-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ssa0z6/mhjgSFr7pqD39UKD/xBrWf6JJNiGT6OaYRpPendt37luzltyM3QolRIkv ZWlVSku1iL1cJfR5aykw8g== 0000029332-94-000003.txt : 19940331 0000029332-94-000003.hdr.sgml : 19940331 ACCESSION NUMBER: 0000029332-94-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19931225 FILED AS OF DATE: 19940325 DATE AS OF CHANGE: 19940328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIXIE YARNS INC CENTRAL INDEX KEY: 0000029332 STANDARD INDUSTRIAL CLASSIFICATION: 2200 IRS NUMBER: 620183370 STATE OF INCORPORATION: TN FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 000-02585 FILM NUMBER: 94518107 BUSINESS ADDRESS: STREET 1: 1100 S WATKINS ST CITY: CHATTANOOGA STATE: TN ZIP: 37404 BUSINESS PHONE: 6156982501 MAIL ADDRESS: STREET 1: P O BOX 751 CITY: CHATTANOOGA STATE: TN ZIP: 37401 FORMER COMPANY: FORMER CONFORMED NAME: DIXIE MERCERIZING CO DATE OF NAME CHANGE: 19670524 10-K 1 MAIN DOCUMENT 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 [FEE REQUIRED] For the fiscal year ended December 25, 1993. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______ to _______. Commission File Number: 0-2585 Dixie Yarns, Inc. (Exact name of registrant as specified in its charter) Tennessee 62-0183370 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1100 South Watkins Street Chattanooga, Tennessee 37404 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (615) 698-2501 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered None None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $3.00 Par Value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, 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 the registrant's knowledge, in definitive proxy or other information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] -Continued- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K (Continued) State the aggregate market value of the voting stock held by non-affiliates of the registrant as of March 11, 1994: Common Stock - $103,901,205; Class B Common Stock - No market exists for the shares of Class B Common Stock, which is neither registered under Section 12 of the Act nor subject to section 15(d) of the Act. Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date. Class Outstanding as of March 11, 1994 Common Stock, $3.00 Par Value 11,521,733 shares (1) Class B Common Stock, $3.00 Par Value 735,228 shares Class C Common Stock, $3.00 Par Value 0 shares (1) The shares outstanding include the 1,029,446 shares issued subject to put option pursuant to the acquisition of the assets of Masland Carpets, Inc. on July 9, 1993 Documents Incorporated By Reference Specified portions of the following document are incorporated by reference: Proxy Statement of the registrant for annual meeting of shareholders to be held May 5, 1994 (Part III). PART I ITEM 1. BUSINESS GENERAL An integral part of the Company's strategy during the past two years has been to restructure its operations and expand into floorcovering. Today, the Company operates in two business segments - Textile products and Floorcovering - with approximately half of its sales in each segment. Prior to the acquisitions of Carriage and Masland in 1993, the Company's single line of business, textile products, included the Company's Candlewick carpet yarn operations. With the expansion into the floorcovering business, the Company's carpet yarn operations are now included in the floorcovering segment. Financial information relating to the Company's business segments have been restated for all periods presented and are set forth in Note (O) to the Company's consolidated financial statements. TEXTILES TEXTILE INDUSTRY - The domestic textile industry manufactures products for a variety of end uses, including home furnishings (domestics, drapery and upholstery), industrial products, transportation applications and apparel. The industry, which encompasses yarn preparation, fabric formation and product distribution, is structured with various degrees of vertical integration, depending upon the particular products involved. The textile industry is made up of a great number of companies, none of which are believed to have sales that comprise as much as 10% of the total market. The domestic apparel market, which includes a substantial portion of the customers for the Company's products, is continually faced with competition from imports; however, management believes that implementation of the North American Free Trade Agreement may increase demand for domestic textile products by continuing to encourage utilization of such products by non-domestic cut and sew operations. Additionally, management believes consumer buying patterns continue to be influenced by mass merchandisers and retailers emphasizing price competition for value-added products. The domestic textile industry also services the home furnishing and other industries in a number of applications which are impacted by housing sales as well as by domestic automotive production levels. THE COMPANY'S TEXTILE PRODUCTS - The Company manufactures and markets yarns, threads and knit fabrics from a variety of natural and man-made fibers. Textile products are primarily sold to manufacturers of apparel, domestics, drapery and upholstery, hosiery, industrial fabrics, transportation and other industries. The Company produces a wide variety of products, with a significant focus on high-end value added products. Although the textile products business is organized into three business groups, substantial sales and customer overlap exists among the groups. Textile products are focused on narrow groups of products, related by manufacturing processes, performance qualities and end uses. No group of such products individually accounts for as much as 10% of Dixie's consolidated revenues for 1993, 1992 or 1991 and no customer's volume exceeded 10 percent of the Company's total sales for 1993. The Company's Yarn Group ("Yarn Group") is comprised of the Natural and Dyed Yarn Group and the Synthetics Yarn Group. Products produced and marketed through these groups include ring spun, open end and air jet single and plied yarns which are sold to manufacturers of premium-price apparel, high-end home furnishings, and industrial products. A portion of the yarn produced by the yarn spinning facilities is further processed by the Company's mercerizing and package dyeing facilities. Cotton is the primary fiber for both natural, and mercerized and package dyed markets served. Other markets served include products manufactured from man-made (synthetics) fibers, many of which are high technology fibers that impart strength, heat resistance, stretch and/or characteristics relating to comfort and insulation properties. Natural, dyed and synthetic yarns are marketed through a combination of salaried sales force and, to a lesser extent, commissioned sales agents. The Company's Industrial Sewing Thread Group ("Threads USA") is one of three major domestic manufacturers and marketers of industrial sewing thread, with a full line of products that includes cotton, spun polyester, corespun and filament threads. Thread products are sold directly by the Company's sales personnel through an extensive regional warehouse network as well as to independent wholesale jobbers. The Company's Knit Fabric Group ("Caro Knit") knits, dyes and finishes 100 percent cotton circular knit fabrics for apparel and industrial markets. A majority of the yarn used for the production of the knit fabric is supplied by the Company's yarn facilities. Knit products are sold primarily by its own salaried sales force. The Company's sales order backlog position in its textile products business was approximately $79,000,000 on December 25, 1993 compared to approximately $102,000,000 on December 26, 1992. All of these orders can reasonably be expected to be filled within the 1994 fiscal year. Although the competition faced by the Company's textile business varies depending on the markets involved, a substantial portion of the Company's products in the Company's domestic textile products business is faced with competition from imports. The Company owns a number of patents used in its textile business, and patent protection is sought as a matter of course when machinery or process improvements are made that are considered patentable. However, in the opinion of the Company, its textile operations are not materially dependent upon patents and patent applications. FLOORCOVERING THE CARPET INDUSTRY - The carpet industry is composed of approximately 100 manufacturers of which the top 5 account for over 50% of total sales in the industry. The industry has two primary markets, residential and commercial, with the residential market making up the largest portion of industry's sales. A substantial portion of industry shipments is made in response to replacement demand. The residential market consists of broadloom carpets, rugs and bathmats in a broad range of styles, colors, textures and yarns. The carpet industry also manufactures carpet for the automotive, recreational vehicle and recreational boat industries. The carpet industry is highly competitive with competition principally from 100 domestic manufacturers of carpets and rugs. Carpet manufacturers also face competition from the hard surface floorcovering industry. The principal methods of competition within the carpet industry are quality, style, price and service. THE COMPANY'S FLOORCOVERING BUSINESS - The Company's floorcovering business manufactures and markets carpet yarns and floorcovering products for specialty markets through Candlewick Yarns ("Candlewick"), Carriage Industries, Inc. ("Carriage") and Masland Carpet, Inc. ("Masland"). Candlewick is one of the world's largest independent carpet yarn manufacturers. Its customers include end-use product manufacturers in the bath rug, automotive and broadloom carpet markets. Candlewick is a producer of premier yarns for floorcovering applications. It competes through product quality and innovation. Its product development center and relationships with fiber suppliers have been developed to provide customers a means to evaluate yarn and fiber variations. Candlewick has a significant share of the bath rug yarn market due to the breadth of its product line, service capabilities, quality and history of innovation. Products of Candlewick are marketed through its own salaried sales force. Carriage is a vertically integrated carpet manufacturer serving specialized markets. Its highly diversified markets include: original equipment manufacturers of manufactured housing, recreational vehicles, and small boats; the exposition/trade show market; contract/residential market; and the home center/needlebond market. Carriage's manufacturing operations include yarn extrusion, yarn processing,tufting, needlebonding, dyeing, finishing and finished product transportation through its own trucking fleet. Its product line is marketed by a staff of salaried sales personnel and to a lesser extent commission sales representatives. Carriage competes only in selected portions of the floorcovering market. Competition is based not only on price, but also on quality of goods, customer service and reputation for reliability. The Company has developed a broad array of specialized products of varying styles, widths, colors and backing. Rapid, just-in-time delivery of customer orders is an important part of the Company's customer service program. The Company controls delivery of its products through its trucking fleet of 68 tractor-trailers and utilization of regional distribution centers for finished goods. Masland markets broadloom products for specification by the architectural and design communities and residential carpet and designer rugs to a select group in interior design showrooms and high-end specialty retailers. Each of the markets served require quality, service, innovation in styling and product design. Competition within its business is based primarily on quality, service and styling, with price becoming an increasingly important factor, particularly in the Company's contract business. The Company's sales order backlog position in its floorcovering business was approximately $37,000,000 on December 25, 1993 compared to approximately $24,000,000 on December 26, 1992. All of these orders can reasonably be expected to be filled within the 1994 fiscal year. The Company's floorcovering business owns a variety of trademarks under which its products, particularly those sold by Masland, are marketed. While such trademarks are important to Masland's business, there is no one trademark, other than the name Masland itself, which is of material importance to the segment. There was no single class of products exceeding 10 percent of the Company's sales volume for 1993, 1992 or 1991 and no customer's volume exceeded 10 percent of the Company's total sales for 1993. SEASONALITY Within the varied markets serviced by the Company, there are a number of seasonal production cycles, but the Company's business as a whole is not considered to be significantly affected by seasonal factors. Correspondingly, there appear to be no material impacts on working capital relating to seasonality or other business dynamics. ENVIRONMENTAL While compliance with current federal, state and local provisions regulating the discharge of material into the environment may require additional expenditures by the Company, these expenditures are not expected to have a material effect on capital expenditures, earnings or the competitive position of the Company. RAW MATERIALS The Company obtains natural and synthetic raw materials from a number of domestic suppliers. Cotton fiber is purchased at market rates from numerous cotton merchants and directly from cotton growing cooperatives under short-term supply contracts at costs which are significant factors in the Company's pricing of its products. Man-made fibers are purchased from major chemical suppliers. Although the Company's procurement of raw materials is subject to variations in price and availability due to agricultural and other market conditions and in the price of petroleum used to produce man-made fibers, the Company believes that its sources of raw materials are adequate and that it is not materially dependent on any single supplier. UTILITIES The Company uses electricity as its principal energy source, with oil or natural gas used in some facilities for finishing operations as well as heating. During the past five years the Company has not experienced any material problems in obtaining electricity, natural gas or oil at anticipated prices. Nevertheless, energy shortages of extended duration could have an adverse effect on the Company's operations. The Company had approximately 7,300 associates as of the end of fiscal 1993. ITEM 2. PROPERTIES The following table lists the Company's facilities according to location, type of operation and approximate total floor space as of March 11, 1994. Approximate Location Type of Operation Square Feet CORPORATE Administrative: Chattanooga, TN Administrative 41,000 TEXTILE PRODUCTS Administrative: Gastonia, NC Administrative 61,000 Warehousing: Gastonia, NC (2 locations) Warehousing 88,000 Sales Branch Warehouses (4 locations) Warehousing 54,000 Total Warehousing 142,000 Manufacturing: Chattanooga, TN Yarn Spinning 440,000 Mebane, NC Yarn Spinning 99,000 Ranlo, NC Yarn Spinning 482,000 Saxapahaw, NC Yarn Spinning 264,000 Tarboro, NC Yarn Spinning 340,000 Chattanooga, TN Package Yarn Dyeing, Bleaching and Mercerizing 276,000 Tryon, NC Bleaching and Mercerizing 63,000 Gastonia, NC Thread Yarn Dyeing and Finishing 530,000 Arroyo, Puerto Rico Thread Yarn Dyeing and Finishing 22,000 Gastonia, NC Thread Yarn Spinning 445,000 Jefferson, SC Knitting, and Fabric Dyeing and Finishing 274,000 Newton, NC Yarn Spinning and Knitting 252,000 Total Manufacturing 3,487,000 FLOORCOVERING Administrative: Dalton, GA Administrative 13,000 Calhoun, GA Administrative 60,000 Mobile, AL(2) Administrative 20,000 Total Administrative 93,000 Warehousing: Ringgold, GA Warehousing 119,000 Manufacturing: Lemoore, CA Tufted Yarn Spinning 322,000 Ringgold, GA Tufted Yarn Spinning 290,000 Roanoke, AL (1) Tufted Yarn Spinning 190,000 Calhoun, GA Carpet Manufacturing 1,016,000 Chatsworth, GA Carpet Manufacturing 24,000 Atmore, AL Carpet Manufacturing 262,000 Mobile, AL(2) Rug Manufacturing, Distribution 400,000 Total Manufacturing 2,504,000 Total 6,447,000 ITEM 2. PROPERTIES - CONTINUED (1) This property is currently leased. Under the provisions of the Roanoke, AL lease, the Company is acquiring title to the property over the term of the lease, which is expected to terminate in 2004. (2) This property is currently leased. Under the provision of the Mobile, AL lease, the Company will acquire the property at the end of the lease. In addition to the facilities listed above, the Company owns or leases various administrative, storage, warehouse and office spaces. In the opinion of the Company, its manufacturing facilities are well maintained and the machinery is efficient and competitive. Operations at each plant generally vary between 120 hours and 168 hours per week. There are no material encumbrances on any of the Company's operations. ITEM 3. LEGAL PROCEEDINGS There are no material pending legal proceedings to which the Company or its subsidiaries are a party or of which any of its property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted during the fourth quarter of 1993 to a vote of the shareholders. Pursuant to instruction G of Form 10-K the following is included as an unnumbered item to Part I. EXECUTIVE OFFICERS OF THE REGISTRANT The names, ages, positions and offices held by the executive officers of the registrant as of March 11, 1994, are listed below along with their business experience during the past five years. Name, Age Business Experience During and Position Past Five Years Daniel K. Frierson, 52 Director since 1973, Chairman of Chairman of the Board, President the Board since 1987 and Chief and Chief Executive Officer, Executive Officer since 1980. Director, Member of Executive Director of the American National Committee Bank & Trust Co.. Brother of Paul K. Frierson Phil Barlow, 45 Corporate Vice President and Corporate Vice President and President of Carriage Industries, President, Carriage Industries, Inc. Inc. since 1993. Vice President of Sales and Marketing, Carriage, 1988- 1993. Director of Sales and Marketing, Carriage, 1986 - 1988. David C. Clarke, 36 Corporate Vice President and Corporate Vice President and President, Threads USA since President, Threads USA February, 1994. Executive Vice President of Sales, Threads USA, from September, 1992 to February, 1994. Vice President of Direct Sales, Threads USA, from November, 1991 to September, 1992. Director of Direct Sales, Threads USA, from February, 1991 to November, 1991. Director of Sales, American Thread Company, from 1989 - 1991. C. Pat Driver, 53 Corporate Vice President and Corporate Vice President and President, Synthetic Yarn Group President, Synthetic Yarns since June, 1992. Corporate Vice President and President, Dixie Yarns Group, from 1989 to June, 1992. President, Carpet Yarns, Group (Candlewick), 1983 - 1989. EXECUTIVE OFFICERS OF THE REGISTRANT -- CONT. Name, Age Business Experience During and Position Past Five Years Paul K. Frierson, 56 Director since 1988. Corporate Corporate Vice President and Vice President and President, President, Candlewick Yarns, Carpet Yarns Group (Candlewick) Director since 1989. Executive Vice President of Candlewick from 1984 - 1989. Director of Nationsbank/Chattanooga. Brother of Daniel K. Frierson. Charles P. McCamy, 40 Corporate Vice President and Corporate Vice President and President, Caro Knit Group President, Caro Knit since December, 1992. Vice President of Manufacturing, Caro Knit Group, from January, 1991 to December, 1992. Vice President of Manufacturing, Great American Knitting Mills, 1989 - 1990. George B. Smith, 53 Corporate Vice President and Corporate Vice President President, Natural and Dyed Yarn and President, Natural and Dyed Yarns Group since August, 1993. President Natural Yarn Group from October, 1992 to August, 1993. Self-employed (Consulting and Commission Sales) June, 1990 to November, 1992. Corporate Vice President, Avondale Mills, Inc., 1986 - 1990. President, Avondale Yarn Division, 1989 - 1990. President, Avondale Fabric Division, 1986-1989. John Sturdy, 64 Corporate Vice President and Corporate Vice President President, Masland Carpets, Inc., and President, Masland Carpets, Inc. 1993. President & Chief Executive Officer, Masland Carpets, Inc., 1991 - 1993. President & Chief Operating Officer, The Harbinger Company, Inc., subsidiary of Horizon Industries, Inc. 1984 - 1991. W. Derek Davis, 43 Corporate Vice President of Human Corporate Vice President - Resources since January, 1991. Human Resources Corporate Employee Relations Director, 1990 - 1991. Employee Relations Director, Dixie Yarns Group and Carpet Yarns Group (Candlewick), 1988 - 1990. EXECUTIVE OFFICERS OF THE REGISTRANT -- CONT. Name, Age Business Experience During and Position Past Five Years Jon Faulkner, 34 Corporate Vice President of Corporate Vice President - Administration since 1993. Director Administration of Management Information Systems, 1990 - 1993. Manager of Warehouses and Distribution, Threads USA, 1989 - 1990. Gary Harmon, 48 Treasurer since 1993. Treasurer Director of Tax and Financial Planning, 1985 - 1993. D. Eugene Lasater, 43 Controller since 1988 Controller Starr T. Klein, 51 Secretary since November, 1992. Secretary Assistant Secretary, 1987 - 1992. The executive officers of the registrant are elected annually by the Board of Directors at its first meeting held after each annual meeting of the Company's shareholders. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS The Company's Common Stock trades on the over-the-counter National Market System with the NASDAQ symbol DXYN. No market exists for the Company's Class B Common Stock. As of March 11, 1994, the total number of record holders of the Company's Common Stock was approximately 6,200 and the total number of holders of the Company's Class B Common Stock was 19. Management of the Company estimates that there are approximately 4,700 shareholders who hold the Company's Common Stock in nominee names. Dividends and Price Range of Common Stock for the four quarterly periods in the years ended December 25, 1993 and December 26, 1992 are as follows: QUARTERLY FINANCIAL DATA, DIVIDENDS AND PRICE RANGE OF COMMON STOCK (Unaudited) (dollar amounts in thousands, except per share data)
1993 Quarter 1st 2nd 3rd 4th Net sales $120,777 $161,439 $152,530 $159,855 Gross profit 15,407 23,288 24,673 20,855 Net income 907 2,062 841 874 Earnings per common and common equivalent share .10 .18 .07 .07 Dividends: Common Stock .05 .05 .05 .05 Class B Common Stock .05 .05 .05 .05 Common Stock prices: High $ 15.38 $ 16.75 $ 13.50 $ 11.38 Low $ 12.25 $ 10.75 $ 10.50 $ 8.75 1992 Quarter 1st 2nd 3rd 4th Net sales $119,149 $123,462 $113,965 $113,256 Gross profit 14,304 15,188 15,004 13,090 Net income 212 1,262 2,048 1,945 Earnings per common and common equivalent share .02 .14 .23 .22 Dividends: Common Stock .05 .05 .05 .05 Class B Common Stock .05 .05 .05 .05 Common Stock prices: High $ 12.00 $ 14.25 $ 14.13 $ 13.00 Low $ 7.50 $ 9.75 $ 9.25 $ 9.25 The total of quarterly earnings per share does not equal the annual earnings per share due primarily to Common Stock purchased and issued during the respective periods. Gross profit, net income and earnings per share have been restated to reflect the adoption of Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes," in 1993. The operating results of Carriage and Masland are included subsequent to acquisitions in arch and July of 1993, respectively. The discussion of restrictions on payment of dividends is included in Note (E) to Consolidated Financial Statements included herein.
ITEM 6. SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with the related consolidated financial statements and notes thereto included under Items 8, 14(a) (1) and (2) and 14 (d) of the report on Form 10-K.
Year Ended December 25, December 26, December 28, December 29, December 30, 1993(1) 1992(2) 1991(2) 1990(2) 1989(2) Net sales $594,601,350 $469,832,466 $491,952,433 $556,207,313 $570,840,490 Income(loss) from continuing operations(3,4) 4,684,359 5,467,421 (25,557,215) 6,644,109 11,530,227 Total assets 496,578,881 397,080,239 372,806,621 394,041,690 385,710,694 Long-term debt: Senior indebtedness 87,649,871 70,022,500 59,323,800 28,987,400 60,925,900 Subordinated notes 50,000,000 50,000,000 50,000,000 50,000,000 --- Convertible subordinated debentures 44,782,000 44,782,000 44,782,000 47,000,000 50,000,000 Common Stock, subject to put option 18,177,958 --- --- --- --- Per Share: Income(loss) from continuing operations: (3,4) Primary .41 .62 (2.90) .70 1.11 Fully diluted .40 .62 (2.90) .70 1.11 Cash dividends declared: Common Stock .2000 .2000 .4200 .6800 .6800 Class B Common Stock .2000 .2000 .4200 .6800 .6633 (1) Includes the results of operations of Carriage Industries, Inc. and Masland Carpets, Inc. subsequent to their acquisitions on March 12, 1993 and July 9, 1993, respectively. See Note (B) to the Consolidated Financial Statements. (2) Results for 1989 through 1992 have been restated to reflect the adoption of SFAS No. 109, "Accounting for Income Taxes." See Note (H) to the Consolidated Financial Statements. (3) Income(loss) from continuing operations includes a restructuring charge of $18,271,000, or $2.08 per share, for the year ended December 28, 1991 and a charge for losses on plant closings of $1,143,000, or $.12 per share, for the year ended December 29, 1990. See Note (I) to the Consolidated Financial Statements. (4) Income(loss) from continuing operations excludes a charge for the cumulative effect of an accounting charge of $1,497,000, or $.17 per share, and an extraordinary gain from the early retirement of debt of $452,000, or $.05 per share, for the year ended December 28, 1991 and an extraordinary gain from the early retirement of debt of $699,000, or $.07 per share, for the year ended December 29, 1990.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION GENERAL An integral part of the Company's strategy has been to restructure its textile operations and expand into floorcovering. Today, the Company operates in two business segments - Textile products and Floorcovering - with approximately half of its sales in each segment. Restructuring - During the latter part of 1991, the Company accrued the estimated cost to restructure its operations of approximately $28.3 million ($18.3 million after-tax) and began implementation of a plan to reduce costs in its operations by consolidating manufacturing facilities and expanding to seven- day scheduled operations. Cost of the restructuring incurred through 1993, consisted of approximately $13.5 million to write-down certain assets to estimated fair market value, approximately $3.2 million for severance payments and approximately $11.1 million for other direct costs of the restructuring. Five smaller manufacturing facilities were closed and one was sold. Production and equipment from the discontinued facilities were consolidated into larger, more efficient units and virtually every textile and carpet yarn facility was impacted by the restructuring. Disruptions associated with product and machinery changes had a negative impact on operating profits, particularly in 1993. Substantially all of the planned changes have been completed; however, additional costs are anticipated in 1994 until operations reach planned efficiency levels. Expansion into floorcovering - The carpet industry has been consolidating for a number of years and the Company intends to participate in the industry's consolidation by acquiring carpet companies that serve specialty markets. The acquisition of Carriage Industries, Inc. was completed on March 12, 1993 and Masland Carpets, Inc. was acquired on July 9, 1993. Both Carriage and Masland produce floorcovering products for specialty markets. Carriage is a vertically integrated manufacturer of specialized floorcovering for the manufactured housing, recreational vehicle and small boat industries, the exposition/trade show market, the contract/residential market, and the home center/needlebond market. Masland manufactures high-end residential and contract commercial carpet and designer rugs for interior designers, architects and specialty retailers. RESULTS OF OPERATIONS 1993 Compared with 1992 - Sales for the year ended December 25, 1993 increased approximately 27%. The increase in 1993 sales is attributable to the Company's floorcovering business, which now includes the Company's carpet yarn manufacturing operations and subsequent to their 1993 acquisitions, the operations of Carriage Industries, Inc. and Masland Carpets, Inc.. The dollar volume of sales of the Company's textile products declined 4.5% in 1993, although unit volume increased. The decline in sales of textile products is attributable to weak retail apparel markets and the sale of a dyed yarn facility in the first quarter of 1993. Net income was $4.5 million, or $.41 per share, in 1993 compared with $5.5 million, or $.62 per share, in 1992. Operating income for 1993 was 9.2% of sales in the Company's floorcovering business and .5% of sales for textile products, compared with 6.4% and 4.4%, respectively, in 1992. In addition to the 1993 acquisitions, floorcovering enjoyed strong growth and favorable conditions in the markets it serves throughout 1993. The decrease in operating profits for textile products in 1993 is principally due to weak demand for apparel products and raw material price increases that could not be passed along to customers resulting in price and margin erosion, particularly in the third and fourth quarters of 1993. Disruptions associated with production and operating consolidations have had a negative impact on profits of the Company's textile business. The increase in gross profits and selling, general and administrative expenses as a percent of sales in 1993 reflects the traditional higher margins and higher selling and product distribution costs associated with the specialized floorcovering markets serviced by Carriage and Masland. The increase in other income in 1993 is principally the result of approximately $1.8 million of storm insurance proceeds and gains from assets disposals. Interest expense increased in 1993 due to the higher levels of debt. The Company's effective income tax rate differs from the statutory income tax rates due primarily to nondeductible amortization of intangible assets. Also in 1993, a non-cash income tax charge of approximately $.5 million, or $.04 per share, resulted from the effect of the increase in the statutory federal income tax rate on deferred income taxes established in prior years. During the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" and changed its method of accounting for income taxes to the liability method. In connection with the change in method of accounting, financial statements for periods subsequent to 1986 were restated as if the new method had been in effect during those periods. The effect of the change was to decrease 1992 net income by approximately $.2 million, or $.03 per share, and increase the 1991 net loss by approximately $.2 million, or $.02 per share. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which requires, under certain conditions, the adoption of accrual accounting for postemployment benefits no later than 1994. The Company sponsors no such plans and the new standard is not expected to affect the Company's financial statements. 1992 Compared with 1991 - Dollar sales decreased in 1992 although unit volume increased. The decrease in dollar volume of sales was attributable to the Company's textile products business, which declined in 1992 due to the effect of adverse economic conditions in high-end markets and a greater portion of unit sales consisting of lower priced products. Operating profits, excluding the effect of the restructuring charge in 1991, increased in both the Company's floorcovering and textile products segments increased as a result of reductions in raw materials costs, manufacturing costs, and selling, general and administrative expenses. Interest expense decreased in 1992 due to lower interest rates. The Company's effective income tax rate differs from the statutory income tax rate due primarily to nondeductible amortization of intangible assets. Net income for 1991 was negatively impacted by an $18.3 million after-tax charge to record the estimated cost of product and facility consolidations associated with the planned restructuring of operations and a $1.5 million after-tax charge for the cumulative effect of the change in method of accounting for postretirement benefits other than pensions when Statement of Financial Accounting Standards No. 106 was adopted. LIQUIDITY AND CAPITAL RESOURCES During the three year period ended December 25, 1993, funds generated from operating activities totaled $117.2 million and funds raised through additional long-term debt amounted to $56.4 million. These cash flows funded the Company's operations, capital expenditures, and cash used in business acquisitions. Funds generated from operating activities (including $45 million from the sale of accounts receivables) were $60.2 million in 1993 and were supplemented by $16.5 million of additional senior indebtedness and $9.2 million (exclusive of insurance proceeds) from the disposal of assets. These funds financed, among other things, $38.8 million of capital expenditures (exclusive of storm and fire related expenditures), the retirement of $36.3 million of debt and expenses related to acquisitions, and dividend payments. On March 13, 1993 a severe winter storm damaged a substantial portion of Carriage's manufacturing facilities, and in August 1993, a fire destroyed Bretlin's Chatsworth, Georgia needlebond facility. Carriage and Bretlin have substantially completed the rebuilding of their damaged facilities. Expenditures to replace or repair damaged facilities, costs, and certain losses associated with the storm and fire were approximately $33.5 million in 1993. Both losses were covered by insurance. Through the end of 1993, insurance reimbursements of approximately $28.1 million had been received. Although the insurance recovery for the storm and fire damage has not been concluded, coverage continues to appear adequate. Capital expenditures were approximately 128% of depreciation and amortization expenses during the three year period ended December 25, 1993 and were directed toward upgrading equipment, improving quality, and providing for greater production efficiency and flexibility. Capital expenditures for 1994 are expected to be below the level of depreciation and amortization expenses and will be concentrated in the Company's floorcovering business. The Company acquired approximately 46% of the outstanding common stock of Carriage Industries, Inc. in 1992 for $27.4 million cash and acquired Carriage's remaining, publicly-held shares on March 12, 1993 in exchange for approximately 2.5 million shares of the Company Common Stock, options to purchase approximately .1 million shares of the Company's Common Stock, and approximately $.7 million cash. On July 9, 1993, the assets of Masland Carpets, Inc. were acquired in exchange for approximately 1.0 million shares of the Company's Common Stock, $1.1 million cash, and the assumption of approximately $.8 million of debt. The holders of the shares issued in the Masland acquisition have the right, after two years, to put the shares to the Company at a price of approximately $18 per share. In October 1993, the Company entered into a seven-year agreement to sell an undivided interest in a revolving pool of its trade accounts receivable. At December 25, 1993, a $45,000,000 interest had been sold under this agreement, and the sale is reflected as a reduction of accounts receivable. The cost of this program are based upon rating agencies' assessment of the quality of the receivables pool and the purchasers' level of investment and are fixed at 6.08% per annum plus administrative fees typical in such transactions. In addition, the Company is generally responsible for credit losses associated with sold receivables. At December 25, 1993, the Company's debt structure consisted of $44.8 million of convertible subordinated debentures, $ 50.0 million of subordinated notes, and $86.5 million of senior indebtedness, principally under a revolving credit and term loan agreement. The convertible subordinated debentures require mandatory sinking fund payments beginning in 1998. Payments are not required under the Company's subordinated notes until 2000. The revolving credit and term loan agreement provides revolving credit up to $125.0 million until September 30, 1995, at which time the outstanding balance, at the Company's election, may be converted into a term loan payable in semi-annual installments over five years. At year-end, the available unused borrowing capacity under the agreement was approximately $38.5 million. The Company's future liquidity requirements are expected to consist primarily of capital expenditures, seasonal working capital requirements, and funds necessary to finance the Company's expansion in the floorcovering business. These liquidity requirements are expected to be financed from operating cash flows, existing credit arrangements, issuance of capital stock, and public or private debt. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The supplementary financial information as required by Item 302 of Regulation S-K is included in PART II, ITEM 5 of this report and the remaining response is included in a separate section of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The section entitled "Information about Nominees for Directors" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 5, 1994 is incorporated herein by reference. Information regarding the executive officers of the registrant is presented in Part I of this report. ITEM 11. EXECUTIVE COMPENSATION The section entitled "Executive Compensation Information" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 5, 1994 is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The section entitled "Principal Shareholders", as well as the beneficial ownership table (and accompanying notes) from the section entitled "Information About Nominees for Directors" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 5, 1994 is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The section entitled "Certain Transactions Between the Company and Directors and Officers" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 5, 1994 is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) (1) and (2)-- The response to this portion of Item 14 is submitted as a separate section of this report. (3) Listing of Exhibits: (i) Exhibits Incorporated by Reference: (3a) Restated Charter of Dixie Yarns, Inc. (3b) Amended and Restated By-Laws of Dixie Yarns, Inc. (4a) Second Amended and Restated Revolving Credit and Term Loan Agreement dated January 31, 1992 by and among Dixie Yarns, Inc., and Trust Company Bank, NationsBank of North Carolina, N.A. and Chemical Bank. (4b) Loan Agreement dated February 6, 1990, between Dixie Yarn, Inc. and New York Life Insurance Company and New York Life Insurance and Annuity Corporation. (4c) Form of Indenture, Dated May 15, 1987 between Dixie Yarns, Inc. and Morgan Guaranty Trust Company of New York as trustee. (4d) Revolving Credit Loan Agreement dated as of September 16, 1991 by and among Ti-Caro, Inc. and Trust Company Bank, individually and as Agent, NCNB National Bank and Chemical Bank. (4e) First Amendment to Revolving Credit Loan Agreement dated as of August 19, 1992 by and among Ti-Caro, Inc., T-C Threads, Inc. and Trust Company Bank, individually and as agent, NCNB National Bank, and Chemical Bank. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - CONTINUED (3) Listing of Exhibits: (10a) Dixie Yarns, Inc. 1983 Incentive Stock Option Plan. (10b) Dixie Yarns, Inc. Incentive Stock Plan. (10c) Dixie Yarns, Inc. Nonqualified Defined Contribution Plan. (10d) Dixie Yarns, Inc. Nonqualified Employee Savings Plan. (10e) Dixie Yarns, Inc. Incentive Compensation Plan. (10f) Asset Transfer and Restructuring Agreement dated July 19, 1993, by and among Dixie Yarns, Inc., Masland Carpets, Inc., individual management investors of Masland Carpets, Inc., The Prudential Insurance Company of America and Pruco Life Insurance Company (10g) Assignment and Bill of Sale dated July 9, 1993, by and between Dixie Yarns, Inc. and Masland Carpets, Inc. (10h) Assignment and Assumption Agreement dated July 9, 1993, by and between Dixie Yarns, Inc. and Masland Carpets, Inc. (10i) Stock Rights and Restrictions Agreement dated July 9, 1993, by and among Dixie Yarns, Inc., Masland Carpets, Inc., The Prudential Insurance Company of America and Pruco Life Insurance Company of America. (10j) Pooling and Servicing Agreement dated as of October 15, 1993, among Dixie Yarns, Inc., Dixie Funding, Inc. and NationsBank of Virginia, N.A. (as Trustee). (10k) Annex X - Definitions, to Pooling and Servicing Agreement dated as of October 15, 1993, among Dixie Yarns, Inc., Dixie Funding, Inc. and NationsBank of Virginia, N.A. (as Trustee). (10l) Series 1993-1 Supplement, dated as of October 15, 1993, to Pooling and Servicing Agreement dated as of October 15, 1993, among Dixie Yarns, Inc., Dixie Funding Inc. and NationsBank of Virginia, N.A. (as Trustee). (10m) Certificate Purchase Agreement dated October 15, 1993, among Dixie Yarns, Inc., Dixie Funding, Inc. and New York Life Insurance and Annuity Corporation. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - CONTINUED (3) Listing of Exhibits --Continued (10n) Certificate Purchase Agreement dated October 15, 1993, among Dixie Yarns, Inc., Dixie Funding, Inc. and John Alden Life Insurance Company. (10o) Certificate Purchase Agreement dated October 15, 1993, among Dixie Yarns, Inc., Dixie Funding, Inc. and John Alden Life Insurance Company of New York. (10p) Certificate Purchase Agreement dated October 15, 1993, among Dixie Yarns, Inc., Dixie Funding, Inc. and Keyport Life Insurance Company. (10q) Executive Severance Agreement dated as of September 8, 1988 as amended. (ii) Exhibits filed with this report: (4f) First Amendment, dated August 25, 1993 to Second Amended and Restated Revolving Credit and Term Loan Agreement dated January 31, 1992, by and among Dixie Yarns, Inc. and Trust Company Bank, NationsBank of North Carolina, N.A. and Chemical Bank. (11) Statement Re: Computation of Earnings Per Share. (21) Subsidiaries of the Registrant. (23) Consent of Ernst & Young. (b) Reports on Form 8-K--The following reports on Form 8-K have been filed by the registrant during the last quarter of the period covered by this report: Current Report on Form 8-K, dated October 15, 1993 reporting the sale of an undivided interest in a revolving pool of its trade accounts receivable. (c) Exhibits--The response to this portion of Item 14 is submitted as a separate section of this report. See Item 14 (a) (3) (ii) above. (d) Financial Statement Schedules--The response to this portion of Item 14 is submitted as a separate section of this report. 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. DIXIE YARNS, INC. March 24, 1994 BY: /s/DANIEL K. FRIERSON Daniel K. Frierson, Chairman of the Board, President and 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. Chairman of the Board, President, Director and /s/DANIEL K. FRIERSON Chief Executive Officer March 24, 1994 Daniel K. Frierson Corporate Vice-President, President of the Candlewick /s/PAUL K. FRIERSON Group and Director March 24, 1994 Paul K. Frierson /s/D. EUGENE LASATER Controller March 24, 1994 D. Eugene Lasater /s/GARY A. HARMON Treasurer March 24, 1994 Gary A. Harmon /s/PAUL K. BROCK Director March 24, 1994 Paul K. Brock SIGNATURES -- CONTINUED /s/LOVIC A. BROOKS, JR. Director March 24, 1994 Lovic A. Brooks, Jr. /s/J. FRANK HARRISON, JR. Director March 24, 1994 J. Frank Harrison, Jr. /s/JAMES H. MARTIN, JR. Director March 24, 1994 James H. Martin, Jr. /s/PETER L. SMITH Director March 24, 1994 Peter L. Smith /s/JOSEPH T. SPENCE, JR. Director March 24, 1994 Joseph T. Spence, Jr. /s/ROBERT J. SUDDERTH, JR. Director March 24, 1994 Robert J. Sudderth, Jr. ANNUAL REPORT ON FORM 10-K ITEM 8, ITEM 14 (a)(1) AND (2) AND ITEM 14(d) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FINANCIAL STATEMENTS FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 25, 1993 DIXIE YARNS, INC. CHATTANOOGA, TENNESSEE FORM 10-K--ITEM 14(a)(1) and (2) DIXIE YARNS, INC. AND SUBSIDIARIES LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of Dixie Yarns, Inc. and subsidiaries are included in Item 8: Report of Independent Auditors Consolidated balance sheets--December 25, 1993 and December 26, 1992 Consolidated statements of income(loss)--Years ended December 25, 1993, December 26, 1992, and December 28, 1991 Consolidated statements of cash flows--Years ended December 25, 1993, December 26, 1992, and December 28, 1991. Consolidated statements of stockholders' equity--Years ended December 25, 1993, December 26, 1992, December 28, 1991 The following consolidated financial statement schedules of Dixie Yarns, Inc. and subsidiaries are included in Item 14(d): Schedule V--Property, plant and equipment Schedule VI--Accumulated depreciation, depletion, and amortization of property, plant and equipment Schedule VIII--Valuation and qualifying account Schedule X--Supplementary income statement information All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions, or are inapplicable, or the information is otherwise shown in the financial statements or notes thereto, and therefore have been omitted. Report of Independent Auditors Board of Directors Dixie Yarns, Inc. We have audited the accompanying consolidated balance sheets of Dixie Yarns, Inc. and subsidiaries as of December 25, 1993 and December 26, 1992, and the related consolidated statements of income (loss), stockholders' equity, and cash flows for each of the three years in the period ended December 25, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Dixie Yarns, Inc. and subsidiaries at December 25, 1993 and December 26, 1992, and the consolidated results of its operations and cash flows for each of the three years in the period ended December 25, 1993, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Note (H) to the consolidated financial statements, in 1993 the Company changed its method of accounting for income taxes. ERNST & YOUNG Chattanooga, Tennessee February 17, 1994 DIXIE YARNS, INC. CONSOLIDATED BALANCE SHEETS
December 25, December 26, 1993 1992 ASSETS CURRENT ASSETS Cash and cash equivalents $ 4,047,459 $ 1,425,985 Accounts receivable (less allowance for doubtful accounts of $3,900,000 in 1993 and $4,200,000 in 1992) 26,553,831 50,415,020 Inventories 105,809,888 67,086,327 Other 11,667,083 4,067,430 TOTAL CURRENT ASSETS 148,078,261 122,994,762 PROPERTY, PLANT AND EQUIPMENT On the basis of cost Land and improvements 12,346,361 9,754,481 Buildings and improvements 105,198,798 81,597,789 Machinery and Equipment 350,751,015 286,908,460 468,296,174 378,260,730 Less accumulated amortization and depreciation 193,037,707 180,466,651 275,258,467 197,794,079 INTANGIBLE ASSETS (less accumulated amortization of $8,742,059 in 1993 and $7,116,742 in 1992) 62,722,113 42,648,228 INVESTMENT IN AFFILIATE 27,936,050 OTHER ASSETS 10,520,040 5,707,120 TOTAL ASSETS $496,578,881 $397,080,239
December 25, December 26, 1993 1992 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 32,245,506 $ 24,007,294 Accrued expenses 26,518,429 21,010,085 Current portion of long-term debt 446,829 1,300 TOTAL CURRENT LIABILITIES 59,210,764 45,018,679 LONG-TERM DEBT Senior indebtedness 87,649,871 70,022,500 Subordinated notes 50,000,000 50,000,000 Convertible subordinated debentures 44,782,000 44,782,000 182,431,871 164,804,500 OTHER LIABILITIES 13,037,877 3,093,503 DEFERRED INCOME TAXES 48,038,943 37,804,231 COMMON STOCK, SUBJECT TO PUT OPTION - 1,029,446 shares 18,177,958 STOCKHOLDERS' EQUITY Common Stock ($3 par value per share): Authorized 80,000,000 shares, issued and outstanding, including shares in treasury - 13,852,233 shares in 1993 and 11,342,422 shares in 1992 41,556,699 34,027,266 Class B Common Stock ($3 par value per share): Authorized 16,000,000 shares, issued and outstanding- 735,228 shares in 1993 and 1992 2,205,684 2,205,684 Additional paid-in capital 131,684,054 107,149,489 Retained earnings 60,302,834 57,841,860 Minimum pension liability adjustment (4,981,943) 230,767,328 201,224,299 Less Common Stock in treasury at cost - 3,356,646 shares in 1993 and 3,340,930 shares in 1992 55,085,860 54,864,973 175,681,468 146,359,326 Commitments - Note N TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $496,578,881 $397,080,239
See notes to consolidated financial statements. DIXIE YARNS, INC. CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Year Ended December 25, December 26, December 28, 1993 1992 1991 Net sales $594,601,350 $469,832,466 $491,952,433 Cost of sales 510,378,826 412,246,551 443,015,737 84,222,524 57,585,915 48,936,696 Selling, general and administrative expenses 59,910,691 32,469,983 36,702,948 Restructuring and plant closing costs --- --- 28,275,877 Corporate expenses 5,159,000 5,600,000 7,700,000 Other income (expense) - net 2,640,156 256,021 (1,491,092) 21,792,989 19,771,953 (25,233,221) Interest expense 12,772,630 10,824,344 12,180,429 INCOME(LOSS) BEFORE INCOME TAXES, EXTRAORDINARY GAIN, AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 9,020,359 8,947,609 (37,413,650) Income tax provision (benefit) 4,336,000 3,480,188 (11,856,435) INCOME (LOSS) BEFORE EXTRAORDINARY GAIN AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 4,684,359 5,467,421 (25,557,215) Extraordinary gain from debt retirement (less applicable income taxes of $288,000) 451,706 Cumulative effect of accounting change (less applicable income taxes of $898,000) (1,497,195) NET INCOME (LOSS) $ 4,684,359 $ 5,467,421 $(26,602,704) Per common and common equivalent share: Income (loss) before extraordinary gain and cumulative effect of accounting change $ .41 $ .62 $ (2.90) Extraordinary gain .05 Cumulative effect of accounting change (.17) Net income (loss) $ .41 $ .62 $ (3.02) See notes to consolidated financial statements.
DIXIE YARNS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 25, December 26, December 28, 1993 1992 1991 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 4,684,359 $ 5,467,421 $(26,602,704) Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization 31,221,998 25,041,941 24,418,389 Provision (benefit) for deferred income taxes 3,768,000 2,023,188 (12,553,435) Equity in earnings of affiliate (353,000) (586,000) -- (Gain) loss on property, plant and equipment disposals (1,994,510) (1,371,960) 120,000 Restructuring and plant closing costs --- --- 27,102,088 Extraordinary gain from debt retirement --- -- (451,706) Cumulative effect of accounting change --- -- 1,497,195 Changes in operating assets and liabilities, net of effects of business combinations: Accounts receivable (includes $45 million sold in 1993) 43,839,084 (2,050,734) 7,532,675 Inventories 1,452,857 7,712,869 934,448 Other current assets (2,614,774) 295,393 1,696,554 Other assets (1,887,097) 452,274 3,109,202 Accounts payable and accrued expenses (18,859,652) 5,385,942 (12,177,436) Other liabilities 923,090 (262,485) 276,793 NET CASH PROVIDED BY OPERATING ACTIVITIES 60,180,355 42,107,849 14,902,063 CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from sales and insurance recovery of property, plant and equipment 14,582,419 1,755,516 2,578,782 Purchase of property, plant and equipment (includes $12.1 million in 1993 for storm/fire damages) (50,885,812) (26,324,316) (38,306,024) Equity investment in Carriage Industries, Inc. --- (27,350,050) --- Cash payments in connection with business combinations, net of cash acquired (3,999,546) --- --- NET CASH USED IN INVESTING ACTIVITIES (40,302,939) (51,918,850) (35,727,242) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in credit line borrowings 16,500,000 10,700,000 36,900,000 Debt assumed in acquisitions and retired (32,327,167) --- --- Repayment of senior debt and repurchase of convertible subordinated notes --- -- (8,946,575) Capital stock acquired (339,268) (229,636) (3,217,191) Dividends paid (2,223,385) (1,745,573) (3,690,585) Other 1,133,878 175,516 154,804 NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (17,255,942) 8,900,307 21,200,453 INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 2,621,474 (910,694) 375,274 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,425,985 2,336,679 1,961,405 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 4,047,459 $ 1,425,985 $ 2,336,679 See notes to consolidated financial statements.
DIXIE YARNS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Class B Additional Pension Common Common Common Paid-In Retained Liability Stock In Stock Stock Capital Earnings Adjustment Treasury BALANCE AT DECEMBER 30, 1990 $33,912,783 $2,205,684 $107,116,277 $82,839,357 $(51,602,871) Restatement for the cumulative effect of change in method of accounting - Note (H) 1,573,944 BALANCE AT DECEMBER 30, 1990 AS RESTATED 33,912,783 2,205,684 107,116,277 84,413,301 (51,602,871) Common Stock acquired and retired - 6,463 shares (19,389) (59,423) Common Stock acquired for treasury- 242,675 shares (3,138,379) Common Stock sold under stock option and Employees' Stock Purchase Plan - 22,900 shares 68,700 87,104 Net income (loss) for the year (26,602,704) Dividends declared-Common Stock and Class B Common Stock $.42 per share (3,690,585) BALANCE AT DECEMBER 28, 1991 33,962,094 2,205,684 107,143,958 54,120,012 (54,741,250) Common Stock acquired and retired - 7,876 shares (23,628) (82,285) Common Stock acquired for treasury - 9,900 shares (123,723) Common Stock sold under stock option and Employees' Stock Purchase Plan - 29,600 shares 88,800 87,816 Net income for the year 5,467,421 Dividends declared-Common Stock and Class B Common Stock $.20 per share (1,745,573) BALANCE AT DECEMBER 26, 1992 34,027,266 2,205,684 107,149,489 57,841,860 (54,864,973) Common Stock acquired and retired - 8,582 shares (25,746) (92,635) Common Stock acquired for treasury - 15,716 shares (220,887) Common Stock sold under stock option and Employees' Stock Purchase Plan - 45,499 shares 136,497 174,481 Common Stock issued in connection with Carriage Industries acquisition - 2,472,894 shares 7,418,682 23,754,688 Options issued in connection with Carriage Industries acquisition 698,031 Net income for the year 4,684,359 Minimum pension liability adjustment (4,981,943) Dividends declared-Common Stock and Class B Common Stock $.20 per share (2,223,385) BALANCE AT DECEMBER 25, 1993 $41,556,699 $2,205,684 $131,684,054 $60,302,834 $(4,981,943) $(55,085,860) See notes to consolidated financial statements.
DIXIE YARNS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of Dixie Yarns, Inc. and its wholly-owned subsidiaries (the "Company"). Significant intercompany accounts and transactions have been eliminated in consolidation. Cash Equivalents: Highly liquid investments with original maturities of three months or less when purchased are reported as cash equivalents. Credit and Market Risk: The Company sells products primarily to manufacturers located throughout the United States who produce products for a wide variety of end users. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. An allowance for doubtful accounts is maintained at a level which management believes is sufficient to cover potential credit losses. The Company invests its excess cash in short- term investments and has not experienced any losses on those investments. Inventories: Substantially all inventories are stated at cost determined by the last-in, first-out (LIFO) method, which is less than market. Inventories are summarized as follows: 1993 1992 At current cost: Raw materials $ 25,274,771 $ 19,619,417 Work-in-process 24,602,923 15,662,366 Finished goods 62,664,139 41,338,244 Supplies, repair parts and other 9,792,498 10,329,674 122,334,331 86,949,701 Excess of current cost over LIFO value (16,524,443) (19,863,374) $105,809,888 $67,086,327 During 1993 and 1992, the reduction of certain inventory quantities resulted in liquidations of LIFO inventory quantities carried at lower costs prevailing in prior years. The effect of these reductions was to increase net income by approximately $350,000 ($.03 per share) and $506,000 ($.06 per share) for 1993 and 1992, respectively. Property, Plant and Equipment: Provision for depreciation and amortization of property, plant and equipment has been computed using the straight-line method for financial reporting purposes and in accordance with the applicable statutory recovery methods for tax purposes. Depreciation and amortization of property, plant and equipment for financial reporting purposes totaled $29,245,367 in 1993, $23,712,953 in 1992, and $22,847,307 in 1991. When events occur that change the extent or manner in which long-lived assets are used, such as a restructuring of the Company's operations, evidence of physical defects, or technological obsolescence, such impaired assets are written down to their estimated fair market value. If such assets are permanently taken out of service, they are no longer depreciated. DIXIE YARNS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Intangible Assets: The excess of the purchase price over the fair market value of identifiable net assets acquired in business combinations is being amortized using the straight-line method over 40 years. The carrying value of goodwill will be reviewed if the facts and circumstances suggest that it may be impaired. Impairment will be measured, and goodwill reduced, for any deficiency of estimated cash flows during the amortization period related to the business acquired. Income Taxes: The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," in 1993. See Note (H). Earnings per Share: Primary earnings per common and common equivalent share is computed using the weighted average number of shares of Common Stock outstanding and includes the effects of Class B Common Stock and the potentially dilutive effects of the exercise of stock options and the put option. Fully-diluted earnings per share reflects the maximum potential dilution of per share earnings which would have occurred assuming the exercise of stock options, the put option, and the conversion of subordinated debentures into shares of Common Stock. For 1993, 1992 and 1991, the additional dilution computed was less than 3%. Revenue recognition: The Company recognizes revenue at the time title passes to the customer. Postemployment Benefits: The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment Benefits," which requires, under certain conditions, the adoption of accrual accounting for postemployment benefits no later than 1994. The Company sponsors no such plans and the new standard is not expected to affect the Company's financial statements. Reclassifications: In order to conform to the 1993 presentation, certain operating group expenses for 1992 and 1991 which had previously been reported as cost of sales, were reclassified to selling, general and administrative expenses in the accompanying consolidated statements of income (loss). In addition, corporate expenses have been segregated from selling, general and administrative expenses. NOTE B - BUSINESS COMBINATIONS On September 4, 1992, the Company acquired approximately 46% of the outstanding shares of Carriage Industries, Inc. ("Carriage") for $27,400,446 cash ($13.25 per share plus expenses) and on March 12, 1993 acquired the remaining shares of Carriage. The Company issued 2,472,884 shares of its Common Stock, options to purchase 83,044 shares of its Common Stock, and approximately $661,000 cash in exchange for the remaining shares and options for shares of Carriage. The acquisition was accounted for as a purchase effective March 12, 1993, and accordingly, the results of operations and accounts of Carriage subsequent to March 12, 1993 are included in the Company's consolidated financial statements. The total purchase price of $63,685,083 (the Company's initial cash investment in Carriage, expenses of the acquisition, and the estimated fair value of the Company's Common Stock and options exchanged) was allocated to the net tangible assets of Carriage based on the estimated fair market values of the assets acquired. As required by the purchase method of accounting, the excess amount of the purchase price over the fair market value of Carriage's net tangible assets was recorded as an intangible asset and is being amortized using the straight-line method over 40 years. On July 9, 1993, the Company acquired the operating assets and liabilities of Masland Carpets, Inc. ("Masland") in exchange for 1,029,446 shares of the Company's Common Stock, approximately $1,100,000 cash, and the assumption of $750,000 of debt. The Common Stock was issued subject to an agreement which provides certain registration rights respecting the Common Stock, as well as the right, after two years, to put the shares to the Company at a price of $18.06 per share (reduced by dividends paid). The acquisition was accounted for as a purchase effective July 9, 1993, and accordingly, the results of operations and accounts of Masland subsequent to July 9, 1993 are included in the Company's consolidated financial statements. The total purchase price of $19,622,192 (cash paid, expenses of the acquisition, and estimated fair value of the Company's Common Stock issued subject to put option) was allocated to the net tangible assets of Masland based on the estimated fair market values of the assets acquired. A summary of net assets acquired is as follows: Carriage Masland Current assets $ 49,865,747 $ 16,316,797 Property, plant and equipment 53,440,710 11,748,152 Other assets 4,618,971 76,181 Current liabilities (26,802,995) (7,072,437) Long-term debt (27,222,687) (450,000) Other liabilities and deferred taxes (12,326,472) (1,553,215) Intangible asset 21,699,203 --- Net Assets Acquired Excluding Cash 63,272,477 19,065,478 Cash 412,606 556,714 Net Assets Acquired $63,685,083 $19,622,192 The following unaudited pro forma summary presents the consolidated results of operations as if the acquisitions of Carriage and Masland had occurred at the beginning of each period presented after giving effect to certain adjustments, including amortization of cost in excess of net tangible assets acquired, interest expense on debt to finance the acquisitions and related income taxes. The pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results that would have occurred had the acquisitions occurred at the beginning of the periods presented or of results which may occur in the future. 1993 1992 Net sales $641,950,000 $637,680,000 Income from continuing operations 6,218,000 8,628,000 Net income (1) 6,218,000 4,099,000 Per common and common equivalent share: Income from continuing operations .49 .67 Net income (1) .49 .32 (1) Net income for the fiscal year ended December 26, 1992 includes losses of $3,537,000 after taxes ($.28 per share) on operations of and disposal of a Carriage segment held for sale and a loss of $992,000 after taxes ($.08 per share) to record the cumulative effect of the adoption of Statement of Financial Accounting Standards No. 106,"Employers Accounting for Postretirement Benefits Other than Pensions" by Masland. Prior to the merger, the Company's initial investment in Carriage was accounted for by the equity method. Accordingly, net income for 1993 and 1992 includes the Company's proportionate share of Carriage's earnings for periods prior to the merger of approximately $320,000 and $538,000 after taxes, respectively. Condensed unaudited historical financial information of Carriage at and for the twelve months ended December 27, 1992 and December 29, 1991 is summarized as follows: 1992 1991 Income statement information: Net sales $133,363,000 $105,976,000 Gross profit 36,096,000 24,936,000 Income from continuing operations 4,697,000 726,000 Net income 1,160,000 974,000 Balance sheet information: Current assets 41,920,000 --- Non-current assets 44,827,000 --- Current liabilities 18,811,000 --- Non-current liabilities 33,617,000 --- NOTE C --SALE OF ACCOUNTS RECEIVABLE In October 1993, the Company entered into a seven-year agreement to sell an undivided interest in a revolving pool of its trade accounts receivable. At December 25, 1993, a $45,000,000 interest had been sold under this agreement, reflected as a reduction of accounts receivable in the accompanying consolidated balance sheets. The costs of this program, which were approximately $570,000 in 1993, are based upon rating agencies' assessment of the quality of the receivables pool and the purchasers' level of investment and are fixed at 6.08% per annum plus administrative fees typical in such transactions. These costs are included in other expense. The Company maintains allowances for doubtful accounts at a level which management believes is sufficient to cover potential credit losses relating to trade accounts receivable, including receivables sold. NOTE D--ACCRUED EXPENSES Accrued expenses consists of the following: 1993 1992 Compensation and benefits $ 11,775,625 $ 9,156,692 Interest expense 2,632,072 2,486,885 Restructuring expense 487,376 3,641,046 Other 11,623,356 5,725,462 $ 26,518,429 $21,010,085 NOTE E--LONG-TERM DEBT AND CREDIT ARRANGEMENTS Long-term debt consists of the following: 1993 1992 Senior Debt: Credit line borrowings $ 86,500,000 $ 70,000,000 Other 1,596,700 23,800 88,096,700 70,023,800 Less current portion 446,829 1,300 87,649,871 70,022,500 Subordinated notes 50,000,000 50,000,000 Convertible subordinated debentures 44,782,000 44,782,000 $182,431,871 $164,804,500 The Company's revolving credit and term loan agreement provides for borrowings of up to $125,000,000 until September 30, 1995, at which time the outstanding balance, at the Company's election, may be converted into a term loan payable in semi-annual installments over five years. The Company may select from several interest rate options which effectively allow for borrowings at rates equal to or lower than the lender's prime rate. A commitment fee of 1/4% per annum is payable on the average daily unused balance of the revolving credit line. At December 25, 1993, the Company's unused borrowing capacity under the arrangement was approximately $38,500,000. The Company's subordinated notes are unsecured, bear interest of 9.96% payable semiannually, and are due in semiannual installments $2,381,000 beginning February 1, 2000. The convertible subordinated debentures bear interest of 7% payable semiannually and are due 2012. The debentures are convertible by the holder into shares of Common Stock of the Company at an effective conversion price of $32.20 per share, subject to adjustment under certain circumstances. The debentures are redeemable at the Company's option through May 15, 1997, in whole or in part, at prices ranging from 102.8% to 100.7% of their principal amount. Subsequent to that date the debentures may be redeemed at 100% of their principal amount. Mandatory sinking fund payments commencing May 15, 1998, will retire $2,500,000 principal amount of the debenture annually and approximately 70% of the debentures prior to maturity. The debentures are subordinated in right of payment to all other indebtedness of the Company. During 1991, the Company repurchased $2,218,000 face value of the debentures resulting in an extraordinary after-tax gain of $451,706 ($.05 per share). The Company's long-term debt and credit arrangements include restrictions relating to minimum net worth, debt to capital ratio, and other financial ratios. The agreements also limit the amount of cash dividends that may be paid. Retained earnings available for payment of dividends amounted to approximately $978,000 at December 25, 1993. Approximate maturities of long-term debt for each of the five years succeeding December 25, 1993, assuming conversion of amounts outstanding under the revolving credit arrangement to a term loan as discussed above, are $447,000 in 1994, $459,000 in 1995, $16,471,000 in 1996 $16,317,000 in 1997, and $18,818,000 in 1998. Interest payments in 1993, 1992, and 1991 were approximately $12,662,000, $11,077,000, and $11,947,000, respectively. NOTE F--FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts and estimated fair values of the Company's financial instruments are as follows: 1993 1992 Carrying Fair Carrying Fair Amount Value Amount Value Cash and cash equivalents $ 4,047,459 $ 4,047,459 $ 1,425,985 $ 1,425,985 Long-term debt (including current portion) 182,878,700 178,974,000 164,805,800 157,893,000 Common Stock, subject to put option 18,177,958 18,177,958 --- --- The carrying amounts of cash and cash equivalents approximate fair values due to the short-term maturity of these instruments. The fair values of the Company's long-term debt were estimated using discounted cash flow analysis based on incremental borrowing rates for similar types of borrowing arrangements and quoted market rates for public debt. The fair value of the Company's Common Stock, subject to put option, was based on current interest rates, future cash flows, and the quoted market prices of the Company's Common Stock. NOTE G--CAPITAL STOCK Holders of Class B Common Stock have the right to twenty votes per share on matters that are submitted to Shareholders for approval and to dividends in an amount not greater than dividends declared and paid on Common Stock. Class B Common Stock is restricted as to transferability; however, the Class B Common Stock may be converted into Common Stock on a one share for one share basis. The Company's Charter authorizes 200,000,000 shares of Class C Common Stock, $3 par value per share, and 16,000,000 shares of Preferred Stock. No shares of Class C Common Stock or Preferred Stock have been issued. Also see Note (B) NOTE H--INCOME TAXES In 1993, the Company adopted Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes," which requires the liability method of accounting for income taxes. The Company restated financial statements for periods subsequent to December 26, 1986, to reflect application of the new method. The effect of the change was to decrease income from continuing operations and net income for 1992 by approximately $200,000 ($.03 per share) and increase the loss from continuing operations and net loss for 1991 by approximately $200,000 ($.02 per share). The provision (benefit) for income tax on income (loss) from continuing operations consist of the following: 1993 1992 1991 Current Deferred Current Deferred Current Deferred Federal $ 21,000 $3,490,000 $1,209,000 $1,879,953 $492,000 $(11,501,838) State 547,000 278,000 248,000 143,235 205,000 (1,051,597) $ 568,000 $3,768,000 $1,457,000 $2,023,188 $697,000 $(12,553,435) Deferred income taxes reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax bases of those assets and liabilities. Significant components of the Company's deferred tax liabilities and assets are as follows: Deferred Tax Liabilities 1993 1992 Property, plant and equipment $52,792,000 $41,419,000 Inventories 8,634,000 7,018,000 Other 404,000 1,235,000 Total deferred tax liabilities 61,830,000 49,672,000 Deferred Tax Assets Post-retirement benefits 4,073,000 95,000 Other employee benefits 3,925,000 3,169,000 Alternative minimum tax 3,361,000 1,871,000 Allowances for bad debts, claims and discounts 2,727,000 1,983,000 Restructuring 730,000 5,765,000 Other 1,737,000 810,000 Valuation reserve --- --- Total deferred tax assets 16,553,000 13,693,000 Net deferred tax liabilities $45,277,000 $35,979,000 Differences between the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rate to income (loss) from continuing operations are reconciled as follows: 1993 1992 1991 Statutory rate applied to income (loss) from continuing operations $3,157,000 $ 3,042,000 $(12,721,000) Plus state income taxes net of federal tax provision (benefit) 536,000 258,000 (559,000) 3,693,000 3,300,000 $(13,280,000) Increase(decrease) attributable to: Non deductible amortization of intangible assets resulting from business combinations 559,000 423,000 423,000 (Gain) loss accounted for on equity method (96,000) (153,000) 1,457,000 Effect of Federal tax rate increase on deferred income taxes 500,000 --- --- Other items (320,000) (89,812) (456,435) 643,000 180,188 1,423,565 Total tax provision (benefit) $4,336,000 $3,480,188 $(11,856,435) Income tax payments, net of tax refunds received, in 1993, 1992, and 1991 were approximately $2,079,000, $1,024,000, and $5,066,000, respectively. NOTE I--RESTRUCTURING AND PLANT CLOSING COSTS In the fourth quarter of 1991, the Company developed and began implementation of a plan to restructure the Company's manufacturing facilities and support services areas and accrued associated costs of $28,276,000 ($18,271,000 or $2.08 per share after taxes). The plan included, among other things, production and machinery consolidations into fewer facilities, information systems conversions and personnel reductions. As of the end of 1993, the restructuring was substantially complete. Total costs incurred through 1993 consisted of approximately $13,533,000 to write- down certain assets to estimated fair market value, approximately $3,156,000 for severance payments, and approximately $11,100,000 for other direct costs, including product consolidations, equipment relocation, systems conversions, and other related expenses. NOTE J--STOCK PLANS The Company's 1990 Incentive Stock Plan reserves 770,000 shares of Common Stock for sale or award to key associates under stock options, stock appreciation rights, restricted stock performance grants, or other awards. Outstanding options are exercisable at a cumulative rate of 25% to 33 1/3% per year after the second year from the date the options are granted. Options outstanding were granted at prices at or above market price on the date of grant and include grants under the 1983 Incentive Stock Plan, under which no further options may be granted. At December 25, 1993, options to purchase 126,662 shares were exercisable under these plans. A summary of the option activity under the 1990 and 1983 Incentive Stock Plans is as follows: Number of Option Price Shares Per Share Outstanding at December 29, 1990 423,874 $ 4.58 - $33.83 Granted 35,000 13.00 - 13.50 Exercised (19,650) 4.58 - 6.42 Cancelled (56,600) 5.83 - 14.00 Outstanding at December 28, 1991 382,624 4.58 - 33.83 Granted 254,000 10.75 - 11.00 Exercised (27,800) 4.58 - 5.83 Cancelled (68,412) 10.75 - 33.83 Outstanding at December 26, 1992 540,412 5.83 - 30.75 Granted 197,000 12.50 - 15.25 Exercised (22,100) 5.83 Cancelled (87,400) 10.75 - 30.75 Outstanding at December 25, 1993 627,912 $10.75 - $30.75 The Company also has a stock purchase plan which authorizes 108,000 shares of Common Stock for purchase by supervisory associates at the market price prevailing at the time of purchase. At December 25, 1993, 65,940 shares remained available for issue. Shares sold under this plan are held in escrow until paid for and are subject to repurchase agreements which give the Company the right of first refusal at the prevailing market price. Numbers of shares sold under the plan were 12,700 in 1993, 1,800 in 1992, and 3,300 in 1991. The Company issued options for the purchase of 83,044 shares of Common Stock, which were immediately exercisable at prices ranging from $3.19 - $5.27 per share, in connection with the acquisition of Carriage. During 1993, options for 10,699 shares were exercised at prices ranging from $3.43 - $4.29 per share. At December 25, 1993, options for 72,345 shares at prices ranging from $3.19 - $5.27 per share remain exercisable. NOTE K--PENSION PLANS The Company has defined benefit and defined contribution pension plans which cover essentially all associates. Benefits for associates participating in the defined benefit plans are based on years of service and compensation during the period of participation. Plan assets consist primarily of cash equivalents and publicly traded stocks and bonds. The Company's practice is to fund defined benefit plans in accordance with minimum requirements of the Employee Retirement Income Security Act of 1974. Contributions and costs of the defined contribution plans are based on several factors including a percentage of each participant's compensation, the operating performance of the Company, and matching of participant contributions by the Company. Participants in the Company's largest defined benefit plan became eligible participants in a newly established 401(k) defined contribution plan effective in 1994. All accrued benefits under the defined benefit plan became fully vested and were frozen as of December 24, 1993. A portion of the liability of the defined benefit plan was settled through lump sum payments to electing associates. Losses incurred as a result of these settlements and the curtailment described above totaled $768,680 and $358,626 during 1993 and 1992, respectively. Settlement losses of $196,580 included in the 1993 amount were a direct result of the Company's restructuring plan and were charged to the restructuring reserve established in 1991. The net periodic pension cost included the following components: 1993 1992 1991 Defined benefit plans: Service cost $ 1,315,353 $ 1,446,829 $ 1,522,052 Interest cost 1,625,217 1,841,940 2,000,193 Actual return on plan assets (1,326,794) (1,227,989) (5,022,036) Other Components 153,850 (1,056,697) 2,777,701 1,767,626 1,004,083 1,277,910 Defined contribution plans 410,559 --- --- Net periodic pension expense $ 2,178,185 $ 1,004,083 $ 1,277,910 The following table sets forth the funded status of the Company's defined benefit retirement plans and related amounts included in the Company's consolidated balance sheets: 1993 1992 Actuarial present value of benefit obligations: Vested benefits $24,092,792 $14,753,954 Nonvested benefits 1,336 1,284,875 Accumulated benefit obligations $24,094,128 $16,038,829 Plan assets at fair value $16,138,289 $18,540,107 Projected benefit obligation (24,094,128) (17,902,255) Projected benefit obligation (in excess of) or less than plan assets (7,955,839) 637,852 Unrecognized net loss 8,764,390 2,918,403 Remaining unrecognized net transition asset (462,761) (995,762) Adjustment to recognize minimum liability (8,301,629) --- Pension related (liability) asset included in the consolidated balance sheets $(7,955,839) $ 2,560,493 In accordance with the provisions of Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions," the Company has recorded an additional minimum liability at December 25, 1993 representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension costs. This additional liability reduced stockholders' equity by $4,981,943 (net of income tax benefit of $3,319,686). The increased liability in 1993 results primarily from decreasing the assumed discount rate used in determining the projected benefit obligation from 8.5% to 7.13%. The weighted average discount rate used in determining the projected benefit obligation was 7.13% for 1993, 8.5% for 1992, and 9% for 1991. There was no increase in future compensation levels assumed for 1993 (due to the freezing of benefits), and a 4% and 5% rate of increase was used for 1992 and 1991, respectively. The assumed long-term rate of return on plan assets was 8.5% for 1993 and 1992, and 9% for 1991. NOTE L--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company and one of its subsidiaries provided medical, dental and life insurance coverage for retirees under postretirement benefit plans. The parent company provides medical and dental benefits until age 65 to early retirees who have met specified age and service requirements. It pays a portion of these costs for participants who retired prior to 1992 and also pays a portion of the life insurance premiums for a certain group of retirees. No new retirees may become eligible for the life insurance benefits. For measurement purposes, a 12% annual rate of increase in the per capita claims cost for the medical and dental plans was used for 1993, 1992, and 1991. The discount rate used to determine the accumulated postretirement benefit obligations was 7.5% for 1993, 8.5% for 1992, and 9% for 1991. During 1993, the Company settled a portion of its postretirement benefit obligation under the life insurance plan through the payment of lump- sum distributions made to beneficiaries of insured participants. Losses incurred as a result of these settlements totaled $73,049. A subsidiary also provides medical, dental and life insurance plans for all retired associates who have completed required service and age requirements. The subsidiary pays the full cost of these benefits for associates who retired prior to June 1992. Eligible retirees after this date pay a portion of these benefits at the equivalent rates under COBRA. The weighted-average annual assumed rates of increase in the per capita cost of covered medical and dental benefits is 15% and 12% in 1993 for pre-65 and post-65 benefits, respectively, gradually declining to 6% in 2005, and remaining at that level thereafter. The accumulated postretirement benefit obligations were determined using an 8% weighted average discount rate. The components of net periodic postretirement benefit cost are as follows: 1993 1992 1991 Medical Life Medical Life Medical Life and Dental Insurance and Dental Insurance and Dental Insurance Plans Plans Plans Plans Plans Plans Interest cost $107,295 $102,863 $103,719 $63,318 $112,076 $80,964 Service cost 17,766 1,641 --- --- --- --- Amortization of net loss --- 8,942 --- --- --- --- Settlement losses --- 73,049 --- --- --- --- Net periodic postretirement benefit cost $125,061 $186,495 $103,719 $63,318 $112,076 $80,964 The following table sets forth the funded status of the Company's defined benefit retirement plans and related amounts included in the Company's consolidated balance sheets: 1993 1992 Life Life Medical Insurance Medical Insurance Plans Plans Plans Plans Accumulated postretirement benefit obligations: Retirees $(1,564,521) $(1,400,126) $(865,400) $(1,141,876) Active participants (476,711) (69,941) --- --- (2,041,232) (1,470,067) (865,400) (1,141,876) Plan assets --- --- --- --- Accumulated postretirement benefit obligation in excess of plan assets (2,041,232) (1,470,067) (865,400) (1,141,876) Unrecognized net actuarial loss due to past experience different from assumptions made 151,957 431,861 --- 318,645 Accrued postretirement benefit liability included in the consolidated balance sheet $(1,889,275) $(1,038,206) $(865,400) $ (823,231) The assumed rate used to measure the per capita claims cost can have a significant effect on the amounts reported. Increasing the assumed rate by one percentage point in each year would increase the accumulated postretirement benefit obligation and net periodic postretirement benefit cost by approximately $170,000 and $14,000, respectively. NOTE M --STORM AND FIRE DAMAGE On March 13, 1993, a severe winter storm substantially damaged Carriage's manufacturing facilities, including machinery. On August 4, 1993, a fire destroyed Carriage's Bretlin needlebond facility. Both losses were covered by insurance and the total insurance benefits recognized during 1993 were $33,500,000, including approximately $5,400,000 accrued as a receivable. The Company spent approximately $17,900,000 in 1993 to replace and repair capital assets which had been destroyed or damaged. Insurance proceeds in excess of the net book value of destroyed assets and the repair costs of damaged assets were approximately $13,400,000 and are reflected in the financial statements as other income ($1,800,000) and a reduction to cost of sales ($11,600,000) to offset extra expenses and losses incurred as a result of the storm and fire. The insurance claims have not been concluded. NOTE N--COMMITMENTS The Company had outstanding commitments for purchases of machinery and equipment of approximately $11,686,000 at December 25, 1993. NOTE O --INDUSTRY SEGMENT INFORMATION The Company operates in two industry segments: textile products and floorcovering. Textile products include yarns, industrial sewing threads and knit fabrics. Floorcovering includes carpet for manufactured housing, recreational vehicles, high-end residential and commercial markets, rugs and yarns. Prior to the acquisitions of Carriage and Masland in 1993, the Company's single line of business, textile products, included the Company's Candlewick sales yarn operations serving the broadloom and rug manufacturing markets. With the expansion into production and sales of finished floorcovering products through the Carriage and Masland acquisitions, the operations of Candlewick are now included in the floorcovering segment. Accordingly, a restatement of the Company's financial information, by segment, is reflected for the periods presented in the consolidated financial statements. (dollar amounts in thousands) Net Sales Operating Profit(Loss)(1) 1993 1992 1991 1993 1992 1991 Business Segments Textile products $332,059 $347,802 $370,825 $ 1,629 $15,352 $(14,631) Floorcovering 263,899 123,107 122,273 24,424 7,913 1,416 Intersegment elimination (1,357) (1,077) (1,146) --- --- --- Total $594,601 $469,832 $491,952 26,053 23,265 (13,215) Interest expense 12,773 10,824 12,180 Corporate expenses 5,159 5,600 11,448 Other income (expense)-net(1) 899 2,107 (571) Income (loss) before income taxes $ 9,020 $ 8,948 $(37,414) Identifiable Capital Assets at Year End Expenditures 1993 1992 1991 1993 1992 1991 Business Segments Textile products $306,076 $310,594 $311,039 $27,504 $24,072 $34,109 Floorcovering 181,663 73,973 47,332 10,316 1,854 3,475 Corporate 8,840 12,513 14,436 1,005 398 722 Total $496,579 $397,080 $372,807 $38,825 $26,324 $38,306 Depreciation and Amortization 1993 1992 1991 Business Segments Textile products $20,531 $19,851 $18,109 Floorcovering 8,051 3,189 3,312 Corporate 663 673 1,426 Total $29,245 $23,713 $22,847 (1) Net gains (losses) included in operating profit (loss) on a segment basis but classified in "other income (expense) - net" in the Company's Consolidated Statements of Income (Loss) are as follows: 1993 - $1,741; 1992 - $(1,851); 1991-$(920). Operating loss for 1991 includes restructuring costs as follows: Textile products - $23,306; Floorcovering - $ 1,222; Corporate - $3,748. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT DIXIE YARNS, INC. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F CLASSIFICATION Balance at Additions Other Changes-Add Balance at Beginning of Period at Cost Retirements (Deduct)-Describe End of Period Year ended December 25, 1993: Land and improvements 9,754,481 3,559,478 (2) 967,598 -0- 12,346,361 Buildings and improvements 81,597,789 33,438,645 (2) 9,828,502 (9,134) 105,198,798 Machinery and equipment 286,908,460 79,076,551 (2) 19,654,214 4,420,218 (4) 350,751,015 TOTALS $378,260,730 $116,074,674 $30,450,314 $4,411,084 $468,296,174 Year ended December 26, 1992: Land and improvements 9,371,375 655,364 62,925 (209,333) (4) 9,754,481 Buildings and improvements 79,830,875 904,339 15,862 878,437 (4) 81,597,789 Machinery and equipment 265,521,942 24,764,613 (3) 5,419,298 2,041,203 (4) 286,908,460 TOTALS $354,724,192 $26,324,316 $5,498,085 $ 2,710,307 $378,260,730 Year ended December 28, 1991: Land and improvements 9,364,729 320,035 313,389 -0- 9,371,375 Buildings and improvements 78,594,047 1,974,175 737,347 -0- 79,830,875 Machinery and equipment 255,441,550 36,011,814 (3) 7,794,545 (18,136,877) (5) 265,521,942 TOTALS $343,400,326 $38,306,024 $8,845,281 $(18,136,877) $354,724,192
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT DIXIE YARNS, INC. AND SUBSIDIARIES CONTINUED
COL. A COL. B COL. C COL. D COL. E COL. F CLASSIFICATION Balance at Additions Other Changes-Add Balance at Beginning of Period at Cost Retirements (Deduct)-Describe End of Period (1) Certain amounts previously reported have been restated to reflect adoption of SFAS No. 109, "Accounting for Income Taxes." See Note (H) to the Consolidated Financial Statements. (2) In addition to machinery and equipment replacements and improvements, includes assets acquired in connection with business combinations. See Note (B) to the Consolidated Financial Statements. Also includes $12.1 million expended to replace storm/fire damaged assets. See Note (M) to the Consolidated Financial Statements. (3) Machinery and equipment replacements and improvements. (4) Represents reclassification of previous writedown and net book value of assets traded. (5) Represents writedown of assets to net realizable value. Depreciable lives in effect for the principal classes of property are generally as follows: Acquired after 1980 Acquired before 1981 Land improvements 10 to 20 years 20 years Buildings and improvements 20 to 30 years 10 to 45 years Machinery and equipment 3 to 12 years 3 to 9 years
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT DIXIE YARNS, INC. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E COL. F CLASSIFICATION Balance at Additions Other Changes-Add Balance at Beginning of Period at Cost Retirements (Deduct)-Describe End of Period Year ended December 25, 1993: Land and improvements 1,588,558 149,399 (200,450) -0- 1,537,507 Buildings and improvements 22,874,336 2,779,738 (1,204,918) 4,611 24,453,767 Machinery and equipment 156,003,757 26,316,230 (15,087,537) (186,017) 167,046,433 TOTALS $180,466,651 $29,245,367 $(16,492,905) $(181,406) $193,037,707 Year ended December 26, 1992: Land and improvements 1,435,281 153,100 -0- 177 1,588,558 Buildings and improvements 20,391,522 2,487,749 4,759 (176) 22,874,336 Machinery and equipment 139,990,311 21,072,104 5,058,611 (47) 156,003,757 TOTALS $161,817,114 $23,712,953 $5,063,370 $ (46) $180,466,651 Year ended December 28, 1991: Land and improvements 1,286,920 149,761 1,400 -0- 1,435,281 Buildings and improvements 18,107,364 2,426,897 142,739 -0- 20,391,522 Machinery and equipment 124,678,643 20,270,649 4,958,981 -0- 139,990,311 TOTALS $144,072,927 $22,847,307 $5,103,120 $ -0- $161,817,114 Certain amounts previously reported have been restated to reflect adoption of SFAS No. 109, "Accounting for Income Taxes." See Note (H) to the Consolidated Financial Statements.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS DIXIE YARNS, INC. AND SUBSIDIARIES
COL. A COL. B COL. C COL. D COL. E ADDITIONS (1) (2) DESCRIPTION Balance at Charged to Charged to Deductions- Balance at Beginning of Costs and Other Accounts Describe End of Period Period Expenses -Describe Year ended December 25, 1993: Reserves deducted from asset accounts: Allowance for doubtful accounts $4,200,000 $ -0- $1,494,483 (1) $1,794,483 (2) $3,900,000 Provision to reduce inventories to net realizable value 4,230,000 -0- 5,410,780 (1) 2,303,851 (3) 7,336,929 Year ended December 26, 1992: Reserves deducted from asset accounts: Allowance for doubtful accounts $4,086,000 $ 422,488 $ -0- $ 308,488 (2) $4,200,000 Provision to reduce inventories to net realizable value 5,976,000 -0- -0- 1,746,000 (3) 4,230,000 Year ended December 28, 1991: Reserves deducted from asset accounts: Allowance for doubtful accounts $3,032,000 $2,043,984 $ -0- $ 989,984 (2) $4,086,000 Provision to reduce inventories to net realizable value 2,293,609 3,682,391 (3) -0- -0- 5,976,000 (1) Increase in reserves in connection with business combinations. See Note (B) to the Consolidated Financial Statements. (2) Uncollectible accounts written off, net of recoveries, and for 1993, reductions credited to costs and expenses. (3) Provision for current items net of reductions for previous items.
SCHEDULE X-SUPPLEMENTARY INCOME STATEMENT INFORMATION DIXIE YARNS, INC. AND SUBSIDIARIES COL. A COL. B ITEM Charged to Costs and Expenses Year Ended December 25, December 26, December 28, 1993 1992 1991 Maintenance and repairs $27,010,840 $23,209,089 $24,945,876 Amounts for depreciation and amortization of intangible assets, preoperating costs and similar deferrals; taxes, other than payroll and income taxes; royalties and advertising costs are not presented as such amounts are less than 1% of total sales and revenues. ANNUAL REPORT ON FORM 10-K ITEM 14 (c) EXHIBITS YEAR ENDED DECEMBER 25, 1993 DIXIE YARNS, INC. CHATTANOOGA, TENNESSEE Exhibit Index EXHIBIT NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE (3a) Restated Charter of Dixie Incorporated by reference to Yarns, Inc. Exhibit (3a) to Dixie's Annual Report on Form 10-K for the year ended December 30, 1989.* (3b) Amended and Restated By- Incorporated by reference to Laws of Dixie Yarns, Inc. Exhibits (3b) and (3c) to Dixie's Annual Report on Form 10-K for the year ended December 29, 1990.* (4a) Second Amended and Restated Incorporated by reference to Revolving Credit and Term Exhibit (4a) to Dixie's Annual Loan Agreement, dated Report on Form 10-K for the January 31, 1992, by and year ended December 28, 1991.* among Dixie Yarns, Inc. and Trust Company Bank, NationsBank of North Carolina, N.A. and Chemical Bank. (4b) Loan Agreement, dated Incorporated by reference to February 6, 1990 between Exhibit (4d) to Dixie's Annual Dixie Yarns, Inc. and New Report on Form 10-K for the York Life Insurance Company year ended December 30, 1989.* and New York Life Annuity Corporation. (4c) Form of Indenture, dated Incorporated by reference to May 15, 1987 between Dixie Exhibit 4.2 to Amendment No. 1 Yarns, Inc. and Morgan of Dixie's Registration Guaranty Trust Company of Statement No. 33-140 78 on Form New York as Trustee. S-3, dated May 19, 1987. * Commission File No. 0-2585 Exhibit Index - Continued EXHIBIT NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE (4d) Revolving Credit Loan Incorporated by reference to Agreement dated as of Exhibit (4d) to Dixie's Annual September 16, 1991 by Report on Form 10-K for the and among Ti-Caro, Inc. and year ended December 28, 1991.* Trust Company Bank, individually and as agent, NCNB National Bank, and Chemical Bank. (4e) First Amendment to Revolving Incorporated by reference to Credit Loan Agreement dated Exhibit 4(e) to Dixie's Annual as of August 19, 1992 by and Report on form 10-K for the among Ti-Caro, Inc., T-C year ended December 26, 1992.* Threads, Inc. and Trust Company Bank, individually and as agent, NCNB National Bank, and Chemical Bank. (4f) First Amendment, dated Filed herewith August 25, 1993 to Second Amended and Restated Revolving Credit and Term Loan Agreement dated January 31, 1992, by and among Dixie Yarns, Inc. and Trust Company Bank, NationsBank of North Carolina, N.A. and Chemical Bank. (10a) Dixie Yarns, Inc. 1983 Incorporated by reference to Incentive Stock Option Exhibit (10c) to Dixie's Annual Plan. Report on Form 10-K for the year ended December 28, 1985.* (10b) Dixie Yarns, Inc. Incentive Incorporated by reference to Stock Plan. Exhibit (10) to Dixie's Quarterly Report on Form 10-Q for the quarter ended March 31, 1990.* (10c) Dixie Yarns, Inc. Nonquali- Incorporated by reference to fied Defined Contribution Exhibit (10c) to Dixie's Annual Plan. Report on form 10-K for the year ended December 26, 1992.* (10d) Dixie Yarns, Inc. Nonquali- Incorporated by reference to fied Employee Savings Plan. Exhibit (10d) to Dixie's Annual Report on form 10-K for the year ended December 26, 1992.* * Commission File No. 0-2585 Exhibit Index - Continued EXHIBIT NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE (10e) Dixie Yarns, Inc. Incentive Incorporated by reference to Compensation Plan. Exhibit (10e) to Dixie's Annual Report on form 10-K for the year ended December 26, 1992.* (10f) Asset Transfer and Restruc- Incorporated by reference to turing Agreement dated Exhibit (2a) to Dixie's Current July 9, 1993, by and among Report on Form 8-K dated Dixie Yarns, Inc., Masland July 9, 1993.* Carpets, Inc., individual management investors of Masland Carpets, Inc., The Prudential Insurance Company of America and Pruco Life Insurance Company. (10g) Assignment and Bill of Sale Incorporated by reference to dated July 9, 1993, by and Exhibit (2b) to Dixie's Current between Dixie Yarns, Inc. Report on Form 8-K dated July 9, and Masland Carpets, Inc. 1993.* (10h) Assignment and Assumption Incorporated by reference to Agreement dated July 9, 1993, Exhibit (2c) to Dixie's Current by and between Dixie Yarns, Report on Form 8-K dated July 9, Inc. and Masland Carpets, 1993.* Inc. (10i) Stock Rights and Restrictions Incorporated by reference to Agreement dated July 9, 1993, Exhibit (2d) to Dixie's Current by and among Dixie Yarns, Report on Form 8-K dated July 9, Inc., Masland Carpets, Inc., 1993.* The Prudential Insurance Company of America and Pruco Life Insurance Company. (10j) Pooling and Servicing Incorporated by reference to Agreement dated as of Exhibit (2a) to Dixie's October 15, 1993, among Current Report on Form 8-K Dixie Yarns, Inc., Dixie dated October 15, 1993.* Funding, Inc. and NationsBank of Virginia, N.A. (as Trustee). * Commission File No. 0-2585 Exhibit Index - Continued EXHIBIT NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE (10k) Annex X - Definitions, to Incorporated by reference to Pooling and Servicing Exhibit (2b) to Dixie's Agreement dated as of Current Report on Form 8-K October 15, 1993, among dated October 15, 1993.* Dixie Yarns, Inc., Dixie Funding, Inc. and NationsBank of Virginia, N.A. (as Trustee). (10l) Series 1993-1 Supplement, Incorporated by reference to dated as of October 15, Exhibit (2c) to Dixie's 1993, to Pooling and Current Report on Form 8-K Servicing Agreement dated as dated October 15, 1993.* of October 15, 1993, among Dixie Yarns, Inc., Dixie Funding, Inc. and NationsBank of Virginia, N.A. (as Trustee). (10m) Certificate Purchase Incorporated by reference to Agreement dated October 15, Exhibit (2d) to Dixie's 1993, among Dixie Yarns, Current Report on Form 8-K Inc., Dixie Funding, Inc. dated October 15, 1993.* and New York Life Insurance and Annuity Corporation. (10n) Certificate Purchase Incorporated by reference to Agreement dated October 15, Exhibit (2e) to Dixie's 1993, among Dixie Yarns, Current Report on Form 8-K Inc., Dixie Funding, Inc. dated October 15, 1993.* and John Alden Life Insurance Company. (10o) Certificate Purchase Incorporated by reference to Agreement dated October 15, Exhibit (2f) to Dixie's 1993, among Dixie Yarns, Current Report on Form 8-K Inc., Dixie Funding, Inc. dated October 15, 1993.* and John Alden Life Insurance Company of New York. (10p) Certificate Purchase Incorporated by reference to Agreement dated October 15, Exhibit (2g) to Dixie's 1993, among Dixie Yarns, Current Report on Form 8-K Inc., Dixie Funding, Inc. dated October 15, 1993.* and Keyport Life Insurance Company. * Commission File No. 0-2585 Exhibit Index - Continued EXHIBIT NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE (10q) Executive Severance Incorporated by reference to Agreement dated as of Exhibit (19) to Dixie's Quarterly September 8, 1988 as Report on Form 10-Q for the amended. quarter ended March 27,1993.* (11) Statement re: Computation Filed herewith. of Earnings Per Share. (21) Subsidiaries of the Filed herewith. Registrant. (23) Consent of Ernst & Young. Filed herewith. *Commission File No. 0-2585 EX-4.F 2 EXHIBIT 4(F) EXHIBIT 4(f) FIRST AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT THIS FIRST AMENDMENT to Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of August 25, 1993 (the "First Amendment"), by and among DIXIE YARNS, INC. (the "Borrower"), a Tennessee corporation, TRUST COMPANY BANK, a Georgia banking corporation, NATIONSBANK OF NORTH CAROLINA, N.A. a national banking association, and CHEMICAL BANK, a New York banking corporation (collectively, the "Banks" and individually, a "Bank"), and TRUST COMPANY BANK, as agent for the Banks (in such capacity, the "Agent"). WITNESSETH: WHEREAS, the Borrower, the Banks and the Agent are parties to a certain Second Amended and Restated Revolving Credit and Term Loan Agreement, dated as of January 31, 1992 (the "Agreement") pursuant to which the Banks agreed to lend and the Borrower agreed to borrow revolving credit loans and term loans in an aggregate principal amount not to exceed $125,000,000; and WHEREAS, the Borrower has requested and the Banks have agreed to amend the Agreement to allow the Borrower to enter into a receivables securitization program substantially on the term outlined in the Term Sheet (the "Term Sheet") attached hereto as Exhibit "A" (the "Securitization Program") subject to the terms and conditions set forth herein; NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand paid by the Borrower to the Banks, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: I. Section 1.01 of the Agreement is hereby amended as follows: (a) The definition of "Funded Debt" is hereby amended by adding the following sentence thereto: "Notwithstanding any provision of this Agreement to the contrary, Funded Debt shall include the face amount of all interests in the trust from time to time established pursuant to the Securitization Program which interests are owned by Persons other than Dixie Yarns, Inc. or Dixie Funding, Inc." (b) The following definitions are hereby inserted in alphabetical order: "FINANCIAL OFFICER" of any corporation shall mean the chief or principal financial officer, principal accounting officer, treasurer or controller of such corporation. "SECRUITIZATION DOCUMENTS" shall mean all documents from time to time executed in connection with the Securitization Program, including without limitation that certain Pooling and Servicing Agreement among Dixie Funding, Inc. as transferor, Dixie Yarns, Inc. as servicer and NationsBank of Virginia, N.A., as Trustee for the Certificateholders as such document is originally executed or as thereafter amended, modified or supplemented. "SECURITIZATION PROGRAM" shall mean that certain accounts receivable purchase program established by the Borrower and its wholly-owned subsidiary, Dixie Funding, Inc., for the sale of the accounts receivable of the Borrower and certain of its Subsidiaries to Dixie Funding, Inc. for further transfer to a trust or series of trusts in return for certain interests in such trust or trusts with such interests in an aggregate amount not to exceed $60,000,000 to be sold to certain third party investors with all other interests in such trust or trusts to be retained by Dixie Funding, Inc. or Dixie Yarns, Inc. II. Section 5.10 of the Agreement is hereby amended by deleting all references therein to the "chief financial officer" of the Borrower and substituting in lieu thereof references to the "Financial Officer". III. Subsection 6.01(m) of the Agreement is hereby deleted in its entirety and the following subsections (m) and (n) substituted in lieu thereof: "(m) Liens on accounts receivable securing the obligations of the Borrower and its Subsidiaries pursuant to the Securitization Program; PROVIDED THAT, the obligations secured by such Liens held by third-party investors does not exceed $60,000,000 in the aggregate; plus "(n) extensions, renewals or replacements of any Lien referred to in clauses (a) through (m) of this Section 6.01, provided that the principal amount of the Debt or obligations secured thereby is not increased and that any such extension, renewal or replacement is limited to the property originally encumbered by the Lien." IV. Subsection 6.02(g) of the Agreement is hereby deleted in its entirety and substituting of the following subsections (g), (h) and (i) in lieu thereof: "(g) the Threads Loan and the guarantee thereof by Ti-Caro, Inc.; plus (h) Debt from Dixie Funding, Inc. to the Borrower in the form of a revolving note and subordinated notes issued in payment for the transfer of receivables pursuant to the terms of the Securitization Program; plus (i) Debt from Carriage Industries, Inc. to the Borrower in the form of Intercompany Advances in an aggregate principal amount not to exceed $32,000,000 at any one time outstanding." V. Section 6.03 of the Agreement is hereby amended as follows: (a) Subsection 6.03(a) of the Agreement is hereby deleted in its entirety and the following subsection (a) substituted in lieu thereof: "(a) make or permit to remain outstanding Intercompany Advances permitted by Section 6.02(a), (b), (h) and (i) and Intercompany Advances from a Subsidiary to Borrower; plus" (b) Subsection 6.03(m) of the Agreement is hereby deleted in its entirety and the following subsections (m) and (n) substituted in lieu thereof: "(m) each of the Borrower and Ti-Caro, Inc. may permit to remain outstanding in favor of the Banks, its respective guarantee of the Threads Loan; plus (n) the Borrower may make initial investments in Dixie Funding, Inc. in order to establish Dixie Funding, Inc. as a wholly-owned Subsidiary and Dixie Funding, Inc. may transfer accounts receivable acquired by it, directly or indirectly, from the Borrower and certain Subsidiaries to a trust or series of trusts in return for certain certificates of ownership interests in such trust or trusts pursuant to the terms of the Securitization Program." VI. Section 6.04(e) of the Agreement is hereby deleted in its entirety and the following subsections (e) and (f) substituted in lieu thereof: (e) In addition to exchanges permitted pursuant to Section 6.03(1) hereof, Borrower and its Subsidiaries may, in any one fiscal year, sell at then current market value, assets (including stock of a Subsidiary) (i) having a book value less than twenty-five percent (25%) of the Net Tangible Assets as of the end of the most recent preceding fiscal quarter, and (ii) which contributed less than twenty-five percent (25%) of Net Income Before Interest and Taxes of Borrower for the immediately preceding four fiscal quarters; PROVIDED, HOWEVER, following any sale of the stock of a Subsidiary which results in a minority interest in such former Subsidiary, any resulting investment in such former Subsidiary must be permitted pursuant to Section 6.03(i) hereof; plus (f) The Borrower may sell its accounts receivable and accounts receivable purchased from other Subsidiaries to Dixie Funding, Inc. and Dixie Funding, Inc. may transfer such accounts receivable to a trust or series of trusts in return for cash and certain ownership interests in such trust or trusts pursuant to the terms of the Securitization Program." VII. Section 6.08 of the Agreement is hereby deleted in its entirety and the following substituted in lieu thereof: "SECTION 6.08. SALE OR DISCOUNT OF RECEIVABLES. Except for the Securitization Program and maturity factoring arrangements contemplated by Section 6.01(i) hereof, sell or permit any Subsidiary to sell with recourse or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable." VIII. The Agreement is amended by adding the following Section 6.12: "SECTION 6.12. AMENDMENT OF SECURITIZATION DOCUMENTS. Except as otherwise provided in Section 7.01(e) hereof, shall not amend, modify or waive and material provision of the Securitization Documents as in effect on the date hereof or the definition of "Termination Event" without the prior written consent of the Required Banks." IX. This First Amendment shall not be effective unless and until each of the following conditions has been satisfied: (i) the receipt by the Agent of a fully executed counterpart of this First Amendment; (ii) the execution of the Securitization Documents and establishment of the Securitization Program in accordance with the terms of the Term Sheet and otherwise on terms and conditions acceptable to the Banks; and (iii) evidence satisfactory to the Banks that the proceeds of the initial sale of the Investor Certificates (as such term is defined in the Securitization Documents) has been or will be used to repay the indebtedness of Carriage Industries, Inc. listed on Exhibit "B". X. Upon and after the effective date of this Fist Amendment, all references to the Agreement shall mean the Agreement as amended by this First Amendment. Except as expressly provided in this First Amendment, the execution and delivery of this First Amendment does not and will not amend, modify or supplement any provision of or constitute a consent to a waiver of noncompliance with the provisions of the Agreement, and except as specifically provided in this First Amendment, the Agreement shall remain in full force and effect. XI. All the representations and warranties set forth in Article IV of the Agreement are true and correct as if made on the date hereof except for matters occurring since the date of the Agreement not reflected in the schedules; all of such matters have been reported to the Banks if required by Article V of the Agreement and do not otherwise violate the terms of the Agreement. No Default or Event of Default exists under the Agreement as of the date hereof. XII. This First Amendment shall be binding on, and shall inure to the benefit of the parties hereto and their respective successors and assigns. XIII. This First Amendment shall be governed by, and construed in accordance with, the laws of the State of Georgia. XIV. This First Amendment may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same instrument. XV. This First Amendment constitutes the entire understanding of the parties with respect to the subject matter hereof, and any other prior or contemporaneous agreements, whether written or oral, with respect thereto are expressly superseded hereby. IN WITNESS WHEREOF the parties hereto have caused this First Amendment to be executed and delivered by their duly authorized officers as of the day and year first above written. DIXIE YARNS, INC. TRUST COMPANY BANK, individually and as Agent NATIONSBANK OF NORTH CAROLINA, N.A. CHEMICAL BANK EX-11 3 EXHIBIT 11 EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE DIXIE YARNS, INC. AND SUBSIDIARIES
Year End December 25, December 26, December 28, 1993 1992 1991 PRIMARY: Net income (loss) $ 4,684,359 $5,467,421 $(26,602,704) SHARES: Weighted average number of Common Shares outstanding assuming conversion of Class B Common Stock 11,192,720 8,727,231 8,768,200 Net effect of dilutive stock options based on the treasury stock method using average market price 65,836 28,805 29,108 Net effect of put option based on the reverse treasury stock method using average market price 202,875 --- --- TOTAL SHARES 11,461,431 8,756,036 8,797,308 PER SHARE AMOUNT $ .41 $ .62 $ (3.02) FULLY-DILUTED: Net income (loss) $ 4,684,359 $5,467,421 $(26,602,704) After-tax interest requirement of convertible subordinated debentures(A) --- --- --- ADJUSTED NET INCOME(LOSS) $ 4,684,359 $5,467,421 $(26,602,704) SHARES: Weighted average number of Common Shares outstanding assuming conversion of Class B Common Stock 11,192,720 8,727,231 8,768,200 Net effect of dilutive stock options based on the treasury stock method using year-end market price if higher than the average market price 66,084 44,492 28,661 Net effect of put option based on the reverse treasury stock method using year end market price if lower than the average market price 401,259 --- --- Effect of assumed conversion of dilutive convertible subordinated debentures(A) --- --- --- TOTAL SHARES 11,660,063 8,771,723 8,796,861 PER SHARE AMOUNT $ .40 $ .62 $ (3.02) A) The assumed conversion of convertible subordinated debentures into 1,390,745 shares with an after-tax interest requirement of $1,894,739 for the year ended December 25, 1993, into 1,390,745 shares with an after-tax interest requirement of $1,923,739 for the year ended December 26, 1992, and into 1,397,450 shares with an after-tax interest requirement of $1,933,852 for the year ended December 28, 1991, has been excluded from the computation since the effect was anti-dilutive.
EX-21 4 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT DIXIE SUBSIDIARY STOCK SUMMARY DIXIE YARNS, INC. SUBSIDIARIES STATE/COUNTRY OF SUBSIDIARY INCORPORATION Dixie Exports, Inc. USVI Carriage Industries, Inc. Georgia Masland Carpets, Inc. Alabama Candlewick - Ringgold, Inc. Tennessee Candlewick - Lemoore, Inc. Tennessee Candlewick - Roanoke/Tennessee, Inc. Tennessee Dixie Funding, Inc. Tennessee T-C Threads, Inc. Tennessee Threads of Puerto Rico, Inc. North Carolina EX-23 5 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-30473) pertaining to the Employee Stock Purchase Plan of Dixie Yarns, Inc., the Registration Statement (Form S-8 No. 33-59564), the Registration Statement (Form S-8 No. 33-42615) pertaining to the Incentive Stock Option Plan of Dixie Yarns, Inc., and Post-Effective Amendment Number 2 to the Registration Statements (Form S-8 No. 2-20604 and No. 2-56744) pertaining to the Employee Stock Purchase Plan and Employee Stock Option Plan of Dixie Yarns, Inc. of our report dated February 17, 1994, with respect to the consolidated financial statements and schedules of Dixie Yarns, Inc. included in the Annual Report (Form 10-K) for the year ended December 25, 1993. ERNST & YOUNG Chattanooga, Tennessee March 25, 1994 -----END PRIVACY-ENHANCED MESSAGE-----