
relevant to the advisability of repurchasing publicly traded debt.
For information regarding commitments and contingencies, see Note 17 to
Consolidated Financial Statements.
ENVIRONMENTAL MATTERS
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and certain other damages related to
on-site and off-site soil and groundwater contamination. The Company's
management believes that it has obtained, and is in material compliance with,
all material environmental permits and approvals necessary to conduct its
various businesses. Environmental compliance costs for continuing businesses
currently are accounted for as normal operating expenses or capital expenditures
of the business units. In the opinion of management, based on the facts
presently known to it, such environmental compliance costs will not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a PRP in a number of proceedings.
The Company may be named as a PRP at other sites in the future, including with
respect to divested and acquired businesses. It is a normal risk of operating a
manufacturing business that liability may be incurred for investigating and
remediating on-site and off-site contamination. The Company is currently engaged
in investigation or remediation at certain sites. It is difficult to estimate
the total cost of investigation and remediation due to various factors including
incomplete information regarding particular sites and other PRP's, uncertainty
regarding the extent of environmental problems and the Company's share, if any,
of liability for such problems, the selection of alternative compliance
approaches, the complexity of environmental laws and regulations and changes in
cleanup standards and techniques. When it has been possible to provide
reasonable estimates of the Company's liability with respect to environmental
sites, provisions have been made in accordance with generally accepted
accounting principles. However, there can be no assurance that the Company has
identified or properly assessed all potential environmental liability arising
from the activities or properties of the Company, its present and former
subsidiaries and their corporate predecessors. As of January 29, 1994, the
Company has established reserves of approximately $30.8 million for the
estimated future costs related to all its known environmental sites. In the
opinion of management, based on the facts presently known to it, the
environmental costs and contingencies will not have a material adverse effect on
the Company's consolidated financial condition or results of operations. See
"ITEM 3. LEGAL PROCEEDINGS -- Environmental Proceedings."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements of Collins & Aikman Group, Inc.
and subsidiaries included herein and listed on the Index to Financial Statements
set forth in Item 14(a)(1) of this Form 10-K Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following is a list of the names and ages (as of April 28, 1994) of all
the incumbent directors of the Company, indicating all other positions and
offices with the Company held by each person, the date each such person was
appointed a director and each such person's principal occupations and employment
during the past five years. All such persons have been appointed to serve until
their successors are elected, or until their earlier resignation or retirement.
None of such directors is related to any executive officer or other director of
the Company by blood, marriage or adoption. The directors are also directors of
Holdings and Holdings II as well. The affiliations between the Company and WP
Management, WP Group, WP & Co., the Blackstone Group and Blackstone (as such
terms are defined below) are set forth below under "ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Certain Affiliations".
POSITIONS AND OFFICES HELD AND
PRINCIPAL OCCUPATIONS AND EMPLOYMENT
NAME AGE DIRECTOR SINCE DURING THE PAST FIVE YEARS
David A. Stockman................ 47 December 1988 Co-Chairman and Co-Chief Executive Officer since July
1993. General Partner of the Blackstone Group
Holdings L.P. (the "Blackstone Group"), which is
under common control with Blackstone Partners,
since 1988. Mr. Stockman is also a director of
Edward J. DeBartolo Corporation.
Bruce Wasserstein................ 46 June 1992 Co-Chairman and Co-Chief Executive Officer since June
1992. Chairman and Chief Executive Officer,
Wasserstein Perella Management Partners, Inc. ("WP
Management") since June 1992; Chief Executive
Officer and Chairman or President, Wasserstein
Perella Group, Inc. ("WP Group") since 1988. Mr.
Wasserstein is Chairman of the Board of Maybelline,
Inc.
James R. Birle................... 58 December 1988 Co-Chairman and Co-Chief Executive Officer from May
1991 until July 1993. Co-Chairman and Chief
Executive Officer from December 1988 to May 1991;
General Partner of the Blackstone Group since 1988.
Mr. Birle is also a director of Connecticut Mutual
Life Insurance Co., Great Lakes Dredge & Dock
Corporation and Transtar, Inc.
Stephen A. Schwarzman............ 47 December 1988 Co-Founding Partner of the Blackstone Group and
President and Chief Executive Officer of The
Blackstone Group L.P. ("Blackstone") since 1985.
Mr. Schwarzman is also a director of Great Lakes
Dredge & Dock Corporation and Transtar, Inc.
18
POSITIONS AND OFFICES HELD AND
PRINCIPAL OCCUPATIONS AND EMPLOYMENT
NAME AGE DIRECTOR SINCE DURING THE PAST FIVE YEARS
Randall Weisenburger............. 35 August 1989 Vice Chairman since April 1994. Deputy Chairman from
July 1992 to April 1994; Managing Director of WP &
Co. since December 1993; Director of WP & Co. from
December 1992 to December 1993; Vice President of
WP & Co. from December 1989 to December 1992;
Associate of WP & Co. from 1988 to December 1989.
Mr. Weisenburger is also Vice Chairman of the Board
of Mabelline, Inc. and Chairman of the Yardley
Lentheric Group.
W. Townsend Ziebold, Jr.......... 31 December 1992 Director of WP & Co. since December 1993; Vice-
President of WP & Co. from December 1991 to
December 1993; Associate of WP & Co. from 1988 to
December 1991. Mr. Ziebold is also a director of
Maybelline, Inc.
EXECUTIVE OFFICERS
The following is a list of the names and ages (as of April 28, 1994) of all
the executive officers of the Company, indicating all positions and offices with
the Company held by each such person and each such person's principal
occupations and employment during the past five years. All such persons hold
office at the pleasure of the Company's Board of Directors.
POSITIONS AND OFFICES HELD AND PRINCIPAL OCCUPATIONS
NAME AGE AND EMPLOYMENT DURING THE PAST FIVE YEARS
David A. Stockman.................. 47 See description under "Directors" above.
Bruce Wasserstein.................. 46 See description under "Directors" above.
Randall J. Weisenburger............ 35 See description under "Directors" above.
William J. Brucchieri.............. 51 President, Imperial Wallcoverings, Inc., a wholly owned subsidiary of
C&A Co., a wholly owned subsidiary of the Company, since February
1993 and named an executive officer of the Company for purposes
hereof in April 1994. Executive Vice President of Imperial
Wallcoverings, Inc. from March 1992 to January 1993. Executive Vice
President of Mastercraft Division of C&A Co. from January 1990 to
February 1992. Vice President, Operations of Mastercraft Division of
C&A Co. from August 1989 to January 1990. Vice President,
Administration and Control, Mastercraft Division of C&A Co., from
January 1988 to July 1989.
Thomas E. Hannah................... 55 President and Chief Executive Officer of Collins & Aikman Textile and
Wallcoverings Group, a division of C&A Co., a wholly owned
subsidiary of the Company, since November 1991 and named an
executive officer of the Company for purposes hereof in April 1993.
President and Chief Executive Officer of the Collins & Aikman
Textile Group from February 1989 to November 1991. President of
Milliken & Company's Finished Apparel Division prior to that.
19
POSITIONS AND OFFICES HELD AND PRINCIPAL OCCUPATIONS
NAME AGE AND EMPLOYMENT DURING THE PAST FIVE YEARS
Andrew Major....................... 72 President of Collins & Aikman Decorative Fabrics Group, a division of
C&A Co., a wholly owned subsidiary of the Company, since 1987, and
named an executive officer of the Company for purposes hereof in
April 1994.
John P. McNicholas................. 31 Vice Chairman since April 1994. Deputy Chairman from July 1992 to
April 1994; Vice President of Blackstone Group from January 1992 to
present; Associate of Blackstone Group from November 1990 to
December 1991; Associate, Merchant Banking Group -- Merrill Lynch
Capital Markets from August 1989 to November 1990. Graduate student,
Darden School of Business Administration, University of Virginia in
1989.
Paul W. Meeks...................... 41 Vice President and Treasurer since September 1992. Assistant Treasurer
from April 1988 to September 1992.
John D. Moose...................... 57 President of Collins & Aikman North American Auto Group, a division of
C&A Co., a wholly owned subsidiary of the Company, since June 1989,
and named an executive officer of the Company for purposes hereof in
April 1994. Executive Vice President, Marketing of Automotive
Division of Automotive Division of C&A Co. prior to that.
Elizabeth R. Philipp............... 37 Executive Vice President, General Counsel and Secretary since April
1994. Vice President, General Counsel and Secretary from April 1993
to April 1994; Vice President and General Counsel from September
1990 to April 1993. Prior to that, associated with the law firm of
Cravath, Swaine & Moore.
Mark O. Remissong.................. 41 Senior Vice President and Chief Financial Officer of C&A Co., a wholly
owned subsidiary of the Company, and an executive officer of the
Company for purposes hereof since December 1993. Vice President of
Finance for Burlington Industries from 1989 until December 1993.
Harry F. Schoen III................ 58 President, Mastercraft Division of C&A Co., a wholly owned subsidiary
of the Company, since January 1993 and named an executive officer of
the Company for purposes hereof in April 1994. Executive Vice
President and Chief Operating Officer of the Mastercraft Division of
C&A Co. from April 1992 to December 1992. General Manager of
Milliken & Company's Greige Fine Goods Group prior to that.
20
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered to the Company and its subsidiaries by (i)
the Company's Co-Chairmen of the Board and Co-Chief Executive Officers, (ii) the
Company's former Co-Chairman of the Board and Co-Chief Executive Officer (who
resigned from such positions on July 20, 1993), (iii) the Company's four most
highly compensated executive officers (other than the Co-Chief Executive
Officers) who were serving as executive officers at the end of the fiscal year
ended January 29, 1994 and whose total annual salary and bonus exceeded $100,000
and (iv) two former executive officers who would have been among the Company's
four most highly compensated executive officers but for the fact that they were
not serving as executive officers on January 29, 1994 (the individuals named in
clauses (i) through (iv) being hereinafter referred to as the "named executive
officers"). On April 1, 1993, Mr. Fenton's employment as an executive officer of
the Company or any of its subsidiaries terminated. On January 28, 1994, Mr.
Seelert ceased to be an executive officer of the Company due to the sale by the
Company of its Kayser-Roth subsidiary. Mr. Seelert resigned from Kayser-Roth on
January 28, 1994.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION
OTHER AWARDS
NAME AND ANNUAL SECURITIES PAYOUTS ALL OTHER
PRINCIPAL YEAR SALARY BONUS COMPENSATION UNDERLYING LTIP COMPENSATION
POSITION (1) ($) ($) ($) OPTIONS (#) PAYOUTS ($) ($)
DAVID A. STOCKMAN 1993 15,000(2) 0 0 0 0 0
Co-Chairman of 1992 15,000(2) 0 0 0 0 0
the Board and 1991 15,000(2) 0 0 0 0 0
Co-Chief
Executive Officer
BRUCE WASSERSTEIN 1993 15,000(2) 0 0 0 0 0
Co-Chairman of 1992 7,500(2)(3) 0 0 0 0 0
the Board and 1991 N/A N/A N/A N/A N/A N/A
Co-Chief Executive
Officer
JAMES R. BIRLE 1993 15,000(2) 0 0 0 0 0
Former Co-Chairman 1992 15,000(2) 0 0 0 0 0
of the Board and 1991 15,000(2) 0 0 0 0 0
Former Co-Chief
Executive Officer
THOMAS E. HANNAH 1993 415,000 783,960 (4) 981,435 2,319,907(5) 19,481(6)
President and CEO 1992 407,500 630,800 (4) 0 0 24,256
of Collins & Aikman 1991 364,600 0 (4) 0 0 28,500
Textile and
Wallcoverings Group
DAVID J. MCKITTRICK 1993 350,000 375,000(8) 244,667(9) 0 0 12,809(10)
Vice Chairman and 1992 271,923(11) 175,000 (4) 0 0 914
Chief Operating 1991 N/A N/A N/A N/A N/A N/A
Officer (7)
PAUL W. MEEKS 1993 125,833 42,000 153,465(12) 11,403 6,500(5) 4,836(13)
Vice President and 1992 106,000 60,000 (4) 0 0 6,540
Treasurer 1991 100,000 52,000 (4) 0 0 2,035
ELIZABETH R. PHILIPP 1993 256,250 120,000 (4) 91,853 77,433(5) 9,838(14)
Executive Vice 1992 246,667 100,000 (4) 0 0 19,566
President, General 1991 230,000 75,000 (4) 0 0 2,610
Counsel and Secretary
ROBERT L. SEELERT 1993 300,000 0 (4) 0 0 11,683(15)
Former President 1992 300,000 150,000 (4) 0 0 3,501
and CEO of 1991 227,308(16) 150,000 91,545(17) 0 0 90,095
Kayser-Roth
Corporation, a
former subsidiary
of Group
21
LONG TERM COMPENSATION
ANNUAL COMPENSATION
OTHER AWARDS
NAME AND ANNUAL SECURITIES PAYOUTS ALL OTHER
PRINCIPAL YEAR SALARY BONUS COMPENSATION UNDERLYING LTIP COMPENSATION
POSITION (1) ($) ($) ($) OPTIONS (#) PAYOUTS ($) ($)
ROBERT S. FENTON 1993 162,211(18) 0 (4) 0 69,737(5) 15,364(19)
Former Vice 1992 225,000 100,000 (4) 0 0 470,094
President, Tax 1991 206,250 63,000 (4) 0 0 19,469
and Administration,
and Secretary
(1) The information given in this table is for the fiscal years indicated, not
calendar years. 1993 indicates the fiscal year ended January 29, 1994. 1992
indicates the fiscal year ended January 30, 1993. 1991 indicates the fiscal
year ended January 25, 1992.
(2) Represents compensation for serving on the Board of Directors of the
Company. Mr. Stockman, Mr. Wasserstein and Mr. Birle received no separate
compensation during the years shown for serving as executive officers of
the Company or any of its subsidiaries.
(3) Mr. Wasserstein was elected as director and appointed Co-Chairman of the
Board of Directors and Co-Chief Executive Officer of the Company effective
June 19, 1992. "N/A" appearing in the table opposite Mr. Wasserstein's name
denotes not applicable, as it pertains to fiscal years in which Mr.
Wasserstein held no positions with the Company or its subsidiaries.
(4) Total perquisites for executive officer were less than the lesser of
$50,000 or 10% of annual salary and bonus. Perquisites for an executive
officer may, but do not necessarily, include reimbursement for any of the
following expenses: car; financial planning; executive fitness; executive
physicals and medical; luncheon club; and relocation.
(5) The amounts for Mr. Hannah, Mr. Meeks and Ms. Philipp represent payouts in
November 1993 under the Equity Share Plan, which was terminated in October
1993. In connection with such termination, certain conditions as to the
vesting of awards to the following executive officers were modified: Mr.
Hannah (approximately $464,000 of the amount shown as a payout was
attributable to such modification); Mr. Meeks (the entire payout was
attributable to such modification); and Ms. Philipps ($12,000 of the amount
shown as a payout was attributable to such modification). The payout to Mr.
Fenton was made in August 1993 based upon Mr. Fenton's vested interest in
the Equity Share Plan as of April 1993 (the date at which Mr. Fenton ceased
to be an executive officer of the Company or any of its subsidiaries).
(6) Amount for fiscal 1993 consists of (i) C&A Co.'s contributions to the C&A
Co. Profit Sharing Plan, a defined contribution plan (the "PSP"), in the
amount of approximately $4,717, (ii) C&A Co.'s contributions to the
non-qualified supplement to the PSP (the "SPSP") in the amount of
approximately $5,699, (iii) premiums in the amount of $4,812 and $911 paid
by C&A Co. for basic term life insurance and Accidental Death &
Dismemberment life insurance ("AD&D life insurance"), respectively, under
group life insurance policies and (iv) interest income in the amount of
$3,342 in connection with a promissory note (bearing interest at the rate
of 4% per annum and maturing April 1, 1993) which was given by C&A Co. to
Mr. Hannah for a portion of his fiscal 1992 bonus.
(7) Mr. McKittrick was appointed Vice Chairman and Chief Operating Officer on
March 23, 1992. Prior to that date, Mr. McKittrick held no positions with
the Company or its subsidiaries. "N/A" appearing in the table opposite Mr.
McKittrick's name denotes not applicable, as it pertains to fiscal years in
which Mr. McKittrick held no positions with the Company or its
subsidiaries. Mr. McKittrick resigned as an executive officer of the
Company and any of its subsidiaries on April 4, 1994, but continues to
serve as principal financial and accounting officer with limited
responsibilities for a transitional period. See "Employment Agreements".
22
(8) $200,000 of this amount represents the portion of Mr. McKittrick's phantom
equity award vested during fiscal 1993. The vested amount is payable upon
termination for reasons other than cause pursuant to his employment
agreement. See "Employment Agreements".
(9) Includes $228,204 reimbursement for relocation costs in connection with Mr.
McKittrick's move to Group's headquarters in Charlotte, North Carolina,
including gross-ups of relocation reimbursements to compensate the
executive for incremental federal and state income taxes.
(10) Amount for fiscal 1993 consists of (i) Group's contributions to the PSP in
the amount of approximately $4,717, (ii) Group's contributions to the SPSP
in the amount of approximately $2,283, (iii) premiums in the amount of
$4,057 and $645 paid by Group for basic term life insurance and AD&D life
insurance, respectively, under group life insurance policies and (iv)
interest income in the amount of $1,107 in connection with a promissory
note (bearing interest at the rate of 4% per annum and maturing April 1,
1993) which was given by Group to Mr. McKittrick for a portion of his
fiscal 1992 bonus.
(11) Includes salary for the period from March 23, 1992 through January 30,
1993, the portion of fiscal year 1992 during which Mr. McKittrick was an
executive officer of the Company.
(12) Includes $148,226 representing reimbursement for relocation costs in
connection with Mr. Meeks' move to Group's headquarters in Charlotte, North
Carolina, including gross-ups of relocation reimbursements to compensate
the executive for incremental federal and state income taxes.
(13) Amount for fiscal 1993 consists of (i) Group's contributions to the PSP in
the amount of approximately $3,912 and (ii) premiums in the amount of $828
and $96 paid by Group for basic term life insurance and AD&D life
insurance, respectively, under group life insurance policies.
(14) Amount for fiscal 1993 consists of (i) Group's contributions to the PSP in
the amount of approximately $4,717, (ii) Group's contributions to the SPSP
in the amount of approximately $1,427, (iii) premiums in the amount of
$2,958 and $343 paid by Group for basic term life insurance and AD&D life
insurance, respectively, under group life insurance policies and (iv)
interest income in the amount of $393 in connection with a promissory note
(bearing interest at the rate of 4% per annum and maturing April 1, 1993)
which was given by Group to Ms. Philipp for a portion of her fiscal 1992
bonus.
(15) Amount for fiscal 1993 consists of (i) Kayser-Roth's matching contributions
to the 401(m) Kayser-Roth Corporation Employees' Savings Plan (the "K-R
Savings Plan") in the amount of $4,500, (ii) premiums in the amount of $126
paid by Kayser-Roth for basic term life insurance and AD&D life insurance
under group life insurance policies, (iii) interest income in the amount of
approximately $955 in connection with a promissory note (bearing interest
at the rate of 4% per annum and maturing April 1, 1993) which was given by
Kayser-Roth to Mr. Seelert for a portion of his fiscal 1992 bonus and (iv)
premiums in the amount of approximately $6,102 paid by Kayser-Roth for long
term disability insurance. Mr. Seelert resigned on January 28, 1994 after
the sale of Kayser-Roth.
(16) Includes salary for the period from May 1, 1991 through January 25, 1992,
the portion of the fiscal year during which Mr. Seelert was employed by
Kayser-Roth.
(17) Includes approximately $86,179 for relocation costs in connection with Mr.
Seelert's move to Kayser-Roth's headquarters in Greensboro, North Carolina,
including gross-ups of relocation reimbursements to compensate the
executive for incremental federal and state income taxes.
(18) Mr. Fenton ceased to be an executive officer of the Company or any of its
subsidiaries on April 1, 1993. However, Mr. Fenton continues to be employed
by the Company (although not as an executive officer) pursuant to a new
employment agreement. See "Employment Agreements".
(19) Amount for fiscal 1993 consists of (i) Group's contributions to the PSP in
the amount of approximately $4,717, (ii) Group's contributions to the SPSP
in the amount of approximately $1,877, (iii) Group's matching contributions
to the Retirement Savings Plus Plan (the "RSPP") and payment in lieu of a
contribution in 1993 to the non-qualified supplement to the RSPP (the
"Supplemental RSPP") in the amounts of $1,363 and $1,948, respectively,
(iv) premiums of $4,348 and $748 paid by Group for basic term life
insurance and AD&D life insurance, respectively, under group life insurance
policies and (v) interest income in the
23
amount of $363 in connection with a promissory note (bearing interest at
the rate of 4% per annum and maturing April 1, 1993) which was given by
Group to Mr. Fenton for a portion of his fiscal 1992 bonus. The RSPP was
terminated on April 30, 1993 and account balances of continuing employees
were rolled over into the PSP. The Supplemental RSPP was terminated and
account balances were paid out.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is further information on grants of stock options pursuant to
the 1993 Plan for the fiscal year ended January 29, 1994, to the named executive
officers. The 1993 Plan became effective as of January 28, 1994 (the "Effective
Date") upon the approval by vote of the majority of common stock of Holdings
("Holdings Common Stock") in April 1994.
NUMBER OF POTENTIAL REALIZABLE VALUE
SECURITIES % OF TOTAL AT ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS GRANTED EXERCISE MARKET PRICE STOCK PRICE APPRECIATION
OPTIONS TO EMPLOYEES PRICE ON DATE OF EXPIRATION FOR OPTION TERM (2)
NAME GRANTED (#)(1) IN FISCAL 1993 ($ / SH) GRANT (2) DATE (3) 5% ($) 10% ($)
0% ($)
David A. Stockman 0 0 N/A N/A N/A N/A N/A N/A
Bruce Wasserstein 0 0 N/A N/A N/A N/A N/A N/A
James R. Birle 0 0 N/A N/A N/A N/A N/A N/A
Thomas E. Hannah
(4) 841,230 27.0 3.99 13.14 1/28/04 7,697,255 14,645,814 25,312,611
140,205 4.5 8.26 13.14 1/28/04 684,200 1,842,294 3,620,093
David J. McKittrick 0 0 N/A N/A N/A N/A N/A N/A
Paul W. Meeks (4) 11,403 .4 3.99 13.14 1/28/04 104,337 198,526 343,116
Elizabeth R.
Philipp (4) 83,508 2.7 3.99 13.14 1/28/04 764,098 1,453,874 2,512,756
8,345 .3 8.26 13.14 1/28/04 40,724 109,653 215,468
Robert L. Seelert 0 0 N/A N/A N/A N/A N/A N/A
Robert S. Fenton 0 0 N/A N/A N/A N/A N/A N/A
(1) Options granted under the 1993 Plan are subject to restrictions on transfer
and exercise. No option granted may be exercised prior to the earlier of the
closing of a Public Offering (as defined under the 1993 Plan) or the
expiration of two years from the Effective Date, subject to acceleration in
the event of a Change in Control of Holdings (as defined in the 1993 Plan)
and subject to the authority of a duly authorized disinterested committee of
the directors of Holdings (the "Committee"). The Committee may set a
schedule of exercisability with regard to each option grant, may, at any
time, accelerate the time at which all or any part of the options may be
exercised and may waive any other conditions to exercise. In the event that
a Public Offering does not occur with respect to Holdings by January 28,
1995 the Committee may amend or terminate the 1993 Plan and a participant's
rights with respect to any options granted prior to such amendment or
termination. Shares of Holdings Common Stock purchased upon exercise of an
option may not be transferred for a period of two years following the Public
Offering, or after such shorter time as the Committee may determine. In
consideration of a grant of options an employee agrees not to engage,
without the written consent of the Committee, in any Competitive Activity
(as defined in the 1993 Plan) during the employee's employment and for one
year following termination of employment. Additionally, in further
consideration of such grant the employee agrees to fully discharge Holdings
and various related entities from any and all claims, liabilities or
obligations under a previously canceled benefits plan known as the Equity
Share Plan, the termination of the Equity Share Plan or the creation of any
new plan.
(2) The options specified hereunder were granted prior to an initial public
offering. Consequently, the market price date of grant is equal to the
estimated fair market value used by Group for accounting purposes to
determine compensation expense related to the option grants.
(3) No option is exercisable after the expiration of ten years from the date of
grant.
24
(4) Stock options granted to the named individuals under the 1993 Plan vest in
accordance with the following schedule, pursuant to the provisions of their
individual grant agreements:
(a) Mr. Hannah: 50% on June 1, 1995 and 50% on June 1, 1996
(b) Mr. Meeks and Ms. Philipp: 40% on June 1, 1995 and 60% on June 1,
1996
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
Shown below is information with respect to the year-end value of
unexercised options to purchase Holdings' Common Stock granted under the 1993
Plan to the named executive officers and held by them effective as of January
28, 1994.
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY-OPTIONS AT
SHARES ACQUIRED VALUE AT FY-END (#) FY-END ($)
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
David A. Stockman 0 0 0 0 N/A N/A
Bruce Wasserstein 0 0 0 0 N/A N/A
James R. Birle 0 0 0 0 N/A N/A
Thomas E. Hannah 0 0 0 841,230 N/A 7,697,255
0 0 0 140,205 N/A 684,200
David J. McKittrick 0 0 0 0 N/A N/A
Paul W. Meeks 0 0 0 11,403 N/A 104,337
Elizabeth R. Philipp 0 0 0 83,508 N/A 764,098
0 0 0 8,345 N/A 40,724
Robert L. Seelert 0 0 0 0 N/A N/A
Robert S. Fenton 0 0 0 0 N/A N/A
DEFINED BENEFIT OR ACTUARIAL PLAN DISCLOSURE
Messrs. Stockman, Wasserstein and Birle have never participated in and have
not received and will not receive any benefits under the Pension Plan, the C&A
Co. Plan, the C&A Co. Excess Benefit Plan or the C&A Co. SRIP Plan described
below. See "Summary Compensation Table", footnote 2. Mr. Seelert has never
participated in the Pension Plan, the C&A Co. Plan, the C&A Co. Excess Benefit
Plan or the C&A Co. SRIP Plan. Mr. Seelert, prior to his resignation from
Kayser-Roth, did participate in Kayser-Roth's Cash Balance Plan, but his entire
interest was unvested and thus forfeited upon his resignation. Mr. Seelert has
not received and will not receive any benefits under such Cash Balance Plan.
PENSION PLAN. Certain current and former employees of the Company,
including certain named executive officers, are entitled to monthly annuities
commencing at age 65 under the Company's Salaried Employees' Pension Plan (the
"Pension Plan"), which was terminated in 1985. All actual plan participants as
of December 31, 1984 as a group will be entitled to benefits from the annuities
purchased for them totaling $5,160,000 per year at age 65. The annual benefits
of Messrs. McKittrick, Meeks, Hannah and Fenton and Ms. Philipp will be
approximately $0, $1,100, $0, $3,600 and $0, respectively.
C&A CO. PLAN. Provided certain eligibility requirements are met, at the end
of each calendar month, pay credits are applied to a participant's account under
the Collins & Aikman Corporation Employees' Pension Account Plan (the "C&A Co.
Plan") based on the participant's length of credited service and compensation
(as defined) during that month. For participants aged 50 or older, the monthly
pay credit is based on either credited service and compensation or age and
compensation, whichever results in the higher amount.
25
The following chart sets forth how pay credits are determined under the C&A
Co. Plan:
PERCENTAGE OF
COMPENSATION USED TO
DETERMINE PAY CREDITS
UP TO
1/3 OVER 1/3
ELIGIBILITY REQUIREMENT OF THE OF THE
YEARS OF S.S. S.S.
CREDITED SERVICE OR AGE WAGE BASE WAGE BASE
less than 10 less than 50 2.5% 4.5%
10 - 14 50 - 54 3.0% 5.5%
15 - 19 55 - 59 4.0% 6.5%
20 - 24 60 - 64 5.0% 8.0%
25 or more 65 or more 6.0% 10.0%
The dollar amounts that result from these percentages are added together
and the total is the pay credit for the month.
In addition, interest credits are applied each month to the account
balance. Participants make no contributions to the C&A Co. Plan. Employer
contributions are 100% vested after five years of service or at age 65,
whichever is earlier, and may vest under certain other circumstances as set
forth in the C&A Co. Plan. The estimated annual benefits payable upon retirement
at normal retirement age under the C&A Co. Plan for Messrs. McKittrick, Meeks,
Hannah and Fenton and Ms. Philipp are $2,600, $13,600, $8,200, $16,900 and
$11,000, respectively. Participants in the C&A Co. Plan have the option,
however, of receiving the value of their vested account in a lump sum following
termination of employment.
C&A CO. EXCESS PLAN. The Excess Benefit Plan of Collins & Aikman
Corporation (the "C&A Co. Excess Plan") works in conjunction with the C&A Co.
Plan (which is described above) and provides to the employee any benefit which
the C&A Co. Plan would have provided but for certain legal limitations under the
Employee Retirement Income Security Act of 1974 and Internal Revenue Service
regulations. The pay credits and interest credits are determined as described
with respect to the C&A Co. Plan as if no legal limitations existed, and then
this plan provides any benefit which is in excess of the benefit provided under
the C&A Co. Plan. The estimated annual benefits payable upon retirement at
normal retirement age under the C&A Co. Excess Plan for Messrs. McKittrick,
Meeks, Hannah, and Fenton and Ms. Philipp are $3,000, $0, $24,700, $100, and
$2,200, respectively.
C&A CO. SRIP. Participation in the Collins & Aikman Corporation
Supplemental Retirement Income Plan (the "C&A Co. SRIP") is solely at the
discretion of the Board of Directors of C&A Co. and is extended to a select
group of key executives. The plan provides a participating employee with a
retirement benefit at age 62. A target benefit is first calculated for each
employee based on Total Annual Compensation (final base salary plus the average
of the bonuses paid for the last three fiscal years) and years of service at
retirement. The benefit payable from the C&A Co. SRIP is determined as the
excess of the target benefit over any pension benefits payable from Social
Security and any other retirement plans sponsored by C&A Co. An employee does
not become vested in a benefit until reaching age 62.
26
The following table shows, for specified compensation/years of service
classifications, the hypothetical annual target benefits under the C&A Co. SRIP
for employees retiring at age 65, assuming that the retiring participant elects
a single life annuity.
PENSION PLAN TABLE
TOTAL ANNUAL YEARS OF SERVICE
COMPENSATION 10 15 20 25 30 35
$ 100,000 $ 42,000 $ 51,000 $ 60,000 $ 60,000 $ 60,000 $ 60,000
125,000 52,500 63,750 75,000 75,000 75,000 75,000
150,000 63,000 76,500 90,000 90,000 90,000 90,000
175,000 73,500 89,250 105,000 105,000 105,000 105,000
200,000 84,000 102,000 120,000 120,000 120,000 120,000
225,000 94,500 114,750 135,000 135,000 135,000 135,000
250,000 105,000 127,500 150,000 150,000 150,000 150,000
275,000 115,500 140,250 165,000 165,000 165,000 165,000
300,000 126,000 153,000 180,000 180,000 180,000 180,000
400,000 168,000 204,000 240,000 240,000 240,000 240,000
450,000 189,000 229,500 270,000 270,000 270,000 270,000
500,000 210,000 255,000 300,000 300,000 300,000 300,000
600,000 252,000 306,000 360,000 360,000 360,000 360,000
700,000 294,000 357,000 420,000 420,000 420,000 420,000
800,000 336,000 408,000 480,000 480,000 480,000 480,000
900,000 378,000 459,000 540,000 540,000 540,000 540,000
1,000,000 420,000 510,000 600,000 600,000 600,000 600,000
Mr. Hannah is the only named executive officer participating in this plan.
He currently has five years of plan service, and at age 65, he will have an
estimated 14 years, 5 months of plan service.
EMPLOYMENT AGREEMENTS
In June 1989, the Company entered into an employment agreement (the
"Original Agreement") with Mr. Fenton at an initial base salary of $200,000 per
year. In the event of involuntary termination for reasons other than cause, the
Original Agreement provided for severance benefits equal to two times annual
base compensation. On December 30, 1992, Mr. Fenton was notified that his
employment with the Company and its subsidiaries pursuant to the Original
Agreement was being involuntarily terminated without cause effective April 1,
1993. Mr. Fenton ceased to be an executive officer of the Company or any of its
subsidiaries on April 1, 1993. Mr. Fenton's severance in the amount of $450,000
pursuant to the Original Agreement is being paid in periodic installments which
commenced after April 1, 1993.
In addition, Mr. Fenton entered into an employment agreement with the
Company dated as of February 25, 1993 (as amended, the "New Agreement") which
provides for his employment with the Company for a term commencing April 1, 1993
and ending April 1, 1995. During the term of the New Agreement, Mr. Fenton will
work on such special projects as may be assigned to him from time to time at an
annual base salary of $150,000 for his first year of employment thereunder and
$75,000 for his second year of employment thereunder; provided, that, upon the
Company's prior approval, any services rendered by Mr. Fenton in excess of 1000
hours during his first year of employment and 500 hours during his second year
of employment will be separately compensated for at the rate of $200 per hour.
The New Agreement provides that Mr. Fenton's employment will not be
involuntarily terminated without cause.
In July 1990, the Company entered into an employment agreement with Ms.
Philipp at an initial base salary of $225,000 per year with a minimum cash bonus
equal to 30% of base salary for the first year of employment. The initial term
of the agreement commenced September 1990 and ended January 30, 1993, with
automatic one
27
year renewals thereafter. In the event of involuntary termination for reasons
other than cause, including the Company's failure to renew the agreement, any
requirement that Ms. Philipp's office be relocated or any change in control (as
defined), the agreement provides for severance benefits equal to Ms. Philipp's
base salary then in effect for a period of one year from the termination date
plus the pro rata portion of any cash bonuses she would have received had she
been employed for the entire fiscal year.
In May 1991, Kayser-Roth entered into an employment agreement with Mr.
Seelert at an initial base salary of $300,000 per year with minimum cash bonuses
of $150,000 per year for fiscal 1991 and fiscal 1992. The initial term of the
agreement expired May 1, 1993, but was extended until May 1, 1994. In the event
of involuntary termination for reasons other than cause, the agreement provides
for severance benefits equal to his base salary then in effect plus his minimum
bonus for the entire remaining portion of his term of employment. Following the
sale of Kayser-Roth by Group, Mr. Seelert resigned on January 28, 1994.
In March 1992, the Company entered into an employment agreement with Mr.
McKittrick, which was amended as of April 1994. The agreement, as amended,
provides for an initial base salary of $350,000 per year and a cash bonus of not
less than $87,500 for the six months ending July 30, 1994. Pursuant to the
agreement, as amended, Mr. McKittrick ceased to be Vice Chairman and Chief
Operating Officer on April 4, 1994 and became principal financial and accounting
officer with limited responsibilities for a transitional period. The term of the
agreement, as amended, ends July 30, 1994, unless extended by written agreement
of the parties. In the event of termination for reasons other than cause prior
to the expiration of the term of employment (other than a voluntary termination
by Mr. McKittrick prior to July 1, 1994), the agreement provides for payment of
(i) base salary then in effect for the remaining portion of the term of
employment (or, in the case of a voluntary termination, until the termination
date) plus (ii) a pro rata portion of $87,500 (representing the cash bonus for
the current period). In addition, in the event of termination for reasons other
than cause (including for this purpose the expiration of the term of
employment), the agreement, as amended, also provides for payment of (i) the
amount of $17,000 as a retirement severance benefit in addition to the value of
Mr. McKittrick's vested accounts under the PSP and C&A Co. Plan plus (ii) any
amount payable with respect to Mr. McKittrick's phantom equity award. Mr.
McKittrick's award, which was made pursuant to his employment agreement with the
Company, represents phantom equity in Holdings in the amount of $1,000,000 and
vests at the rate of $200,000 per year, with cliff vesting for the first two
years and continuous vesting thereafter (provided Mr. McKittrick does not
voluntarily terminate his employment prior to July 1, 1994). Upon the
termination of Mr. McKittrick's employment without cause, Mr. McKittrick will
receive the vested portion of his phantom equity.
In July 1992, C&A Co. entered into an employment agreement with Mr. Hannah,
which was amended as of February 1994. The agreement, as amended, provides for
an initial base salary of $525,000 and participation in any executive bonus
plan, with a target bonus of 75% of base salary then in effect up to a maximum
of 150% of base salary. The agreement expires January 31, 1997, with automatic
one year renewals thereafter unless C&A Co. notifies Mr. Hannah prior to that
time of its intention to terminate the agreement. In the event of involuntary
termination for reasons other than cause and other than a change of control, the
agreement provides for severance benefits equal to Mr. Hannah's base salary then
in effect for a period of one year from the termination date plus any unpaid
cash bonus for the prior fiscal year and a pro rata portion of any bonus he
would have received had he been employed for the entire fiscal year. C&A Co.
also entered into a letter agreement with Mr. Hannah in May 1991 pursuant to
which Mr. Hannah is entitled to receive an amount equal to two times his base
salary then in effect in the event his employment is terminated by C&A Co.
within three months prior to or one year following a change of control (as
defined) of C&A Co.
In August 1992, Group entered into a letter agreement with Mr. Meeks
pursuant to which Mr. Meeks became an officer of Group at an initial base salary
of $125,000 per year. Mr. Meeks' employment is on an "at will" basis and may be
terminated by Mr. Meeks or Group at any time. The letter agreement provides that
Mr. Meeks is eligible for benefits under the Group severance policy in existence
at the date of the letter agreement (the "Existing Severance Policy") for a
period of 24 months following a change of control (as defined) of Group. The
Existing Severance Policy generally provides for 1.5 weeks of base salary per
year of service, with a minimum of 12 weeks and a maximum of 39 weeks. After 24
months following a change of control, Mr. Meeks will be eligible for severance
benefits under such policy as may be effective at that time within the then
current
28
organization for persons who may be reasonably considered to have positions
comparable to Mr. Meeks' at that time. If, as a result of a change of control or
other organizational change, a position is offered to Mr. Meeks that is not
reasonably comparable to his then current position, Mr. Meeks has the option of
terminating his employment with severance benefit eligibility per the Existing
Severance Policy.
COMPENSATION OF DIRECTORS
Each director of the Company (or the Partner who designates such director
to the Board of Directors) receives an annual fee of $15,000, payable quarterly,
for serving as a director. See "ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT -- Certain Agreements" and "ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is currently comprised of Mr.
Stockman, Co-Chairman of the Board and Co-Chief Executive Officer of the
Company, and Mr. Weisenburger, Deputy Chairman of the Company. Prior to July 20,
1993, the Company's Compensation Committee was comprised of Mr. Birle, who was
at that time Co-Chairman of the Board and Co-Chief Executive Officer, and Mr.
Weisenburger. None of Mr. Stockman, Mr. Weisenburger or Mr. Birle is separately
compensated for serving as an executive officer of the Company or any of its
subsidiaries. Mr. Stockman (after July 20, 1993), Mr. Birle (through July 20,
1993) and Mr. Weisenburger deliberated during the last completed fiscal year
concerning compensation of executive officers of the Company who are separately
compensated for serving as executive officers of the Company. None of the
executive officers of the Company who are separately compensated for serving as
executive officers of the Company serve as directors of the Company or serve on
the Compensation Committee of the Company.
Messrs. Birle and Stockman are general partners of Blackstone Group,
Blackstone Management and Blackstone Management Associates L.P. ("Blackstone
Associates"). Mr. Weisenburger is a Managing Director of WP & Co., which is a
subsidiary of WP Group. WP Group formed WP Partners. See "ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -- Certain Affiliations."
Group has agreed to pay to each of Blackstone Management and WP & Co. or
their affiliates an annual operating management fee of $1 million. This fee was
paid upon the consummation of the Merger and, thereafter, on each subsequent
anniversary of the consummation of the tender offer in which Holdings acquired
its shares of the Company's Common Stock. Also, effective April 1, 1990, the
Company agreed to pay to each of Blackstone Management and WP & Co. or their
affiliates an annual management and financial advisory services fee of $1.5
million, payable quarterly in advance. Group also reimburses Blackstone
Management and WP & Co. or their affiliates for out-of-pocket expenses in
connection with their management.
The Board of Directors of the Company has authorized the investment by the
Company from time to time of amounts not to exceed $5 million in a short-term
investment fund to which Blackrock Financial Management L.P. serves as
investment advisor. Blackrock Financial Management L.P., an affiliate of
Blackstone, charges annual management fees equal to .3% of the amount invested,
plus nominal out of pocket expenses. Since the beginning of fiscal 1993, the
Company has paid to Blackrock Financial Management L.P. fees of approximately
$7,000.
Since the beginning of fiscal 1993, in connection with the divestiture of
the Engineering Group, Group has paid divestiture fees (i) to Blackstone
Management in the amount of approximately $512,500 and (ii) to WP & Co. and WP
Partners in an aggregate amount of $512,500. Since the beginning of fiscal 1993,
in connection with the consummation of two credit agreements by Group's former
subsidiary, Kayser-Roth, Group has paid fees (i) to Blackstone Management in the
amount of $375,000 and (ii) to WP & Co. and WP Partners in an aggregate amount
of $375,000. Since the beginning of fiscal 1993, Group has paid $1,394,000 to
each of Blackstone Management and WP & Co. or their affiliates in connection
with the divestiture of Kayser-Roth.
In September 1993, Blackstone entered into an agreement with Group to
provide advisory services and assistance in connection with the sale or
disposition by Group of Builders Emporium. The agreement provides for
29
reimbursement of out-of-pocket expenses plus payment of fees to be paid by Group
to Blackstone of (i) $100,000 per fiscal month, commencing with the fiscal month
ending September 25, 1993 and ending with the fiscal month ending January 29,
1994 and (ii) $100,000 for the fiscal quarter commencing January 30, 1994 and
ending April 30, 1994. Since the beginning of fiscal 1993, Group has paid
$600,000 under this agreement. In addition, Blackstone negotiated with Arkaid
Incorporated, a real estate consultant ("Arkaid"), to receive 20% of the
incentive fees payable to Arkaid by the Company in connection with the
resolution of lease liabilities of Builders Emporium. Since the beginning of
fiscal 1993, no such incentive fees have been accrued or paid to Arkaid.
Wasserstein Perella Securities, Inc. ("WP Securities"), a wholly owned
subsidiary of WP Group, has acted, and may in the future act, as agent for the
Company in the purchase from time to time of the Company's debt securities,
although no amounts have been paid or accrued to WP Securities for this purpose
since the beginning of fiscal 1993.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth in the table below is certain information as of April 28, 1994,
regarding the beneficial ownership of voting securities of the Company by
persons who are known to the Company to own beneficially more than 5% of the
Company's voting stock.
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS
Common Stock.................. Collins & Aikman Holdings Corporation 47,808,123(1) 100.00%
8320 University Executive Park
Suite 102
Charlotte, North Carolina 28262
Collins & Aikman Holdings II 47,808,123(1) 100.00%
Corporation
8320 University Executive Park
Suite 102
Charlotte, North Carolina 28262
Blackstone Capital Partners L.P. 47,808,123(1) 100.00%
118 North Bedford Road
Suite 300
Mount Kisco, New York 10549
Wasserstein Perella Partners, L.P. 47,808,123(1) 100.00%
31 West 52nd Street
New York, New York 10019
(1) See "Certain Affiliations" below.
SECURITY OWNERSHIP OF MANAGEMENT
Executive officers and directors of the Company as a group (15 persons)
beneficially own: (i) no shares of Common Stock; (ii) no shares of the Company's
$2.50 Convertible Preferred Stock, Series A, par value $.10 per share (the
"Series A Preferred Stock"); (iii) no shares of the Company's 15 1/2% Junior
Cumulative Exchangeable Redeemable Preferred Stock, par value $0.10 per share
("Intermediate Preferred Stock"); (iv) no shares of the 15 1/2% Cumulative
Exchangeable Redeemable Preferred Stock, par value $0.01 per share (the "Merger
Preferred Stock"), of Holdings; and (v) no shares of Holdings Common Stock. For
further information regarding the securities ownership of the directors of the
Company, see "Certain Affiliations" below.
Messrs. Birle, Stockman, Wasserstein, McKittrick, Meeks, Hannah and Seelert
and Ms. Philipp beneficially own the following securities of the Company and
Holdings: (i) no shares of Common Stock; (ii) no shares of Series A Preferred
Stock; (iii) no shares of Intermediate Preferred Stock; (iv) no shares of Merger
Preferred Stock; and (v) no shares of Holdings Common Stock. For further
information regarding the securities ownership of Messrs. Birle, Stockman and
Wasserstein, see "Certain Affiliations" below. Mr. Fenton beneficially owns the
following securities of the Company and Holdings: (i) no shares of Common Stock;
(ii) no shares of Series A
30
Preferred Stock; (iii) no shares of Intermediate Preferred Stock; (iv) 11 shares
of Merger Preferred Stock (less than 1% of this class); and (v) no shares of
Holdings Common Stock.
CERTAIN AFFILIATIONS
Blackstone Partners is a Delaware limited partnership formed in 1987 for
the purpose of, among other things, (i) committing capital to facilitate
corporate restructuring, leveraged buyouts, bridge financings and other
investments and (ii) capitalizing affiliates which will engage in investment and
merchant banking activities. The sole general partner of Blackstone Partners is
Blackstone Associates, a Delaware limited partnership, whose general partners
include Messrs. Birle, Schwarzman and Stockman. At present, the business of
Blackstone Associates consists of performing the function of, and serving as,
the general partner of certain limited partnerships, including Blackstone
Partners. Messrs. Birle, Schwarzman and Stockman are also general partners of
Blackstone Management.
WP Partners is a Delaware limited partnership, the general partner of which
is WP Management. Mr. Wasserstein is Chairman and Chief Executive Officer of WP
Management and of WP Group. WP Partners was formed by WP Group for the purpose
of participating in merchant banking activities, including committing capital to
the organization and consummation of leveraged buyout transactions. WP
Management and WP Group are both Delaware corporations. WP Management is engaged
in managing WP Partners. WP Group is an international private advisory and
merchant banking firm. The principal subsidiary of WP Group is WP & Co., an
international investment banking firm.
Holdings and Holdings II are both Delaware corporations formed on September
21, 1988, in connection with the tender offer for the Common Stock and the
Merger. The presently outstanding 35,035,000 shares of Holdings Common Stock are
all owned by Holdings II. Each of Blackstone Partners and WP Partners owns one-
half of the 204,502 shares of common stock, par value $1.00 per share, that
constitute the only outstanding voting stock of Holdings II. WP Partners and
Blackstone Partners and certain of their affiliates own the outstanding Class A
common stock of Holdings II, shares of which have no voting power but otherwise
are identical to the common stock of Holdings II.
No director of the Company beneficially owns any shares of Common Stock,
Series A Preferred Stock or Intermediate Preferred Stock. In addition, no
director beneficially owns any shares of any class of equity securities of
Holdings. Messrs. Birle, Schwarzman and Stockman, in their capacities as general
partners of Blackstone Associates, collectively share with all the general
partners of Blackstone Associates the power to vote and to dispose of 102,251
shares of the outstanding voting common stock of Holdings II (representing 50%
of such class of stock) and the power to dispose of 10,250 shares of the
outstanding non-voting Class A common stock of Holdings II (representing
approximately 22.5% of such class of stock). Similarly, Messrs. Wasserstein,
Weisenburger and Ziebold, in their capacities as executive officers or officers
of WP Group, may be deemed to have the power to vote and to dispose of 102,251
shares of the outstanding voting common stock of Holdings II (representing 50%
of such class of stock) and the power to dispose of 19,625 shares of the
outstanding non-voting Class A common stock of Holdings II (representing
approximately 43.1% of such class of stock). For purposes of this filing under
the Securities Exchange Act of 1934, as amended, Messrs. Birle, Schwarzman and
Stockman, on the one hand, and Messrs. Wasserstein, Weisenburger and Ziebold, on
the other hand, may be deemed to be beneficial owners, respectively, of such
securities; however, each of Messrs. Birle, Schwarzman, Stockman, Wasserstein,
Weisenburger and Ziebold expressly disclaims such beneficial ownership of any
equity securities of Holdings II.
CERTAIN AGREEMENTS
Blackstone Partners, WP Partners, Holdings II and Holdings have entered
into a Stockholders Agreement, as amended (the "Stockholders Agreement")
relating to the corporate governance, management and ownership of Holdings II
and its subsidiaries. Among other things, the Stockholders Agreement provides
that Blackstone Partners and WP Partners each shall designate one-half of the
directors of Holdings II, Holdings and the Company.
31
The Stockholders Agreement also places limitations on the redemption, purchase
and transfer of any equity securities of Holdings II or its subsidiaries.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This Item calls for the information required by Item 404 of Regulation S-K.
Pursuant to Instruction 1 to Item 404 of Regulation S-K, no information need be
given in response to Item 404 as to any compensation or transaction reported in
response to Item 402 of Regulation S-K. The compensation or transactions that
would otherwise be required hereunder are set forth under "ITEM 11. EXECUTIVE
COMPENSATION -- Compensation Committee Interlocks and Insider Participation"
pursuant to Item 402(j) of Regulation S-K and as such are not required to be set
forth under this ITEM 13.
For a description of the relationships of the Company's directors with any
of Blackstone Group, Blackstone Partners, Blackstone Management, WP Partners, WP
& Co. or WP Management, see "ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT" and "ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT -- Certain Affiliations" above.
32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE
NUMBER
(A)(1) INDEX TO FINANCIAL STATEMENTS.
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
Report of Independent Public Accountants.................................................. F-1
Consolidated Statements of Operations for the fiscal years ended January 29, 1994, January
30, 1993 and January 25, 1992............................................................ F-2
Consolidated Balance Sheets at January 29, 1994 and January 30, 1993...................... F-3
Consolidated Statements of Other Paid in Capital for the fiscal years ended January 29,
1994, January 30, 1993 and January 25, 1992.............................................. F-4
Consolidated Statements of Accumulated Deficit for the fiscal years ended January 29,
1994, January 30, 1993 and January 25, 1992.............................................. F-4
Consolidated Statements of Cash Flows for the fiscal years ended January 29, 1994, January
30, 1993 and January 25, 1992............................................................ F-5
Notes to Consolidated Financial Statements................................................ F-6
(A)(2) INDEX OF FINANCIAL SCHEDULES.
Report of Independent Public Accountants on Schedules..................................... S-1
Schedule III-Condensed Financial Information of the Registrant............................ S-2
Schedule VIII-Valuation and Qualifying Accounts........................................... S-5
Schedule IX-Short-Term Borrowings......................................................... S-6
Schedule X-Supplementary Statements of Operations Information............................. S-7
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are omitted
because they are not required, are inapplicable, or the information is included
in the consolidated financial statements or notes thereto.
(A)(3) EXHIBITS.
Please note that in the following description of exhibits, the title of any
document entered into, or filing made, prior to and in some cases on July 15,
1992 reflects the name of the entity a party thereto or filing, as the case may
be, AT SUCH TIME. Accordingly, documents and filings described below may refer
to WCI Holdings II Corporation, WCI Holdings Corporation or Wickes Companies,
Inc., if such documents and filings were made prior to and in some cases on July
15, 1992.
EXHIBIT
NUMBER DESCRIPTION
3.1 -- Restated Certificate of Incorporation of Collins & Aikman Group, Inc.
3.2 -- By-Laws of Collins & Aikman Group, Inc.
3.3 -- Certificate of Merger merging WCI Acquisition Corporation, a Delaware corporation, with and
into Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.), a Delaware
corporation, is hereby incorporated by reference to Exhibit 3.3 of Wickes Companies, Inc.'s
Report on Form 10-K for the fiscal year ended January 28, 1989 (SEC File No. 1-6761).
3.4 -- Certificate of Correction Filed to Correct Certain Errors in the Certificate of Merger
merging WCI Acquisition Corporation with and into Collins & Aikman Group, Inc. (formerly
named Wickes Companies, Inc.) is hereby incorporated by reference to Exhibit 3.4 of Wickes
Companies, Inc.'s Report on Form 10-K for the fiscal year ended January 27, 1990.
33
EXHIBIT
NUMBER DESCRIPTION
4.1 -- Specimen certificate representing the 15 1/2% Junior Cumulative Exchangeable Redeemable
Preferred Stock of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) is
hereby incorporated by reference to Exhibit 4.1 of Wickes Companies, Inc.'s Report on Form
10-K for the fiscal year ended January 28, 1989 (SEC File No. 1-6761).
4.2 -- Specimen certificate of Common Stock, par value $0.10 per share, of Collins & Aikman Group,
Inc. (formerly named Wickes Companies, Inc.) is hereby incorporated by reference to Exhibit
4(a) of Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year ended January 30,
1988 (SEC File No. 1-6761).
4.3 -- Indenture dated as of January 26, 1985, pursuant to which 7 1/2%/10% Debentures due 2005 of
Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) were issued is hereby
incorporated by reference to Exhibit T3-C of Wickes Companies, Inc.'s Application for
Qualification of Indentures under the Trust Indenture Act of 1939 on Form T-3, as amended,
dated January 2, 1985 (SEC File No. 22-13520).
4.4 -- Indenture dated as of May 1, 1985, pursuant to which 11 3/8% Usable Subordinated Debentures
due 1997 of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) were
issued is hereby incorporated by reference to Exhibit 4(f) of Wickes Companies, Inc.'s
Current Report on Form 8-K dated May 21, 1985 (SEC File No. 1-6761).
4.5 -- Indenture dated as of May 1, 1985, pursuant to which 15% Subordinated Notes due 1995 of
Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) were issued is hereby
incorporated by reference to Exhibit 4(g) of Wickes Companies, Inc.'s Current Report on
Form 8-K dated May 21, 1985 (SEC File No. 1-6761).
4.6 -- Indenture dated as of June 1, 1986, pursuant to which 11 7/8% Senior Subordinated
Debentures due 2001 of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.)
were issued is hereby incorporated by reference to Exhibit 4 to Amendment No. 3 to Wickes
Companies, Inc.'s Registration Statement on Form S-3 (Registration No. 33-4401) filed June
5, 1986.
4.7 -- First Supplemental Indenture dated as of January 29, 1993, by and between Collins & Aikman
Group, Inc. and Bank One, Columbus, NA regarding 11 7/8% Senior Subordinated Debentures due
2001 of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) is hereby
incorporated by reference to Exhibit 4.11 of Collins & Aikman Group Inc.'s Report on Form
10-K for the fiscal year ended January 30, 1993.
4.8 -- Second Supplemental Indenture dated as of January 29, 1993, by and between Collins & Aikman
Group, Inc. and Bank One, Columbus, NA regarding 11 7/8% Senior Subordinated Debentures due
2001 of Collins & Aikman Group, Inc. (formerly named Wickes Companies, Inc.) is hereby
incorporated by reference to Exhibit 4.12 of Collins & Aikman Group Inc.'s Report on Form
10-K for the fiscal year ended January 30, 1993.
4.9 -- Second Amendment and Restatement of Credit Agreement dated as of April 8, 1994, among
Collins & Aikman Group, Inc. and Continental Bank, N.A., Individually and as Issuing Bank.
4.10 -- Credit Agreement dated as of May 15, 1991, among Collins & Aikman Corporation, certain
subsidiaries of Collins & Aikman Corporation, the financial institutions party thereto and
Continental Bank N.A., as Agent,is hereby incorporated by reference to Exhibit 4.18 of
Wickes Companies, Inc.'s Report on Form 10-Q for the quarter ended April 27, 1991.
34
EXHIBIT
NUMBER DESCRIPTION
4.11 -- First Amendment to Credit Agreement dated as of March 11, 1992, among Collins & Aikman
Corporation, certain subsidiaries of Collins & Aikman Corporation, the financial
institutions party thereto and Continental Bank N.A., as Agent, is hereby incorporated by
reference to Exhibit 4.21 of Wickes Companies Inc. Report on Form 10-K for the fiscal year
ended January 25, 1992.
Collins & Aikman Group, Inc. agrees to furnish to the Commission upon request in accordance
with Item 601(b)(4)(iii)(A) of Regulation S-K copies of instruments defining the rights of
holders of long-term debt of Collins & Aikman Group, Inc. or any of its subsidiaries, which
debt does not exceed 10% of the total assets of Collins & Aikman Group, Inc. and its
subsidiaries on a consolidated basis.
10.1 -- Stockholders Agreement dated as of December 6, 1988, among Blackstone Capital Partners
L.P., Wasserstein Perella Partners, L.P., WCI Holdings II Corporation, WCI Holdings
Corporation and WCI Acquisition Corporation is hereby incorporated by reference to Exhibit
10.1 of the Registration Statement on Form S-4 of WCI Holdings Corporation and Wickes
Companies, Inc. (Registration No. 33-27143) filed February 22, 1989.
10.2 -- Amendment No.1 to Stockholders Agreement dated as of May 1, 1992 to Stockholders Agreement
dated as of December 6, 1988, among Blackstone Capital Partners L.P., Wasserstein Perella
Partners, L.P., Collins & Aikman Holdings II Corporation, Collins & Aikman Holdings
Corporation, and Collins & Aikman Group, Inc. is hereby incorporated by reference to
Exhibit 10.5 of Collins & Aikman Group, Inc.'s Report on Form 10-Q for the quarter ended
October 24, 1992.
10.3 -- Employment Agreements dated as of June 16, 1989 between Wickes Companies, Inc. and certain
executive officers is hereby incorporated by reference to Exhibit 10.1 of Wickes Companies,
Inc.'s Report on Form 10-K for the fiscal year ended January 27, 1990.*
10.4 -- First Amendment to Employment Agreements dated as of March 20, 1990 between Wickes
Companies, Inc. and certain executive officers is hereby incorporated by reference to
Exhibit 10.2 of Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year ended
January 27, 1990.*
10.5 -- Employment Agreement dated as of July 18, 1990 between Wickes Companies, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.3 of Wickes Companies,
Inc.'s Report on Form 10-K for the fiscal year ended January 26, 1991.*
10.6 -- Agreement dated as of February 25, 1993 and First Amendment dated as of March 29, 1993
between Collins & Aikman Group, Inc. and a former executive officer is hereby incorporated
by reference to Exhibit 10.8 of Collins & Aikman Group Inc.'s Report on Form 10-K for the
fiscal year ended January 30, 1993.*
10.7 -- Employment Agreement dated as of May 1, 1991 between Kayser-Roth Corporation and an
executive officer is hereby incorporated by reference to Exhibit 10.6 of Collins & Aikman
Group Inc.'s Report on Form 10-K for the fiscal year ended January 30, 1993.*
10.8 -- First Amendment to Employment Agreement dated as of May 1, 1991 between Kayser-Roth
Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.7 of
Collins & Aikman Group, Inc.'s Report on Form 10-Q for the quarter ended July 31, 1993.*
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form
pursuant to Item 14(c) of this report.
35
EXHIBIT
NUMBER DESCRIPTION
10.9 -- Letter Agreement dated as of May 16, 1991 and Employment Agreement dated as of July 22,
1992 between Collins & Aikman Corporation and an executive officer is hereby incorporated
by reference to Exhibit 10.5 of Collins & Aikman Group Inc.'s Report on Form 10-K for the
fiscal year ended January 30, 1993.*
10.10 -- First Amendment to Employment Agreement dated as of February 24, 1994 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit
10.7 of the Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation
(File No. 33-53179) filed April 19, 1994.*
10.11 -- Letter Agreements dated as of May 16, 1991 between Collins & Aikman Corporation and certain
executive officers is hereby incorporated by reference to Exhibit 10.14 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No. 33-53179) filed
April 19, 1994.*
10.12 -- Employment Agreement dated as of February 1, 1992 between Collins & Aikman Corporation and
an executive officer is hereby incorporated by reference to Exhibit 10.15 of the
Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No.
33-53179) filed April 19, 1994.*
10.13 -- Agreement dated as of March 23, 1992 between Collins & Aikman Group, Inc. and an executive
officer is hereby incorporated by reference to Exhibit 10.4 of Collins & Aikman Group
Inc.'s Report on Form 10-K for the fiscal year ended January 30, 1993.*
10.14 -- First Amendment to Agreement dated as of April 4, 1994 between Collins & Aikman Group, Inc.
and an executive officer.*
10.15 -- Employment Agreement dated as of April 27, 1992 between Collins & Aikman Corporation and an
executive officer is hereby incorporated by reference to Exhibit 10.16 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No. 33-53179) filed
April 19, 1994.*
10.16 -- Letter Agreement dated as of August 12, 1992 between Collins & Aikman Group, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.7 of Collins & Aikman
Group Inc.'s Report on Form 10-K for the fiscal year ended January 30, 1993.*
10.17 -- Employment Agreement dated as of March 1, 1993 between Imperial Wallcoverings, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.17 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No. 33-53179) filed
April 19, 1994.*
10.18 -- Employment Agreement dated as of October 1, 1993 between Collins & Aikman Corporation and
an executive officer is hereby incorporated by reference to Exhibit 10.18 of the
Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No.
33-53179) filed April 19, 1994.*
10.19 -- The Wickes Equity Share Plan, is hereby incorporated by reference to Exhibit 10.8 of
Collins & Aikman Group Inc.'s Report on Form 10-K for the fiscal year ended January 30,
1993.*
10.20 -- Warrant Agreement dated as of January 8, 1994 by and between Collins & Aikman Group, Inc.
and Legwear Acquisition Corporation is hereby incorporated by reference to Exhibit 10.20 of
Collins & Aikman Holdings Corporation's Form 10-K for the fiscal year ended January 29,
1994.
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form
pursuant to Item 14(c) of this report.
36
EXHIBIT
NUMBER DESCRIPTION
10.21 -- 1993 Employee Stock option Plan is hereby incorporated by reference to Exhibit 10.12 of the
Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No.
33-53179) filed April 19, 1994.
10.22 -- 1994 Employee Stock option Plan is hereby incorporated by reference to Exhibit 10.13 of the
Registration Statement on Form S-2 of Collins & Aikman Holdings Corporation (File No.
33-53179) filed April 19, 1994.
10.23 -- Acquisition Agreement dated as of November 22, 1993 as amended and restated as of January
28, 1994, among Collins & Aikman Group, Inc., Kayser-Roth Corporation and Legwear
Acquisition Corporation is hereby incorporated by reference to Exhibit 2.1 of Collins &
Aikman Group, Inc.'s Current Report on Form 8-K dated February 10, 1994.
21 -- List of subsidiaries of Collins & Aikman Group, Inc.
(B) REPORTS ON FORM 8-K.
No current reports on Form 8-K were filed during the year for which this
report on Form 10-K is filed.
37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 3rd day of May,
1994.
COLLINS & AIKMAN GROUP, INC.
By: /s/ DAVID A. STOCKMAN By: /s/ BRUCE WASSERSTEIN
David A. Stockman Bruce Wasserstein
CO-CHAIRMAN OF THE BOARD OF DIRECTORS CO-CHAIRMAN OF THE BOARD OF DIRECTORS
AND CO-CHIEF EXECUTIVE OFFICER AND CO-CHIEF EXECUTIVE OFFICER
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.
SIGNATURE TITLE DATE
/s/ DAVID A. STOCKMAN Co-Chairman of the Board of Directors May 3, 1994
and Co-Chief Executive Officer
David A. Stockman
/s/ BRUCE WASSERSTEIN Co-Chairman of the Board of Directors May 3, 1994
and Co-Chief Executive Officer
Bruce Wasserstein
/s/ RANDALL J. WEISENBURGER Vice Chairman and Director May 3, 1994
Randall J. Weisenburger
/s/ DAVID J. MCKITTRICK Principal Financial and Accounting Officer May 3, 1994
David J. McKittrick
/s/ JAMES R. BIRLE Director May 3, 1994
James R. Birle
/s/ STEPHEN A. SCHWARZMAN Director May 3, 1994
Stephen A. Schwarzman
/s/ W. TOWNSEND ZIEBOLD, JR. Director May 3, 1994
W. Townsend Ziebold, Jr.
38
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Collins & Aikman Group, Inc.:
We have audited the accompanying consolidated balance sheets of Collins &
Aikman Group, Inc. (a Delaware corporation) and subsidiaries as of January 29,
1994 and January 30, 1993, and the related consolidated statements of
operations, other paid-in capital, accumulated deficit and cash flows for each
of the three fiscal years in the period ended January 29, 1994. 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 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 financial statements referred to above present fairly,
in all material respects, the financial position of Collins & Aikman Group, Inc.
and subsidiaries as of January 29, 1994 and January 30, 1993, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 29, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 11 to the Consolidated Financial Statements,
the Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" in the
fiscal year ended January 25, 1992.
ARTHUR ANDERSEN & CO.
Charlotte, North Carolina,
April 27, 1994.
F-1
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Net sales............................................................... $ 1,305,517 $ 1,277,500 $ 1,184,316
Cost of goods sold...................................................... 995,790 978,473 915,486
Selling, general and administrative expenses............................ 219,028 241,057 224,878
Management equity plan expense.......................................... 26,736 -- --
Restructuring costs..................................................... -- 10,000 --
Goodwill write-down..................................................... 144,800 -- --
1,386,354 1,229,530 1,140,364
Operating income (loss)................................................. (80,837) 47,970 43,952
Interest expense, net of interest income of $4,328, $3,958 and $6,935... 84,241 87,075 87,674
Loss from continuing operations before income taxes..................... (165,078) (39,105) (43,722)
Income taxes............................................................ 11,614 2,299 15,848
Loss from continuing operations......................................... (176,692) (41,404) (59,570)
Discontinued operations:
Income (loss) from operations, net of income taxes (benefit) of
($467), $1,234 and $2,560.......................................... (4,462) (45,849) 3,669
Loss on disposals, net of income tax benefit of $344,
$0 and $0.......................................................... (111,137) (184,000) (38,000)
Loss before extraordinary item.......................................... (292,291) (271,253) (93,901)
Extraordinary gain on early retirement of debt, net of income
taxes of $362......................................................... -- -- 10,949
Cumulative effect on prior years (to January 26, 1991) of change
in accounting principle, net of income taxes of $0.................... -- -- (87,563)
Net loss................................................................ $ (292,291) $ (271,253) $ (170,515)
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-2
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JANUARY 29, JANUARY 30,
1994 1993
ASSETS
Current Assets:
Cash and cash equivalents........................................................... $ 78,363 $ 80,141
Accounts and notes receivable, net.................................................. 200,368 164,655
Inventories......................................................................... 176,062 165,864
Net assets of discontinued operations............................................... -- 205,131
Receivable from sale of business.................................................... 70,000 --
Other............................................................................... 53,397 23,370
Total current assets............................................................. 578,190 639,161
Property, plant and equipment, net.................................................... 292,600 292,434
Goodwill.............................................................................. 612,042 778,776
Other assets.......................................................................... 57,378 102,810
$ 1,540,210 $ 1,813,181
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Notes payable....................................................................... $ 3,789 $ 9,067
Current maturities of long-term debt................................................ 25,895 61,287
Accounts payable.................................................................... 85,591 75,996
Accrued expenses.................................................................... 140,514 166,049
Other............................................................................... 2,671 1,387
Total current liabilities........................................................ 258,460 313,786
Long-term debt........................................................................ 733,448 784,658
Deferred income taxes................................................................. 640 4,823
Other, including postretirement benefit obligation.................................... 337,186 220,475
Commitments and contingencies (Note 17)...............................................
Redeemable preferred stock (aggregate preference in liquidation $129)................. 132 165
Preferred stock (aggregate preference in liquidation $45,145)......................... 181 181
Common stock (47,808 shares issued and outstanding)................................... 4,781 4,781
Other paid-in capital................................................................. 1,001,126 974,339
Accumulated deficit................................................................... (782,179) (485,355)
Foreign currency translation adjustments.............................................. 309 1,174
Pension equity adjustment............................................................. (13,874) (5,846)
Total stockholder's equity....................................................... 210,344 489,274
$ 1,540,210 $ 1,813,181
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-3
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OTHER PAID-IN CAPITAL
(IN THOUSANDS)
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Balance at beginning of year.............................................. $ 974,339 $ 974,559 $ 974,559
Management equity plan.................................................... 26,736 -- --
Other..................................................................... 51 (220) --
Balance at end of year.................................................... $ 1,001,126 $ 974,339 $ 974,559
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT
(IN THOUSANDS)
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Balance at beginning of year............................................... $(485,355) $(209,588) $ (34,558)
Net loss................................................................... (292,291) (271,253) (170,515)
Preferred stock dividends declared......................................... (4,533) (4,514) (4,515)
Balance at end of year..................................................... $(782,179) $(485,355) $(209,588)
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-4
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
OPERATING ACTIVITIES
Loss from continuing operations............................................ $(176,692) $ (41,404) $ (59,570)
Adjustments to derive cash flow from continuing operating activities:
Depreciation and amortization............................................ 75,225 79,562 78,456
Management equity plan expense........................................... 26,736 -- --
Goodwill write-down...................................................... 144,800 -- --
Restructuring costs...................................................... -- 10,000 --
Decrease in accounts and notes receivable................................ (33,232) (149) (7,166)
Decrease (increase) in inventories....................................... (7,303) 4,308 12,269
Increase (decrease) in accounts payable.................................. 14,145 130 (2,874)
Other, net............................................................... (15,698) (24,703) (30,643)
Net cash provided by (used in) continuing operating activities...... 27,981 27,744 (9,528)
Loss from discontinued operations.......................................... (115,599) (229,849) (34,331)
Adjustments to derive cash flow from discontinued operating activities:
Loss on disposals........................................................ 111,137 184,000 38,000
Depreciation and amortization............................................ 18,075 24,082 24,475
Net change in receivables, inventory and accounts payable................ 70,162 24,163 5,634
Other, net............................................................... (151,192) (15,854) (20,243)
Net cash provided by (used in) discontinued operating
activities....................................................... (67,417) (13,458) 13,535
INVESTING ACTIVITIES
Additions to property, plant and equipment................................. (56,278) (54,181) (61,899)
Sales of property, plant and equipment..................................... 22,710 10,347 7,522
Proceeds from businesses sold.............................................. 148,743 -- 5,598
Other, net................................................................. 43,983 9,223 28,743
Net cash provided by (used in) investing activities................... 159,158 (34,611) (20,036)
FINANCING ACTIVITIES
Issuance of long-term debt................................................. 76,135 60,128 157,587
Reduction of long-term debt and capital lease obligations.................. (179,940) (54,376) (182,760)
Net proceeds (reduction) of short-term borrowings.......................... (5,899) 3,554 (1,057)
Dividends paid............................................................. (4,515) (4,514) (4,515)
Other, net................................................................. (7,281) (2,863) (459)
Net cash provided by (used in) financing activities................... (121,500) 1,929 (31,204)
Decrease in cash and cash equivalents...................................... (1,778) (18,396) (47,233)
Cash and cash equivalents at beginning of year............................. 80,141 98,537 145,770
Cash and cash equivalents at end of year................................... $ 78,363 $ 80,141 $ 98,537
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-5
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR -- The fiscal year of Collins & Aikman Group, Inc. ("Group" or
the "Company") ends on the last Saturday of January. Fiscal 1993 and fiscal 1991
were 52 week years which ended on January 29, 1994 and January 25, 1992,
respectively. Fiscal 1992 was a 53 week fiscal year which ended on January 30,
1993.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE -- Effective as of the
beginning of fiscal 1991, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS 106"). SFAS 106 requires accrual, during the period in which
eligible employees render service, of the expected cost of providing these
benefits to an employee and the employee's beneficiaries and covered dependents.
The Company has recorded the cumulative effect at January 26, 1991, net of tax
of $0, of $87.6 million as of the beginning of fiscal 1991.
ACQUISITION BY COLLINS & AIKMAN HOLDINGS CORPORATION -- On October 25,
1988, the Company, Collins & Aikman Holdings II Corporation (formerly WCI
Holdings II Corporation) ("Holdings II") and Collins & Aikman Holdings
Corporation (formerly WCI Holdings Corporation) ("Holdings") entered into an
Amended and Restated Agreement and Plan of Merger (the "Merger Agreement").
Pursuant to the Merger Agreement, Holdings, a corporation indirectly jointly
owned by Blackstone Capital Partners L.P. and Wasserstein Perella Partners,
L.P., and their respective affiliates, acquired approximately 80% of the shares
of common stock of the Company on December 8, 1988 following a cash tender
offer. Pursuant to the Merger Agreement, on April 13, 1989, a wholly owned
subsidiary of Holdings was merged into the Company (the "Merger"), and the
Company became a direct wholly owned subsidiary of Holdings.
CONSOLIDATION -- The consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany items have
been eliminated in consolidation.
INCOME TAXES -- During fiscal 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 supersedes Statement of Financial Accounting
Standards No. 96, of the same title, which the Company previously followed to
account for income taxes. The adoption of SFAS 109 did not impact the Company's
financial position or results of operations. See also Note 14.
FOREIGN CURRENCY TRANSLATION -- Foreign currency accounts are translated in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation"("SFAS 52"). SFAS 52 generally provides that the assets and
liabilities of foreign operations be translated at the current exchange rates as
of the end of the accounting period and that revenues and expenses be translated
using average exchange rates. The resulting translation adjustment arising from
foreign currency translation is accumulated as a separate component of
stockholder's equity. Translation adjustments during fiscal 1993, 1992 and 1991
were ($865,000), ($5.8) million, and ($1.9) million, respectively.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents include all cash
balances and highly liquid investments with an original maturity of three months
or less. Included in cash and cash equivalents at January 29, 1994 is $8.6
million which is held by the Company's Collins & Aikman Corporation subsidiary
("C&A Co.").
INVENTORIES -- Inventories are valued principally at the lower of cost or
market, but not in excess of net realizable value. Cost is determined on the
first-in, first-out basis.
OTHER CURRENT ASSETS -- Other current assets at January 29, 1994 include
$22.8 million which is on deposit with an insurer to cover future deferred
payments.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated
at cost. Provisions for depreciation are primarily computed on a straight-line
basis over the estimated useful lives of the assets, presently
F-6
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ranging from 3 to 40 years. Leasehold improvements are amortized over the lesser
of the lease term or the estimated useful life of the improvements.
GOODWILL -- Goodwill is being amortized by the straight-line method over 40
years. Management's policy is to continually review whether there have been any
significant and permanent downturns in the industries in which the Company
operates, loss of a majority of customers, introduction of substitute products
and the current and expected future results of the acquired entities in
assessing the recoverability of the goodwill related to each of its businesses.
When the foregoing considerations suggests that a deterioration of the financial
condition of the Company has occurred, the methodology used by the Company to
determine whether there has been an impairment of goodwill is to assess whether
the forecasted operating results (including a proportionate share of the
Company's projected consolidated interest expense) of each of its business units
will recover the recorded goodwill balance over the remaining amortization
period.
Amortization applicable to continuing operations was $21.9 million, $23.1
million and $23.0 million for fiscal 1993, 1992 and 1991, respectively. During
fiscal 1993, Group wrote down goodwill by $144.8 million related to its
Wallcoverings segment as described in Note 2 below. Accumulated amortization was
$133.6 million and $142.0 million at January 29, 1994 and January 30, 1993,
respectively.
ENVIRONMENT -- Accruals for environmental matters are recorded when it is
probable that a liability has been incurred and the amount of the liability can
be reasonably estimated. Accruals for environmental liabilities are generally
included in the balance sheet as other noncurrent liabilities at undiscounted
amounts and exclude claims for recoveries from insurance or other third parties.
Accruals for insurance or other third party recoveries for environmental
liabilities are recorded when it is probable that the claim will be realized.
RECLASSIFICATIONS -- Certain reclassifications have been made to the fiscal
1992 and 1991 statements of operations and statements of cash flows and to the
January 30, 1993 balance sheet to conform to the fiscal 1993 presentation.
2. GOODWILL:
The substantial losses of Builders Emporium and the inability to sell the
Builders Emporium chain as an ongoing entity left the Company with materially
higher leverage and interest costs than previously anticipated. The inability of
the Company to sell its Dura Convertible division ("Dura") at an acceptable
price along with the sale of Kayser-Roth Corporation ("Kayser-Roth") at a price
and on terms that were worse than management's prior expectations of value were
additional adverse factors. Prior to the end of the third quarter, management
explored debt recapitalization alternatives and the possibility of raising new
equity capital. The indications from the financial community at that time were
that a debt recapitalization was not likely to significantly reduce the
Company's interest burden and that raising new equity capital to deleverage the
Company was not feasible at that time. Although management of the Company, based
on the facts known to it at October 30, 1993, was expecting both cyclical and
long-term improvement in the results of operations, an analysis suggested that,
given the Company's capital structure, a deterioration of the financial
condition of the Company had occurred. As a result, the Company forecasted its
operating results forward 33 years, which approximated the remaining
amortization period of the Company's goodwill at October 30, 1993, to determine
whether cumulative net income would be sufficient to recover the goodwill.
At October 30, 1993, management believed that the projected future results
were the most likely scenario given the Company's current capital structure. In
spite of the fact that the operating results reflected in the forecasts showed
improvement over the historical results achieved during the past few years,
management concluded, based on the forecast, that the net income allocable to
the Company's Wallcoverings segment over the forecast period (including a
proportionate share of the Company's projected consolidated interest expense)
would not be sufficient to recover its entire goodwill balance. Accordingly, the
Company recorded a write-down of $144.8
F-7
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million during the third quarter ended October 30, 1993 to reflect the portion
of Wallcoverings' goodwill balance which was not forecasted to be recovered over
the projection period. For the other business units of the Company, net income
over the forecast period was sufficient to recover their respective goodwill
balances.
Management's continuing evaluations have indicated no further impairment in
the ability of Wallcoverings to recover its remaining goodwill and no permanent
impairment with respect to the other operations of the Company.
3. RESTRUCTURING COSTS:
At the end of the third quarter of fiscal 1993, the Company recorded a
restructuring charge of $24.0 million, principally related to the write-down of
certain surplus or under-utilized assets of the Company's Automotive Products
and Wallcoverings segments and to provide for the obsolescence of certain
manufacturing processes as a result of shifts in customer demand. During the
fourth quarter of fiscal 1993, management reevaluated its plan to restructure
these manufacturing facilities and, based on changes in product mix and
underlying improvement in certain of the Company's businesses, management has
concluded that the assets and facilities identified previously can be utilized
at a level of production that would not result in the impairment of the asset
values. Accordingly, in the fourth quarter of fiscal 1993, management has
revised its estimate and reversed these charges.
During fiscal 1992, the Company incurred certain identifiable costs in
connection with the restructuring of Wallcoverings. The restructuring costs,
aggregating $10.0 million, principally related to the closure of certain
manufacturing and distribution facilities.
4. DISCONTINUED OPERATIONS:
During fiscal 1991, Group reclassified the remaining businesses of Wickes
Manufacturing Company consisting of its Dura, Bumper and H. Koch & Sons ("H.
Koch") divisions as discontinued operations. In July 1992, Group sold its Bumper
and H. Koch divisions. As of the end of fiscal 1992, Group reclassified Builders
Emporium and the Engineering Group as discontinued operations. Group recorded a
loss on disposal of discontinued operations of $184 million in the fourth
quarter of fiscal 1992 principally to provide for the expected loss on sale of
Builders Emporium. In March 1993, the Engineering Group was sold for
approximately $51 million.
As of the end of the second quarter of fiscal 1993, the Company determined
that it would be unable to sell Builders Emporium as an ongoing entity. The
Company recorded an additional loss on disposal of discontinued operations of
$109.3 million principally to (i) provide additional reserves for the
significant reduction in estimated proceeds from disposition and other costs in
connection with the sale or disposition of Builders Emporium inventory, real
estate and other assets and (ii) provide for employee severance and other costs.
Builders Emporium's inventory was sold during the third and fourth quarters of
fiscal 1993 and substantially all accounts receivable and accounts payable
balances were settled as of January 29, 1994. Remaining assets and liabilities
of Builders Emporium relate primarily to real estate and insurance liabilities
which continue to be liquidated.
Kayser-Roth was reclassified as a discontinued operation at the end of the
third fiscal quarter ended October 30, 1993 and was sold on January 28, 1994 for
a total price of approximately $170 million (subject to post-closing purchase
price adjustment). In connection with the sale, Group received a 90 day $70
million Senior unsecured bridge note from the purchaser which was collected on
April 27, 1994.
The results of Builders Emporium, Kayser-Roth, the Engineering Group,
Bumper and H. Koch are classified as discontinued operations for all periods
presented. At the end of the second fiscal quarter ended July 31, 1993, Group
decided to retain its Dura business. The results of Dura are now classified in
the automotive products segment and prior reporting periods have been restated
to reflect Dura as a continuing operation.
F-8
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized statements of operations for periods prior to units being
classified as discontinued operations follow (in thousands):
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Sales............................................................ $ 274,297 $ 977,098 $ 1,042,377
Costs and expenses, other than interest.......................... 268,821 998,703 1,012,309
Interest expense................................................. 10,405 23,010 23,839
Loss before income taxes......................................... (4,929) (44,615) 6,229
Income taxes (benefit)........................................... (467) 1,234 2,560
Income (loss) from discontinued operations....................... $ (4,462) $ (45,849) $ 3,669
The above summarized results include Builders Emporium and the Engineering
Group through January 30, 1993 and Kayser-Roth through the third quarter ended
October 30, 1993 (the respective dates at which these businesses were
reclassified as discontinued operations). The summarized statement of operations
for fiscal 1991 also includes Bumper and H. Koch through their date of sale.
Sales of Builders Emporium in fiscal 1993 aggregated approximately $410 million
and sales of Kayser-Roth for the fourth quarter of fiscal 1993 aggregated
approximately $95 million. Interest expense of $13.1 million (including $5.5
million of interest expense which was reserved for Builders Emporium and
Kayser-Roth), $19.7 million and $20.9 million during fiscal 1993, 1992 and 1991,
respectively, has been allocated to discontinued operations based upon the ratio
of net book value of discontinued operations (including reserves for loss on
disposal) to consolidated invested capital. Interest expense incurred by
Builders Emporium and Kayser-Roth subsequent to their reclassification as
discontinued operations aggregated $2.2 million. Such amounts were charged to
discontinued operations reserves.
In October 1993, Group received $35.1 million from Wickes Lumber Company in
exchange for a Wickes Lumber Company promissory note and warrant that Group had
received in partial consideration for the sale of Wickes Lumber Company in 1988.
Fees paid or accrued to Blackstone Partners and WP Partners for services
related to divestitures aggregated $4.3 million and $500,000 during fiscal 1993
and 1992, respectively. Divestiture fees in fiscal 1993 include $400,000 paid
and $100,000 accrued to Blackstone Partners for advisory services in connection
with the sale of Builders Emporium's inventory, real estate and other assets.
The majority of Builders Emporium's leased properties have been assigned to
third parties. In addition, Group has assigned leases in connection with the
divestiture of Kayser-Roth, the Engineering Group, Wickes Manufacturing Company
and other divested businesses. Although Group has obtained releases from the
lessors of certain properties, Group remains contingently liable under most of
the leases. Group's future liability for these leases, in management's opinion,
based on the facts presently known to it, will not have a material effect on the
Company's consolidated financial condition or future results of operations.
5. ACCOUNTS AND NOTES RECEIVABLE, NET:
Accounts and notes receivable, net, are summarized below (in thousands):
JANUARY 29, JANUARY 30,
1994 1993
Accounts and notes receivable.................................................. $ 207,439 $ 171,403
Less allowance for doubtful accounts........................................... (7,071) (6,748)
$ 200,368 $ 164,655
F-9
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INVENTORIES:
Inventory balances are summarized below (in thousands):
JANUARY 29, JANUARY 30,
1994 1993
Raw materials.................................................................. $ 70,762 $ 62,663
Work in process................................................................ 24,739 26,121
Finished goods................................................................. 80,561 77,080
$ 176,062 $ 165,864
7. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment, net, are summarized below (in thousands):
JANUARY 29, JANUARY 30,
1994 1993
Land and improvements.......................................................... $ 28,347 $ 20,747
Buildings...................................................................... 117,275 123,406
Machinery and equipment........................................................ 414,208 374,946
Leasehold improvements......................................................... 1,421 1,431
Construction in progress....................................................... 21,863 20,733
583,114 541,263
Less accumulated depreciation and amortization................................. (290,514) (248,829)
$ 292,600 $ 292,434
Depreciation and amortization expense of property, plant and equipment
applicable to continuing operations was $42.2 million, $45.5 million and $43.9
million for fiscal 1993, 1992 and 1991, respectively.
8. ACCRUED EXPENSES:
Accrued expenses are summarized below (in thousands):
JANUARY 29, JANUARY 30,
1994 1993
Payroll and employee benefits.................................................. $ 42,086 $ 37,303
Interest....................................................................... 19,242 24,107
Insurance...................................................................... 15,152 25,122
Other.......................................................................... 64,034 79,517
$ 140,514 $ 166,049
F-10
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. LONG-TERM DEBT:
Long-term debt is summarized below (in thousands):
JANUARY 29, JANUARY 30,
1994 1993
Senior indebtedness:
Mortgage notes............................................................... $ 1,464 $ 1,841
Notes payable to banks....................................................... 7,595 7,891
Notes payable to others...................................................... 8,266 4,744
C&A Co. credit facility, average interest rate of 5.5% and 5.3%.............. 137,129 191,155
Debentures due 2005, interest rate 7 1/2% until January 31, 1994, and 10%
thereafter................................................................ 138,694 138,694
Sinking fund debentures due 1994, interest rate 12%.......................... -- 40,982
Industrial revenue bonds due through 2006, interest rates from 5% to
7 5/8%.................................................................... 11,648 12,754
Unamortized debt discount.................................................... (47,650) (53,239)
257,146 344,822
Senior subordinated indebtedness:
Senior subordinated debentures due 2001, interest rate 11 7/8%............... 347,414 347,414
Unamortized debt discount.................................................... (4,629) (5,019)
342,785 342,395
Subordinated indebtedness:
Subordinated notes due 1995, interest rate 15%............................... 137,359 137,359
Subordinated debentures due 1997, interest rate 11 3/8%...................... 24,500 24,500
Unamortized debt discount.................................................... (2,447) (3,131)
159,412 158,728
Total debt..................................................................... 759,343 845,945
Less current maturities........................................................ (25,895) (61,287)
$ 733,448 $ 784,658
Group's C&A Co. subsidiary consummated a $225 million credit agreement with
a syndicate of banks on May 22, 1991 that expires on May 15, 1998 (the "C&A Co.
Credit Agreement"). During fiscal 1991, C&A Co. borrowed $152 million under the
C&A Co. Credit Agreement. Out of these borrowings, $120 million was paid to
Group as a dividend to be used for general corporate purposes. During fiscal
1992, C&A Co. paid Group dividends aggregating $110 million, borrowed an
additional $56.0 million and made principal repayments under the C&A Co. Credit
Agreement of $10.3 million. During fiscal 1993, C&A Co. paid Group dividends
aggregating $30 million, borrowed an additional $17.0 million and made principal
repayments under the C&A Co. Credit Agreement of $71.0 million. Availability
under the C&A Co. Credit Agreement is determined monthly based upon C&A Co.'s
receivables balance. The C&A Co. Credit Agreement permits C&A Co. to pay
additional dividends to Group only if C&A Co. satisfies a minimum liquidity
requirement of $25 million and then limits the amount of total dividends to $175
million plus 90% (or 100% if certain specified ratios are met) of C&A Co.'s net
income (excluding the impact of SFAS 106) subsequent to April 27, 1991. As of
January 29, 1994, an additional $54.8 million was available to C&A Co. under the
C&A Co. Credit Agreement. Although as of that date approximately $56 million of
additional dividends could be paid to Group under the dividend restrictions in
the C&A Co. Credit Agreement, other financial covenants in the C&A Co. Credit
Agreement would limit the amount of dividends to approximately $47 million. C&A
Co. and its subsidiaries are separate corporate entities and the assets of C&A
Co. and its subsidiaries are available first and foremost to satisfy the claims
of the creditors of
F-11
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C&A Co. and such subsidiaries. At January 29, 1994, receivables and fixed assets
pledged as collateral under the C&A Co. Credit Agreement aggregated
approximately $168 million and $104 million, respectively.
On March 12, 1993, Kayser-Roth and a bank consummated a $40 million credit
agreement. Kayser-Roth initially borrowed $35 million under the credit agreement
of which $26 million was paid to Group as a dividend. On May 27, 1993,
Kayser-Roth completed a $75 million credit facility (the "Kayser-Roth Credit
Agreement") with a group of banks to replace the $40 million credit agreement
and, on July 6, 1993, Kayser-Roth paid an additional dividend of $26 million to
Group. Group used approximately $41 million of the proceeds from the original
and the replacement Kayser-Roth credit facilities to redeem all of its
outstanding 12% Sinking Fund Debentures due January 31, 1994 on July 7, 1993.
Group repaid the outstanding borrowings under the Kayser-Roth Credit Agreement
of $66 million with a portion of the cash proceeds from the sale of Kayser-Roth.
There are limitations on the payment of dividends contained in various debt
agreements of Group. Currently, the most restrictive of such limitations is
contained in the indenture, as amended, (the "11 7/8% Indenture") governing the
11 7/8% Senior Subordinated Debentures due 2001 (the "11 7/8% Securities").
Since January 26, 1991, no additional dividends could be paid to Holdings under
such indenture. Under these provisions as of January 29, 1994, Group would have
needed to earn an additional $866 million of consolidated net income (as defined
in the 11 7/8% Indenture) in order to eliminate the deficit in its dividend
capacity (assuming no change in the other factors used to determine Group's
dividend capacity).
Under the terms of the 11 7/8% Indenture, the Company is required to redeem
$138 million aggregate principal amount of 11 7/8% Securities on each June 1
from 1993 through 2000 ("Mandatory Redemptions") and to repay the remaining
outstanding 11 7/8% Securities at maturity on June 1, 2001. Under the terms of
the 11 7/8% Indenture, if Adjusted Net Worth (as such term is defined in the
11 7/8% Indenture) is equal to or less than $700 million on the last day of any
fiscal quarter (the "Minimum Equity Test"), the Company would be required to
begin on the last day of the second fiscal quarter thereafter (unless the
Minimum Equity Test is satisfied at the end of the intervening fiscal quarter)
semi-annual redemptions ("Accelerated Redemptions") of $138 million aggregate
principal amount of 11 7/8% Securities until all the 11 7/8% Securities are
redeemed or until the Minimum Equity Test is again satisfied. The Company can
reduce its obligation to make any cash Mandatory Redemption or Accelerated
Redemption payment through the application of previously redeemed or purchased
and canceled 11 7/8% Securities as permitted by the 11 7/8% Indenture. The
Company has previously delivered for cancellation $1,033 million in aggregate
principal amount of 11 7/8% Securities, which are available for such purpose.
The Company satisfied the Minimum Equity Test at the end of fiscal 1993. On that
date, Adjusted Net Worth was $753.7 million. If the Company had not satisfied
the Minimum Equity Test at that date and did not subsequently satisfy such test,
the first cash redemption payment (after giving effect to credits for previously
acquired 11 7/8% Securities) would be required at the end of the fiscal quarter
ending January 1997. By comparison, if the Company continues to satisfy the
Minimum Equity Test at all times or cures any failure of such test prior to any
accelerated cash redemption payment becoming due, no cash redemption payment
will be required until June 1, 2000.
The 11 3/8% subordinated debentures of Group become callable on May 1,
1995. The remaining indebtedness of Group is callable at various premiums at the
Company's option.
Maturities of long-term debt during each of the five fiscal years
subsequent to January 29, 1994, are $25.9 million, $170.9 million, $63.3
million, $39.9 million and $20.6 million, respectively. Total interest paid by
the Company on all indebtedness was $101.5 million, $102.5 million and $112.6
million for fiscal 1993, 1992 and 1991, respectively.
F-12
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For additional information see "ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" elsewhere herein.
10. LONG-TERM LEASES AND LEASE COMMITMENTS:
The Company is lessee under various long-term operating leases for land and
buildings for periods up to forty years. The majority of these leases contain
renewal provisions. In addition, the Company leases transportation, operating
and administrative equipment for periods ranging from one to ten years.
At January 29, 1994, future minimum lease payments under operating leases
are as follows (in thousands):
FISCAL YEAR ENDING
January 1995................................................. $ 16,568
January 1996................................................. 12,520
January 1997................................................. 9,165
January 1998................................................. 4,128
January 1999................................................. 1,143
Later years.................................................. 2,171
$ 45,695
Rental expense of continuing operations under operating leases was $19.2
million, $19.0 million and $15.4 million for fiscal 1993, 1992 and 1991,
respectively. Obligations under capitalized leases are not significant.
11. EMPLOYEE BENEFIT PLANS:
The Company and its subsidiaries have in effect defined benefit pension
plans covering substantially all employees who meet eligibility requirements.
Plan benefits are generally based on years of service and employee's
compensation during their years of employment. Funding of retirement costs for
these plans complies with the minimum funding requirements specified by the
Employee Retirement Income Security Act. Assets of the pension plans are held in
a Master Trust which invests primarily in equity and fixed income securities.
Net periodic pension cost of continuing operations for fiscal 1993, 1992
and 1991 included the following components (in thousands):
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Service cost...................................................... $ 5,232 $ 5,313 $ 5,240
Interest cost on projected benefit obligation and service cost.... 6,843 6,220 5,947
Actual return on assets........................................... (6,334) 746 (13,771)
Net amortization and deferral..................................... (1,119) (10,063) 7,136
$ 4,622 $ 2,216 $ 4,552
F-13
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets at January 29, 1994 and
January 30, 1993 (in thousands):
JANUARY 29, 1994 JANUARY 30, 1993
PLANS FOR WHICH PLANS FOR WHICH
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
Actuarial present value of benefit obligation:
Vested benefit obligation.............................. $ (21,352) $ (82,248) $ (15,096) $ (76,958)
Accumulated benefit obligation......................... $ (22,214) $ (86,451) $ (15,850) $ (80,432)
Projected benefit obligation............................. $ (24,317) $ (89,435) $ (17,314) $ (83,050)
Plan assets at fair value................................ 24,761 66,795 20,089 72,763
Projected benefit obligation less than (in excess of)
plan assets............................................ 444 (22,640) 2,775 (10,287)
Unrecognized net loss.................................... 2,081 25,315 310 22,122
Prior service cost not yet recognized in net periodic
pension cost........................................... 424 (7,361) 443 (13,608)
Unrecognized net asset at February 1, 1986............... (665) (503) (80) (983)
Adjustment required to recognize minimum liability....... -- (14,068) -- (6,244)
Pension asset (pension liability) recognized in the
consolidated balance sheets............................ $ 2,284 $ (19,257) $ 3,448 $ (9,000)
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7% and 8% at January 29, 1994 and January 30,
1993, respectively. The expected rate of increase in future compensation levels
is 4% and 5.5% and the expected long-term rate of return on plan assets is 9%
and 10% in fiscal 1993 and 1992, respectively.
The provisions of Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" ("SFAS 87"), require companies with any
plans that have an unfunded accumulated benefit obligation to recognize an
additional minimum pension liability, an offsetting intangible pension asset
and, in certain situations, a contra-equity balance. In accordance with the
provisions of SFAS 87, the consolidated balance sheets at January 29, 1994 and
January 30, 1993 include an intangible pension asset of $194,000 and $398,000;
an additional minimum pension liability of $14.1 million and $6.2 million and a
contra-equity balance of $13.9 million and $5.8 million, respectively.
The Company sponsors defined contribution plans covering employees who meet
eligibility requirements. Company contributions are based on a formula as
specified in the plan agreements. Contributions related to continuing operations
were $4.7 million, $4.0 million and $3.4 million in fiscal 1993, 1992 and 1991,
respectively.
The Company has provided postretirement life, health and medical coverage
for certain retirees under plans currently in effect. Many of the Company's
domestic employees may be eligible for benefits if they reach retirement age
while still employed by the Company.
Effective as of the beginning of fiscal 1991, the Company adopted Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Statement requires that costs
of such benefits be accrued as a form of deferred compensation earned during the
period that employees render service, rather than the previously permitted
practice of accounting for such costs as incurred.
F-14
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company elected to recognize the cumulative effect of this change in
accounting principle as of the beginning of fiscal 1991.
The following table sets forth the amounts included in the Company's
consolidated balance sheets (in thousands):
JANUARY 29, JANUARY 30,
1994 1993
Accumulated postretirement benefit obligation:
Retirees..................................................................... $ 48,559 $ 56,497
Fully eligible active plan participants...................................... 12,425 13,145
Other active plan participants............................................... 13,845 26,366
Unrecognized prior service gain from plan amendments......................... 23,764 --
Unrecognized net gain........................................................ 7,408 8,869
Total postretirement benefit obligation................................. $ 106,001 $ 104,877
Net periodic postretirement benefit cost of continuing operations,
determined on the accrual basis, included the following components (in
thousands):
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Service cost -- benefits attributed to service during the year............. $ 2,131 $ 2,168 $ 2,066
Interest cost on accumulated postretirement benefit obligation............. 4,385 6,865 6,574
Amortization of unrecognized net gain...................................... (200) -- --
Net periodic postretirement benefit cost................................... $ 6,316 $ 9,033 $ 8,640
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7% at January 29, 1994 and 8% at January
30, 1993. The plans are unfunded.
For measurement purposes, a 14% annual rate of increase in the per capita
cost of covered health care benefits was assumed for fiscal 1993; the rate was
assumed to decrease 1% per year to 6% for fiscal 2001 and remain at that level
thereafter. The health care cost trend rate assumption has an impact on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by 1 percentage point in each year would increase the accumulated
postretirement benefit obligation as of January 29, 1994 by $878,000 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $103,000.
Effective April 1, 1994, the Company amended the postretirement benefit
plan which covers substantially all of the eligible current and retired
employees of the Company's continuing operations. Pursuant to the amendment the
Company's obligation for future health care inflation will be limited to 6% per
year through March 31, 1998. Subsequent to March 1998, the Company will not
provide coverage for inflation in health care costs.
12. COMMON STOCK AND PREFERRED STOCK:
At January 29, 1994 and January 30, 1993, 70,000,000 shares of $.10 par
value common stock were authorized and approximately 47,808,000 shares were
issued and outstanding.
At January 29, 1994 and January 30, 1993, 30,000,000 shares of $.10 par
value preferred stock were authorized and approximately 1,806,000 shares of
convertible preferred stock, Series A were outstanding. Each share of Series A
preferred stock, which has an annual dividend of $2.50 per share, is convertible
into 0.50 shares of Merger Preferred Stock of Holdings, subject to subsequent
adjustment pursuant to its terms.
F-15
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. MANAGEMENT EQUITY PLANS:
Effective on January 28, 1994, Holdings adopted the 1993 Employee Stock
Option Plan ("1993 Plan") for certain key employees of Group. The 1993 Plan was
created primarily for the special purpose of rewarding key employees for the
appreciation earned through prior service under the Company's previous equity
share plan that was terminated on October 29, 1993. Holdings granted options to
acquire 3,119,466 shares of the Common Stock at an average exercise price of
$4.57 per share. The majority of these options vest 40% in June 1995 with the
remaining shares vesting in June 1996. In connection with the adoption of this
plan, the Company recorded a charge of $26.7 million for management equity plan
expense.
In addition, effective in April 1994, Holdings adopted the 1994 Employee
Stock Option Plan ("1994 Plan") as a successor to the 1993 Plan to facilitate
awards to certain key employees and to consultants. The 1994 Plan authorizes the
issuance of up to 2,980,534 shares of Common Stock and provides that no options
may be granted after 10 years from the effective date of this plan. Options for
169,634 shares of Common Stock at an average exercise price of $5.52 per share
were granted to key employees of Group in April 1994. Management equity plan
expense of $1.3 million will be recognized as the options ratably vest over the
next three years.
Upon a change of control of Holdings, as defined, all of the above options
become fully vested and exercisable.
14. INCOME TAXES:
During the first quarter of fiscal 1992, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 supersedes Statement of Financial Accounting
Standards No. 96, of the same title, which the Company previously followed to
account for income taxes. The adoption of SFAS 109 did not impact the Company's
financial position or results of operations.
Deferred income taxes are provided for the temporary differences between
the financial reporting and tax basis of the Company's assets and liabilities.
The components of the net deferred tax liability as of January 29, 1994 and
January 30, 1993 were as follows (in thousands):
JANUARY 29, JANUARY 30,
1994 1993
Deferred tax assets:
Employee benefits including postretirement benefits.......................... $ 69,245 $ 69,903
Net operating loss carryforwards............................................. 134,928 83,599
Investment tax credit carryforwards.......................................... 11,900 14,567
Alternative minimum tax credits.............................................. 7,000 9,523
Other liabilities and reserves............................................... 130,093 133,586
Valuation allowance.......................................................... (289,204) (251,426)
Total deferred tax asset..................................................... 63,962 59,752
Deferred tax liabilities:
Property, plant and equipment................................................ 51,258 50,213
Unamortized debt discount.................................................... 13,344 14,362
Total deferred tax liability................................................. 64,602 64,575
Net deferred tax liability..................................................... $ 640 $ 4,823
The valuation allowances of $289.2 million at January 29, 1994 and $251.4
million at January 30, 1993 were established because, in the Company's
assessment, it was uncertain whether the net deferred tax assets would be
realized.
F-16
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provisions for income taxes applicable to continuing operations for
fiscal 1993, 1992 and 1991, are summarized as follows (in thousands):
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Current
Federal, including tax sharing payment to (from) Holdings....... $ 337 $(1,222) $ 4,209
State and local................................................. 6,462 4,896 5,470
Foreign......................................................... 7,697 5,739 2,193
14,496 9,413 11,872
Deferred
State and local................................................. (16) (5,936) 3,339
Foreign......................................................... (2,866) (1,178) 637
(2,882) (7,114) 3,976
Income taxes.................................................... $11,614 $ 2,299 $15,848
Domestic and foreign components of income (loss) from continuing operations
before income taxes are summarized as follows (in thousands):
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Domestic.......................................................... $(175,213) $ (51,574) $ (51,794)
Foreign........................................................... 10,135 12,469 8,072
$(165,078) $ (39,105) $ (43,722)
A reconciliation between income taxes computed at the statutory Federal
rate (35% for fiscal 1993 and 34% for fiscal 1992 and 1991) and the provisions
for income taxes applicable to continuing operations is as follows (in
thousands):
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Amount at statutory Federal rate.................................. $ (57,777) $ (13,296) $ (14,865)
State and local income taxes, net of Federal income tax benefit... 6,229 (2,893) 5,814
Foreign tax more than Federal tax at statutory rate............... 1,284 321 86
Amortization and write-off of goodwill............................ 58,357 7,840 7,835
Valuation allowance............................................... 5,509 6,934 --
Net operating loss generated...................................... -- -- 13,454
Tax sharing payment to Holdings................................... 337 3,848 3,894
Other............................................................. (2,325) (455) (370)
Income taxes...................................................... $ 11,614 $ 2,299 $ 15,848
In addition, the valuation allowance was increased by $38.4 million in
fiscal 1993 and $68.6 million in fiscal 1992 to offset deferred tax assets
arising from the losses of discontinued operations.
F-17
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At January 29, 1994, Group had the following tax attribute carryforwards
available for Federal income tax purposes (in thousands):
EXPIRATION
AMOUNT DATES
Net operating losses -- regular tax
Prior to acquisition of Group by Holdings ("Preacquisition"), subject to
limitations............................................................... $134,000 1996-2003
Postacquisition, unrestricted................................................ 251,000 2006-2008
$385,000
Net operating losses -- alternative minimum tax
Preacquisition, subject to limitations....................................... $118,000 1996-2002
Postacquisition, unrestricted................................................ 202,000 2006-2008
$320,000
Investment tax and other credits
Preacquisition, subject to limitations....................................... $ 11,900 1994-2003
Alternative minimum tax credits................................................ $ 7,000 No limit
The regular tax net operating loss carryforwards include amounts related to
Kayser-Roth and subsidiaries for preacquisition regular tax purposes, subject to
limitations, of $35 million and postacquisition regular tax purposes,
unrestricted, of $62 million. Alternative minimum tax net operating loss
carryovers include amounts related to Kayser-Roth and subsidiaries of $33
million for preacquisition alternative minimum tax purposes, subject to
limitations, and $51 million for postacquisition alternative minimum tax
purposes, unrestricted. Although the sale agreement provides that an election
will be made (under Section 338(h)(10) of the Internal Revenue Code) to treat
the sale as an asset sale for Federal income tax purposes, there are provisions
whereby the purchaser of Kayser-Roth and the Company can reevaluate this
decision. If the purchaser and the Company mutually agree to treat the
transaction as a stock sale rather than an asset sale, the net operating losses
related to Kayser-Roth and subsidiaries will be transferred from the Company to
the purchaser.
The Internal Revenue Service has examined the returns of C&A Co. and its
subsidiaries for the last three fiscal years prior to its acquisition by the
Company in December 1986. Certain adjustments were agreed to and the effect of
those adjustments, principally reductions to the net operating loss
carryforwards and investment tax credit carryforwards, are reflected in the
amounts discussed above. In the course of an examination of the Company's
Federal income tax returns for fiscal 1988 and 1989, the IRS has challenged the
availability of $176.6 million of the Company's approximately $385.0 million of
current NOLs. The examination is at a preliminary stage and management believes
that the basis for the IRS' position is unclear. Management disputes the IRS'
challenge and believes that substantially all of the NOLs should be available
(subject to certain limitations) to offset its income, if any, in the future. If
the IRS were to maintain its position and all or a majority of such position
were to be upheld in litigation, the amount of the NOLs available to the Company
in future years would be materially reduced.
The Company and its subsidiaries have entered into a tax sharing agreement
with Holdings. The tax sharing agreement provides for payments to (from)
Holdings for utilization of Holdings tax losses by the Company and its
subsidiaries. The agreement provides for tax sharing payments calculated in
accordance with Federal tax regulations. Tax sharing payments paid to Holdings
during fiscal 1993, 1992 and 1991 were $0, $4.5 million and $7.2 million,
respectively. The Company's tax sharing receivable from Holdings of $8.8 million
at January 29, 1994 and the related fiscal 1992 tax sharing benefit result from
the utilization of tax loss carrybacks. This receivable from Holdings is
currently expected to be settled through offset against future years tax sharing
payable amounts.
F-18
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income taxes paid including tax sharing payments to Holdings of $0, $4.5
million and $7.2 million, were $3.3 million, $21.3 million and $26.2 million for
fiscal 1993, 1992 and 1991, respectively.
15. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS, ACCOUNTS AND NOTES RECEIVABLE, AND ACCOUNTS
PAYABLE -- The carrying amount approximates fair value because of the short
maturity of these instruments.
RECEIVABLE FROM SALE OF BUSINESS, LONG-TERM INVESTMENTS -- Fair value
approximates carrying value.
LONG-TERM DEBT -- The fair value of the Company's publicly-traded long-term
debt is based upon the quoted market prices for the issues. The fair value
of the remaining long-term debt of the Company approximates the carrying
value.
The estimated fair values of the Company's financial instruments are
summarized as follows (in thousands):
JANUARY 29, 1994 JANUARY 30, 1993
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
Receivable from sale of business................................. $ 70,000 $ 70,000 $ -- $ --
Long-term investments............................................ -- -- 32,675 32,675
Long-term debt................................................... 759,343 826,066 845,945 830,875
16. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:
The Company reclassified its industry segments during 1993 to realign its
products based on primary customer groups. Businesses related to the automotive
industry which were part of Specialty Textiles have been renamed Automotive
Products. The decorative fabrics and floorcoverings businesses have been
reclassified as Interior Furnishings. Previously, the floorcoverings business
was part of the Specialty Textiles segment. Wallcoverings products which were
previously part of the Home Furnishings segment have been renamed Wallcoverings.
Industry segment information has been restated for fiscal 1992 and 1991.
For fiscal 1993, 1992 and 1991, sales to General Motors Corporation
approximated 16.1%, 15.3% and 17.2%, respectively, and sales to Chrysler
Corporation approximated 10.0%, 10.2% and 8.3%, respectively, of total
consolidated sales. These sales were part of the Automotive Products segment.
Information about the Company's segments for fiscal 1993, 1992 and 1991
follows (in thousands):
OPERATING DEPRECIATION
NET INCOME AND CAPITAL
FISCAL YEAR ENDED JANUARY 29, 1994 SALES LOSS (B) AMORTIZATION ASSETS (B) EXPENDITURES
Automotive Products......................... $ 677,867 $ 55,279 $ 36,712 $ 783,718 $ 29,208
Interior Furnishings........................ 407,201 40,683 15,617 350,342 11,768
Wallcoverings............................... 220,449 (138,010) 11,453 209,424 3,751
1,305,517 (42,048)(c) 63,782 1,343,484 44,727
Corporate items............................. -- (38,789)(d) 384 196,726 196
1,305,517 (80,837) 64,166 1,540,210 44,923
Discontinued operations..................... -- -- 18,075 -- 11,355
$ 1,305,517 $ (80,837) $ 82,241 $1,540,210 $ 56,278
F-19
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING
INCOME DEPRECIATION
NET (LOSS) AND CAPITAL
FISCAL YEAR ENDED JANUARY 30, 1993 (A) SALES (B) AMORTIZATION ASSETS (B) EXPENDITURES
Automotive Products......................... $ 643,827 $ 42,330 $ 39,771 $ 749,688 $ 20,563
Interior Furnishings........................ 391,778 34,647 15,876 335,708 14,295
Wallcoverings............................... 241,895 (4,960) 12,646 374,706 3,045
1,277,500 72,017(c) 68,293 1,460,102 37,903
Corporate items............................. -- (24,047)(d) 228 147,948 306
1,277,500 47,970 68,521 1,608,050 38,209
Discontinued operations..................... -- -- 24,082 205,131 15,972
$ 1,277,500 $ 47,970 $ 92,603 $1,813,181 $ 54,181
OPERATING
INCOME DEPRECIATION
NET (LOSS) AND CAPITAL
FISCAL YEAR ENDED JANUARY 25, 1992 SALES (B) AMORTIZATION ASSETS (B) EXPENDITURES
Automotive Products......................... $ 610,325 $ 45,242 $ 37,195 $ 762,009 $ 24,220
Interior Furnishings........................ 336,773 25,403 16,791 340,269 9,519
Wallcoverings............................... 237,218 (871) 12,712 406,529 5,093
1,184,316 69,774 66,698 1,508,807 38,832
Corporate items............................. -- (25,822) 246 134,447 96
1,184,316 43,952 66,944 1,643,254 38,928
Discontinued operations..................... -- -- 24,475 357,341 22,971
$ 1,184,316 $ 43,952 $ 91,419 $2,000,595 $ 61,899
(a) The fiscal year ended January 30, 1993 included fifty-three weeks.
(b) Operating income is determined by deducting all operating expenses,
including restructuring costs, goodwill write-down and other costs, from
revenues. Operating expenses do not include interest expense. Assets of the
business segments include goodwill. Operating income reflects related
amortization.
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30,
1994 1993
(IN THOUSANDS)
(c) Segment operating income before goodwill write-down and restructuring costs:........ $ 102,752 $ 82,017
Goodwill write-down................................................................ (144,800) --
Restructuring costs................................................................ -- (10,000)
Segment operating income (loss)..................................................... $ (42,048) $ 72,017
(d) Corporate items in fiscal 1993 include $26.7 million of management equity
plan expense. Corporate items in fiscal 1993, 1992 and 1991 each include
operating management and advisory fees to affiliates of Holdings of $5.0
million.
17. COMMITMENTS AND CONTINGENCIES:
During 1991, a Fifth Consolidated Amended Complaint was filed in IN RE IVAN
F. BOESKY SECURITIES LITIGATION, involving numerous class actions and individual
claims against a variety of defendants including the Company. Among other
things, this complaint asserts claims on behalf of certain of the Company's
former preferred stockholders alleging a conspiracy to manipulate the price of
the Company's stock in 1986 for the purpose of triggering a redemption of
certain outstanding preferred stock of the Company. In 1992, Advanced
Development
F-20
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
& Engineering Centre ("ADEC"), a division of an indirect subsidiary of the
Company, filed arbitration demands against the Pakistan Ordnance Factories Board
("POF") concerning ADEC's installation of a munitions facility for POF. POF
filed arbitration counterclaims alleging that ADEC's alleged breach of contract
caused POF to lose its entire investment in the munitions facility.
The ultimate outcome of the legal proceedings to which the Company is a
party will not, in the opinion of the Company's management based on the facts
presently known to it, have a material effect on the Company's consolidated
financial condition or future results of operations.
In 1988, the federal government filed suit in the U.S. District Court for
the District of Rhode Island against Group's former Kayser-Roth Corporation
subsidiary and others in connection with a Superfund site in Rhode Island. The
District Court held Kayser-Roth liable under CERCLA for all past and future
response costs. By Amended Administrative Order issued June 4, 1991, the EPA
directed Kayser-Roth to implement the remedies set forth in its Record of
Decision issued September 18, 1990. Since the beginning of fiscal 1990 to date,
Kayser-Roth has paid approximately $2.9 million for past response costs,
prejudgment interest and remediation. Kayser-Roth is in the process of complying
with the remainder of the order. Group has agreed to indemnify Kayser-Roth with
respect to this matter.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a potentially responsible party
("PRP") in a number of proceedings. The Company may be named as a PRP at other
sites in the future, including with respect to divested and acquired businesses.
It is a normal risk of operating a manufacturing business that liability may be
incurred for investigating and remediating on-site and off-site contamination.
The Company is currently engaged in investigation or remediation at certain
sites. It is difficult to estimate the total cost of investigation and
remediation due to various factors including incomplete information regarding
particular sites and other PRP's, uncertainty regarding the extent of
environmental problems and the Company's share, if any, of liability for such
problems, the selection of alternative compliance approaches, the complexity of
environmental laws and regulations and changes in cleanup standards and
techniques. When it has been possible to provide reasonable estimates of the
Company's liability with respect to environmental sites, provisions have been
made in accordance with generally accepted accounting principles. However, there
can be no assurance that the Company has identified or properly assessed all
potential environmental liability arising from the activities or properties of
the Company, its present and former subsidiaries and their corporate
predecessors. As of January 29, 1994, the Company has established reserves of
approximately $30.8 million for the estimated future costs related to all its
known environmental sites. In the opinion of management, based on the facts
presently known to it, the environmental costs and contingencies will not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and certain other damages related to
on-site and off-site soil and groundwater contamination. The Company's
management believes that it has obtained, and is in material compliance with,
all material environmental permits and approvals necessary to conduct its
various businesses. Environmental compliance costs for continuing businesses
currently are accounted for as normal operating expenses or capital expenditures
of the business units. In the opinion of management, based on the facts
presently known to it, such environmental compliance costs will not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
For additional information regarding the foregoing, see "ITEM 3. LEGAL
PROCEEDINGS" appearing elsewhere herein.
F-21
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for fiscal 1993 and 1992 follows (in
thousands):
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE AFTER NET
GROSS INCOME INCOME INCOME
FISCAL YEAR ENDED JANUARY 29, 1994 NET SALES PROFIT TAXES TAXES (LOSS)
First Quarter.......................... $ 339,043 $ 78,948 $ 156 $ (5,296) $ (8,504)
Second Quarter......................... 289,694 61,230 (15,043) (17,222) (130,122)
Third Quarter.......................... 334,629 84,445 (161,449) (164,194) (163,685)
Fourth Quarter......................... 342,151 85,104 11,258 10,020 10,020
$1,305,517 $309,727 $(165,078) $(176,692) $(292,291)
LOSS FROM
CONTINUING OPERATIONS
BEFORE AFTER
GROSS INCOME INCOME NET
FISCAL YEAR ENDED JANUARY 30, 1993 NET SALES PROFIT TAXES TAXES LOSS
First Quarter.......................... $ 319,488 $ 72,564 $ (6,812) $ (11,009) $ (16,980)
Second Quarter......................... 319,713 74,081 (7,411) (11,855) (16,406)
Third Quarter.......................... 314,873 70,819 (7,048) (7,764) (16,078)
Fourth Quarter (a)..................... 323,426 81,563 (17,834) (10,776) (221,789)
$1,277,500 $299,027 $ (39,105) $ (41,404) $(271,253)
(a) The fourth quarter of fiscal 1992 included fourteen weeks.
The quarterly financial data above has been restated to reflect Kayser-Roth
as a discontinued operation and Dura as a continuing operation.
Loss from continuing operations before income taxes in the third quarter of
fiscal 1993 includes the write-down of goodwill of $144.8 million and
restructuring costs of $24.0 million. The fourth quarter of fiscal 1993 includes
management equity plan expense of $26.7 million offset by the reversal of the
third quarter restructuring costs. (See Note 3). Net loss in fiscal 1993
includes provisions for loss on disposal of discontinued operations of $1.8
million and $109.3 million in the first and second quarters, respectively. Loss
from continuing operations before income taxes in fiscal 1992 includes
restructuring costs of $10.0 million in the fourth quarter. Net loss in fiscal
1992 includes provision for loss on disposal of discontinued operations of
$184.0 million in the fourth quarter.
The Company's operations are not subject to significant seasonal
influences.
19. SUBSEQUENT EVENT:
On April 19, 1994, Holdings, as part of a proposed recapitalization (the
"Recapitalization") filed a registration statement on Form S-2 for the issuance
of 20.0 million shares of common stock. The Recapitalization, if effected, would
result in the defeasance and redemption, or repayment, of virtually all
outstanding debt and all preferred stock of Group. The sources of capital for
the Recapitalization are proceeds of the public offering, cash on hand and
amounts to be available under certain proposed new credit facilities aggregating
$775 million. In connection with the Recapitalization, Holdings II, currently
the sole common stockholder of Holdings, will be merged into Holdings and
Holdings will change its name to Collins & Aikman Corporation. Concurrently,
Group will be merged into its wholly owned subsidiary, C&A Co., which will
change its name to C&A Products Co.
F-22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Collins & Aikman Group, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Collins & Aikman Group, Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
April 27, 1994. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedules listed in the
accompanying index are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Charlotte, North Carolina,
April 27, 1994.
S-1
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
JANUARY 29, JANUARY 30,
1994 1993
ASSETS
Current Assets:
Cash and cash equivalents........................................................... $ 69,403 $ 57,094
Receivable from sale of business.................................................... 70,000 --
Other current assets................................................................ 40,952 37,188
Total current assets............................................................. 180,355 94,282
Investments in and advances to subsidiaries........................................... 893,204 1,190,722
Long-term investments................................................................. -- 33,831
Other assets.......................................................................... 30,140 27,888
$ 1,103,699 $ 1,346,723
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt................................................ $ -- $ 40,982
Accounts payable and accrued expenses............................................... 96,777 113,436
Other current liabilities........................................................... 3,748 9,067
Total current liabilities........................................................ 100,525 163,485
Long-term debt........................................................................ 593,241 586,579
Other noncurrent liabilities.......................................................... 199,457 107,220
Commitments and contingencies (Note 1)
Redeemable preferred stock............................................................ 132 165
Preferred stock....................................................................... 181 181
Common stock.......................................................................... 4,781 4,781
Other stockholder's equity............................................................ 205,382 484,312
Total stockholder's equity....................................................... 210,344 489,274
$ 1,103,699 $ 1,346,723
S-2
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Other expenses............................................................. $ (10,753) $ (11,214) $ (13,387)
Interest expense........................................................... (74,977) (90,940) (94,630)
Loss from continuing operations before income taxes and equity in loss of
subsidiaries............................................................. (85,730) (102,154) (108,017)
Income tax benefit......................................................... 681 9,905 13,134
Equity in loss of subsidiaries............................................. (123,242) (42,227) (79,512)
Loss from continuing operations............................................ (208,291) (134,476) (174,395)
Loss from discontinued operations.......................................... (84,000) (136,777) (431)
Loss before extraordinary item and cumulative change in accounting
principle................................................................ (292,291) (271,253) (174,826)
Extraordinary item......................................................... -- -- 10,949
Cumulative effect of change in accounting principle........................ -- -- (6,638)
Net loss................................................................... $(292,291) $(271,253) $(170,515)
S-3
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
Net cash provided by (used in) operating activities........................ $ (84,532) $ 57,000 $ 51,688
Investing Activities:
Proceeds from businesses sold............................................ 148,743 -- 5,598
Sales of property, plant and equipment................................... 22,116 7,288 3,003
Other.................................................................... 52,987 1,285 4,868
Net cash provided by investing activities............................. 223,846 8,573 13,469
Financing Activities:
Net advances to subsidiaries............................................. (74,467) (41,455) (2,515)
Net reductions of long-term debt and capital lease obligations........... (48,023) (32,895) (153,432)
Other.................................................................... (4,515) (4,536) (4,515)
Net cash used in financing activities................................. (127,005) (78,886) (160,462)
Net increase (decrease) in cash............................................ 12,309 (13,313) (95,305)
Cash and cash equivalents at beginning of year............................. 57,094 70,407 165,712
Cash and cash equivalents at end of year................................... $ 69,403 $ 57,094 $ 70,407
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. PRESENTATION:
These condensed financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. For disclosures regarding redeemable
preferred stock and commitments and contingencies, see Notes 12 and 17,
respectively, to Consolidated Financial Statements.
2. LONG-TERM DEBT:
Long-term debt consisted of 7 1/2% to 10% debentures due 2005, 11 7/8%
senior subordinated debentures due 2001, 15% subordinated notes due 1995 and
11 3/8% subordinated debentures due 1997. Maturities of long-term debt during
each of the five fiscal years subsequent to January 29, 1994, are $0,
$137,359,000, $24,500,000, $0 and $0, respectively. For additional disclosures
regarding long-term debt, see Note 9 to Consolidated Financial Statements.
3. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR ADDITIONAL DISCLOSURES.
S-4
COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS (A)
FOR THE FISCAL YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND JANUARY 25,
1992
(IN THOUSANDS)
ADDITIONS
CHARGED
BALANCE AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER AT END OF
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS YEAR
FISCAL YEAR ENDED JANUARY 29, 1994
Allowance for doubtful accounts...................... $ 6,748 $ 2,521 $ 720(b) $ (2,918)(c) $ 7,071
Valuation allowance for deferred tax assets.......... $ 251,426 $ 43,896 $ -- $ (6,118) $ 289,204
FISCAL YEAR ENDED JANUARY 30, 1993
Allowance for doubtful accounts...................... $ 6,401 $ 3,700 $ 765(b) $ (4,118)(c) $ 6,748
Valuation allowance for deferred tax assets.......... $ 173,486(d) $ 75,511 $3,758 $ (1,329) $ 251,426
FISCAL YEAR ENDED JANUARY 25, 1992
Allowance for doubtful accounts...................... $ 5,675 $ 4,324 $ 937(b) $ (4,535)(c) $ 6,401
(a) The fiscal years ended January 30, 1993 and January 25, 1992 have been
restated to exclude amounts related to discontinued operations.
(b) Reclassification and collection of accounts previously written off.
(c) Reclassifications and uncollectible amounts written off.
(d) The valuation allowance for deferred tax assets arose as a result of the
Company's adoption of Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" as of the beginning of fiscal 1992. See Note
14 to Consolidated Financial Statements.
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COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE IX -- SHORT-TERM BORROWINGS
FOR THE FISCAL YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND JANUARY 25,
1992
(IN THOUSANDS)
WEIGHTED
AVERAGE WEIGHTED
INTEREST MAXIMUM AVERAGE AVERAGE
RATE ON AMOUNT AMOUNT INTEREST
BALANCE AT BALANCE OUTSTANDING OUTSTANDING RATE
END OF AT END OF DURING THE DURING THE DURING THE
CATEGORY YEAR YEAR YEAR YEAR (A) YEAR (B)
FISCAL YEAR ENDED JANUARY 29, 1994
Banks............................................. $ 41 7.3% $ 5,000 $ 388 7.5%
Other............................................. $ 3,748 4.5% $ 4,067 $ 2,455 4.4%
FISCAL YEAR ENDED JANUARY 30, 1993
Banks............................................. $ 5,000 7.5% $ 5,000 $ 385 7.5%
Other............................................. $ 4,067 3.9% $ 4,179 $ 2,908 5.0%
FISCAL YEAR ENDED JANUARY 25, 1992
Banks............................................. $ 2,217 12.5% $11,677 $ 9,912 14.9%
Other............................................. $ 4,179 5.8% $ 5,050 $ 2,396 7.4%
(a) The average amount outstanding during the year was computed by dividing the
total month-end outstanding principal balances by the number of months.
(b) The weighted average interest rates were computed by dividing the total
interest expense on short-term debt by the average amount outstanding during
the fiscal year.
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COLLINS & AIKMAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY STATEMENTS OF OPERATIONS INFORMATION
FOR THE FISCAL YEARS ENDED JANUARY 29, 1994, JANUARY 30, 1993 AND JANUARY 25,
1992
(IN THOUSANDS)
CHARGED TO COSTS AND EXPENSES
FISCAL FISCAL FISCAL
ITEM 1993 1992 1991
Maintenance and Repairs.......................................................... $36,842 $31,445 $27,862
Advertising Costs................................................................ $ 2,714 $ 2,515 $ 6,569
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