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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 25, 1999
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
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 $39,860,060 as of March 15, 2000.
As of March 15, 2000, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 61,879,272 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Proxy Statement for 2000 Annual Meeting of Stockholders to be filed within
120 days of December 25, 1999--Part III, Items 10, 11, 12 and 13.*
* Only the portions of this document expressly described in the items listed
are incorporated by reference herein.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT INDEX
Item 1. Business, page 1.
Item 2. Properties, page 4.
Item 3. Legal Proceedings, page 4.
Item 4. Submission of Matters to a Vote of Security Holders, page 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters,
page 6.
Item 6. Selected Financial Data, page 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations, page 8.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk, page 20.
Item 8. Financial Statements and Supplementary Data, page 21.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure, page 21.
Item 10. Directors and Executive Officers of the Registrant, page 22.
Item 11. Executive Compensation, page 22.
Item 12. Security Ownership of Certain Beneficial Owners and Management, page
22.
Item 13. Certain Relationships and Related Transactions, page 22.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K, page
23.
PART I
Item 1. Business
Development
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 (formerly
Collins & Aikman Holdings Corporation) is a Delaware corporation which was
formed on September 21, 1988. As of December 25, 1999, Blackstone Capital
Partners, L.P. ("Blackstone Partners") and Wasserstein Perella Partners, L.P.
("WP Partners") and their respective affiliates collectively own approximately
87% of the Common Stock of the Company. 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.
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 Wiesbaden, Germany.
The Company subsequently implemented a global account manager structure for
each of its automotive original equipment manufacturer ("OEM") customers. The
Company undertook the Reorganization to reduce costs and improve operating
efficiencies throughout operations and to more effectively respond to the
OEMs' demand for complete interior trim systems and more sophisticated
components, based on increased levels of design and styling support and
quieter automobile interiors. The Reorganization and global account manager
structure has enabled the Company to increase customer service on a global
basis and maintain local expertise to provide specialized sales, marketing,
development, design, engineering and program management services capable of
delivering interior modules, systems and individual 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 most of the Company's products.
Thomas E. Evans joined the Company as Chief Executive Officer on April 22,
1999. Mr. Evans replaced Thomas E. Hannah, who retired from the Company on
June 30, 1999. Mr. Evans also serves as a director and Chairman of the
Company's Board of Directors. Mr. Evans, 48 years old, was formerly President
of Tenneco Automotive, a subsidiary of Tenneco, Inc. Prior to that, Mr. Evans
held several management positions, the last being Senior Vice President of
Operations, at Case Corporation, a subsidiary of Tenneco, Inc.
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, Thomas E. Evans, reviewed the plan. Upon final
completion of the Reorganization plan, the Company recognized a pre-tax
restructuring charge of $33.4 million in 1999. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Recent Developments" for additional discussion of the restructuring charge.
On July 26, 1999, the Company announced that Rajesh K. Shah had been named
Executive Vice President and Chief Financial Officer. Mr. Shah replaced J.
Michael Stepp. Mr. Shah, 48 years old, was formerly Vice President and Chief
Financial Officer of UT Automotive. Prior to that, Mr. Shah held several
management positions with Varity Corporation.
1
General
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, with 1999 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 compete in five principal product lines -- molded
floor carpet, acoustical products, luggage compartment trim, accessory
floormats, and plastic-based interior trim modules, systems and components.
The Company's Specialty Automotive Products division competes in 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 18% of the Company's sales for 1999 were attributable to
products utilized in vehicles built outside of North America, compared to
approximately 20% in 1998. The Company is dependent on certain significant
customers. In 1999, 1998 and 1997, 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 1999, 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 1999, 1998 and 1997,
the Company's net sales of molded floor carpets were $468.0 million, $417.0
million and $384.7 million, respectively.
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 1999, 1998 and 1997,
the Company's net sales of acoustical products were $209.8 million, $225.1
million, and $167.8 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 1999, 1998 and
1997, the Company's net sales of luggage compartment trim were $90.6 million,
$95.9 million and $101.0 million, respectively.
Accessory Floormats. Accessory automotive floormats include rubber-backed,
carpeted floormats typically installed to preserve the quality of original
floor carpets. In 1999, 1998 and 1997, the Company's net sales of accessory
floormats were $165.9 million, $157.2 million and $139.3 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.
2
Plastic-based Interior Trim Modules, 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 modules, systems and components, in
1999, 1998 and 1997 were $435.4 million, $417.5 million and $294.6 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 1999,
1998 and 1997, the Company had net sales of automotive fabrics of $269.5
million, $267.2 million and $319.0 million, respectively. The Company also
manufactures other non-automotive products, which accounted for approximately
four percent of the Company's sales in 1999.
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, in 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 1999, 1998 and 1997 were $118.9 million, $104.3
million and $88.8 million, respectively.
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.
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 required 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.
The Company principally competes for new business at the design stage of
new models and upon the redesign of existing models. The Company is vulnerable
to a decrease in demand 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.
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 24% reduction in its investment in working capital (including
accounts receivable, inventory and accounts payable) to $168 million in 1999,
compared to $221 million in 1998.
3
Facilities
At December 25, 1999, the Company had 63 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 9.6 million square feet. Approximately 79% of the
total square footage of these facilities is owned and the remainder is leased.
Many facilities are strategically located to provide JIT inventory delivery to
the Company's customers. Capacity at any plant depends, among other things, on
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 the majority of its plants
generally operate at between 80% and 100% of capacity. The Company does have
certain isolated plants that operate at capacity levels around 50% due to
production demands at the specific facilities. 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 fiscal 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".
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 25, 1999, the Company's continuing operations employed
approximately 15,600 persons on a full-time or full-time equivalent basis.
Approximately 5,800 of such employees are represented by labor unions.
Approximately 1,400 employees are represented by collective bargaining
agreements that expire during 2000. Management believes that the Company's
relations with its employees represented by labor unions and its other
employees are generally good. When completed, the Reorganization will affect
approximately 1,100 employees.
Year 2000 Issues
For a discussion of the impact of Year 2000 compliance issues, see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Impact of Year 2000 Compliance."
Item 2. Properties
For information concerning the principal physical properties of the Company
and its operating divisions, see "Item 1. Business".
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.
4
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 accounting principles. As of
December 25, 1999, 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 23 sites
where the Company is participating in the investigation or remediation of the
site, either directly or through financial contribution, and 8 additional
sites where the Company is alleged to be responsible for costs of
investigation or remediation. As of December 25, 1999, the Company's estimate
of its liability for the 31 sites is approximately $22.9 million. As of
December 25, 1999, the Company has established reserves of approximately $30.5
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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
5
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, 2000, there were
approximately 1,900 beneficial holders. The following table lists the high and
low sales prices for the Common Stock for the full quarterly periods during
the two most recent fiscal years.
Fiscal 1999 Fiscal 1998
------------- ---------------
High Low High Low
------ ------ ------- -------
First Quarter......... 6 1/4 4 1/8 9 11/16 7 11/16
Second Quarter........ 7 7/16 4 9 1/2 6 13/16
Third Quarter......... 7 5/8 4 9/16 7 1/2 6 3/16
Fourth Quarter........ 7 4 7/8 7 7/16 4 15/16
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.
6
Item 6. Selected Financial Data
Fiscal Year Ended
---------------------------------------------------------------
December 25, December 26, December 27, December 28, January 27,
1999 1998 1997 1996 (1) 1996
------------ ------------ ------------ ------------ -----------
(in thousands, except per share data)
Statement of Operations
Data:
Net sales............... $1,898,597 $1,825,469 $1,629,332 $1,053,821 $ 902,017
Gross margin............ 284,717 248,225 233,160 188,475 164,325
Selling, general and
administrative
expenses............... 145,784 142,724 119,381 82,699 65,996
Restructuring charge and
impairment of long-
lived assets (2)...... 33,391 -- 22,600 -- 2,400
Goodwill amortization... 7,023 7,023 6,669 3,872 270
Operating income........ 98,519 98,478 84,510 101,904 95,659
Interest expense, net
(3).................... 92,045 82,004 77,581 39,850 22,150
Loss on sale of
receivables (4)........ 5,356 6,066 4,700 4,533 6,246
Income (loss) from
continuing operations
before income taxes.... (1,119) 5,193 2,907 57,408 67,263
Income tax expense
(benefit).............. 246 5,284 12,998 24,442 (139,959)
Income (loss) from
continuing operations.. (1,365) (91) (10,091) 32,966 207,222
Income (loss) from
discontinued
operations, including
disposals, net of
income taxes........... -- -- 166,047 14,468 (781)
Income (loss) before
extraordinary items and
cumulative effect of a
change in accounting
principle.............. (1,365) (91) 155,956 47,434 206,441
Net income (loss) (5)... (10,215) (3,815) 155,235 40,824 206,441
Per Share Data:
Income (loss) from
continuing operations
per basic share........ (0.16) -- (0.15) 0.48 2.96
Income (loss) from
continuing operations
per diluted share...... (0.16) -- (0.15) 0.47 2.91
Dividends per share..... 0.81 -- -- -- --
Balance Sheet Data (at
period end):
Total assets............ $1,348,890 $1,382,211 $1,302,392 $1,530,289 $ 991,361
Long-term debt,
including current
portion................ 912,542 866,049 772,934 1,175,594 759,966
Common stockholders'
deficit................ (151,121) (79,771) (66,850) (194,578) (227,852)
Other Data (from
continuing operations):
Capital expenditures.... $ 86,430 $ 95,847 $ 56,521 $ 35,000 $ 53,156
Depreciation and
amortization........... 71,474 67,074 58,840 32,395 28,427
EBITDA (6).............. 183,354 167,547 165,950 134,299 124,086
- --------
(1) 1996 was a 48-week year.
(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. In
fiscal 1995, the Company incurred a charge of $2.4 million related
primarily to the closure of a carpet plant and the write down of fixed
assets at another carpet plant. See Notes to Consolidated Financial
Statements.
(3) Excludes amounts allocated to discontinued operations totaling $12.5
million, $26.7 million, and $26.5 million in 1997, 1996 and 1995,
respectively. No amounts were allocated to discontinued operations in 1999
and 1998.
7
(4) Excludes amounts allocated to discontinued operations totaling $0.6
million, $2.2 million, and $2.4 million in 1997, 1996, and 1995,
respectively. No amounts were allocated to discontinued operations in 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 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
Dividends
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 relating to the
distribution of the proceeds from the sale of 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.
Reorganization
On February 10, 1999, the Company announced the Reorganization, a
comprehensive plan 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 Wiesbaden, Germany.
In addition, the Company 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. The Reorganization and global account manager
structure has allowed the Company to increase customer service on a global
basis and maintain local expertise to provide specialized sales, marketing,
development, design, engineering and program management services capable of
delivering interior module systems and individual 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 most 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, Thomas E. Evans, 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 Reorganization includes 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, for $6.0 million. The facility's
operations are in the process of being located to another fabrics facility.
The acoustics facility in Vastra Frolunda, Sweden, is scheduled to be closed
in September, 2000. Approximately $4.7 million in severance costs have been
provided for employees at these facilities.
8
The remaining severance costs for operating personnel primarily relate to
employee reductions at C&A Plastics UK and in a number of the Company's North
American operations. Severance costs for management and administrative
personnel primarily relate to employee reductions at the Company's former
North Carolina corporate headquarters and at the North American Automotive
Interior Systems division. When completed, the Reorganization will affect
approximately 1,100 employees.
The Company currently expects the Reorganization plan to be substantially
completed by December, 2000. In addition to the restructuring charge, the
Company expensed certain costs for relocation and start up of operations
related to the closed facilities. These expenses amounted to approximately $4
million during 1999. The Company currently estimates that the total cost of
the Reorganization, including the restructuring charge, will be approximately
$43 million, of which approximately $10 million represents other one-time
costs, which are expensed as incurred.
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 fiscal 1999 were $1,898.6 million
compared to $1,825.5 million in fiscal 1998. 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. Years prior to 1996 refer to the
fiscal year of the Company which ended on the last Saturday of January of the
following year. 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
1999 Compared to 1998
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 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 starting 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.
9
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.
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
inefficiences 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 is being closed as part of the Reorganization discussed
above. The division also incurred a high level of relocation expenses
associated with the establishment of its headquarters in Wiesbaden, 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 Wiesbaden, 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.
10
Restructuring Charge: The Company recognized a $33.4 million charge in 1999
relating to the Reorganization plan discussed above.
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.
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 receivable 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 11 1/8% Senior Notes due
2001 (the "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 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.
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.
1998 Compared to 1997
The Divisions
North American Automotive Interior Systems
Net Sales: Net sales for the North American Automotive Interior Systems
division increased 1.1% to $1,065.5 million in 1998, up $11.9 million from
1997. This increase is due in part to the August 1998 acquisition of
Industrias Enjema, S.A. de C.V. ("Enjema"), which generated sales of $8.3
million. In addition, the division generated sales increases in four of its
five product lines. These sales increases were partially offset by the effect
of the General Motors strike in the second and third quarters of 1998, which
negatively impacted sales by $37.1 million. Strikes at DaimlerChrysler and
General Motors in the second quarter of 1997 negatively impacted sales by
$10.7 million.
11
Operating Income: Operating income for the division increased 86.0% to $74.5
million in 1998, up from $40.1 million in 1997. During the third quarter of
1997, the division incurred charges of approximately $57.9 million principally
related to C&A Plastics. These charges, which primarily related to
manufacturing inefficiencies experienced by C&A Plastics in connection with
product launches and record volume for its products, included asset
impairments, reductions in goodwill, provisions for certain programs operating
at a loss, inventory adjustments, certain previously deferred costs and other
provisions. Of the $57.9 million in charges, $34.0 million is included in cost
of goods sold, $22.6 million is included in impairment of long-lived assets
and $1.3 million is included in selling costs. In 1998, the division's
operating income was negatively impacted by the General Motors strike. The
division experienced sales volume losses to General Motors during the strike
and also incurred a number of cost increases as the division resumed
production following the strike. Many of General Motors' post-strike plant
start-ups were erratic, causing the division certain manufacturing
inefficiencies and cost overruns, especially at C&A Plastics. The division
also experienced delays in achieving planned cost reductions due to these
strike-related factors. Manufacturing inefficiencies associated with the
closure of the division's Salisbury, North Carolina, carpet manufacturing
operations, which were relocated to the division's Parker plant in Greenville,
South Carolina and relocation of certain manufacturing operations from the
Parker plant to the division's Albemarle, North Carolina plant, also
contributed to the decrease. The division's floormat operations also incurred
a $2.0 million unfavorable inventory adjustment. In addition, the division
incurred increased expenditures at C&A Plastics in 1998 in connection with
improvement programs and increased costs relating to systems upgrades and Year
2000 compliance efforts. As a percentage of sales, operating margin for the
division increased to 7.0% in 1998 from 3.8% in 1997.
European Automotive Interior Systems
Net Sales: Net sales for the European Automotive Interior Systems division
increased 180.6% to $338.0 million in 1998, up $217.6 million from 1997. The
increase is primarily due to several acquisitions in 1997 and 1998, including
certain operations of Perstorp A.B. ("Perstorp") located in Germany (the
"German Operations") in August 1997, the remaining interest in the Collins &
Aikman/Perstorp joint venture in Sweden, Belgium and France (the "Collins &
Aikman/Perstorp Joint Venture") in December 1997, C&A Plastics UK in February
1998, and C&A Floormats Europe in June 1998. These entities generated combined
incremental sales of $213.1 million in 1998.
Operating Income: Operating income for the division increased 107.6% to $9.2
million in 1998, up $4.8 million from 1997. The increase is primarily due to
the acquisitions of the German Operations, the remaining interest in the
Collins & Aikman/Perstorp Joint Venture, C&A Plastics UK and C&A Floormats
Europe. These entities generated combined incremental operating income of $4.1
million in 1998. As a percentage of sales, operating margin decreased to 2.7%
in 1998 from 3.6% in 1997, primarily due to costs associated with systems
upgrades and Year 2000 compliance efforts incurred in 1998.
Specialty Automotive Products
Net Sales: Net sales for the Specialty Automotive Products division decreased
7.3% to $422.0 million in 1998, down $33.4 million from 1997. The sales
decrease was primarily due to lower automotive fabric sales caused by an
increased demand for leather seating applications, an unfavorable mix on
several models and a decrease in build on several key vehicles. The decrease
in automotive fabric sales was partially offset by an increase in convertible
top systems due to sales to the Ford Mustang, General Motors Corvette and
Chrysler Sebring. The General Motors strike in the second and third quarters
of 1998 negatively impacted the division's sales by $7.0 million. The strikes
at DaimlerChrysler and General Motors during the second quarter of 1997
impacted the division's sales by $6.7 million.
Operating Income: Operating income for the division decreased 62.7% to $14.2
million in 1998, down $23.9 million from 1997. The Company's automotive
fabrics operations experienced unfavorable manufacturing variances resulting
from lower volume, program run-outs and an unfavorable product mix and also
incurred charges related to idle equipment. In addition, the division incurred
costs associated with systems upgrades and Year 2000 compliance efforts. As a
percentage of sales, operating margin decreased to 3.4% in 1998 from 8.4% in
1997.
12
The Company as a Whole
Net Sales: The Company's net sales increased 12.0% to $1,825.5 million in
1998, up $196.1 million from 1997, resulting primarily from the factors
discussed above.
Gross Margin: Gross margin for the Company was 13.6% in 1998, down from 14.3%
in 1997. During the third quarter of 1997, the Company incurred charges of
approximately $57.9 million principally related to C&A Plastics. These
charges, which primarily related to manufacturing inefficiencies experienced
by C&A Plastics in connection with product launches and record volume for its
products, included asset impairments, reductions in goodwill, provisions for
certain programs operating at a loss, inventory adjustments, certain
previously deferred costs and other provisions. Of the $57.9 million in
charges, $34.0 million is included in cost of goods sold, $22.6 million is
discussed below as impairment of long-lived assets and $1.3 million was
included in selling costs. Adjusted for certain of the charges taken by C&A
Plastics, gross margin was 15.2% in 1997. The decrease in gross margin is due
in part to the 1998 General Motors strike. The Company experienced sales
volume losses to General Motors during the strike and also incurred a number
of cost increases as the Company resumed production following the strike. Many
of General Motors' post-strike plant start-ups were erratic, causing the
Company certain manufacturing inefficiencies and cost overruns, especially at
C&A Plastics. The Company also experienced delays in achieving planned cost
reductions due to these strike-related factors. In addition, manufacturing
inefficiencies associated with the closure of the Company's Salisbury, North
Carolina carpet manufacturing operations, which were relocated to the
Company's Parker plant in Greenville, South Carolina, and relocation of
certain manufacturing operations from the Parker plant to the Company's
Albemarle, North Carolina plant also contributed to the decrease. The
Company's automotive fabrics operations experienced unfavorable manufacturing
variances resulting from lower volume, program run-outs and an unfavorable
product mix and also incurred charges related to idle equipment.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased 18.8% in 1998 to $149.7 million, up from
$126.1 million in 1997. The increase is primarily attributable to the
Company's recent acquisitions of C&A Plastics UK, the German Operations,
Perstorp's remaining interest in the operations constituting the former
Collins & Aikman/Perstorp Joint Venture, C&A Floormats Europe and Enjema.
These operations had combined incremental selling, general and administrative
expenses of $20.6 million. The remaining increase is due to costs associated
with systems upgrades, Year 2000 compliance efforts and increased expenditures
at C&A Plastics in connection with improvement programs. As a percentage of
sales, selling, general and administrative expenses increased to 8.2% in 1998
from 7.7% in 1997. The increase as a percentage of sales is primarily due to
lower sales volumes in automotive fabrics.
Impairment of Long Lived Assets: As previously discussed, during the third
quarter of 1997, C&A Plastics wrote down fixed assets by $5.1 million to net
realizable value and reduced its goodwill by $17.5 million, as a result of an
evaluation of the recoverability of the long lived assets of C&A Plastics that
was conducted in connection with the determination of the charges discussed
above.
Interest Expense: Interest expense allocated to continuing operations, net of
interest income of $3.7 million and $5.7 million in 1998 and 1997,
respectively, increased $4.4 million to $82.0 million in 1998 from $77.6
million in 1997. The increase is due to a higher outstanding debt balance in
1998. Total net interest expense, including amounts allocated to discontinued
operations, was $90.1 million in 1997. No amounts were allocated to
discontinued operations in 1998.
Loss on the Sale of Receivables: The Company sells on a continuous basis,
through its Carcorp subsidiary, interests in a pool of accounts receivable. In
connection with the receivables sales, a loss of $6.1 million was recognized
in 1998, compared to a loss of $4.7 million in 1997. The increase in the loss
on the sale of receivables is due to an increase in sales. In addition, C&A
Plastics was added as a seller under the Receivables Facility (as hereinafter
defined) during June 1997. Total loss on the sale of receivables, including
amounts allocated to discontinued operations, was $5.3 million in 1997.
13
Other (Income) Expense: The Company recognized foreign currency transaction
losses of $4.8 million in 1998, compared to $1.9 million in 1997. These losses
incurred in 1998 were primarily due to the strengthening of the U.S. dollar
against the Canadian dollar. Other expense in 1998 also includes the loss from
the Company's joint venture with Courtaulds of $0.1 million. Other income in
1997 also includes income from the Collins & Aikman/Perstorp Joint Venture of
$0.9 million and a $1.7 million gain on the sale of the Borg Textiles division
in the third quarter of 1997.
Income Taxes: The Company recognized a provision for income taxes of $5.3
million in 1998, compared to $13.0 million in 1997. The Company's effective
tax rate in 1998 was 102%, compared to 447% in 1997. The decrease in the
Company's tax expense and effective rate is due primarily to lower non-
deductible goodwill in 1998 compared to 1997, which included the $17.5 million
of goodwill written off by C&A Plastics.
Discontinued Operations: No income from discontinued operations has been
reflected in 1998, as the operations of the Company's Imperial Wallcoverings
Inc. subsidiary ("Wallcoverings") prior to its sale were charged to the
Company's discontinued operations reserves. The Company's income from
discontinued operations of $4.3 million in 1997 includes the operations of the
Company's Mastercraft Group and Floorcoverings subsidiary ("Floorcoverings")
and JPS Automotive's Air Restraint and Technical Products Division ("Airbag").
Losses incurred by Wallcoverings from April 29, 1996 to the date of sale have
been charged to the Company's existing discontinued operations reserves.
Wallcoverings was sold on March 13, 1998 to Imperial Home Decor Group, Inc, an
affiliate of Blackstone Partners, for $71.9 million and an option for 6.7% of
the common stock of Imperial Home Decor Group, Inc. The Company recorded a
loss of $21.1 million, net of income tax benefits, in September 1997, to
adjust the recorded value of Wallcoverings to the expected proceeds.
Accordingly, no gain or loss resulted from the sale of Wallcoverings.
The sale of Floorcoverings for approximately $195.6 million was completed in
February 1997 and resulted in a gain of $85.3 million, net of income taxes of
$53.4 million. The sale of the Mastercraft Group was completed in July 1997
for approximately $309.5 million, resulting in a gain on the sale of
discontinued operations of $97.5 million, net of income taxes of $65.0
million. The Company sold Airbag for approximately $56 million. No gain or
loss was recorded on the sale since the sales price approximated the
acquisition fair value and book value of Airbag.
Extraordinary Loss: In 1998, the Company recognized an extraordinary loss
consisting of 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 on the market at prices in excess of carrying
values. In 1997, the Company recognized a loss of $0.7 million, net of income
taxes of $0.4 million, in connection with the purchase by JPS Automotive of
$19.4 million principal amount of JPS Automotive Senior Notes on the open
market at prices in excess of carrying values.
Net Income (Loss): The combined effect of the foregoing resulted in a net loss
of $3.8 million, compared to net income of $155.2 million in 1997.
Liquidity and Capital Resources
The Company and its subsidiaries had cash and cash equivalents totaling
$14.0 million and $23.8 million at December 25, 1999 and December 26, 1998,
respectively. The Company had $144.2 million of borrowing availability under
its credit arrangements as of December 25, 1999. The total was comprised of
$119.2 million under the Company's revolving credit facility (including $16.4
million available to the Canadian Borrowers, as hereinafter defined),
approximately $24.9 million under bank demand lines of credit in Canada and
Austria, a line of credit for certain other European locations, and $0.1
million available under the Receivables Facility. Availability as of December
25, 1999 under the revolving credit facility was reduced by outstanding
letters of credit of $19.2 million.
14
On May 28, 1998, the Company entered 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 the 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"). On May 13, 1999, the Company
closed on a senior secured term loan facility in the principal amount of $100
million, payable in quarterly installments beginning December 1999 through
final maturity in December 2005 (the "Term Loan C Facility"). The proceeds
from the Term Loan C Facility were used to pay the $44.0 million special
dividend previously discussed, repay amounts outstanding under the Company's
Revolving Credit Facility and for general corporate purposes.
At December 25, 1999, the Company had outstanding $85.0 million under the
Term Loan A Facility, $122.0 million under the Term Loan B Facility, $100.0
million under the Term Loan C Facility, and $111.6 million under the Revolving
Credit Facility (including $43.6 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 "Subordinated
Notes"). The 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 Subordinated Notes
indenture's general test for the incurrence of indebtedness, and does not
expect to meet such test during 2000. However, the Company expects all its
borrowing needs for the foreseeable future to be allowed under exceptions for
permitted indebtedness in the indenture. For additional discussion of the
Subordinated Notes, see Note 10 to the Consolidated Financial Statements.
At December 25, 1999, JPS Automotive had approximately $87.4 million of
indebtedness outstanding (including a premium of $1.3 million) related to the
JPS Automotive Senior Notes. The Company is operating JPS Automotive as a
restricted subsidiary under the Credit Agreement Facilities and the indenture
governing the Subordinated Notes. For additional discussion of the JPS
Automotive Senior Notes, see Note 10 to the Consolidated Financial Statements.
C&A Products utilized a receivable facility (the "Receivables Facility"),
entered into through the Trust formed by Carcorp, comprised of (i) term
certificates in an aggregate face amount of $50 million and have a term of
five years and (ii) variable funding certificates, which represent revolving
commitments of up to an aggregate of $75 million and have a term of five
years. Carcorp purchased on a revolving basis and transferred to the Trust
virtually all trade receivables generated by C&A Products and certain of its
subsidiaries (the "Sellers") in the United States and Canada. The certificates
represented the right to receive payments generated by the receivables held by
the Trust.
15
Availability under the variable funding certificates at any time depended
primarily on the amount of receivables generated by the Sellers from sales to
the automotive industry, 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). Based on these criteria, at December
25, 1999 the maximum amount available under the variable funding certificates
was $66.5 million, of which $0.1 million was not utilized.
On December 27, 1999, the Company entered into a new receivables facility
(the "New Receivables Facility"), replacing the Receivables Facility. 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 remains the purchaser of the Sellers' trade receivables,
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 upon criteria
similar to those in the Receivables Facility. On December 27, 1999, the
Company funded $120 million through the New Receivables Facility, leaving
approximately $12 million available, but unutilized. The interest rate on sold
interests is equal to the rate paid by the conduits to the holders of the
commercial paper plus a margin of .70% and dealer fees of .05% (6.66% at
inception). In addition, the Company pays .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 a master equipment lease agreement for a maximum of $50
million of machinery and equipment. At December 25, 1999, the Company had
approximately $20 million of potential availability under this master lease
for future machinery and equipment requirements of the Company subject to the
lessor's approval. In the year ended December 25, 1999, the Company made lease
payments relating to continuing operations of approximately $5.8 million for
machinery and equipment sold and leased back under this master lease. The
Company expects lease payments for continuing operations under this master
lease to be approximately $6.1 million during fiscal 2000.
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 $95.1 million for 1999.
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 24% reduction in working capital (including accounts receivable,
inventory and accounts payable) to $168 million in 1999, compared to $221
million in 1998.
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
capital expenditures. At December 25, 1999, the Company had total outstanding
indebtedness of $912.5 million (excluding approximately $19.2 million of
outstanding letters of credit) at a weighted average interest rate of 9.95%
per annum. Of the total outstanding indebtedness, $818.6 million relates to
the Credit Agreement Facilities and the Subordinated Notes.
See Notes 10 and 11 to the Consolidated Financial Statements for
information regarding the interest rates on the Credit Agreement Facilities,
Subordinated Notes, JPS Automotive Senior Notes, Receivables Facility and New
Receivables Facility. Cash interest paid was $91.9 million and $86.6 million
for the fiscal years ended December 25, 1999 and December 26, 1998,
respectively.
Due to the variable interest rates under the Credit Agreement Facilities
and the Receivables Facility, the Company is sensitive to changes in interest
rates. Based upon amounts outstanding at December 25, 1999, a .5% increase in
each of LIBOR and Canadian bankers' acceptance rates (6.5% and 5.2%,
respectively, at December 25, 1999) would impact interest costs by
approximately $2.1 million annually on the Credit Agreement Facilities and
$0.6 million annually on the Receivables Facility.
16
The current maturities of long-term debt primarily consist of 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 2000, 2001, 2002, 2003, and 2004,
are $28.0 million, $116.4 million, $32.9 million, $28.3 million and $165.4
million, respectively. The JPS Automotive Senior Notes will mature in 2001. 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
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 Subordinated Notes at 100%
of their principal amount plus accrued interest. C&A Products must also make
an offer to purchase outstanding Subordinated Notes at 101% of their principal
amount plus accrued interest if a Change in Control (as defined) of the
Company occurs. In addition, the indenture governing the JPS Automotive Senior
Notes requires JPS Automotive to apply the net proceeds from the sale of
assets of JPS Automotive to offer to purchase JPS Automotive Senior Notes, to
the extent not applied within 270 days of such asset sale to an investment in
capital expenditures or other long term tangible assets of JPS Automotive, to
permanently reduce senior indebtedness of JPS Automotive or to purchase JPS
Automotive Senior Notes in the open market.
The Company's Board of Directors authorized the expenditure of up to $25
million in 1999 to repurchase shares of the Company's Common Stock at
management's discretion. This amount was reduced to approximately $2 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. The
Company believes it has sufficient liquidity under its existing credit
arrangements to effect the repurchase program. The Company spent approximately
$1.8 million and $25.0 million to repurchase shares during fiscal 1999 and
1998, respectively.
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of December 25, 1999, the Company's
continuing operations had approximately $10.9 million in outstanding capital
expenditure commitments. The Company currently anticipates that its capital
expenditures for continuing operations for fiscal 2000 will be in the range of
$70 to $80 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 fiscal 1999, prices for most of the Company's primary raw
materials remained constant with price levels at December 26, 1998. While the
Company may not be able to pass on future raw material price increases to its
customers, it believes 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. The Company is currently assessing the impact of that
bankruptcy filing. Management currently anticipates that the net cash
requirements of its discontinued operations will be approximately $22 million
in fiscal 2000. 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.
17
Tax Matters
At December 25, 1999, the Company had outstanding net operating loss
carryforwards ("NOLs") of approximately $268.1 million for Federal income tax
purposes. Substantially all of these NOLs expire over the period from 2008 to
2019. The Company also has unused Federal tax credits of approximately $18.9
million, $6.7 million of which expire during the period 2000 to 2019.
Future sales of common stock by the Company or its principal shareholders,
or changes in the composition of its principal shareholders, could constitute
a "change in control" that would result in annual limitations on the Company's
use of its NOLs and unused tax credits. Management cannot predict whether such
a "change in control" will occur. If such a "change in control" were to occur,
the resulting annual limitations on the use of NOLs and tax credits would
depend 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 time of the "change in
control", which cannot be known at this time.
Management has reviewed the Company's operating results for recent years as
well as the outlook for its continuing businesses in concluding it is more
likely than not that the net deferred tax assets of $91.9 million at December
25, 1999 will be realized. A major goal of the Reorganization is to lower the
overall cost structure of the Company and thereby increase profitability.
These factors along with the timing of the reversal of its temporary
differences and the expiration dates 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 25, 1999 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 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 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
18
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 25, 1999, 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 23 sites where the Company is participating in the
investigation or remediation of the site, either directly or through financial
contribution, and 8 additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. As of
December 25, 1999, the Company's estimate of its liability for these 31 sites,
is approximately $22.9 million. As of December 25, 1999, the Company has
established reserves of approximately $30.5 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.
Impact of Year 2000 Compliance
The Company has currently not experienced any significant systems or other
Year 2000 problems. The Company's comprehensive plan to address Year 2000
issues (the "Year 2000 Plan") included the acceleration of the Company's
Business Systems Integration Plan (the "BSIP Plan"). The BSIP Plan was
initiated in connection with the Company's 1996 acquisitions to create common
manufacturing, financial reporting and cost control information systems
throughout the Company as a whole. The total cost of the Company's Year 2000
Plan, including $29 million of costs associated with the BSIP Plan, was $33
million. Included in this amount is $7 million of salaries and other payroll
costs of Company employees to the extent that they devoted a portion of their
time to the project. Approximately $21 million of the total costs were
incurred during 1999. The Company expensed and capitalized these costs in
accordance with appropriate accounting policies.
Safe Harbor Statement
This Form 10-K contains statements which, to the extent they are not
historical fact, constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements
involve risks and uncertainties. The forward-looking statements in this Form
10-K are intended to be subject to the safe harbor protection provided by the
Safe Harbor Acts.
Risks and uncertainties that could cause actual results to vary materially
from those anticipated in the forward-looking statements included in this Form
10-K include general economic conditions in the market in which the Company
operates and industry-based factors such as possible declines in the North
American and European automobile and light truck builds, labor strikes at the
Company's 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, risks associated
with conducting business in foreign countries and Year 2000 readiness issues,
as well as factors more specific to the Company such as the substantial
leverage of the Company and its subsidiaries, limitations imposed by the
Company's debt facilities and changes made in connection with the integration
of operations acquired by the Company and the implementation of the global
reorganization program. The Company's 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 the Company's
operations, products and markets, see "Item 1. Business" and the above
discussion in this "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and also see the Company's other filings
with the Securities and Exchange Commission.
19
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 modify 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.
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 25, 1999.
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 ($CAD), as indicated in parentheses (dollar
amounts in thousands).
Expected Maturity Date Fair Value
-------------------------------------------------------- December 25,
2000 2001 2002 2003 2004 Thereafter Total 1999
------- ------- ------- ------- -------- ---------- -------- ------------
Debt:
Fixed rate ($US)....... $86,043 $400,000 $486,043 $481,915
Average interest
rate................. 11.1% 11.5%
Variable rate ($US).... $26,750 $28,000 $31,750 $27,375 $121,125 $140,000 $375,000 $375,000
Average interest
rate................. 9.6% 9.7% 9.7% 9.3% 9.5% 10.1%
Variable rate ($CAD)... $ 43,622 $ 43,622 $ 43,622
Average interest
rate................. 9.2%
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 have agreed to adopt 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.
At December 25, 1999, the Company had the following foreign currency
forward contracts outstanding: (i) British pounds for Euros with a U.S. dollar
equivalent notional amount of $5.0 million, a weighted average contract rate
of 1.495 Euros and an unrealized loss of $0.3 million and (ii) Euros for
Swedish krona with a U.S. dollar equivalent notional amount of $0.1 million
and a weighted average contract rate of 0.054 krona. These contracts mature in
2000. 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 exposures discussed above.
20
The Company also had option contracts with a U.S. dollar equivalent
notional amount of $45 million outstanding at December 25, 1999 with a
weighted average strike price of Canadian $1.53. These contracts allow the
Company's Canadian operations to buy U.S. dollars for Canadian dollars. These
contracts expire periodically in 2000.
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.
21
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by Item 401 of Regulation S-K regarding executive
officers and directors is incorporated herein by reference to that portion of
the Registrant's definitive Proxy Statement to be used in connection with its
2000 Annual Meeting of Stockholders, which will be filed in final form with
the Commission not later than 120 days after December 25, 1999 (the "Proxy
Statement"), captioned "Executive Officers of the Company" and "Election of
Directors -- Information as to Nominees and Other Directors". The information
required by Item 405 of Regulation S-K regarding disclosure of delinquent
filers is incorporated herein by reference to that portion of the proxy
statement captioned "Section 16(a) Beneficial Ownership Reporting Compliance".
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference
to that portion of the Proxy Statement captioned "Executive Compensation".
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is incorporated herein by reference
to those portions of the Proxy Statement captioned "Voting Securities and
Principal Stockholders", "Security Ownership of Management" and "Election of
Directors -- Information as to Nominees and Other Directors".
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated herein by reference
to those portions of the Proxy Statement captioned "Compensation Committee
Interlocks and Insider Participation", and "Information as to Nominees and
Other Directors -- Certain Relationships".
22
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 25, 1999, December 26, 1998 and December 27, 1997............ F-2
Consolidated Balance Sheets at December 25, 1999 and December 26,
1998.................................................................. F-3
Consolidated Statements of Cash Flows for the fiscal years ended
December 25, 1999, December 26, 1998 and December 27, 1997............ F-4
Consolidated Statements of Common Stockholders' Deficit for the fiscal
years ended December 25, 1999, December 26, 1998 and December 27,
1997.................................................................. 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 25, 1999, December 26, 1998, and December
27, 1997 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 the 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 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.
3.3 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.
23
Exhibit
Number Description
4.2 Indenture, dated as of June 1,1996, between Collins & Aikman Product
Co., Collins & Aikman Corporation and First Union National Bank of
North Carolina, as Trustee, is hereby incorporated by reference to
Exhibit 4.1 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, among Collins & Aikman
Products Co., as Borrower, Collins & Aikman Canada, Inc. and Collins &
Aikman Plastics, Ltd., as Canadian Borrowers, Collins & Aikman
Corporation, as Guarantor, the lenders named therein, 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 4.4 of Collins & Aikman Corporation's Report on Form 10-Q for
the fiscal quarter ended June 27, 1998.
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.
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.
24
Exhibit
Number Description
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 Amended and Restated Stockholders Agreement dated as of June 29, 1994
among the Company, Collins & Aikman Group, Inc., Blackstone Capital
Partners L.P. and Wasserstein Perella Partners, L.P. is hereby
incorporated by reference to Exhibit 10.1 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended January
28, 1995.
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.*
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 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.*
10.12 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.*
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14 (c) of this report.
25
Exhibit
Number Description
10.13 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.*
10.13 Amendment to Collins & Aikman Corporation Supplemental Retirement
Income Plan is hereby incorporated by reference to Exhibit 10.12 of
the Collins & Aikman Corporation's Report on Form 10-K for the fiscal
year ended December 26, 1998.*
10.15 1993 Employee Stock Option Plan, as amended and restated, is hereby
incorporated by reference to Exhibit 10.13 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended April
29, 1995.*
10.16 1994 Employee Stock Option Plan, as amended through February 7, 1997,
is hereby incorporated by reference to Exhibit 10.12 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended
March 29, 1997.*
10.17 1994 Directors Stock Option Plan as amended and restated is hereby
incorporated by reference to Exhibit 10.15 to Collins & Aikman
Corporation's Report on Form 10-K for the year ended December 26,
1998.*
10.18 Excess Benefit Plan of Collins & Aikman Corporation is hereby
incorporated by reference to Exhibit 10.25 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended
January 28, 1995.*
10.19 1994 Employee Stock Option Plan, as amended and restated through June
3, 1999 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
10.20 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.17 of Collins & Aikman Corporation's Report
on Form 10-K for the fiscal year ended December 27, 1997.*
10.21 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.18 of Collins & Aikman Corporation's Report
on Form 10-K for the fiscal year ended December 27, 1997.*
10.22 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.19 of Collins & Aikman Corporation's Report
on Form 10-K for the fiscal year ended December 27, 1997.*
10.23 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.20 of Collins & Aikman Corporation's Report
on Form 10-K for the fiscal year ended December 27, 1997.*
10.24 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.22 of Collins & Aikman Corporation's report
on Form 10-Q for the fiscal quarter ended March 28, 1998.*
10.25 Change in control agreement dated August 9, 1999 between Collins &
Aikman Corporation and an executive officer.*
10.26 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer.*
10.27 Change in control agreement dated March 17 ,1998 between Collins &
Aikman Corporation and an executive officer.*
10.28 Change in control agreement dated July 26, 1999 between Collins &
Aikman Corporation and an executive officer.*
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* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14 (c) of this report.
26
Exhibit
Number Description
10.29 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer.*
10.30 Employment Agreement dated October 1, 1999 between Collins & Aikman
Products Co. and an executive officer.*
10.31 Severance Benefit Agreement dated July 26, 1999 between Collins &
Aikman Corporation and an executive officer.*
10.32 Severance Benefit Agreement dated August 9, 1999 between Collins &
Aikman Corporation and an executive officer.*
10.33 Letter agreement dated December 17, 1999 between Collins & Aikman
Corporation and an executive officer.*
10.34 Lease, executed as of the 1st day of June 1987, between Dura
Corporation and Dura Acquisition Corp. is hereby incorporated by
reference to Exhibit 10.24 of Amendment No. 5 to Collins & Aikman
Holdings Corporation's Registration Statement on Form S-2
(Registration No. 33-53179) filed July 6, 1994.
10.35 Amended and Restated Receivables Sale Agreement dated as of March 30,
1995 among Collins & Aikman Products Co., Ack-Ti-Lining, Inc., WCA
Canada Inc., Imperial Wallcoverings, Inc., The Akro Corporation, Dura
Convertible Systems Inc., each of the other subsidiaries of
Collins & Aikman Products Co. from time to time parties thereto and
Carcorp, Inc. is hereby incorporated by reference to Exhibit 10.18 of
Collins & Aikman Corporation's Report on Form 10-K to the fiscal year
ended January 28, 1995.
10.36 Servicing Agreement, dated as of March 30, 1995, among Carcorp, Inc.,
Collins & Aikman Products Co., as Master Servicer, each of the
subsidiaries of Collins & Aikman Products Co. from time to time
parties thereto and Chemical Bank, as Trustee is hereby incorporated
by reference to Exhibit 10.19 of Collins & Aikman Corporation's Report
on Form 10-K to the fiscal year ended January 28, 1995.
10.37 Pooling Agreement, dated as of March 30, 1995, among Carcorp, Inc.,
Collins & Aikman Products Co., as Master Servicer and Chemical Bank,
as Trustee, is hereby incorporated by reference to Exhibit 10.20 of
Collins & Aikman Corporation's Report on Form 10-K to the fiscal year
ended January 28, 1995.
10.38 Series 1995-1 Supplement, dated as of March 30, 1995, among Carcorp,
Inc., Collins & Aikman Products Co., as Master Servicer and Chemical
Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.21
of Collins & Aikman Corporation's Report on Form 10-K to the fiscal
year ended January 28, 1995.
10.39 Series 1995-2 Supplement, dated as of March 30, 1995, among Carcorp,
Inc., Collins & Aikman Products Co., as Master Servicer, the Initial
Purchasers parties thereto, Societe Generale, as Agent for the
Purchasers and Chemical Bank, as Trustee is hereby incorporated by
reference to Exhibit 10.22 of Collins & Aikman Corporation's Report on
Form 10-K to the fiscal year ended January 28, 1995.
10.40 Amendment No. 1, dated September 5, 1995, among Carcorp, Inc., as
Company, Collins & Aikman Products Co., as Master Servicer, and
Chemical Bank, as Trustee, to the Pooling Agreement, dated as of March
30, 1995, among the Company, the Master Servicer and Trustee is hereby
incorporated by reference to Exhibit 10.2 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended July
29, 1995.
10.41 Amendment No. 2, dated October 25, 1995, among Carcorp, Inc., as
Company, Collins & Aikman Products Co., as Master Servicer, and
Chemical Bank, as Trustee, to the Pooling Agreement, dated as of March
30, 1995, among the Company, the Master Servicer and the Trustee is
hereby incorporated by reference to Exhibit 10.2 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended October
28, 1995.
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14 (c) of this report.
27
Exhibit
Number Description
10.42 Amendment No. 1, dated February 29, 1996, to the Series 1995-1
Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins &
Aikman Products Co., as Master Servicer, and Chemical Bank, as
Trustee, is hereby incorporated by reference to Exhibit 10.20 of
Collins & Aikman Corporation's Report on Form 10-K for the fiscal year
ended January 27, 1996.
10.43 Amendment No. 1, dated February 29, 1996, to the Series 1995-2
Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins &
Aikman Products Co., as Master Servicer, Societe Generale, as agent,
and Chemical Bank, as Trustee, is hereby incorporated by reference to
Exhibit 10.21 of Collins & Aikman Corporation's Report on Form 10-K
for the fiscal year ended January 27, 1996.
10.44 Receivables Transfer Agreement dated December 27, 1999, among Carcorp,
Inc. as Transferor, Collins & Aikman Products Co. as Guarantor and as
Collection Agent, Park Avenue Receivables Corporation and Redwood
Receivables Corporation,, as Initial Purchasers, The Several Financial
Institutions Party Hereto from time to time, as Liquidity Banks, The
Several Agent Banks Party Hereto from time to time, as Funding Agents
and The Chase Manhattan Bank, as Administrative Agent.
10.45 Master Equipment Lease Agreement dated as of September 30, 1994,
between NationsBanc Leasing Corporation of North Carolina and Collins
& Aikman Products Co. is hereby incorporated by reference to Exhibit
10.27 of Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended October 29, 1994.
10.46 Equity Purchase Agreement by and among JPSGP, Inc., Foamex--JPS
Automotive L.P. and Collins & Aikman Products Co. dated August 28,
1996 is hereby incorporated by reference to Exhibit 2.1 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended
July 27, 1996.
10.47 Amendment No. 1 to Equity Purchase Agreement by and among JPSGP, Inc.,
Foamex--JPS Automotive L.P., Foamex International Inc. and Collins &
Aikman Products Co. dated as of December 11, 1996 is hereby
incorporated by reference to Exhibit 2.2 of Collins & Aikman
Corporation's Current Report on Form 8-K dated December 10, 1996.
10.48 Equity Purchase Agreement by and among Seiren U.S.A. Corporation,
Seiren Automotive Textile Corporation, Seiren Co., Ltd. and Collins &
Aikman Products Co. dated December 11, 1996, is hereby incorporated by
reference to Exhibit 2.3 of Collins & Aikman Corporation's Current
Report on Form 8-K dated December 10, 1996.
10.49 Acquisition Agreement between Perstorp A.B. and Collins & Aikman
Products Co. dated December 11, 1996 is hereby incorporated by
reference to Exhibit 2.4 of Collins & Aikman Corporation's Current
Report on Form 8-K dated December 10, 1996.
10.50 Agreement among Perstorp A.B., Perstorp GmbH, Perstorp Biotec A.B. and
Collins & Aikman Products Co. dated December 11, 1996 is hereby
incorporated by reference to Exhibit 2.5 of Collins & Aikman
Corporation's current report on Form 8-K dated December 10, 1996.
10.51 Settlement and Amendment Agreement dated as of December 16, 1997 by
and among Collins & Aikman Products Co., Perstorp A.B., Perstorp GmbH,
Collins & Aikman Holding A.B., Collins & Aikman Automotive Systems
GmbH, Collins & Aikman Automotive Systems N.V., Collins & Aikman
Automotive Systems A.B. and Perstorp Components GmbH and related
Letter Amendment Agreement is hereby incorporated by reference to
Exhibit 10.38 of Collins & Aikman Corporation's Report or Form 10-Q
for the fiscal quarter ended September 26, 1998.
10.52 Acquisition Agreement dated as of December 9, 1996 among Collins &
Aikman Products Co., Collins & Aikman Floor Coverings Group, Inc.,
Collins & Aikman F