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SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

For the Fiscal Year Ended January 31, 2004

Commission File Number 333-88212

COLLINS & AIKMAN FLOORCOVERINGS, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (706) 259-9711

Securities registered pursuant to Section 12 (b) of the Act: None

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12b-2 of the Act).    Yes  ¨    No  x

As of April 26, 2004, 1,000 shares of the Registrant’s common stock, no par value, were outstanding and held entirely by Tandus Group, Inc. None of the Registrant’s common stock was held by non-affiliates.

Documents incorporated by reference: None.

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PART I

Item 1. Business

All references in this Form 10-K to “we”, “us”, “our” or the “Company” refer to Collins & Aikman Floorcoverings, Inc. and subsidiaries.

Forward-Looking Statements

The Company has made in this Form 10-K and from time to time may make written and oral forward-looking statements. Written forward-looking statements may appear in documents filed with the Securities and Exchange Commission, in press releases and in reports to shareholders. The Private Securities Litigation Reform Act of 1995 contains a safe harbor for forward-looking statements. The Company relies on this safe harbor in making such disclosures. All statements contained in this Annual Report on Form 10-K as to future expectations and financial results including, but not limited to, statements containing the words “plans,” “believes,” “intends,” “anticipates,” “expects,” “projects,” “should,” “will” and similar expressions, should be considered forward-looking statements subject to the safe harbor. The forward-looking statements are based on management’s current beliefs and assumptions about expectations, estimates, strategies and projections for the Company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes or results may differ materially from what is expressed or forecasted in such forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements whether as a result of future information, future events or otherwise. The risks, uncertainties and assumptions regarding forward-looking statements include, but are not limited to, product demand and market acceptance risks; product development risks, such as delays or difficulties in developing, producing and marketing new products; the impact of competitive products, pricing and advertising; constraints resulting from the financial condition of the Company, including the degree to which the Company is leveraged; cycles in the construction and renovation of commercial and institutional buildings; failure to retain senior executives and other qualified personnel; unanticipated termination or interruption of the Company’s arrangement with its primary third-party supplier of nylon yarn; debt service requirements and restrictions under credit agreements and indentures; general economic conditions in the United States and in markets outside of the United States served by the Company; government regulations; risks of loss of material customers; environmental matters; and other risks described in the Company’s Securities and Exchange Commission filings.

General

Based on annual sales and brand recognition, we are a leading manufacturer of floorcovering products for the North American specified commercial carpet market. The Company’s floorcovering products include (i) vinyl-backed six-foot roll carpet and modular carpet tile and (ii) high-style tufted and woven broadloom carpet. The Company designs, manufactures and markets its C&A, Monterey and Crossley brands under the Tandus Group name, for a wide variety of end markets, including corporate offices, education, healthcare, government facilities and retail stores. Because of the diversity of the Company’s end markets, management believes its business tends to be less sensitive to economic downturns than many of our competitors, which rely more heavily on the corporate market. The ability to provide a “package of product offerings” coupled with flexible distribution channels, allows the Company to provide a wide array of floorcovering solutions tailored for each of its customers. The Company was formed in 1995 as a Delaware corporation and is headquartered in Georgia, with additional locations in California, Canada, the United Kingdom, and Singapore.

We believe that our C&A brand holds the number one market position in six-foot roll carpet, and is among the leading brands within the modular carpet tile market. Our C&A brand products are highly regarded as a result of their long-term performance, comfort under foot, installation ease, longer useful life and advanced backing technology.

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Our Monterey brand is a known design leader in the high-style, fashion-oriented sector of the commercial broadloom carpet market due to its creative designs and intricate patterns in a wide variety of colors, textures, pile heights and densities. The brand has been acknowledged on numerous occasions with various awards for its design leadership.

The Crossley brand is a recognized design leader in Canada in the tufted and woven broadloom commercial carpet markets. The Crossley brand uses its crossweave looms and state of the art tufting technology to produce high-quality woven and tufted products in a wide variety of patterns and price points to meet the needs of interior design professionals, flooring contractors and end users.

On January 25, 2001, our parent company, CAF Holdings, Inc. (“CAF Holdings”), was acquired in a recapitalization transaction by an investor group led by OCM Principal Opportunities Fund II, L.P. (“Oaktree”), Banc of America Capital Investors (“BACI”) along with other private equity investors and members of our senior management team. The recapitalization was financed through a cash investment by Oaktree Fund, BACI and other investors of $192.5 million, senior bank borrowings of $209.0 million and “rollover” equity of $38.4 million by certain existing stockholders, including senior management.

On May 8, 2002, CAF Extrusion, Inc., (“Extrusion”) a wholly-owned subsidiary, acquired a yarn extrusion manufacturing plant located in Calhoun, Georgia for approximately $32.4 million. In addition, CAF Extrusion, Inc. purchased the real property on which the plant is located from a third party for approximately $2.4 million. The acquisition was funded from cash on hand.

We estimate that the U.S. commercial carpet market, which is comprised of the specified and non-specified segments, generated sales of approximately $2.9 billion in 2003. We focus on the specified commercial carpet market, which we estimate represented approximately $2.5 billion of the total U.S. commercial carpet market in 2003. In the specified commercial carpet market, products are manufactured to the specifications of architects, designers and owners, as compared to the non-specified market in which products are purchased off-the-shelf. The key competitive factors in the specified carpet market are product durability, long-term performance, product design and service, rather than price. We believe the company is well-positioned when trends within the specified commercial carpet market improve, including (1) six-foot roll carpet continuing to gain market share from other floorcoverings in end markets in which it has distinct performance advantages, such as ease of maintenance, long-term performance and longer useful life; (2) modular carpet tile increasingly being used instead of other flooring surfaces due to increased raised flooring applications and the continuing trend toward modular furniture systems; and (3) increasing customer demand for high-style broadloom carpet with complex patterns and textures.

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Products

The Tandus Group designs, manufactures and markets a comprehensive package of complementary products under the C&A, Monterey and Crossley brands, including six-foot roll carpet, modular carpet tile and woven and tufted broadloom carpet. In woven broadloom carpet, yarn is woven together to form a single integrated fabric and is distinguishable from tufted broadloom in which yarn is sewn into a preformed primary backing with the later addition of a second backing. With a portfolio of products available in a wide variety of colors, textures, pile heights, densities and price points, we are able to market ourselves as a one-stop solution for specified commercial carpet. Each of our products offers distinctive characteristics for use and application. We believe that our ability to offer a complete package of product offerings is a distinct competitive advantage since each product provides unique features and benefits as follows:

Six-Foot Roll Carpet. We believe that our C&A brand holds the number one market position in vinyl-backed, six-foot roll carpet. Six-foot roll carpet provides performance advantages over twelve-foot broadloom carpet and hard surface flooring and is used primarily in applications that require (i) long-term appearance retention, (ii) ease of maintenance and (iii) comfort under foot. Our six-foot roll carpet utilizes the Powerbond backing technology and the patented RS “peel and stick” installation system.

Modular Carpet Tile. We believe C&A was the first manufacturer in the United States to introduce vinyl-backed modular carpet tile technology and is among the leading brands within the domestic modular carpet tile market. Our modular carpet tile system is specifically engineered to have a monolithic appearance on the floor and because of the product’s unique reduced seam visibility, it is often mistaken for roll goods. Our modular carpet tile products are offered in a variety of sizes to accommodate a range of domestic and international requirements. Our C&A brand carpet tile is being made with ER3, our patented recycled content backing.

Broadloom Carpet. The Monterey and Crossley brands are recognized design leaders in the high-style, fashion-oriented sector of the commercial broadloom carpet market. Sold primarily in twelve-foot rolls, Monterey broadloom carpet is tufted carpet, while Crossley manufactures both tufted and woven broadloom carpet. Broadloom carpet is particularly suited for fashionable designs and stylish interiors as its width provides a broad area upon which creative designs and intricate patterns can be displayed in a wide variety of colors, textures, pile heights and densities. Specified broadloom carpet is primarily used in end markets where aesthetics and style are the drivers rather than durability or long-term appearance retention. In general, broadloom carpet is more frequently replaced than six-foot roll goods or carpet tile because of its prevalence in spaces that are regularly renovated in order to reflect current fashion trends and styles.

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Product Features

Powerbond. In 1967, our C&A brand introduced Powerbond, the industry’s first vinyl cushioned backing system. This closed-cell backing technology exhibits superior durability, cleaning characteristics and reduced seam visibility. Powerbond combines the best attributes of hard surfaces (longer useful life and ease of maintenance) and carpet floorcoverings (comfort, acoustics and aesthetics). It eliminates problems associated with traditional broadloom carpet, including delamination (separation of carpet backing), zippering and unraveling. In addition, these products are installed using chemically-welded seams rather than conventional glued seams to provide a homogeneous, impermeable moisture barrier. Other Powerbond features include its ease of repair, long-term appearance, a 50% to 100% longer useful life than conventional broadloom carpet and 15 to 20 year non-prorated warranty against delamination, loss of cushion resiliency and watermarking.

RS. In 1988, we introduced our RS technology, a patented releasable “peel & stick” adhesive system for Powerbond vinyl-backed product installation, which dramatically simplifies installation. The RS technology enables products to be bonded to a surface without the use of wet adhesives thus minimizing disruption to customers during the installation process. Conventional installations with wet adhesives normally require significant downtime for the adhesive to cure prior to installation. The RS technology also addresses carpet-related indoor air quality concerns by eliminating the fumes typically associated with wet adhesives. The RS technology minimizes disruption to usable space, which is critical in each of our end markets.

ER3. ER3 is a patented backing for modular carpet tile produced from both post-consumer and post-industrial carpet waste. This closed-loop system (waste-to-product) allows us to take used carpet tile from our customers and use it as raw material for producing new carpet tile. This system eliminates our customers’ disposal costs and keeps waste out of landfills at a time when environmental sensitivities are high.

Crossley Weaving Heritage. Weaving continues to be an important differentiation for us in high-end markets. Woven fabrics are unique in construction and highly valued by professional designers as a result of their more refined styling capability and pattern flexibility. Woven carpets are a single integrated fabric that offer strength, stability and locked-in-yarns to prevent zippering or pulling. We are one of only a few manufacturers in North America with weaving capability.

End Markets

Corporate. We offer a complete package of product offerings that addresses virtually every need of the corporate facility manager and their interior designers and architects, including six-foot roll carpet, modular carpet tile and tufted and woven broadloom carpet. In early 2000, we established the Corporate Development Group, which focuses exclusively on marketing all of our brands to the corporate market. This group works with the individual brands to develop flooring solutions for corporate facility managers. We have focused on projects where we tend to excel on the basis of product durability, appearance retention, product design and service rather than pricing. As part of our strategy to increase penetration of this market, we have a national accounts program that targets the country’s largest corporations. This group focuses on Fortune 1000 corporations by developing relationships at the senior levels in facility management and purchasing.

Education. The education market has been a primary focus for the C&A brand since the development of Powerbond in 1967. Powerbond’s long-term appearance retention characteristics have been the principal factor behind its success in this market, as customers tend to be particularly sensitive to longer useful life, comfort, acoustics and ease of maintenance. The Powerbond product in many of these installations has been in use for more than 20 years. Historically, we have focused on the kindergarten through 12^th grade market, however, over the last few years, we have focused our marketing efforts on expanding into the college and university market. We expect to capitalize on our broad product offerings to grow this segment, as colleges and universities have more diverse floorcovering needs than the primary and secondary school markets.

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Health Care. We believe that Powerbond RS is particularly well suited to the health care market because of its moisture impermeability and quick, safe installation. Powerbond RS, which is installed without wet adhesives, facilitates use immediately following installation, a critical concern within the health care market, and its moisture impermeability and welded seams make it easy to maintain. As healthcare facilities continue to create “home like” environments for their patients, we anticipate that there will be increased demand for a combination of high-performance and high-style products, allowing our diverse product lines to compliment each other. With the growth and consolidation of national health care organizations, we believe we are well-positioned to cross promote the Monterey and Crossley brands to existing C&A customer relationships that have a need for broadloom products.

Government. We market and sell to federal, state and local governments. We are suppliers to the U.S. General Services Administration, which establishes product categories and related minimum product specifications for various budget levels and aesthetic requirements. State and local governments purchase floorcovering products independently through contracts with approved suppliers. We are currently an approved supplier to several states and municipalities. We believe that our success in the government market is due in part to our environmental initiatives, including both the Powerbond RS “peel & stick” backing system and our ER3 recycled content product offerings.

Retail Stores. We focus on major retail chains which have the potential for large, nationwide volumes. This segment requires a diverse product offering, as needs vary from high-end boutiques to mass merchandisers. We believe that our products are particularly suited to fulfill these needs and provide the added advantage of reducing potential “slip and fall” liability. A significant portion of these sales is managed by our Source One department, which arranges product installation for our customers. Our installation service and our comprehensive project management capabilities are critical to meet short construction schedules inherent in the retail market.

International Markets. In July 1999, we acquired Crossley Carpet Mills, Ltd (“Crossley”) of Truro, Nova Scotia. This acquisition has allowed us to market all three brands in Canada through the Crossley organization. In addition, in August 1998, we acquired a 51.0% interest in Collins & Aikman Floorcoverings Asia Pte. Ltd., a start-up commercial carpet distribution venture in Singapore. We established our first international sales office in 1989 in the United Kingdom, and in 1998 acquired a carpet backing manufacturer headquartered in Wales. Our presence in such international markets enables us to distribute our products throughout the world and strengthen our relationships with U.S.-based multi-national corporate accounts. We plan to continue to add distributors and dedicated sales personnel in strategic international geographies to increase our share of the global commercial carpet market. During the second half of fiscal 2004, we expect to begin production of carpet tile products in Suzhou, China. We plan to sell the products manufactured at this facility into mainland China and throughout southeast Asia.

Sales and Segmentation Strategy

We utilize a segmented sales and marketing strategy to target the specific needs of the customers in each of our end markets. This segmented marketing strategy requires each sales person to develop an expertise in a specific end market, resulting in greater customer-focused service, comprehensive market coverage and increased sales productivity.

Our brands provide custom designed products and promotional materials for each end market, which highlight the advantages of our products in several key performance categories. Each end market is sensitive to different issues and places value on different performance characteristics. We have developed our proprietary products and technical innovations in response to the needs of our target customers and segments. Although we will work with a distributor in order to arrange for delivery and sale, our primary contact with the customer is through our sales force and not through an intermediary. This enables us to continue to customize our products and services to respond to the specific needs of the customer, which we believe is a unique approach in the industry. We have an in-house design team for each brand that is dedicated to developing new, innovative designs for each of our primary end markets.

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Across our brands, the majority of sales are specified by the facility owner or a professional designer. Because each market has distinct performance, design and installation requirements, our account managers focus on educating the facility owners and design professionals on (i) the technical specifications and proprietary advantages of our products, (ii) our unique design capabilities for specific market segments, (iii) our environmental initiatives and (iv) our unique, value-added services. We believe this end market-oriented strategy has resulted in greater visibility for our brands.

Distribution

We sell and distribute our products through three primary channels: direct to the end customer, Source One and dealers. Although a majority of our invoicing is through floorcovering dealers, our primary marketing efforts are focused on the end customer and professional designers and architects who create specifications for our products. By focusing on the needs of the end customer, our distribution strategy enables the sales and marketing personnel to establish multiple relationships within specific segments and regions. We operate with this flexible distribution philosophy to meet the needs of the customer rather than mandating from whom our customers can buy our products. Our distribution channels are outlined below.

Direct. Direct distribution allows customers to purchase floorcoverings directly from us. Our account managers work directly with the customer to advise, educate and make recommendations for the selection and specification of the right product for the particular application. The customer is responsible for sub-contracting the project management and installation.

Source One. Source One, our in-house project management department, provides single-source coordination and turn-key project management service. The department was established to provide a “one phone call,” “single-source” project management service to meet the specific needs of our customer base. The service includes facility measurement, project coordination, order entry, delivery and installation of a wide range of interior finishes from our broad product offerings. A network of over 1,000 certified installers and strategic dealer partnerships throughout the United States is utilized for product installation.

Dealers. The carpet industry has traditionally sold products to customers through the use of local dealers, who typically broker products from manufacturers and subcontract installation through local installers. Many customers request that the product be delivered through a local dealer who provides a range of project management services, including carpet removal, staging and installation services. Through a non-exclusive alignment with The Invironmentalists, a nationwide network of owned and franchised floorcovering dealers, we provide turn-key floorcovering services, including estimations, installation, reclamation of existing materials and maintenance.

Backlog

Our backlog of unshipped orders was approximately $27.2 million at January 31, 2004. Historically, backlog is subject to significant fluctuations due to the timing of orders for individual large projects.

Product Development and Design

Leadership in product development and design is important in the commercial floorcovering marketplace as designers and customers seek up-to-date product aesthetics. Unlike many of our competitors, which manufacture standard products that serve a wide cross-section of markets, we develop products tailored to the requirements of specific market segments. This process begins with feedback from leading designers and customers in each segment relating to product features such as color, texture and pattern. This marketplace input is vital as the product/styling needs are very different for each end market. Our Product Development Group is highly integrated with our sales organization and customer base, which increases the effectiveness of the product development process.

We estimate that approximately 30% of our sales involve custom colors or designs requiring accurate interpretation of customer needs and timely conversion into a sample fabric. Each brand has dedicated sample equipment that facilitates quick turnaround of custom design requests.

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Competition

The commercial floorcovering industry is highly competitive. Our C&A brand competes with other brands of vinyl-backed carpet, including vinyl-backed rolls of similar lengths, as well as twelve-foot broadloom carpet and other types of commercial floorcovering. The major competitors to the C&A brand are Lees Carpet (recently acquired by Mohawk Industries, Inc.) and Shaw Industries, Inc. in the six-foot roll goods and Interface Flooring System (owned by Interface, Inc.), Miliken, Lees Carpet and Shaw Industries, Inc. in modular carpet tile products. Our Monterey and Crossley brands compete with other carpet manufacturers and manufacturers of vinyl and other types of floorcovering. The major competitors to the Monterey and Crossley brands are Bentley Mills (owned by Interface, Inc.), Mohawk Industries, Atlas Carpets, Masland Carpets and Shaw Industries, Inc. Although the industry has experienced consolidation, a large number of manufacturers remain. In North America, we believe we are the largest manufacturer of six-foot roll carpet, a leading manufacturer of modular carpet tile and a design leader in the high-style commercial broadloom carpet market. There are a number of domestic competitors that manufacture these products and certain of these competitors have greater financial resources than we do.

We believe the key competitive factors in our primary floorcovering markets are product durability, appearance retention, product design and service. In this specified commercial market, six-foot roll carpet and modular carpet tiles compete with various floorcoverings, of which broadloom carpet has the largest market share. Our six-foot roll carpet has gained market share from traditional broadloom carpet in end markets in which it has distinct performance advantages, such as ease of maintenance, appearance retention and longer useful life. Modular carpet tile has also increasingly been used instead of other flooring surfaces due to increased raised flooring applications, which enable under-the-floor cable management and air delivery systems, and the continuing trend toward modular furniture systems which require the functionality of tile. In the high-style specified commercial broadloom carpet market, the principal competitive factors of the Monterey and Crossley brands are aesthetics, service and quality.

Manufacturing and Facilities

We own four manufacturing facilities in Dalton, Georgia including (i) a yarn processing plant with carpet dyeing capabilities, (ii) a carpet tufting plant, (iii) a carpet finishing and tile cutting plant, which includes tile printing and recycling operations and (iv) a customer service center and distribution warehouse. Extrusion owns a yarn extrusion facility in Calhoun, Georgia. Crossley owns a manufacturing, administrative and warehouse facility in Truro, Nova Scotia. Advance Carpet Tiles, Ltd. (“ACT”) owns two facilities in the United Kingdom, including a six-foot roll and tile finishing plant. Monterey Carpets, Inc. (“Monterey Carpets”) leases a carpet tufting, administrative and warehouse facility in Santa Ana, California. In addition to these facilities, we lease a number of sales and service facilities and one warehouse in the United States and one sales and service facility in the United Kingdom. We believe our manufacturing capacity is sufficient to meet our requirements for the foreseeable future. During the second half of fiscal 2004, we plan to begin production of carpet tile products in Suzhou, China. We plan to sell the products manufactured at this facility into mainland China and throughout southeast Asia.

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The following table summarizes our manufacturing, distribution and sales facilities:

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We have a 50% partnership interest in Chroma System Partners (“Chroma”), which operates an 88,266 square foot carpet dyeing and finishing plant in Santa Ana, California. Monterey and the other partner have agreed to purchase carpet dyeing and finishing services exclusively from Chroma at market prices. These service agreements may be canceled upon a one-year’s notice and withdrawal from the partnership. In addition, Monterey has agreed to provide certain executive management and operational services at cost while Chroma has agreed to provide Monterey with certain maintenance and utility services at cost.

Raw Materials

Our raw materials, including yarn, nylon and polypropylene chip, primary backing, coater materials, and dye chemicals, represent the single largest component of our carpet’s costs. Yarn comprises about one-third of the carpet’s cost structure and in excess of 50.0% of total raw material costs. Historically, we have been able to pass on yarn price increases in the ordinary course of business in response to published increases by major yarn suppliers. Increases in the cost of petroleum-based raw materials could adversely effect us if we were unable to pass the increase through to our customers. Unanticipated termination or interruption of our arrangement with our primary third-party supplier of nylon yarn could have a material adverse effect on us. We use Invista 6,6 continuous filament yarn for the majority of our products.

While Invista is a very important vendor, we believe that there are adequate alternative sources of supply from which we could fulfill our synthetic fiber requirement.

The other significant raw materials used by us in our carpet manufacturing process include coater materials, such as vinyl resins and primary backing. We have not experienced a problem sourcing nylon, processed yarn or any other raw material used in the manufacture of carpet from our suppliers and do not anticipate any difficulties in sourcing these raw materials in the future although no assurances can be given.

At our yarn extrusion plant, significant raw materials are nylon and polypropylene chips and dye chemicals. The chips purchased are used to manufacture nylon 6 and polypropylene yarn. The dyes and chemicals purchased are used to dye the yarn.

Patents, Copyrights and Trademarks

We own numerous copyrights and patents in the United States and certain other countries, including our Powerbond RS patent which expires in 2008, and our patents (process and product) for the ER3 backing produced from our environmental programs, which expire in 2014. We also own numerous registered trademarks in the United States, including Powerbond and Powerbond RS. We consider our industry knowledge and technology more important to our current business than our patents or our copyrights or trademarks and, accordingly, believe the expiration of existing patents or loss of a copyright or trademark will not have a material adverse effect on our operations. However, we actively maintain and enforce patents, trademarks, copyrights and trade secrets.

Seasonality

The Company experiences seasonal fluctuations, with generally lower sales and gross profit in the first and fourth quarters of the fiscal year and higher sales and gross profit in the second and third quarters of the fiscal year. The seasonality of sales and profitability is primarily a result of disproportionately higher education end market sales during the summer months while schools are normally closed and floorcovering can be installed.

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Employees

At January 31, 2004, we had a total of 1,584 employees of which 985 were hourly and 599 salaried. We have experienced no work stoppages and believe that our employee relations are good. All of our employees are non-union with the exception of Crossley’s approximately 204 manufacturing workers in Canada that are subject to a collective bargaining agreement. The collective bargaining agreement that represents this union expires on June 30, 2006.

Environmental Matters

Our operations are subject to federal, state and local laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment. The costs of complying with environmental protection laws and regulations have not had a material adverse impact on our financial condition or results of operations in the past and are not expected to have a material adverse impact in the future. The environmental management systems of our floorcovering manufacturing facilities are certified under ISO 14001.

Financial Information About Operating Segments and Geographic Areas

The Company operates in two industry segments: floorcoverings and extrusion. Information relating to the Company’s two operating segments can be found in Note 14 to the Company’s consolidated financial statements for the year ended January 31, 2004. Certain information concerning our net sales and long-lived assets by geographic areas can also be found in Note 14.

Item 2. Properties

For information concerning the principal physical properties of the Company, see “Item 1. Business – Manufacturing and Facilities.”

Item 3. Legal Proceedings

In 1996 and 1997, the Company sold approximately $0.6 million of carpet tile product to Employers Mutual Insurance Companies (“EMC”). EMC subsequently filed suit in the United States District Court for the Southern District of Iowa on August 6, 2002, alleging the carpet experienced premature wearing and discoloration, and asserted that the Company should pay damages based upon theories of violation of warranties, negligence and fraud. The Company examined EMC’s claim prior to commencement of the action and determined that EMC had not properly maintained the carpet, resulting in irreversible damage to the carpet. The Company filed a motion for summary judgment and the United States District Court for the Southern District of Iowa ruled in favor of the Company on the negligence, written warranty claims and implied warranty of merchantability. Other claims included express oral warranty, implied warranty of fitness for particular purpose, fraudulent misrepresentation and fraudulent nondisclosure were tried to a jury. On March 18, 2004, subsequent to the Company’s fiscal year-end, the jury entered a verdict in favor of the Company on the fraudulent misrepresentation and fraudulent nondisclosure claims and in favor of EMC on the express oral warranty and implied warranty of fitness for particular purpose. The jury awarded EMC $0.8 million in damages for full replacement of the carpet.

The Company believes substantial errors were committed in the trial, including the failure of the trial court to render judgment as a matter of law that the Company did not owe EMC a fiduciary duty, and in the erroneous application by the jury of its instructions on the measure of damages. The Company continues to deny liability and is evaluating its options, which include filing a motion for judgment as a matter of law pursuant to Rule 50 of the Federal Rules of Civil Procedure and a motion for a new trial. The judgment award of $0.8 million has been recorded as an accrued liability in the January 31, 2004 consolidated balance sheet. The Company incurred legal expenses during fiscal 2003 related to the EMC lawsuit of approximately $0.7 million. These expenses are included in the Company’s consolidated statement of operations for fiscal 2003.

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From time to time the Company is subject to claims and suits arising in the ordinary course of business, including workers’ compensation and product liability claims, which may or may not be covered by insurance. Management believes that the various asserted claims and litigation in which the Company is currently involved will not have a material adverse effect on its financial position or results of operations.

Item 4. Submission of Matters to A Vote of Security Holders

None.

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

As of April 26, 2004, there was one holder of record of the Company’s common stock. There is no public trading market for the Company’s common stock.

The following table provides information as of January 31, 2004, with respect to compensation plans under which Tandus Group equity securities are authorized for issuance.

Dividends

The declaration and payment of dividends is at the discretion of our Board, and depends upon, among other things, our investment policy and opportunities, results of operations, financial condition, cash requirements, future prospects, and other factors that may be considered relevant by our Board at the time of its determination. Such other factors include certain limitations in covenants contained in our senior credit facility and in the indentures governing our public indebtedness. Due to these limitations, the Board plans to pay no dividends in the forseeable future.

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Item 6. Selected Financial Data

The following data is qualified in its entirety by the consolidated financial statements of the Company and other information contained elsewhere herein. The financial data as of and for the years ended January 29, 2000, January 27, 2001, January 26, 2002, January 25, 2003 and January 31, 2004 have been derived from the audited financial statements of the Company. The following financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto appearing elsewhere herein.