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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10218
COLLINS & AIKMAN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3489233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5755 NEW KING COURT
TROY, MICHIGAN 48098
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (248) 824-2500
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $35,322,726 as of March 23, 2001.
As of March 23, 2001, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 87,096,863 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
The information required by Part III (Items 10, 11, 12 and 13) is
incorporated by reference to portions of the registrant's definitive Proxy
Statement for the 2001 Annual Meeting of Stockholders, which will be filed
within 120 days of December 31, 2000.
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COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT INDEX
PAGE
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Item 1. Business.................................................... 1
Item 2. Properties.................................................. 6
Item 3. Legal Proceedings........................................... 6
Item 4. Submission of Matters to a Vote of Security Holders......... 7
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 8
Item 6. Selected Financial Data..................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 10
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 20
Item 8. Financial Statements and Supplementary Data................. 22
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure.................................... 22
Item 10. Directors and Executive Officers of the Registrant.......... 23
Item 11. Executive Compensation...................................... 23
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 23
Item 13. Certain Relationships and Related Transactions.............. 23
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 24
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PART I
This Annual Report contains "forward-looking" information, as that term is
defined by the federal securities laws, about our financial condition, results
of operations and business. You can find many of these statements by looking for
words such as "may," "will," "expect," "anticipate," "believe," "estimate" and
similar words used in this Annual Report. The forward-looking statements in this
Annual Report are intended to be subject to the safe harbor protection provided
by the federal securities laws.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties (including trade relations and competition). Because the
statements are subject to risks and uncertainties, actual results may differ
materially from those expressed or implied by the forward-looking statements. We
caution readers not to place undue reliance on the statements, which speak only
as of the date of this Annual Report.
The cautionary statements set forth above should be considered in
connection with any subsequent written or oral forward-looking statements that
we or persons acting on our behalf may issue. We do not undertake any obligation
to review or confirm analysts' expectations or estimates or to release publicly
any revisions to any forward-looking statements to reflect events or
circumstances after the date of this report or to reflect the occurrence of
unanticipated events.
Risks and uncertainties that could cause actual results to vary materially
from those anticipated in the forward-looking statements included in this Annual
Report include general economic conditions in the market in which we operate and
industry-based factors such as possible declines in the North American and
European automobile and light truck builds, labor strikes at our major
customers, changes in consumer preferences, dependence on significant automotive
customers, the level of competition in the automotive supply industry, pricing
pressure from automotive customers and risks associated with conducting business
in foreign countries, as well as factors more specific to us such as substantial
leverage, limitations imposed by our debt facilities and changes made in
connection with the integration of operations acquired by us and the
implementation of the global reorganization program. Our divisions may also be
affected by changes in the popularity of particular vehicle models, particular
interior trim packages or the loss of programs on particular vehicle models and
risks associated with conducting business in foreign countries. For a discussion
of certain of these and other important factors which may affect our operations,
products and markets, see "ITEM 1. BUSINESS" and "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
also our other filings with the Securities and Exchange Commission.
ITEM 1. BUSINESS
DEVELOPMENTS
Collins & Aikman Corporation (the "Company") is the global leader in
automotive floor and acoustic systems, and is a leading supplier of automotive
fabric, interior trim and convertible top systems. The Company is a Delaware
corporation which was formed on September 21, 1988. The Company conducts all of
its operating activities through its wholly-owned Collins & Aikman Products Co.
("C&A Products") subsidiary. Predecessors of C&A Products have been in operation
for more than a century.
During the first quarter of 2001, Heartland Industrial Partners, L.P. and
its affiliates ("Heartland") acquired a controlling interest equal to
approximately 60% of the Company through a purchase of 25 million shares of
common stock from the Company and a purchase of 27 million shares from
Blackstone Capital Partners, L.P. and its affiliates ("Blackstone Partners") and
Wasserstein Perella Partners, L.P. and its affiliates ("WP Partners"). In the
sale, the Company received gross proceeds of $125.0 million, or approximately
$95.0 million after fees and expenses associated with the transactions. The
purchase price also gave the Company a profit participation right on certain
future common stock sales by Heartland. Prior to the transaction, as of December
31, 2000, Blackstone Partners and WP Partners collectively owned approximately
87% of the common stock of the Company.
Heartland is a private equity firm formed to focus on investments in
industrial companies. Heartland's strategy is to facilitate the growth of its
controlled companies through acquisitions and internal growth. As a
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result of Heartland's acquisition of control of the Company, Heartland is
entitled to designate a majority of the Company's Board of Directors.
As a result of the above transactions (collectively the "Heartland
Transaction"), the Company's total shares outstanding increased from
approximately 62 million shares to approximately 87 million shares and
Blackstone Partners' and WP Partners' ownership percentage in the Company
declined from approximately 87% to approximately 31%.
On February 10, 1999, the Company announced a comprehensive plan (the
"Reorganization") to reorganize its global automotive carpet, acoustics,
plastics and accessory floormats businesses into two divisions: North American
Automotive Interior Systems, headquartered in the Detroit metropolitan area, and
European Automotive Interior Systems, headquartered in Germany. In addition, the
Company subsequently implemented a global account manager structure for each of
the Company's automotive original equipment manufacturer ("OEM") customers. The
Company undertook the Reorganization to reduce costs and improve operating
efficiencies throughout the Company's operations and to more effectively respond
to the OEMs' demand for complete interior trim systems and more sophisticated
components. As part of the Reorganization, the Company also established the
Specialty Automotive Products division, which includes the Company's automotive
fabrics and Dura Convertible Systems businesses. Although these products have
not historically been sold in conjunction with the Company's other interior trim
offerings, the Company's new strategy of leveraging its acoustic capabilities
with its design and styling expertise is anticipated to change the marketing
approach for all of the Company's products.
The Company announced on February 10, 1999 that it anticipated incurring a
restructuring charge related to the Reorganization of approximately $8 million
to $9 million. However, in connection with the change in the Company's Chief
Executive Officer and the Company's operating results in the first quarter, the
Company delayed certain aspects of the Reorganization while the Company's new
Chief Executive Officer reviewed the plan. Upon final completion of the
Reorganization plan, the Company recognized a pre-tax restructuring charge of
$33.4 million, including $13.4 million of asset impairments, $15.0 million of
severance costs and $5.0 million related to the termination of sales commission
contracts at the Company's North American plastics operations.
The 1999 Reorganization included the closure of three facilities. The
Homer, Michigan plastics facility was closed in August 1999 and its operations
were relocated to an existing plastics facility. The Cramerton, North Carolina
fabrics facility was sold in September 1999 and the relocation of its operations
to another fabrics facility was completed in 2000. The acoustics facility in
Vastra Frolunda, Sweden, was closed in September 2000 and its operations were
relocated to other facilities in Europe. In addition to these closures, the
Company recognized severance costs for operating personnel at the Company's
plastics operations in the United Kingdom and the Company's fabrics,
convertibles and accessory floormats operations in North America. The Company
also recognized severance costs for management and administrative personnel at
the Company's former North Carolina headquarters and North American Automotive
Interior Systems division.
During 2000, certain modifications were made to the Reorganization, which
changed the original estimates. Severance costs for individuals and payments for
the termination of sales commission arrangements originally contemplated in the
Reorganization were approximately $3.1 million lower than the original
estimates. The reduction consisted of $2.0 million of severance benefits and
$1.1 million of payments for termination of sales commission arrangements.
However, during 2000, there were additional personnel terminations made as the
Company continued to reshape its management team. The Company estimates indicate
that the adjustment to reduce the original restructuring provision approximates
the provision required for the additional personnel terminated in 2000. As of
December 31, 2000, the Company's Reorganization efforts, as modified, were
substantially complete and approximately 1,000 employees had been terminated.
During the first quarter of 2001, the Company announced that it had signed
a letter of intent to acquire the Becker Group LLC ("Becker"), a supplier of
plastic components to the automotive industry, with 2000 sales of approximately
$235 million. Under terms of the letter, the Company will purchase all of the
operating assets and equity interests of Becker. Consideration is expected to
include $60.0 million in cash, an
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$18.0 million non-compete agreement (paid out evenly over five years), 17
million shares of the Company's common stock and warrants for 500,000 shares at
an exercise price of $5.00 per share.
On December 4, 1997, the Company entered into a joint venture with
Courtaulds Textiles (Holdings) Limited ("Courtaulds") to manufacture automotive
interior fabrics in the United Kingdom. As of December 31, 2000, the Company and
Courtaulds each owned 50% of the joint venture. The Company's investment in the
joint venture of $4.8 million at December 31, 2000 and $5.5 million at December
25, 1999 has been included in other assets in the accompanying consolidated
balance sheets. During the first quarter of 2001, the Company purchased the
remaining 50% from Courtaulds for $4.1 million.
As part of the 1996 acquisition of Perstorp AB (See Note 3 to the
Consolidated Financial Statements), the Company acquired 75% of the Collins &
Aikman Carpet and Acoustics, S.A. de C.V. joint venture. During the first
quarter of 2001, the Company acquired the remaining 25% of the Collins & Aikman
Carpet and Acoustics, S.A. de C.V. joint venture and related intangible assets
for $3.5 million.
GENERAL
The Company is a global leader in automotive floor and acoustic systems,
and is a leading supplier of automotive fabric, interior trim and convertible
top systems, with 2000 net sales of approximately $1.9 billion. The Company
operates through three divisions: North American Automotive Interior Systems,
European Automotive Interior Systems and Specialty Automotive Products. The
Company's North American Automotive Interior Systems and European Automotive
Interior Systems divisions have five principal product lines -- molded floor
carpet, acoustical products, luggage compartment trim, accessory floormats, and
plastic-based interior trim systems and components. The Company's Specialty
Automotive Products division supplies automotive fabrics and convertible top
systems.
The Company's North American Automotive Interior Systems and European
Automotive Interior Systems divisions sell principally to automotive OEMs. The
Specialty Automotive Products division sells automotive fabrics to other
automotive suppliers, including suppliers with which the Company competes in
certain product lines. Convertible top systems, also marketed through the
Specialty Automotive Products division, are sold directly to OEMs. The majority
of customers for all three divisions are located in the North American and
European markets.
Approximately 17% of the Company's sales for 2000 were attributable to
products utilized in vehicles built outside of North America, compared to
approximately 18% in 1999. The Company is dependent on certain significant
customers. In 2000, 1999 and 1998, direct and indirect sales to each of General
Motors Corporation, Ford Motor Company and DaimlerChrysler AG accounted for 10%
or more of the Company's net sales. Automotive industry demand historically has
been influenced by both cyclical factors and long-term trends in the driving age
population and disposable income. Although the Company's operations are not
subject to significant seasonal influences, the Company has historically
experienced sales declines during the OEMs' scheduled summer shut-downs, usually
occurring in the third quarter of the year.
PRODUCTS
The Company's North American Automotive Interior Systems and European
Automotive Interior Systems divisions include the following product groups:
molded floor carpet, acoustical products, luggage compartment trim, accessory
floormats and plastic-based interior trim modules, systems and components. The
Specialty Automotive Products division produces automotive fabrics and
convertible top systems. The Company's automotive products are used primarily in
automobiles and light trucks. The Company also produces other automotive and
non-automotive products. In 2000, approximately 96% of the Company's sales were
automotive-related, compared to approximately 63% in 1996.
Molded Floor Carpet. Molded floor carpets primarily include polyethylene,
barrier-backed and molded urethane underlay carpet. In 2000, 1999 and 1998, the
Company's net sales of molded floor carpets were $458.2 million, $468.0 million
and $417.0 million, respectively.
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Acoustical Products. Acoustical products primarily include interior dash
insulators, damping materials and engine compartment NVH (noise, vibration and
harshness) systems. Acoustical products can be combined with molded floor
carpets to provide complete interior floor systems. In 2000, 1999 and 1998, the
Company's net sales of acoustical products were $231.4 million, $209.8 million
and $225.1 million, respectively.
Luggage Compartment Trim. Luggage compartment trim includes one-piece
molded trunk systems and assemblies, wheelhouse covers and center pan mats,
seatbacks, tireboard covers and other trunk trim products. In 2000, 1999 and
1998, the Company's net sales of luggage compartment trim were $71.0 million,
$90.6 million and $95.9 million, respectively.
Accessory Floormats. Accessory automotive floormats include rubber-backed,
carpeted floormats typically installed to preserve the quality of original floor
carpets. In 2000, 1999 and 1998, the Company's net sales of accessory floormats
were $160.4 million, $165.9 million and $157.2 million, respectively. The
Company did not have floormat operations in Europe prior to its acquisition of
Collins & Aikman Automotive Floormats Europe, B.V. ("C&A Floormats Europe")
(previously named Pepers Beheer B.V.) in June 1998. The Company also produces
residential and commercial floormats.
Plastic-based Interior Trim Module Systems and Components. The Company
manufactures automotive door panels, headrests, pillar trim, floor console
systems and instrument panel components. At the beginning of 1998, the Company
acquired Collins & Aikman Plastics (UK) Limited ("C&A Plastics UK") (previously
named Kigass Automotive Group), which increased the Company's capacity to
provide plastic-based trim and systems in Europe. The Company's net sales of
plastic-based interior trim systems in 2000, 1999 and 1998 were $452.1 million,
$435.4 million and $417.5 million, respectively.
Automotive Fabrics. The Company's automotive fabrics operations produce a
wide variety of automotive fabric, including flat-wovens, velvets and knits, and
headliner fabric. The Company also laminates foam to bodycloth. In 2000, 1999
and 1998, the Company had net sales of automotive fabrics of $290.5 million,
$269.5 million and $267.2 million, respectively.
Convertible Top Systems. The Company designs and manufactures convertible
top systems for vehicles built in North America and Europe. The Company markets
and sells to OEMs its "Top-in-a-Box" system, for which it designs and
manufactures all aspects of a convertible top, including the framework, trim
set, backlight and power actuating system. The Company's net sales of
convertible top systems in 2000, 1999 and 1998 were $105.2 million, $118.9
million and $104.3 million, respectively.
The Company also manufactures other non-automotive products, which
accounted for approximately four percent of the Company's sales in 2000. For
additional discussion on the Company's operating segments, including each
segment's revenues from external customers, operating income and total assets,
see Note 20 to the Consolidated Financial Statements.
PATENTS AND TRADEMARKS
The Company owns numerous patents throughout the world relating to
products, materials, assembly and manufacturing processes. Patents have been of
value in the past and are expected to be of value in the future. However, the
loss of any single patent or group of patents would not, in management's
opinion, materially affect the conduct of the Company's business. In addition,
we hold several trademarks relating to various manufacturing processes and
materials.
MARKETING
The Company sells its products directly to its customers under sales
contracts that are obtained primarily through competitive bidding. The Company's
marketing personnel maintain regular contact with its various customers'
engineers and purchasing agents. The Company's marketing activities are
coordinated for each customer through its Advanced Sales and Marketing Group.
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COMPETITION
The automotive supply business is highly competitive. The Company has
competitors in each of its automotive product lines, some of which have
substantially greater financial and other resources than the Company. The
Company's competitors in molded plastic components also include subsidiaries of
certain automotive and light vehicle manufacturers. The automotive supply
business for interior surfaces is highly concentrated in North America, due
mostly to substantial capital requirements and sophistication in design and
styling capability. For the majority of the Company's product lines in North
America, the Company normally competes for new business against only a few other
automotive suppliers. This principally occurs at the design stage of new models
and upon the redesign of existing models. The Company is vulnerable to a
decrease in demand associated with vehicle build in North America and Europe, a
failure to obtain purchase orders for new or redesigned models, a shift in
consumer taste away from products that the Company manufactures and pricing
pressure from its major customers. The Company believes the principal
competitive factors in its industry are quality, price, customer service, design
and engineering capability and reputation with the customer.
WORKING CAPITAL
The Company's working capital consists of accounts receivable, inventory
and accounts payable, which are typical for automotive suppliers. Accounts
receivable are primarily concentrated with large companies such as General
Motors, Ford, DaimlerChrysler and Toyota, which have historically paid within
terms. Inventories are maintained for specific automobile and light truck models
and quantities are based on demand forecasts provided by the customer.
Inventories are mostly required to be delivered on a just-in-time ("JIT") basis.
The Company maintains normal terms and conditions with its vendors.
The Company continued its new compensation program, which was implemented
in 1999, based in part upon maximizing cash flow and increasing asset
utilization. This new focus resulted in a 11% reduction in its investment in
working capital to $150 million in 2000, compared to $168 million in 1999.
FACILITIES
At December 31, 2000, the Company had 72 manufacturing, warehouse and other
facilities located in the U.S., Canada, Mexico, the United Kingdom, Spain,
Austria, Germany, Sweden, Belgium, France, the Netherlands and Japan,
aggregating approximately 10.1 million square feet. Approximately 74% of the
total square footage of these facilities is owned and the remainder is leased
(See Note 12 to the Consolidated Financial Statements). Many facilities are
strategically located to provide JIT inventory delivery to the Company's
customers. Capacity at any plant depends on, among other things, the product
being produced and the processes, tooling and equipment used. Capacity is also
impacted by product demand and shifts in production between plants. The Company
currently estimates that its plants generally operate at between 50% and 100% of
capacity. The Company's capacity utilization is consistent with past experience
in similar economic situations, and the Company believes that its facilities are
sufficient to meet existing needs.
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The Company's revenues, operating profit and identifiable assets for the
last three years attributable to the Company's geographic areas and export sales
from the United States to foreign countries are disclosed in Note 20 to the
Consolidated Financial Statements.
RAW MATERIALS
Raw materials and other supplies used in the Company's continuing
operations are normally available from a variety of competing suppliers. With
respect to most materials, the loss of a single or even a few suppliers would
not have a material adverse effect on the Company. For a discussion of raw
material price trends, see "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital
Resources".
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ENVIRONMENTAL MATTERS
See "ITEM 3. LEGAL PROCEEDINGS -- Environmental Matters" and "ITEM
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Environmental Matters".
EMPLOYEES
As of December 31, 2000, the Company's continuing operations employed
approximately 15,000 persons on a full-time or full-time equivalent basis.
Approximately 5,700 of such employees are represented by labor unions.
Approximately 3,500 employees are represented by collective bargaining
agreements that expire during 2001. Management believes that the Company's
relations with its employees represented by labor unions and its other employees
are generally good.
ITEM 2. PROPERTIES
For information concerning the principal physical properties of the Company
and its operating divisions, see "ITEM 1. BUSINESS -- Facilities".
ITEM 3. LEGAL PROCEEDINGS
Except as described below, the Company and its subsidiaries are not a party
to any material pending legal proceedings, other than ordinary routine
litigation incidental to their businesses.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local environmental laws and
regulations that (i) affect ongoing operations and may increase capital costs
and operating expenses and (ii) impose liability for the costs of investigation
and remediation and otherwise related to on-site and off-site contamination. The
Company's management believes that it has obtained, and is in material
compliance with, all material environmental permits and approvals necessary to
conduct its various businesses. Environmental compliance costs for continuing
businesses currently are accounted for as normal operating expenses or capital
expenditures of such business units, except for certain costs incurred at
acquired locations. Environmental compliance costs relating to conditions
existing at the time the locations were purchased are generally charged to
reserves established in purchase accounting. In the opinion of management, based
on the facts presently known to it, such environmental compliance costs will not
have a material adverse effect on the Company's consolidated financial condition
or future results of operations.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a potentially responsible party
("PRP") in a number of proceedings. The Company may be named as a PRP at other
sites in the future, including with respect to divested and acquired businesses.
The Company is currently engaged in investigation or remediation at certain
sites. In estimating the total cost of investigation and remediation, the
Company has considered, among other things, the Company's prior experience in
remediating contaminated sites, remediation efforts by other parties, data
released by the United States Environmental Protection Agency, the professional
judgment of the Company's environmental experts, outside environmental
specialists and other experts, and the likelihood that other parties which have
been named as PRPs will have the financial resources to fulfill their
obligations at sites where they and the Company may be jointly and severally
liable. Under the theory of joint and several liability, the Company could be
liable for the full costs of investigation and remediation even if additional
parties are found to be responsible under the applicable laws. It is difficult
to estimate the total cost of investigation and remediation due to various
factors, including incomplete information regarding particular sites and other
PRPs, uncertainty regarding the extent of environmental problems and the
Company's share, if any, of liability for such problems, the selection of
alternative compliance approaches, the complexity of environmental laws and
regulations and changes in cleanup standards and techniques. When it has been
possible to provide reasonable estimates of the Company's liability with respect
to environmental sites, provisions have been made in accordance with generally
accepted
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accounting principles. As of December 31, 2000, excluding sites at which the
Company's participation is anticipated to be de minimis or otherwise
insignificant or where the Company is being indemnified by a third party for the
liability, there are 22 sites where the Company is participating in the
investigation or remediation of the site, either directly or through financial
contribution, and 11 additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. As of December 31, 2000,
the Company's estimate of its liability for the 33 sites is approximately $25.5
million. As of December 31, 2000, the Company has established reserves of
approximately $37.0 million for the estimated future costs related to all its
known environmental sites. In the opinion of management, based on the facts
presently known to it, the environmental costs and contingencies will not have a
material adverse effect on the Company's consolidated financial condition or
future results of operations. However, there can be no assurance that the
Company has identified or properly assessed all potential environmental
liability arising from the activities or properties of the Company, its present
and former subsidiaries and their corporate predecessors.
During 2000, the Company settled claims for certain environmental matters
related to discontinued operations for a total of $20.0 million. Settlement
proceeds will be paid to the Company in three installments. The first
installment of $7.5 million was received on June 30, 2000, with the second and
third installments of $7.5 million and $5.0 million to be received in June 2001
and June 2002, respectively. Of the total $20.0 million settlement, the Company
recorded the present value of the settlement as $7.0 million of additional
environmental reserves, based on its assessment of potential environmental
exposures, and $6.6 million, net of income taxes, as income from discontinued
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of 2000.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been traded on the New York Stock Exchange
under the symbol "CKC" since July 7, 1994. At March 15, 2001, there were
approximately 1,550 beneficial holders. The following table lists the high and
low closing prices for the common stock for the full quarterly periods during
the two most recent years.
FISCAL 2000 FISCAL 1999
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HIGH LOW HIGH LOW
---- --- ---- ---
First Quarter............................................... 6 1/8 4 1/2 6 1/4 4 1/8
Second Quarter.............................................. 7 5 1/8 7 7/16 4
Third Quarter............................................... 6 1/8 4 11/16 7 5/8 4 9/16
Fourth Quarter.............................................. 4 15/16 2 7/8 7 4 7/8
During the first quarter of 2001, Heartland acquired a controlling interest
equal to approximately 60% of the Company through a purchase of 25 million
shares of common stock (of which approximately 8.49 million shares were treasury
shares) from the Company and a purchase of 27 million shares from Blackstone
Partners and WP Partners, in each case at $5.00 per share. In the sale, the
Company received gross proceeds of $125.0 million, or approximately $95.0
million after fees and expenses associated with the transactions. The purchase
price also gave the Company a profit participation right on certain future
common stock sales by Heartland. The transactions by which Heartland acquired
control, and the related transactions, are referred to herein as the "Heartland
Transaction."
As a result of the Heartland Transaction, the Company's total shares
outstanding increased from approximately 62 million shares to approximately 87
million shares and Blackstone Partners' and WP Partners' ownership percentage in
the Company declined from approximately 87% to approximately 31%. Heartland
acquired approximately 60% of the Company's common stock.
On March 1, 1999, the Company paid a special dividend of approximately $6.2
million, representing $0.10 per share on all outstanding shares of common stock
held by stockholders of record at the close of business on February 22, 1999. On
May 28, 1999, the Company paid a special dividend related to the distribution of
proceeds from the sale of the Company's Imperial Wallcoverings, Inc. subsidiary
("Wallcoverings") of approximately $44.0 million, representing $0.71 per share
on all outstanding shares of common stock held by stockholders of record as of
the close of business on May 20, 1999. No other dividends or similar
distributions with respect to the common stock have been paid by the Company
since its incorporation in 1988. Any payment of future dividends and the amounts
thereof will be dependent upon the Company's earnings, financial requirements
and other factors deemed relevant by the Company's Board of Directors. Certain
restrictive covenants contained in the agreements governing the Company's credit
facilities and subordinated notes limit the Company's ability to make dividend
and other payments. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Liquidity and Capital
Resources" and Note 10 to the Consolidated Financial Statements.
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ITEM 6. SELECTED FINANCIAL DATA
FISCAL YEAR ENDED(1)
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DECEMBER 31, DECEMBER 25, DECEMBER 26, DECEMBER 27, DECEMBER 28,
2000 1999 1998 1997 1996
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Statement of Operations Data:
Net sales........................ $1,901,819 $1,898,597 $1,825,469 $1,629,332 $1,053,821
Gross margin..................... 266,641 284,717 248,225 233,160 188,475
Selling, general and
administrative expenses....... 151,479 145,784 142,724 119,381 82,699
Restructuring charge and
impairment of long-lived
assets(2)..................... -- 33,391 -- 22,600 --
Goodwill amortization............ 7,077 7,023 7,023 6,669 3,872
Operating income................. 108,085 98,519 98,478 84,510 101,904
Interest expense, net(3)......... 96,589 92,045 82,004 77,581 39,850
Loss on sale of receivables(4)... 9,227 5,356 6,066 4,700 4,533
Income (loss) from continuing
operations before income
taxes......................... 815 (1,119) 5,193 2,907 57,408
Income tax expense............... 2,252 246 5,284 12,998 24,442
Income (loss) from continuing
operations.................... (1,437) (1,365) (91) (10,091) 32,966
Income from discontinued
operations, including
disposals, net of income
taxes......................... 6,600 -- -- 166,047 14,468
Income (loss) before
extraordinary items and
cumulative effect of a change
in accounting principle....... 5,163 (1,365) (91) 155,956 47,434
Net income (loss)(5)............. 4,477 (10,215) (3,815) 155,235 40,824
Per Share Data:
Income (loss) from continuing
operations per basic share.... (0.03) (0.02) -- (0.15) 0.48
Income (loss) from continuing
operations per diluted
share......................... (0.03) (0.02) -- (0.15) 0.47
Dividends per share.............. -- 0.81 -- -- --
Balance Sheet Data (at period end):
Total assets..................... $1,280,290 $1,348,890 $1,382,211 $1,302,392 $1,530,289
Long-term debt, including current
portion....................... 883,979 912,542 866,049 772,934 1,175,594
Common stockholders' deficit..... (154,986) (151,121) (79,771) (66,850) (194,578)
Other Data (from Continuing
Operations):
Capital expenditures............. $ 68,996 $ 86,430 $ 95,847 $ 56,521 $ 35,000
Depreciation and amortization.... 74,706 71,474 67,074 58,840 32,395
EBITDA(6)........................ 182,791 183,354 167,547 165,950 134,299
- ---------------
(1) 2000 was a 53-week year and 1996 was a 48-week year. All other years were 52
weeks.
(2) In 1999, the Company recorded a restructuring charge for the Reorganization
consisting of $13.4 million of asset impairment and $20.0 million primarily
related to severance accruals. In 1997, the Company wrote down fixed assets
by $5.1 million and reduced goodwill by $17.5 million to reflect impairments
in the carrying values of certain assets and goodwill associated with two of
its manufacturing facilities.
(3) Excludes amounts allocated to discontinued operations totaling $12.5 million
and $26.7 million in 1997 and 1996, respectively. No amounts were allocated
to discontinued operations in 2000, 1999 and 1998.
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(4) Excludes amounts allocated to discontinued operations totaling $0.6 million
and $2.2 million in 1997 and 1996, respectively. No amounts were allocated
to discontinued operations in 2000, 1999 and 1998.
(5) In 1999, the Company recorded an $8.9 million charge for the cumulative
effect of a change in accounting principle related to start-up costs.
(6) EBITDA represents earnings from continuing operations before deductions for
net interest expense, loss on sale of receivables, income taxes,
depreciation, amortization, other income and expense and the non-cash
portion of non-recurring charges. EBITDA does not represent and should not
be considered as an alternative to net income or cash flow from operations
as determined by generally accepted accounting principles.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RECENT DEVELOPMENTS
During the first quarter of 2001, Heartland acquired a controlling interest
equal to approximately 60% of the Company through a purchase of 25 million
shares of common stock (of which approximately 8.49 million shares were treasury
shares) from the Company and a purchase of 27 million shares from Blackstone
Partners and WP Partners, in each case at $5.00 per share. In the sale, the
Company received gross proceeds of $125.0 million, or approximately $95.0
million after fees and expenses associated with the transactions. The purchase
price also gave the Company a profit participation right on certain future
common stock sales by Heartland.
Heartland is a private equity firm formed to focus on investments in
industrial companies. Heartland's strategy is to facilitate the growth of its
controlled companies through acquisitions and internal growth. As a result of
the Heartland Transaction, Heartland is entitled to designate a majority of the
Company's Board of Directors.
During the first quarter of 2001, the Company announced that it had signed
a letter of intent to acquire Becker, a supplier of plastic components to the
automotive industry, with 2000 sales of approximately $235 million. Under terms
of the letter, the Company will purchase all of the operating assets and equity
interests of Becker. Consideration is expected to include $60.0 million in cash,
an $18.0 million non-compete agreement (paid out evenly over five years), 17
million shares of the Company's common stock and warrants for 500,000 shares at
an exercise price of $5.00 per share.
Effective February 23, 2001, the Company amended and restated its Credit
Agreement Facilities and received waivers of the interest coverage and leverage
ratio covenants for the period ending December 31, 2000. The Company also
received, at that time, commitments from its lenders for a term loan in the
amount of $50 million maturing January 15, 2006 to be used to retire the
outstanding JPS Automotive 11 1/8% Senior Notes due 2001 (the "Term Loan D
Facility"). The primary purpose of the amendments was to allow the Change of
Control precipitated by the Heartland Transaction and to provide for the Term
Loan D Facility. As a part of this amendment and restatement, the Company is
providing collateral additional to the previous pledge of stock of C&A Products
and its significant subsidiaries and certain intercompany indebtedness and
guarantees from the Company and its U.S. subsidiaries (subject to certain
exceptions). This additional collateral consists of a first priority lien on
substantially all of the assets of the Company, C&A Products and its U.S. and
Canadian subsidiaries with certain exceptions (including assets included in the
Company's receivables facility, certain scheduled assets, and certain assets
whose value relative to cost of lien perfection is considered too low to
include). The Company also obtained amendments adjusting the interest coverage
and leverage ratio covenants as well as adjustments to certain definitions and
calculations, giving the Company increased operating flexibility. These
amendments, together with the current credit environment resulted in additional
amendments to increase the Company's borrowing rates charged under the
previously existing Credit Facilities.
On February 26, 2001 the Company announced that JPS Automotive Inc. and JPS
Automotive Products Corp. (collectively "JPS Automotive") would redeem all of
JPS Automotive's outstanding 11 1/8% Senior Notes due 2001 (the "JPS Automotive
Senior Notes"). The JPS Automotive Senior Notes will be redeemed in full on
March 28, 2001 at a redemption price equal to the principal amount of the JPS
Automotive Senior
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Notes plus the applicable premium, together with interest accrued to the
redemption date, in the amount of $31.83 per $1,000 principal amount of JPS
Automotive Senior Notes.
On December 4, 1997, the Company entered into a joint venture with
Courtaulds Textiles (Holdings) Limited ("Courtaulds") to manufacture automotive
interior fabrics in the United Kingdom. The Company and Courtaulds each own 50%
of the joint venture. The Company's investment in the joint venture of $4.8
million at December 31, 2000 and $5.5 million at December 25, 1999 has been
included in other assets in the accompanying consolidated balance sheets. During
the first quarter of 2001, the Company purchased the remaining 50% from
Courtaulds for $4.1 million.
As part of the 1996 acquisition of Perstorp AB (See Note 3 to the
Consolidated Financial Statements), the Company acquired 75% of Collins & Aikman
Carpet and Acoustics, S.A. de C.V. joint venture. During the first quarter of
2001, the Company acquired the remaining 25% of the Collins & Aikman Carpet and
Acoustics, S.A. de C.V. joint venture and related intangible assets for $3.5
million.
GENERAL
The Company is the global leader in automotive floor and acoustic systems,
and is a leading supplier of automotive fabrics, interior trim and convertible
top systems. The Company's net sales in 2000 were $1,901.8 million compared to
$1,898.6 million in 1999. During 1996, the Company changed its fiscal year end
to the last Saturday in December. Fiscal 1996 was a 48-week period which ended
on December 28, 1996. During 2000, the Company changed its fiscal year-end to a
calendar year-end. Capitalized terms that are used in this discussion and not
defined herein have the meanings assigned to such terms in the Notes to
Consolidated Financial Statements.
The automotive supply industry in which the Company competes is cyclical
and is influenced by the level of North American and European vehicle
production. Management believes the long-term trends in the design and
manufacture of automotive interiors include an increased emphasis on acoustics.
Management further believes that changes to vehicle interiors, including
voice-activated internet access, e-mail capabilities and navigational systems
will require enhanced acoustical properties relative to today's light vehicles.
Additionally, the Company believes that by utilizing its design and styling
capabilities across all of its product lines, it will be able to provide
customers with interiors with better color matching, lower costs and more
harmonious interior environments. Management believes that these interior
surface products can serve as "carriers" for the Company's acoustic products,
and by selling these products together, the Company can differentiate its
products from those of its competitors, provide greater value to its customers
and enhance its product potential.
RESULTS OF OPERATIONS
2000 COMPARED TO 1999
The Company's 2000 fiscal year consisted of 53 weeks as compared to a
52-week year in fiscal 1999. Therefore, sales in all divisions and associated
costs and expenses were impacted by the longer reporting period in fiscal 2000.
In a 53-week year, the Company's policy is to include the additional week in the
first quarter of the year.
The Divisions
The Company operates three divisions, with seven primary product lines. For
additional information regarding the Company's divisions, see Note 20 to the
Consolidated Financial Statements.
North American Automotive Interior Systems
Net Sales: Net sales for the North American Automotive Interior Systems
division increased 2.1% to $1,175.6 million, up $23.9 million from 1999. The
increase in sales was primarily driven by higher industry production volume as
well as a favorable product mix.
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Operating Income: Operating income for the division decreased 2.5% to
$87.2 million, down $2.2 million from 1999. The decrease is due primarily to
one-time costs largely related to various commercial customer recovery issues,
performance issues at the Company's Springfield operation and certain asset
write-offs.
European Automotive Interior Systems
Net Sales: Net sales for the European Automotive Interior Systems division
decreased 7.1% to $284.5 million, down $21.9 million from 1999. This decrease is
primarily due to the negative impact of foreign currency translation offset by
slightly higher industry production volume.
Operating Income: Operating income decreased 52.2% to $1.1 million, down
$1.2 million from 1999. Savings recognized due to restructuring were more than
offset by expenses incurred as the result of commercial customer recovery issues
and one-time costs associated with the closure of the Company's facility in
Vastra Frolunda, Sweden.
Specialty Automotive Products
Net Sales: Net sales for the Specialty Automotive Products division were
relatively flat with the prior year at $441.7 million. Production volume
increases in the fabrics business were offset largely by lower convertible
volumes, primarily due to a reduction in Chrysler Sebring production levels.
Operating Income: Operating income for the division decreased 42.4% to
$22.8 million, down $16.8 million from 1999. The decrease is primarily due to
lower convertible build volumes and operating issues relating to the relocation
of headliner production to the Company's Farmville facility.
The Company as a Whole
Net Sales: The Company's net sales were relatively flat with the prior
year at approximately $1,901.8 million, resulting primarily from the factors
discussed above. Overall, net sales in 2000 increased during the first half of
the year and decreased by a similar amount in the second half of the year
reflecting changes in auto build and a negative effect of foreign currency in
Europe.
Gross Margin: Gross margin for the Company was 14.0% in 2000, down from
15.0% in 1999. This decrease is primarily due to the previously mentioned
commercial customer recovery issues, lower convertible sales mix, headliner
relocation costs and asset write-offs. These decreases are partially offset by
the benefits recognized from the restructuring program implemented in 1999 and
2000 and improved performance at the Company's Manchester, Michigan plastics
facility.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased 3.8% to $158.6 million, up $5.8 million from
1999. The increase is primarily due to one-time costs related to the
aforementioned commercial customer recovery issues and the impact of an
additional week in the first quarter of fiscal 2000 partially offset by one-time
pension-related actuarial benefits driven by the Company's restructuring program
and the reduction of the Company's bonus accrual. As a percentage of sales,
selling, general and administrative expenses increased to 8.3% in 2000, compared
to 8.0% in 1999.
Restructuring Charge: The Company recognized a $33.4 million charge in
1999 relating to the Reorganization plan (See Note 15 to the Consolidated
Financial Statements).
Interest Expense: Interest expense, net of interest income of $3.4 million
and $2.5 million in 2000 and 1999, respectively, increased $4.6 million to $96.6
million in 2000. The increase is primarily attributed to higher average interest
rates and higher average debt balances in 2000. The weighted average interest
rates were 10.0% and 9.6% at December 31, 2000 and December 25, 1999,
respectively.
Loss on the Sale of Receivables: The Company sells on a continuous basis,
through its Carcorp, Inc. subsidiary ("Carcorp"), interests in a pool of
accounts receivable. In connection with the receivables sales, a loss of $9.2
million was recognized in 2000, compared to a loss of $5.4 million in 1999.
During the first quarter of 2000, the Company entered into a new accounts
receivable securitization arrangement resulting in one-time expenses for initial
fees totaling $1.6 million. The remaining increase is due to higher interest
rates and
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increased sales of eligible receivables. The Company's prior securitization
facility expired and the new facility came into effect on December 27, 1999.
Other Expense: The Company recognized other expense of $1.5 million,
compared to other expense of $2.2 million in 1999. The decrease is primarily due
to lower option premiums resulting from a lower volume of hedging activity in
2000 offset, partially by increased foreign exchange transaction losses and
higher losses from joint ventures in 2000.
Income Taxes: The Company recognized income tax expense of $2.3 million in
2000, compared to income tax expense of $0.2 million in 1999. The Company's
effective tax rate was 276% in 2000, compared to (22%) in 1999. The increase in
the Company's effective tax rate is primarily due to the impact of prior year
non-recurring tax credits, along with the effects of certain state taxes and
non-deductible goodwill, which do not fluctuate with income.
Discontinued Operations: In 2000, the Company settled environmental claims
related to discontinued operations for a total of $20 million. Of this amount,
$6.6 million was recorded as income from discontinued operations, net of income
taxes of $4.4 million.
Extraordinary Charge: In 2000, the Company recognized an extraordinary
charge of $0.7 million, net of income taxes of $0.5 million, in connection with
the repurchase of $38 million principal amount of JPS Automotive Senior Notes on
the market at prices in excess of carrying values.
Cumulative Effect of a Change in Accounting Principle: The Company adopted
the provisions of Statement of Position No. 98-5, "Reporting on the Cost of
Start-Up Activities" ("SOP 98-5") at the beginning of 1999. SOP 98-5 provides
guidance on the financial reporting of start-up costs and organization costs and
requires that all nongovernmental entities expense the costs of start-up
activities as these costs are incurred instead of being capitalized and
amortized. The cumulative effect of adopting SOP 98-5 resulted in a charge of
$8.9 million, net of income taxes of $5.1 million, in 1999.
Net Income (Loss): The combined effect of the foregoing resulted in net
income of $4.5 million in 2000, compared to a net loss of $(10.2) million in
1999, which included a restructuring charge of $33.4 million.
1999 COMPARED TO 1998
The Divisions
North American Automotive Interior Systems
Net Sales: Net sales for the North American Automotive Interior Systems
division increased 8.1% to $1,151.7 million, up $86.3 million from 1998. The
increase in sales was driven by a stronger automobile and light truck build in
North America in 1999. A strike at General Motors, the Company's largest
customer, negatively impacted sales in 1998 by approximately $37.1 million.
Operating Income: Operating income for the division increased 20.0% to
$89.4 million, up $14.9 million from 1998. The increase is primarily due to
increased sales volume, partially offset by unfavorable changes in sales mix and
price discounts at several of the division's operations and the incurrence of
significant start-up costs related to the production of various interior modules
for the General Motors GMX-270 at the Company's Manchester, Michigan facility.
In addition, the division incurred certain costs related to the closure and
relocation of the Homer, Michigan, plastics facility into another plastic
facility and relocation expenses associated with the establishment of the
division's headquarters in the Detroit metropolitan area.
European Automotive Interior Systems
Net Sales: Net sales for the European Automotive Interior Systems division
decreased 9.4% to $306.4 million, down $31.7 million from 1998. The decrease is
primarily due to weak demand for acoustical products from Rover, Ford and Volvo.
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Operating Income: Operating income decreased 75.2% to $2.3 million, down
$6.9 million from 1998. The decrease is primarily related to operational
inefficiencies at the division's plastics operations in the United Kingdom.
These inefficiencies derived from system implementation difficulties, which
caused temporary delays and inaccuracies in scheduling, shipping and materials
management information. In addition, the division experienced manufacturing
inefficiencies associated with volume declines on Rover, Ford and Volvo
products. Operating losses were also incurred at a manufacturing facility at
Vastra Frolunda, Sweden, principally due to volume declines. The Vastra Frolunda
facility was closed as part of the Reorganization discussed in (ITEM 1.
BUSINESS -- Developments). The division also incurred a high level of relocation
expenses associated with the establishment of its headquarters in Germany, and
consulting expenses associated with system upgrades and Year 2000 compliance
efforts.
Specialty Automotive Products
Net Sales: Net sales for the Specialty Automotive Products division
increased 4.4% to $440.5 million, up $18.5 million from 1998. Excluding the
impact of the General Motors strike, sales increased $11.5 million, primarily
due to strong demand for the Ford Mustang at the division's convertible top
systems operations.
Operating Income: Operating income for the division increased 178.7% to
$39.6 million, up $25.4 million from 1998. The increase is primarily due to
increased volume at the convertible top systems operations and cost-cutting
efforts at the automotive fabrics operations. In 1998, the automotive fabrics
operations experienced unfavorable manufacturing variances related to a decline
in volume. The volume decline resulted from increased demand for leather
seating, program run-outs and unfavorable product mix factors. In addition, the
fabrics operations incurred charges related to idle equipment. The increase in
operating income in 1999 was partially offset by the impact of certain costs
related to the closure and relocation of the Cramerton, North Carolina, fabrics
facility into another fabrics facility.
The Company as a Whole
Net Sales: The Company's net sales increased 4.0% to $1,898.6 million, up
$73.1 million from 1998, resulting primarily from the factors discussed above.
Gross Margin: Gross margin for the Company was 15.0% in 1999, up from
13.6% in 1998. The increase in gross margin is primarily due to increased volume
and improved manufacturing efficiencies at the Company's North American
Automotive Interior Systems division. In addition, gross margin at the Company's
Specialty Automotive Products division improved over prior year results, which
were impacted by lower sales volumes and manufacturing inefficiencies caused by
increased demand for leather seating applications and charges for idle
equipment. These increases were partially offset by the manufacturing
inefficiencies experienced at the Company's European Automotive Interior Systems
resulting from volume declines and system implementation difficulties at the
division's plastics operations.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased 2.0% to $152.8 million, up $3.1 million from
1998. The increase is primarily due to costs associated with system upgrades,
the establishment of the Company's new headquarters in the Detroit metropolitan
area and Germany and Year 2000 compliance efforts, partially offset by
cost-cutting measures at the Specialty Automotive Products division and lower
personnel costs at the Company's former North Carolina headquarters due to
employee reductions. As a percentage of sales, selling, general and
administrative expenses declined to 8.0% in 1999, compared to 8.2% in 1998.
Restructuring Charge: The Company recognized a $33.4 million charge in
1999 relating to the Reorganization (See Note 15 to the Consolidated Financial
Statements).
Interest Expense: Interest expense, net of interest income of $2.4 million
and $3.7 million in 1999 and 1998, respectively, increased $10.0 million to
$92.0 million in 1999. The increase is primarily due to higher levels of
outstanding debt in 1999. The weighted average interest rates were 9.6% and 9.7%
in 1999 and 1998, respectively.
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Loss on the Sale of Receivables: The Company sells on a continuous basis,
through Carcorp, interests in a pool of accounts receivable. In connection with
the receivables sales, a loss of $5.4 million was recognized in 1999, compared
to a loss of $6.1 million in 1998. The decrease in the loss on sale of
receivables is primarily due to a lower interest rate and decreased borrowings
on the receivables facility during 1999.
Other Expense: The Company recognized other expense of $2.2 million,
compared to other expense of $5.3 million in 1998. The decrease is primarily due
to higher foreign currency transaction losses associated with the Canadian
dollar in 1998.
Income Taxes: The Company recognized income tax expense of $0.2 million in
1999, compared to income tax expense of $5.3 million in 1998. The Company's
effective tax rate was (22%) in 1999, compared to 102% in 1998. The decrease in
the Company's effective tax rate is primarily due to lower foreign taxes and
non-recurring tax credits.
Extraordinary Charge: In 1998, the Company recognized a non-cash
extraordinary charge of $3.6 million, net of income taxes of $2.4 million,
relating to the refinancing of the Company's bank facilities and a charge of
$0.1 million, net of income taxes of $90 thousand, recognized in connection with
the repurchase of $2.6 million principal amount of JPS Automotive Senior Notes
at market prices in excess of carrying values.
Cumulative Effect of a Change in Accounting Principle: The Company adopted
the provisions of SOP 98-5 at the beginning of 1999. The cumulative effect of
adopting SOP 98-5 resulted in a charge of $8.9 million, net of income taxes of
$5.1 million.
Net Loss: The combined effect of the foregoing resulted in a net loss of
$10.2 million in 1999, compared to a net loss of $3.8 million in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents totaling
$20.9 million and $14.0 million at December 31, 2000 and December 25, 1999,
respectively. The Company had $105.1 million of borrowing availability under its
credit arrangements as of December 31, 2000. The total was comprised of $81.4
million under the Company's revolving credit facility (including $42.3 million
available to the Canadian Borrowers, as hereinafter defined), approximately
$23.7 million under bank demand lines of credit in Canada and Austria and a line
of credit for certain other European locations. Availability as of December 31,
2000 under the revolving credit facility was reduced by outstanding letters of
credit of $17.6 million.
During the first quarter of 2001, Heartland acquired 25 million shares of
common stock (of which 8.49 million were shares of treasury stock) from the
Company at a price of $5.00 per share, representing a cash investment in the
Company of $125.0 million before fees and expenses. Net proceeds paid to the
Company were approximately $95.0 million. The proceeds will be used to pay down
the Company's Revolving Credit Facility (as hereinafter defined) and to fund
corporate growth initiatives.
On May 28, 1998, the Company entered, through C&A Products, into new credit
facilities consisting of: (i) a senior secured term loan facility in the amount
of $100 million payable in quarterly installments until final maturity on
December 31, 2003 (the "Term Loan A Facility"); (ii) a senior secured term loan
facility in the principal amount of $125 million payable in quarterly
installments until final maturity on June 30, 2005 (the "Term Loan B Facility"
and, together with the Term Loan A Facility and Term Loan C Facility, as
hereinafter defined, the "Term Loan Facilities"); and (iii) a senior secured
revolving credit facility in an aggregate principal amount of up to $250 million
terminating on December 31, 2003, of which $60 million (or the equivalent
thereof in Canadian dollars) is available to two of the Company's Canadian
subsidiaries (the "Canadian Borrowers"), and of which up to $50 million is
available as a letter of credit facility (the "Revolving Credit Facility" and
together with the Term Loan Facilities, the "Credit Agreement Facilities"). In
addition, the Credit Agreement Facilities included a provision for a Term Loan C
credit facility (the "Term Loan C Facility") of up to $150 million. On May 13,
1999, the Company closed on the Term Loan C Facility in the principal amount of
$100 million. The Term Loan C Facility is payable in quarterly installments
through final maturity on December 31, 2005. The Company used approximately $44
million of the proceeds from the Term Loan C Facility to pay a special dividend
to shareholders on May 28, 1999 (See Note 16 to the
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Consolidated Financial Statements). The remaining proceeds were used to repay
amounts outstanding on the Revolving Credit Facility and for general corporate
purposes.
Effective February 23, 2001, the Company, amended and restated the Credit
Agreement Facilities and received waivers of the interest coverage and leverage
ratio covenants for the period ending December 31, 2000. The Company also
received at that time commitments from its lenders for a term loan ("Term Loan D
Facility") in the amount of $50 million maturing January 15, 2006 to be used to
retire the outstanding JPS Automotive Senior Notes. The primary purpose of the
amendments was to allow the Change of Control precipitated by the Heartland
Transaction and provide for the Term Loan D Facility. As a part of this
amendment and restatement, the Company is providing collateral additional to the
previous pledge of stock of C&A Products and its significant subsidiaries and
certain intercompany indebtedness and guarantees from the Company and its U.S.
subsidiaries (subject to certain exceptions). This additional collateral
consists of a first priority lien on substantially all of the assets of the
Company, C&A Products and its U.S. and Canadian subsidiaries with certain
exceptions (including assets included in the Company's receivables facility,
certain scheduled assets, and certain assets whose value relative to cost of
lien perfection is considered too low to include). The Company also obtained
amendments adjusting the interest coverage and leverage ratio covenants as well
as adjustments to certain definitions and calculations giving the Company
increased operating flexibility. These amendments, together with the current
credit environment, resulted in additional amendments to increase the Company's
borrowing rates charged under the previously existing Credit Facilities. The
weighted average rate of interest on the Credit Agreement Facilities at December
31, 2000 was 9.05%. Under the Credit Agreement Facilities as amended February
23, 2001, the weighted average rate of interest at December 31, 2000, would have
been 10.13%.
At December 31, 2000, the Company had outstanding $66.3 million under the
Term Loan A Facility, $118.0 million under the Term Loan B Facility, $96.0
million under the Term Loan C Facility, and $150.2 million under the Revolving
Credit Facility (including $17.3 million borrowed by the Canadian Borrowers).
The Credit Agreement Facilities, which are guaranteed by the Company and
its U.S. subsidiaries (subject to certain exceptions), contain restrictive
covenants including maintenance of interest coverage and leverage ratios and
various other restrictive covenants which are customary for such facilities.
Effective March 8, 1999, the Company, in view of the decreased sales of
automotive fabrics and the General Motors strike, obtained an amendment to the
Credit Agreement Facilities primarily in order to modify the covenants relating
to interest coverage and leverage ratios throughout the existing terms of the
Credit Agreement Facilities. The amendment resulted generally in an increase in
the interest rates charged under the Credit Agreement Facilities. For additional
discussion of the Credit Agreement Facilities and related restrictive covenants,
see Note 10 to the Consolidated Financial Statements.
On June 10, 1996, C&A Products issued at face value $400 million principal
amount of 11 1/2% Senior Subordinated Notes due 2006 (the "Senior Subordinated
Notes"). The Senior Subordinated Notes indenture contains restrictive covenants
(including, among others, limitations on the incurrence of indebtedness, asset
dispositions and transactions with affiliates) which are customary for such
securities. These covenants are also subject to a number of significant
exceptions. The Company does not currently meet the Senior Subordinated Notes
indenture's general test for the incurrence of indebtedness, and does not expect
to meet such test during 2001. However, the Company expects all its borrowing
needs for the foreseeable future to be allowed under exceptions for permitted
indebtedness in the indenture. During the first quarter of 2001, the Company
solicited and received consent from holders of a sufficient amount of the
outstanding principal of the Senior Subordinated Notes allowing the Change of
Control precipitated by the Heartland Transaction. A Second Supplemental
Indenture dated February 8, 2001 amends the Senior Subordinated Notes indenture
to reflect this and certain other changes, including allowance for the
incurrence of debt in the form of the Term Loan D Facility. For additional
discussion of the Senior Subordinated Notes, see Note 10 to the Consolidated
Financial Statements.
At December 31, 2000, JPS Automotive had approximately $48.3 million of
indebtedness outstanding (including a premium of $0.3 million) related to the
JPS Automotive Senior Notes. The Company is
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operating JPS Automotive as a restricted subsidiary under the Credit Agreement
Facilities and the indenture governing the Senior Subordinated Notes.
On February 26, 2001 the Company announced that JPS Automotive is redeeming
all of the outstanding JPS Automotive Senior Notes. The JPS Automotive Senior
Notes will be redeemed in full on March 28, 2001 at a redemption price equal to
the principal amount of the JPS Automotive Senior Notes plus the applicable
premium together with interest accrued to the redemption date in the amount of
$31.83 per $1,000 principal amount of the JPS Automotive Senior Notes. For
additional discussion of the JPS Automotive Senior Notes, see Note 10 to the
Consolidated Financial Statements.
On December 27, 1999, the Company entered into a new receivables facility
(the "New Receivables Facility"), replacing the Company's previous receivables
facility (the "Old Receivables Facility") which had expired. The New Receivables
Facility utilizes funding provided by commercial paper conduits sponsored by
three of the Company's lenders under its Credit Agreement Facilities. Carcorp
purchases virtually all trade receivables generated by C&A Products and certain
of its subsidiaries (the "Sellers") in the United States and Canada,
transferring rights to collections on those receivables to the conduits. The
conduits in turn issue commercial paper which is collateralized by those rights.
The liquidity facilities backing the New Receivables Facility have terms of 364
days, renewable annually for up to five years.
The total funding available to the Company on a revolving basis under the
New Receivables Facility is up to $171.6 million, depending primarily on the
amount of receivables generated by the Sellers from sales, the rate of
collection on those receivables and other characteristics of those receivables
which affect their eligibility (such as the bankruptcy or downgrading below
investment grade of the obligor, delinquency and excessive concentration). The
Company retains the collection responsibility with respect to the receivables.
The Old Receivables Facility was comprised of (i) term certificates, which
were issued on March 31, 1995 in an aggregate face amount of $110 million having
a term of five years and (ii) variable funding certificates, which represented
revolving commitments of up to an aggregate of $75 million having a term of five
years. The certificates represented the right to receive payments generated by
the receivables held by a trust formed by Carcorp.
On December 27, 1999, the Company funded $120 million through the New
Receivables Facility. At December 31, 2000, the New Receivables Facility was
fully utilized at $82.5 million. The discount on sold interests is equal to the
interest rate paid by the conduits to the holders of the commercial paper plus a
margin of 0.70% and dealer fees of 0.05% (7.41% at inception and 7.40% at
December 31, 2000). In addition, the Company pays 0.25% on the unused committed
portion of the facility. See Note 11 to the Consolidated Financial Statements
for further information regarding the New Receivables Facility.
The Company has equipment lease agreements and building lease agreements
with several lessors which, subject to specific approval, provide availability
of funding for operating leases and sale leasebacks as allowed in its other
financing agreements. The Company made lease payments under the equipment lease
agreements related to continuing operations of approximately $6.9 million, $5.8
million and $5.4 million for 2000, 1999 and 1998, respectively. The Company has
a purchase option on the equipment at the end of the lease term based on the
fair market value of the equipment and has additional options to cause the sale
of some or all of the equipment or to purchase some or all of the equipment at
prices determined under the agreement. The Company has classified the leases as
operating. The Company may sell and lease back additional equipment in the
future under the same lease agreements, subject to the lessor's approval.
The Company's principal sources of funds are cash generated from continuing
operating activities, borrowings under the Credit Agreement Facilities and the
sale of receivables under the New Receivables Facility. Net cash provided by the
continuing operating activities of the Company was $131.0 million for 2000. In
1999, the Company implemented a new compensation program, based in part upon
maximizing cash flow and increasing asset utilization. This new focus resulted
in a 11% reduction in working capital to $150 million in 2000, compared to $168
million in 1999.
The Company's principal uses of funds from operating activities and
borrowings for the next several years are expected to fund interest and
principal payments on its indebtedness, net working capital increases and
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20
capital expenditures. At December 31, 2000, the Company had total outstanding
indebtedness of $884.0 million (excluding approximately $17.6 million of
outstanding letters of credit) at a weighted average interest rate of 10% per
annum. Of the total outstanding indebtedness, $830.5 million relates to the
Credit Agreement Facilities and the Senior Subordinated Notes.
See Notes 10 and 11 to the Consolidated Financial Statements for
information regarding the interest rates on the Credit Agreement Facilities,
Senior Subordinated Notes, JPS Automotive Senior Notes and New Receivables
Facility. Cash interest paid was $94.8 and $91.9 million for the years ended
December 31, 2000 and December 25, 1999, respectively.
Due to the variable interest rates under the Credit Agreement Facilities
and the New Receivables Facility, the Company is sensitive to changes in
interest rates. Based upon amounts outstanding at December 31, 2000, a 0.5%
increase in each of LIBOR and Canadian bankers' acceptance rates (6.6% and 5.8%,
respectively, at December 31, 2000) would impact interest costs by approximately
$2.2 million annually on the Credit Agreement Facilities and $0.4 million
annually on the New Receivables Facility.
The current maturities of long-term debt primarily consist of the JPS
Automotive Senior Notes, the current portion of the Credit Agreement Facilities,
vendor financing, an industrial revenue bond and other miscellaneous debt. The
maturities of long-term debt of the Company's continuing operations during 2001,
2002, 2003, 2004 and 2005 are $84.3 million, $34.1 million, $25.1 million,
$219.9 million and $119.7 million, respectively. In addition, the Credit
Agreement Facilities provide for mandatory prepayments of the Term Loan
Facilities with certain excess cash flow of the Company, net cash proceeds of
certain asset sales or other dispositions by the Company, net cash proceeds of
certain sale/leaseback transactions and net cash proceeds of certain issuances
of debt obligations. The indenture governing the Senior Subordinated Notes
provides that in the event of certain asset dispositions, C&A Products must
apply net proceeds (to the extent not reinvested in the business) first to repay
Senior Indebtedness (as defined, which includes the Credit Agreement Facilities)
and then, to the extent of remaining net proceeds, to make an offer to purchase
outstanding Senior Subordinated Notes at 100% of their principal amount plus
accrued interest. C&A Products must also make an offer to purchase outstanding
Senior Subordinated Notes at 101% of their principal amount plus accrued
interest if a Change in Control (as defined) of the Company occurs. During the
first quarter of 2001, the Company solicited and received consent from holders
of a sufficient amount of the outstanding principal of the Senior Subordinated
Notes allowing the Change in Control precipitated by the Heartland Transaction.
A Second Supplemental Indenture dated February 8, 2001 amends the Senior
Subordinated Notes indenture to reflect this and certain other changes,
including allowance for the incurrence of debt in the form of the Term Loan D
Facility.
During 1999 the Company's Board of Directors authorized the expenditure of
up to $25 million to repurchase shares of the Company's common stock at
management's discretion. This amount was reduced to approximately $2.0 million
by the approximately $6.2 million special dividend paid on March 1, 1999 and the
approximately $44.0 million special dividend paid on May 28, 1999. At December
31, 2000, approximately $1.0 million remained authorized by the Company's Board
of Directors for the Company's 1999 share repurchase program. The Company
believes it has sufficient liquidity under its existing credit arrangements to
effect the repurchase program. The Company spent approximately $0.5 million and
$1.8 million to repurchase shares during 2000 and 1999, respectively.
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of December 31, 2000, the Company's continuing
operations had approximately $7.8 million in outstanding capital expenditure
commitments. The Company currently anticipates that its capital expenditures for
continuing operations for 2001 will be approximately $75.0 million, a portion of
which may be financed through leasing. The Company's capital expenditures in
future years will depend upon demand for the Company's products and changes in
technology.
The Company is sensitive to price movements in its raw material supply
base. During 2000, prices for most of the Company's primary raw materials
remained constant with price levels at December 25, 1999. While the Company may
not be able to pass on future raw material price increases to its customers, it
believes
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that a portion of the increased cost can be offset through value
engineering/value analysis in conjunction with its major customers and by
continued reductions in the cost of off-quality products and processes.
The Company has significant obligations relating to postretirement,
casualty, environmental, lease and other liabilities of discontinued operations.
In connection with the sale and acquisition of certain businesses, the Company
has indemnified the purchasers and sellers for certain environmental
liabilities, lease obligations and other matters. In addition, the Company is
contingently liable with respect to certain lease and other obligations assumed
by certain purchasers and may be required to honor such obligations if such
purchasers are unable or unwilling to do so. On January 5, 2000, Imperial Home
Decor Group, Inc., which purchased Wallcoverings in March, 1998, filed voluntary
petitions for protection under chapter 11 of the U.S. Bankruptcy Code. On March
16, 2001, a Bankruptcy Court approved a restructuring plan for Imperial Home
Decor. The Company is currently assessing the impact of that restructuring plan
filing. Management currently anticipates that the net cash requirements of its
discontinued operations will be approximately $19.6 million in 2001. However,
because the requirements of the Company's discontinued operations are largely a
function of contingencies, it is possible that the actual net cash requirements
of the Company's discontinued operations could differ materially from
management's estimates. Management believes that the Company's cash needs
relating to discontinued operations can be provided by operating activities from
continuing operations and by borrowings under its credit facilities.
TAX MATTERS
At December 31, 2000, the Company had outstanding net operating loss
carryforwards ("NOLs") of approximately $315.0 million for federal income tax
purposes. Substantially all of these NOLs expire over the period from 2008 to
2020. The Company also has unused federal tax credits of approximately $20.9
million, of which $8.7 million expire during the period 2001 to 2020.
As a result of the Heartland Transaction, Heartland will own approximately
60 percent of the outstanding shares. This constitutes a "change in control"
that results in annual limitations on the Company's use of its NOLs and unused
tax credits. This annual limitation on the use of NOLs and tax credits depends
on the value of the equity of the Company and the amount of "built-in gain" or
"built-in loss" in the Company's assets at the date of the "change in control".
Based on the expiration dates of the NOLs and tax credits as well as anticipated
levels of domestic income, management does not believe that the transaction will
have a material impact on these deferred tax assets.
Management has reviewed the Company's operating results for recent years as
well as the outlook for its continuing operations and concluded that it is more
likely than not that the net deferred tax assets of $97.7 million at December
31, 2000 will be realized. The Company announced a reorganization on February
10, 1999 (see Note 15 to the Consolidated Financial Statements) to better align
itself in the marketplace. A major goal of this reorganization is to lower the
overall cost structure of the Company and thereby increase profitability. The
infusion of cash from the Heartland Transaction is expected to lower the overall
debt of the Company and reduce its interest expense. These factors, along with
the timing of the reversal of its temporary differences, certain tax planning
strategies and the expiration date of its NOLs were also considered in reaching
this conclusion. The Company's ability to generate future taxable income is
dependent on numerous factors, including general economic conditions, the state
of the automotive industry and other factors beyond management's control.
Therefore, there can be no assurance that the Company will meet its expectation
of future taxable income.
The valuation allowance at December 31, 2000 provides for certain deferred
tax assets that in management's assessment may not be realized due to tax
limitations on the use of such amounts or that relate to tax attributes that are
subject to uncertainty due to the long-term nature of their realization.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local environmental laws and
regulations that (i) affect ongoing operations and may increase capital costs
and operating expenses and (ii) impose liability for the costs of investigation
and remediation and otherwise relate to on-site and off-site contamination. The
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Company's management believes that it has obtained, and is in material
compliance with, all material environmental permits and approvals necessary to
conduct its various businesses. Environmental compliance costs for continuing
businesses currently are accounted for as normal operating expenses or capital
expenditures of such business units. In the opinion of management, based on the
facts presently known to it, such environmental compliance costs will not have a
material adverse effect on the Company's consolidated financial condition or
future results of operations.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a PRP in a number of proceedings.
The Company may be named as a PRP at other sites in the future, including with
respect to divested and acquired businesses. The Company is currently engaged in
investigation or remediation at certain sites. In estimating the total cost of
investigation and remediation, the Company has considered, among other things,
the Company's prior experience in remediating contaminated sites, remediation
efforts by other parties, data released by the United States Environmental
Protection Agency, the professional judgment of the Company's environmental
experts, outside environmental specialists and other experts, and the likelihood
that other parties which have been named as PRPs will have the financial
resources to fulfill their obligations at sites where they and the Company may
be jointly and severally liable. Under the theory of joint and several
liability, the Company could be liable for the full costs of investigation and
remediation even if additional parties are found to be responsible under the
applicable laws. It is difficult to estimate the total cost of investigation and
remediation due to various factors including incomplete information regarding
particular sites and other PRPs, uncertainty regarding the extent of
environmental problems and the Company's share, if any, of liability for such
problems, the selection of alternative compliance approaches, the complexity of
environmental laws and regulations and changes in cleanup standards and
techniques. When it has been possible to provide reasonable estimates of the
Company's liability with respect to environmental sites, provisions have been
made in accordance with generally accepted accounting principles. As of December
31, 2000, excluding sites at which the Company's participation is anticipated to
be de minimis or otherwise insignificant or where the Company is being
indemnified by a third party for the liability, there are 22 sites where the
Company is participating in the investigation or remediation of the site, either
directly or through financial contribution, and 11 additional sites where the
Company is alleged to be responsible for costs of investigation or remediation.
As of December 31, 2000, the Company's estimate of its liability for these 33
sites, is approximately $25.5 million. As of December 31, 2000, the Company has
established reserves of approximately $37.0 million for the estimated future
costs related to all its known environmental sites. In the opinion of
management, based on the facts presently known to it, the environmental costs
and contingencies will not have a material adverse effect on the Company's
consolidated financial condition or future results of operations. However, there
can be no assurance that the Company has identified or properly assessed all
potential environmental liability arising from the activities or properties of
the Company, its present and former subsidiaries and their corporate
predecessors.
During 2000, the Company settled claims for certain environmental matters
related to discontinued operations for a total of $20.0 million. Settlement
proceeds will be paid to the Company in three installments. The first
installment of $7.5 million was received on June 30, 2000, with the second and
third installments of $7.5 million and $5.0 million to be received in June 2001
and June 2002, respectively. Of the total $20.0 million settlement, the Company
recorded the present value of the settlement as $7.0 million of additional
environmental reserves, based on its assessment of potential environmental
exposures, and $6.6 million, net of income taxes, as income from discontinued
operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
RISK MANAGEMENT
The Company is exposed to market risk from changes in interest rates and
foreign exchange rates. To mitigate the risk from these interest rate and
foreign currency exchange rate fluctuations, the Company enters into various
hedging transactions that have been authorized pursuant to policies and
procedures. The Company does not use derivative financial instruments for
trading purposes.
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INTEREST RATE EXPOSURE
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt obligations. The interest rate
exposure for the Company's variable rate debt obligations is currently indexed
to LIBOR, for U.S.-denominated debt, or the Canadian bankers' acceptance rate,
for Canadian-denominated debt, of one, two, three or six months, as selected by
the Company. While the Company has used interest rate swaps and other interest
rate protection agreements to modify its exposure to interest rate movements and
to reduce borrowing rates, no such agreements were in place at December 31,
2000.
The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates, including debt obligations. The table presents
principal cash flows and related weighted average interest rates by expected
maturity dates for the Company's debt obligations. Weighted average variable
interest rates are based on implied LIBOR and Canadian bankers' acceptance
forward rates in the yield curve at the reporting date. The information is
presented in U.S. dollar equivalents, which is the Company's reporting currency.
The instrument's actual cash flows are denominated in both U.S. dollar ($US) and
Canadian dollar ($CAD), as indicated in parentheses (dollar amounts in
thousands).
EXPECTED MATURITY DATE FAIR VALUE
------------------------------------------------------------------------- DECEMBER 31,
2001 2002 2003 2004 2005 THEREAFTER TOTAL 2000
------- ------- ------- -------- -------- ---------- -------- ------------
Debt:
Fixed rate ($US)......... $48,266 $400,000 $448,266 $376,403
Average interest rate.... 11.125% 11.5%
Variable rate ($US)...... $35,000 $33,000 $24,250 $201,900 $119,000 $413,150 $413,150
Average interest rate.... 8.73% 8.82% 9.03% 9.04% 9.82%
Variable rate ($CAD)..... $ 17,341 $ 17,341 $ 17,341
Average interest rate.... 8.48%
CURRENCY RATE EXPOSURE
The Company is subject to currency rate exposure primarily related to
foreign currency purchase and sale transactions and intercompany and third party
loans. The primary purpose of the Company's foreign currency hedging activities
is to protect against the volatility associated with these foreign currency
exposures. The Company primarily utilizes forward exchange contracts and
purchased options with durations of generally less than 12 months.
On January 1, 1999, eleven of the fifteen member countries of the European
Union (the "Participating Countries") established fixed conversion rates between
their existing sovereign currencies and the Euro. The Participating Countries
adopted the Euro as their common currency on that date. The conversion did not
have a material adverse effect on the Company's consolidated financial position
or results of operations.
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At December 31, 2000, the Company had outstanding the following foreign
currency forward and option contract amounts (amounts in thousands, except
average contract rate):
WEIGHTED AVERAGE
CONTRACT RATE UNREALIZED
CURRENCY SOLD CURRENCY RECEIVED CONTRACT AMOUNT PER CONNECTION GAIN (LOSS)
- ------------- ----------------- --------------- -------------------- -----------
Euro GBP $14,141 0.62330 GBP per EUR --
GBP Euro $ 5,045 0.62377 GBP per EUR --
GBP USD $22,201 1.49330 USD per GBP --
Euro USD $ 2,180 0.93366 USD per EUR --
CAD USD $65,438 1.50671 CAD per USD --
USD CAD $ 8,871 1.50825 CAD per USD --
SEK GBP $40,729 14.21472 SEK per GBP --
Euro GBP $ 5,734 0.61123 GBP per EUR $(206)
GBP Euro $ 5,391 0.61904 GBP per EUR $ 119
Euro SEK $ 9,068 8.35445 SEK per EUR $(533)
USD SEK $ 1,752 9.47954 SEK per USD $ 30
The Company also had option contracts with a notional amount of $43.2
million outstanding at December 31, 2000 with a weighted average strike price of
$1.62. For additional information on hedging activity see Note 5 to the
Consolidated Financial Statements.
The information presented does not fully reflect the net foreign exchange
rate exposure of the Company because it does not include the intercompany
funding arrangements denominated in foreign currencies and the foreign
currency-denominated cash flows from anticipated sales and purchases. Management
believes that the foreign currency exposure relating to these items would
substantially offset the exposure discussed above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements of Collins & Aikman Corporation
and subsidiaries included herein and listed on the Index to Financial Statements
set forth in Item 14 (a) of this Form 10-K report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is incorporated herein by reference the information required by this
Item in the Company's definitive proxy statement for the 2001 Annual Meeting of
Stockholders which will be filed with the Securities and Exchange Commission no
later than 120 days after the close of the year ended December 31, 2000.
ITEM 11. EXECUTIVE COMPENSATION
There is incorporated herein by reference the information required by this
Item in the Company's definitive proxy statement for the 2001 Annual Meeting of
Stockholders which will be filed with the Securities and Exchange Commission no
later than 120 days after the close of the year ended December 31, 2000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is incorporated herein by reference the information required by this
Item in the Company's definitive proxy statement for the 2001 Annual Meeting of
Stockholders which will be filed with the Securities and Exchange Commission no
later than 120 days after the close of the year ended December 31, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is incorporated herein by reference the information required by this
Item in the Company's definitive proxy statement for the 2001 Annual Meeting of
Stockholders which will be filed with the Securities and Exchange Commission no
later than 120 days after the close of the year ended December 31, 2000.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements:
PAGE
NUMBER
------
Report of Independent Public Accountants.................... F-1
Consolidated Statements of Operations for the fiscal years
ended December 31, 2000, December 25, 1999 and December
26, 1998.................................................. F-2
Consolidated Balance Sheets at December 31, 2000 and
December 25, 1999......................................... F-3
Consolidated Statements of Cash Flows for the fiscal years
ended December 31, 2000, December 25, 1999 and December
26, 1998.................................................. F-4
Consolidated Statements of Common Stockholders' Deficit for
the fiscal years ended December 31, 2000, December 25,
1999 and December 26, 1998................................ F-5
Notes to Consolidated Financial Statements.................. F-6
(a)(2) Financial Schedules:
The following financial statement schedules of Collins & Aikman Corporation
for the fiscal years ended December 31, 2000, December 25, 1999 and December 26,
1998 are filed as part of this Report and should be read in conjunction with the
Consolidated Financial Statements of Collins & Aikman Corporation.
PAGE
NUMBER
------
Report of Independent Public Accountants on Schedules....... S-1
Schedule I -- Condensed Financial Information of
Registrant................................................ S-2
Schedule II -- Valuation and Qualifying Accounts............ S-5
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are omitted
because they are not required, are inapplicable or the information is included
in the Consolidated Financial Statements or Notes thereto.
(a)(3) Exhibits:
Please note that in the following description of exhibits, the title of any
document entered into, or filing made, prior to July 7, 1994 reflects the name
of the entity, a party thereto or filing, as the case may be, at such time.
Accordingly, documents and filings described below may refer to Collins & Aikman
Holdings Corporation, Collins & Aikman Group, Inc. or Wickes Companies, Inc., if
such documents and filings were made prior to July 7, 1994.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 -- Restated Certificate of Incorporation of Collins & Aikman
Corporation is hereby incorporated by reference to Exhibit
3.1 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended June 26, 1999.
3.2 -- Certificate of Amendment to the Restated Certificate of
Incorporation of Collins & Aikman Corporation.
3.3 -- By-laws of Collins & Aikman Corporation, as amended, are
hereby incorporated by reference to Exhibit 3.2 of Collins &
Aikman Corporation's Report on Form 10-K for the fiscal year
ended January 27, 1996.
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EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.4 -- Certificate of Elimination of Cumulative Exchangeable
Redeemable Preferred Stock of Collins & Aikman Corporation
is hereby incorporated by reference to Exhibit 3.3 of
Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended October 28, 1995.
4.1 -- Specimen Stock Certificate for the Common Stock is hereby
incorporated by reference to Exhibit 4.3 of Amendment No. 3
to Collins & Aikman Holdings Corporation's Registration
Statement on Form S-2 (Registration No. 33-53179) filed June
21, 1994.
4.2 -- Indenture, dated as of June 1, 1996, between Collins &
Aikman Products Co., Collins & Aikman Corporation and First
Union National Bank of North Carolina, as Trustee, is hereby
incorporated by reference to Exhibit 4.2 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter
ended April 27, 1996.
4.3 -- First Supplemental Indenture dated as of June 1, 1996,
between Collins & Aikman Products Co., Collins & Aikman
Corporation and First Union National Bank of North Carolina,
as Trustee, is hereby incorporated by reference to Exhibit
4.3 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended April 27, 1996.
4.4 -- Credit Agreement, dated as of May 28, 1998, as amended and
restated through February 23, 2001, among Collins & Aikman
Products Co., as Borrower, Collins & Aikman Canada, Inc. and
Collins & Aikman Plastics, Ltd., as Canadian Borrowers,
Collins & Aikman Corporation, the lenders named therein, The
Chase Manhattan Bank, as Administrative Agent, and The Chase
Manhattan Bank of Canada, as Canadian Administrative Agent.
4.5 -- Waiver dated as of October 27, 1998 under the Credit
Agreement dated as of May 28, 1998, among Collins & Aikman
Products Co., Collins & Aikman Canada, Inc. and Collins &
Aikman Plastics, Ltd., as Canadian Borrowers, Collins &
Aikman Corporation, as Guarantor, the Lender Parties
thereto, Bank of America, N.T.S.A., as Documentation Agent,
The Chase Manhattan Bank, as Administrative Agent, and The
Chase Manhattan Bank of Canada, as Canadian Administrative
Agent is hereby incorporated by reference to Exhibit 4.5 of
Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended September 26, 1998.
4.6 -- Waiver dated as of December 22, 1998 under the Credit
Agreement dated as of May 28, 1998, among Collins & Aikman
Products Co., Collins & Aikman Canada, Inc. and Collins &
Aikman Corporation, as Guarantor, the Lender Parties
thereto, Bank of America, N.T.S.A., as Documentation Agent,
The Chase Manhattan Bank, as Administrative Agent, and The
Chase Manhattan Bank of Canada, as Canadian Administrative
Agent is hereby incorporated by reference to Exhibit 4.6 of
Collins & Aikman Corporation's Report on Form 10-K for the
year ended December 26, 1998.
4.7 -- Amendment and Waiver dated as of March 8, 1999, among
Collins & Aikman Products Co., Collins & Aikman Canada,
Inc., Collins & Aikman Plastics Ltd., Collins & Aikman
Corporation, as Guarantor, the Lender Parties thereto, Bank
of America N.T.S.A., as Documentation Agent, The Chase
Manhattan Bank, as Administrative Agent, and The Chase
Manhattan Bank of Canada, as Canadian Administrative Agent
is hereby incorporated by reference to Exhibit 4.7 of
Collins & Aikman Corporation's Report on Form 10-K for the
year ended December 26, 1998.
4.8 -- Tranche C Term Loan Supplement dated as of May 12, 1999 to
the Credit Agreement dated as of May 28, 1998 among Collins
& Aikman Products Co., Collins & Aikman Canada, Inc.,
Collins & Aikman Plastics, Ltd., Collins & Aikman
Corporation, the Financial Institutions parties thereto,
Bank of America N.T.S.A., as Documentation Agent, The Chase
Manhattan Bank, as Administrative Agent, and The Chase
Manhattan Bank of Canada, as Canadian Administrative Agent
is hereby incorporated by reference to Exhibit 4.1 of
Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended June 26, 1999.
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EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.9 -- Indenture dated as of June 28, 1994, between JPS Automotive
Products Corp., as Issuer, JPS Automotive L.P., as Guarantor
and Shawmut Bank Connecticut, N.A., as Trustee, is hereby
incorporated by reference to Exhibit 4.2 of JPS Automotive
Corp.'s Registration Statement on Form S-1, Registration No.
33-75510.
4.10 -- First Supplemental Indenture, dated as of October 5, 1994,
between JPS Automotive Products Corp. and JPS Automotive
L.P., as Co-Obligors, and Shawmut Bank Connecticut, N.A., as
Trustee is hereby incorporated by reference to Exhibit 4.48A
of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s
Report on Form 10-Q for the fiscal quarter ended October 2,
1994.
4.11 -- Second Supplemental Indenture, dated as of February 8, 2001,
by and among Collins & Aikman Products Co., as Issuer,
Collins & Aikman Corporation, as Guarantor, and First Union
National Bank, as Trustee.
4.12 -- Guarantee and Collateral Agreement, dated as of February 23,
2001, made by Collins & Aikman Corporation, Collins & Aikman
Products Co. and certain of their subsidiaries, as Grantors,
in favor of The Chase Manhattan Bank, as Collateral Agent.
4.13 -- Canadian Guarantee and Collateral Agreement, dated as of
February 23, 2001, made by Collins & Aikman Holdings Canada
Inc., Collins & Aikman Canada Inc., Collins & Aikman
Plastics, Ltd., C & A Canada International Holdings Limited
and certain other entities that may become party thereto
from time to time, as Canadian Grantors, in favor of The
Chase Manhattan Bank of Canada, as Canadian Collateral
Agent.
Collins & Aikman Corporation agrees to furnish to the
Commission upon request in accordance with Item 601 (b)(4)
(iii) (A) of Regulation S-K copies of instruments defining
the rights of holders of long-term debt of Collins & Aikman
Corporation or any of its subsidiaries, which debt does not
exceed 10% of the total assets of Collins & Aikman
Corporation and its subsidiaries on a consolidated basis.
10.1 -- Stockholders Agreement, dated February 23, 2001, by and
among Collins & Aikman Corporation, Heartland Industrial
Partners, L.P. and other investor stockholders listed on
Schedule 1 thereto, Blackstone Capital Company II, L.L.C.,
Blackstone Family Investment Partnership I L.P. Blackstone
Advisory Directors Partnership L.P., Blackstone Capital
Partners L.P., and Wasserstein/C&A Holdings, L.L.C.
10.2 -- Employment Agreement dated as of July 18, 1990 between
Wickes Companies, Inc. and an executive officer is hereby
incorporated by reference to Exhibit 10.3 of Wickes
Companies, Inc.'s Report on Form 10-K for the fiscal year
ended January 26, 1991.*
10.3 -- Employment Agreement dated as of July 22, 1992 between
Collins & Aikman Corporation and an executive officer is
hereby incorporated by reference to Exhibit 10.7 of Collins
& Aikman Holdings Corporation's Report on Form 10-K for the
fiscal year ended January 30, 1993.*
10.4 -- First Amendment to Employment Agreement dated as of February
24, 1994 between Collins & Aikman Corporation and an
executive officer is hereby incorporated by reference to
Exhibit 10.7 of Collins & Aikman Holdings Corporation's
Registration Statement on Form S-2 (Registration No.
33-53179) filed April 19, 1994.*
10.5 -- Second Amendment, dated as of October 3, 1996, to the
Employment Agreement, dated as of July 22, 1992, as amended,
between Collins & Aikman Products Co. and an executive
officer is hereby incorporated by reference to Exhibit 10.26
of Collins & Aikman Corporation's Report on Form 10-Q for
the fiscal quarter ended October 26, 1996.*
10.6 -- Third Amendment dated as of August 1, 1997, to the
Employment Agreement dated as of July 22, 1992, as amended,
between the Corporation and an executive officer is hereby
incorporated by reference to Exhibit 10.35 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended September 27, 1997.*
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EXHIBIT
NUMBER DESCRIPTION
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10.7 -- Letter Agreement dated March 23, 1999 with an executive
officer is hereby incorporated by reference to Exhibit 10.7
of Collins & Aikman Corporation's Report on Form 10-K for
the fiscal year ended December 26, 1998.*
10.8 -- Amended and Restated Employment Agreement dated as of
January 20, 1999 between Collins & Aikman Products Co. and
an executive officer is hereby incorporated by reference to
Collins & Aikman Corporation's Report on Form 10-K for the
fiscal year ended December 26, 1998.*
10.9 -- Employment Agreement dated as of January 20, 1999 between
Collins & Aikman Products Co. and an executive officer is
hereby incorporated by reference to Exhibit 10.9 of Collins
& Aikman Corporation's Form 10-K for the fiscal year ended
December 26, 1998.*
10.10 -- Employment Agreement dated as of April 22, 1999 between
Collins & Aikman Corporation and an executive officer is
hereby incorporated by reference to Exhibit 10.10 of Collins
& Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended March 27, 1999.*
10.11 -- Employment Agreement, dated as of March 29, 2000, between
Collins & Aikman Products Co. and an executive officer is
hereby incorporated by reference to Exhibit 10.1 of Collins
& Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended April 1, 2000.*
10.12 -- Employment Agreement, dated as of April 1, 2000, between
Collins & Aikman Products Co. and an executive officer is
hereby incorporated by reference to Exhibit 10.3 of Collins
& Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended July 1, 2000.*
10.13 -- Employment Agreement, dated as of August 1, 2000, between
Collins & Aikman Products Co. and an executive officer is
hereby incorporated by reference to Exhibit 10.6 of Collins
& Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended September 30, 2000.*
10.14 -- Employment Agreement, dated as of August 1, 2000, between
Collins & Aikman Products Co. and an executive officer is
hereby incorporated by reference to Exhibit 10.8 of Collins
& Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended September 30, 2000.*
10.15 -- Letter agreement, dated as of May 12, 1999, with an
executive officer is hereby incorporated by reference to
Exhibit 10.2 of Collins & Aikman Corporation's Report on
Form 10-Q for the fiscal quarter ended June 26, 1999.*
10.16 -- Letter agreement, dated as of April 7, 2000, between Collins
& Aikman Corporation and an executive officer is hereby
incorporated by reference to Exhibit 10.12 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended September 30, 2000.*
10.17 -- Letter agreement, dated as of July 13, 2000, between Collins
& Aikman Corporation and an executive officer is hereby
incorporated by reference to Exhibit 10.11 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended September 30, 2000.*
10.18 -- Service contract between Collins & Aikman Products GmbH and
an executive officer is hereby incorporated by reference to
Exhibit 10.5 of Collins & Aikman Corporation's Report on
Form 10-Q for the fiscal quarter ended September 30, 2000.
10.19 -- Settlement Agreement dated as of April 27, 2000, between
Collins & Aikman Products Co. and an executive officer is
hereby incorporated by reference to Exhibit 10.10 of Collins
& Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended September 30, 2000.
10.20 -- Collins & Aikman Corporation 1998 Executive Incentive
Compensation Plan is hereby incorporated by reference to
Exhibit 10.10 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended December 26, 1998.*
10.21 -- Collins & Aikman Products Co. 2000 Executive Incentive
Compensation Plan is hereby incorporated by reference to
Exhibit 10.5 of Collins & Aikman Corporation's Report on
Form 10-Q for the fiscal quarter ended July 1, 2000.
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EXHIBIT
NUMBER DESCRIPTION
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10.22 -- Collins & Aikman Corporation Supplemental Retirement Income
Plan is hereby incorporated by reference to Exhibit 10.23 of
Amendment No. 5 to Collins & Aikman Holdings Corporation's
Registration Statement on Form S-2 (Registration No.
33-53179) filed July 6, 1994.*
10.23 -- Amendment to Collins & Aikman Corporation Supplemental