0000029332-95-000007.txt : 19950816 0000029332-95-000007.hdr.sgml : 19950816 ACCESSION NUMBER: 0000029332-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950701 FILED AS OF DATE: 19950815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIXIE YARNS INC CENTRAL INDEX KEY: 0000029332 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200] IRS NUMBER: 620183370 STATE OF INCORPORATION: TN FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02585 FILM NUMBER: 95564208 BUSINESS ADDRESS: STREET 1: 1100 S WATKINS ST CITY: CHATTANOOGA STATE: TN ZIP: 37404 BUSINESS PHONE: 6156982501 MAIL ADDRESS: STREET 1: P O BOX 751 CITY: CHATTANOOGA STATE: TN ZIP: 37401 FORMER COMPANY: FORMER CONFORMED NAME: DIXIE MERCERIZING CO DATE OF NAME CHANGE: 19670524 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended July 1, 1995 Commission File Number 0-2585 DIXIE YARNS, INC. (Exact name of registrant as specified in its charter) Tennessee 62-0183370 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1100 South Watkins Street Chattanooga, Tennessee 37404 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (615) 698-2501 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of August 1, 1995 Common Stock, $3 Par Value 10,464,119 shares Class B Common Stock, $3 Par Value 735,228 shares Class C Common Stock, $3 Par Value 0 shares DIXIE YARNS, INC 2 INDEX Part I. Financial Information: Page No. Consolidated Condensed Balance Sheets -- July 1, 1995 and December 31, 1994 3 Consolidated Statements of Income -- Three Months Ended July 1, 1995 and July 2, 1994 5 Consolidated Statements of Income (Loss) -- Six Months Ended July 1, 1995 and July 2, 1994 6 Consolidated Condensed Statements of Cash Flows -- Six Months Ended July 1, 1995 and July 2, 1994 7 Notes to Consolidated Condensed Financial Statements 9 Management's Discussion and Analysis of Results of Operations and Financial Condition 11 Part II. Other Information: Item 4 - Submission of Matters to a Vote of Security Holders 13 Item 6 - Exhibits and Reports on Form 8-K 13 PART I - ITEM 1 3 FINANCIAL INFORMATION DIXIE YARNS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) July 1, December 31, 1995 1994 ____________ ____________ (dollar amounts in thousands) ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,543 $ 1,904 Accounts receivable (less allowance for doubtful accounts of $3,392 in 1995 and $3,617 in 1994) 36,401 28,918 Inventories 114,236 109,964 Other 9,024 11,939 ____________ ____________ TOTAL CURRENT ASSETS 161,204 152,725 PROPERTY, PLANT AND EQUIPMENT 498,439 480,920 Less accumulated amortization and depreciation 232,971 215,406 ____________ ____________ NET PROPERTY, PLANT AND EQUIPMENT 265,468 265,514 INTANGIBLE ASSETS (less accumulated amortization of $11,643 in 1995 and $10,659 in 1994) 63,747 63,620 OTHER ASSETS 6,550 6,461 ____________ ____________ TOTAL ASSETS $ 496,969 $ 488,320 ____________ ____________ ____________ ____________ See Notes to Consolidated Condensed Financial Statements. DIXIE YARNS, INC. 4 CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) July 1, December 31, 1995 1994 ____________ ___________ (dollar amounts in thousands) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 31,429 $ 33,055 Accrued expenses 24,672 30,148 Current portion of long-term debt 439 584 ____________ ____________ TOTAL CURRENT LIABILITIES 56,540 63,787 LONG-TERM DEBT Senior indebtedness 99,758 87,025 Subordinated notes 50,000 50,000 Convertible subordinated debentures 44,782 44,782 ____________ ____________ TOTAL LONG-TERM DEBT 194,540 181,807 OTHER LIABILITIES 12,519 11,676 DEFERRED INCOME TAXES 43,393 42,364 COMMON STOCK, SUBJECT TO PUT OPTION - 1,029,446 shares in 1995 and 1994 18,178 18,178 STOCKHOLDERS' EQUITY Common Stock - issued and outstanding, including shares in treasury, 13,857,642 shares in 1995 and 1994 41,573 41,573 Class B Common Stock - issued and outstanding, 735,228 shares in 1995 and 1994 2,206 2,206 Additional paid-in capital 131,710 131,710 Retained earnings 55,940 54,626 Minimum pension liability adjustment (4,330) (4,330) ____________ ____________ 227,099 225,785 Less Common Stock in treasury at cost - 3,379,323 shares in 1995 and 3,375,990 shares in 1994 55,300 55,277 ____________ ____________ TOTAL STOCKHOLDERS' EQUITY 171,799 170,508 ____________ ____________ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 496,969 $ 488,320 ____________ ____________ ____________ ____________ See Notes to Consolidated Condensed Financial Statements. DIXIE YARNS, INC. 5 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended _________________________________ July 1, July 2, 1995 1994 ______________ ______________ (dollar amounts in thousands, except per share data) Net sales $ 177,809 $ 176,843 Cost of sales 151,637 150,759 ____________ ____________ GROSS PROFIT 26,172 26,084 Selling, general and administrative expenses 20,799 20,586 Other income (expense) - net (69) (1,335) ____________ ____________ INCOME BEFORE INTEREST AND TAXES 5,304 4,163 Interest expense 4,186 3,538 ____________ ____________ INCOME BEFORE INCOME TAXES 1,118 625 Income tax provision 687 506 ____________ ____________ NET INCOME $ 431 $ 119 ____________ ____________ ____________ ____________ Per common and common equivalent share: Net income $ 0.03 $ 0.01 Cash dividends declared: Common stock $ 0.00 $ 0.05 Class B common stock $ 0.00 $ 0.05 See Notes to Consolidated Condensed Financial Statements DIXIE YARNS, INC. 6 CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED) Six Months Ended _________________________________ July 1, July 2, 1995 1994 ______________ ______________ (dollar amounts in thousands, except per share data) Net sales $ 359,455 $ 340,234 Cost of sales 304,731 295,987 ____________ ____________ GROSS PROFIT 54,724 44,247 Selling, general and administrative expenses 42,601 41,099 Other income (expense) - net (1,022) (2,502) ____________ ____________ INCOME BEFORE INTEREST AND TAXES 11,101 646 Interest expense 8,112 6,759 ____________ ____________ INCOME (LOSS) BEFORE INCOME TAXES 2,989 (6,113) Income tax provision (benefit) 1,675 (1,889) ____________ ____________ NET INCOME (LOSS) $ 1,314 $ (4,224) ____________ ____________ ____________ ____________ Per common and common equivalent share: Net income (loss) $ 0.09 $ (0.32) Cash dividends declared: Common stock $ 0.00 $ 0.10 Class B common stock $ 0.00 $ 0.10 See Notes to Consolidated Condensed Financial Statements. DIXIE YARNS, INC. 7 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended ___________________________ July 1, July 2, 1995 1994 ____________ ____________ (dollar amounts in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 1,314 $ (4,224) Depreciation and amortization 18,804 18,472 Provision for deferred income taxes 594 772 Loss on property, plant and equipment 938 37 ____________ ____________ 21,650 15,057 Changes in operating assets and liabilities, net of effects of business combination (16,109) (17,108) ____________ ____________ NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,541 (2,051) CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from sale of property, plant and equipment 318 -0- Purchase of property, plant and equipment (18,786) (18,803) Cash payments in connection with business combination -0- (324) ____________ ____________ NET CASH USED IN INVESTING ACTIVITIES (18,468) (19,127) See Notes to Consolidated Condensed Financial Statements. DIXIE YARNS, INC. 8 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED (UNAUDITED) Six Months Ended ___________________________ July 1, July 2, 1995 1994 ____________ ____________ (dollar amounts in thousands) CASH FLOWS FROM FINANCING ACTIVITIES Net increase in credit line borrowings 12,952 20,770 Dividends paid -0- (1,225) Capital stock acquired (23) (174) Other (363) (289) ____________ ____________ NET CASH PROVIDED BY FINANCING ACTIVITIES 12,566 19,082 DECREASE IN CASH AND CASH EQUIVALENTS (361) (2,096) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,904 4,047 ____________ ____________ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,543 $ 1,951 ____________ ____________ ____________ ____________ SUPPLEMENTAL CASH FLOW INFORMATION Interest paid $ 7,505 $ 5,646 ____________ ____________ ____________ ____________ Income taxes paid, net of refunds received $ (1,324) $ 1,300 ____________ ____________ ____________ ____________ See Notes to Consolidated Condensed Financial Statements. DIXIE YARNS, INC. 9 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements which do not include all of the information and footnotes required in annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended July 1, 1995 are not necessarily indicative of the results that may be expected for the entire year. NOTE B - RECLASSIFICATIONS Net sales, selling, general and administrative expenses and corporate expenses for 1994 have been reclassified to conform with the 1995 presentation. NOTE C - INVENTORIES Inventories are summarized as follows: July 1, December 31, 1995 1994 ____________ ____________ (dollar amounts in thousands) At current cost Raw materials $ 30,326 $ 28,458 Work-in-process 24,508 28,091 Finished goods 72,194 64,401 Supplies, repair parts and other 7,830 7,858 ____________ ____________ 134,858 128,808 Excess of current cost over LIFO value (20,622) (18,844) ____________ ____________ $ 114,236 $ 109,964 ____________ ____________ ____________ ____________ NOTE D - DEBT AND CREDIT ARRANGEMENTS 10 The Company's revolving credit facility, which was renewed in the first quarter of 1995, provides for aggregate borrowings of up to $125.0 million in addition to the availability of a $10.0 million term-loan facility which was utilized to fund the stock repurchase subsequent to the end of the second quarter (see Note E.) At July 1, 1995, the available combined unused borrowing capacity under revolving credit agreements and term-loan facilities was approximately $41.2 million. NOTE E - COMMON STOCK, SUBJECT TO PUT OPTION On July 10, 1995, 1,029,446 shares of common stock issued in connection with the Company's 1993 acquisition of Masland Carpets, Inc. were repurchased for $18.3 million, pursuant to the exercise of the holders' put option. The repurchase was funded under the company's revolving credit and term-loan facilities. NOTE F - STOCK PLANS On May 4, 1995 the Board of Directors acted, effective as of such date, to reprice outstanding options granted prior to 1995 under the Company's 1990 Incentive Stock Plan. Options to purchase 516,000 shares of the Company's Common Stock, originally granted at prices ranging from $10.25 to $14.00 per share, were amended to provide for a revised exercise price of $8.00 per share, which was above the market price of $6.25 per share on the effective date of the amendment. The expiration date of the repriced options was also amended to provide for a new 10 year term commencing on May 4, 1995, under which the options become exercisable at a cumulative rate of 25% per year beginning on May 4, 1997. NOTE G - OTHER INCOME (EXPENSE) - NET Other income (expense) - net for the quarter and six months ended July 1, 1995 included a pre-tax gain of $2.9 million from business interruption insurance proceeds and a pre-tax charge of $1.8 million related to costs associated with consolidation of the Company's synthetic yarn manufacturing facilities. NOTE H - SUBSEQUENT EVENTS The Company has entered into an agreement, subject to certain conditions, to sell its Newton, North Carolina open-end cotton yarn spinning facility to Beacon Manufacturing Company, a wholly owned subsidiary of Pillowtex Corporation, for approximately $6.0 million with a planned closing date in early October. At the buyer's option, consideration may be in the form of a promissory note due in early February, 1996 or the note may be reduced for an amount commensurate with the time value of money if settled earlier. It is anticipated that proceeds from the sale will be utilized to reduce borrowings under the Company's revolving credit arrangements. The sale, which will result in an after-tax, non-cash loss of approximately $5.0 million, is part of the Company's strategic plan to dispose of certain assets which do not meet the Company's performance objectives. PART I - ITEM 2 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following is presented to update the discussion of results of operations and financial condition included in the Company's 1994 Annual Report. RESULTS OF OPERATIONS Net sales for the quarter ended July 1, 1995 were $177.8 million compared to $176.8 million in the second quarter of 1994. Net income was $.4 million, or $.03 per share, compared to $.1 million, or $.01 per share, for the comparable period in 1994. Net income for the quarter and six months ended July 1, 1995 included a pre-tax gain of $2.9 million from business interruption insurance proceeds and a pre-tax charge of $1.8 million related to costs associated with consolidation of the Company's synthetic yarn manufacturing facilities and are classified in "Other income (expense) - net" on the Company's financial statements. Net sales for the six months ended July 1, 1995 were $359.5 million, an increase of 5.6%, from the comparable period in 1994. Net income was $1.3 million, or $.09 per share, for the first six months of 1994 compared to a loss of $4.2 million, or $.32 per share, in the first six months of 1994. Interest expense increased $.6 million and $1.4 million in the quarter and six months ended July 1, 1995, respectively, compared to the second quarter and first six months of 1994. The increase is attributable to the general increase in interest rates. The following table sets forth selected operating data (in millions of dollars) related to the two business segments of the Company. Operating profit or loss for each segment excludes general corporate overhead, certain items classified as other income (expense), interest expense, and income taxes. Quarter Ended Six Months Ended July 1, July 2, July 1, July 2, 1995 1994 1995 1994 Sales - Textile products $ 86.4 $ 87.1 $174.8 $168.6 - Floorcovering 92.3 90.6 186.5 173.2 - Intersegment elimination (0.9) (0.9) (1.8) (1.6) Total sales $177.8 $176.8 $359.5 $340.2 Operating profit/(loss) - Textile products $ (1.3) $ (2.0) $ (0.5) $ (9.1) - Floorcovering 8.0 7.4 14.4 12.2 Total operating profit/(loss) $ 6.7 $ 5.4 $ 13.9 $ 3.1 Operating results for the Company's textile products business included a charge of $1.8 million in the quarter and six months ended July 1, 1995 related to the consolidation of the Company's synthetic yarn manufacturing facilities. Including the charge, operating results improved $.7 million and $8.6 million for the quarter and six months ended July 1, 1995 compared to the comparable periods in 1994. The improvement in results is primarily a result of manufacturing and administrative costs reductions. These improvements more than offset higher cotton and other raw materials costs 12 in 1995 compared to 1994. Net sales were basically flat in the quarter-to- quarter comparison for 1995 and 1994 and reflect an increase of $6.2 million, or 3.6%, in the first six months of 1995 compared to 1994. Floorcovering operating profits of $8.0 million and $14.4 million for the quarter and six months ended July 1, 1995 included a gain of $2.9 million from business interruption insurance proceeds. Excluding the insurance gain, operating earnings declined $2.3 million and $.7 million, respectively, for the second quarter and first six months of 1995, compared with 1994 periods. Although sales were up 1.8% and 7.7% in the quarter and six months of 1995, respectively, compared to the second quarter and first six months of 1994, the earnings decline reflected increased pressure on margins and a higher level of selling, general and administrative costs as demand weakened in the second quarter of 1995 from the high growth levels previously experienced. Demand is presently weak in many of the Company's markets and operating earnings are not expected to improve significantly unless demand for textile and floorcovering products improve. The Company is continuing efforts to further reduce costs and dispose of certain assets that do not meet the Company's performance objectives. LIQUIDITY AND CAPITAL RESOURCES During the six months ending July 1, 1995, $5.5 million were generated by operating activities and were supplemented by increased borrowings of $13.0 million under the Company's revolving credit agreements and were used primarily to fund expenditures for property, plant and equipment. On July 10, 1995, 1,029,446 shares of common stock issued in connection with the Company's 1993 acquisition of Masland Carpets, Inc. were repurchased for $18.3 million, pursuant to the exercise of the holders' put option. The Company's revolving credit and term-loan agreement, which had been renewed for an additional five years in March, 1995, was amended at that time to provide for an additional $10.0 million term-loan availability which was utilized in funding the stock repurchase. At July 1, 1995, the available combined unused borrowing capacity under revolving credit and term-loan, agreements was $41.2 million. On August 11, 1995, the Company entered into an agreement, subject to certain conditions, to sell its Newton, North Carolina open-end cotton yarn spinning facility to Beacon Manufacturing Company, a wholly owned subsidiary of Pillowtex Corporation, for approximately $6.0 million with a planned closing date in early October. At the buyer's option, consideration may be in the form of a promissory note due in early February, 1996 or the note may be reduced for an amount commensurate with the time value of money if settled earlier. It is anticipated that proceeds from the sale will be utilized to reduce borrowings under the Company's revolving credit arrangements. The sale, which will result in an after-tax, non-cash loss of approximately $5.0 million, is part of the Company's strategic plan to dispose of certain assets which do not meet the Company's performance objectives. As a result of this transaction, the Company expects ongoing operating results to improve and anticipates a reduction in future capital expenditure requirements. PART II. OTHER INFORMATION 13 Item 4 - Submission of Matters to a Vote of Security Holders (a) The annual meeting of shareholders was held on May 4, 1995. (c) The meeting was held to consider and vote upon the election of Directors for the following year. All Directors were elected with the results of the vote for each Director summarized as follows: FOR AGAINST ABSTAIN TOTAL Paul K. Brock 23,703,365 36,795 238,977 23,979,137 Lovic A. Brooks, Jr. 23,538,215 201,945 238,977 23,979,137 Daniel K. Frierson 23,701,820 38,340 238,977 23,979,137 Paul K. Frierson 23,702,025 38,135 238,977 23,979,137 J. Frank Harrison, Jr. 23,704,465 35,695 238,977 23,979,137 James H. Martin, Jr. 23,701,715 38,445 238,977 23,979,137 Peter L. Smith 23,703,940 36,220 238,977 23,979,137 Joseph T. Spence, Jr. 23,702,275 37,885 238,977 23,979,137 Robert J. Sudderth, Jr. 23,703,060 37,100 238,977 23,979,137 Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (i) Exhibits Incorporated by Reference None. (ii) Exhibits Filed with this Report (10a) Form of Nonqualified Stock Option Agreement Under the Dixie Yarns, Inc. Incentive Stock Plan. (10b) Form of Amendment to Nonqualified Stock Option Agreement Under the Dixie Yarns, Inc. Incentive Stock Plan. (11) Statement re: Computation of Earnings Per Share. (b) Reports on Form 8-K No reports on Form 8-K have been filed by the registrant during the three month period ended July 1, 1995. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DIXIE YARNS, INC. __________________________ (Registrant) August 14, 1995 ____________________ (Date) /s/GLENN M. GRANDIN __________________________ Glenn M. Grandin Senior Vice President and Chief Financial Officer QUARTERLY REPORT ON FORM 10-Q 15 ITEM 6(a) EXHIBITS QUARTER ENDED JULY 1, 1995 DIXIE YARNS, INC. CHATTANOOGA, TENNESSEE Exhibit Index EXHIBIT NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE (10a) Form of Nonqualified Stock Filed herewith. Option Agreement Under the Dixie Yarns, Inc. Incentive Stock Plan. (10b) Form of Amendment to Filed herewith. Nonqualified Stock Option Agreement Under the Dixie Yarns, Inc. Incentive Stock Plan. (11) Statement re: Computation Filed herewith. of Earnings Per Share. EX-10.A 2 NONQUALIFIED STOCK OPTION AGREEMENT Under the Dixie Yarns, Inc. Incentive Stock Plan THIS OPTION AGREEMENT dated as of _________________, between Dixie Yarns, Inc. a Tennessee corporation (hereinafter the "Company"), and ________________ , a key employee of the Company or of an Affiliate corporation of the Company (hereinafter the "Employee") which Employee was selected by the Compensation Committee of the Board of Directors of the Company (hereinafter the "Committee"). WHEREAS, the Company desires to grant Employee an option as hereinafter described pursuant to the Incentive Stock Plan (a copy of which is attached hereto) of Dixie Yarns, Inc. and its Affiliates (hereinafter the "Plan"); and WHEREAS, Employee desires to accept such option. NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. SHARES SUBJECT TO OPTION. Effective _________________ the Company irrevocably grants to the Employee, not in lieu of salary or any other compensation for services, the option to purchase all or any part of an aggregate of ( ______ ) shares of Common Stock, three dollars ($3.00) par value, of the Company (hereinafter "Common Stock") upon the terms and conditions herein set forth (hereinafter the "Option"). 2. EXERCISE PRICE. The purchase price of the shares of Common Stock subject to the Option shall be $ ____ per share (an amount equal to the fair market value thereof). 3. TIME AND MANNER OF EXERCISE. Subject to the provisions of Paragraphs 4, 5, 6, 7, and 14 hereof, the Option shall become exercisable as to the percentage of the aggregate number of shares covered by the Option on and after each of the following dates during the term of the Option as follows: 25 percent on or after _________________ . 50 percent on or after _________________ . 75 percent on or after _________________ . 100 percent on or after _________________ . The Option shall be exercisable in whole at any time, or in part from time to time, during the term of the Option as to all or any of the shares then exercisable under the Option, but not as to less than 100 shares (or the remaining shares then covered by the Option if less than 100 shares) at any one time. The term of the Option shall be ten (10) years from the date hereof or such shorter period as is prescribed in Paragraphs 4, 5, 6, and 7 hereof, at which time the Option shall automatically expire. Except as provided in Paragraphs 4, 5, 6, and 7 hereof, the Option shall not be exercisable unless the Employee shall, at the time of exercise, be an employee of the Company or of an Affiliate corporation of the Company. The holder of -2- the Option shall have none of the rights of a stockholder with respect to the shares of Common Stock subject to the Option until such shares have been issued to him upon the exercise of the Option. Unless otherwise provided herein, no adjustments shall be made for dividends or other rights for which the record date is prior to the date the Option is exercised. 4. ANTI-ASSIGNMENT PROVISION. Except as may be approved by the Committee where such approval will not adversely affect compliance of the Plan with Rule 16b-3 under the Securities and Exchange Act of 1934, as amended, the Option shall not be transferable by the Employee otherwise than by will or the laws of descent and distribution, and the Option is exercisable, during his lifetime, only by him. More particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as aforesaid), pledged, hypothecated or encumbered in whole or in part either directly or by operation of law or otherwise (except in the event of an Employee's death) including but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner. In the event of any unapproved attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof, or the levy of any attachment or similar process upon the Option, the Option shall -3- automatically become null and void. Any transfer of an Option approved by the Committee shall cause the transferee to be treated as the "Employee" for all purposes of the Plan unless the Committee directs otherwise. 5. TERMINATION OF EMPLOYMENT. In the event that the employment of the Employee shall be terminated (otherwise than by reason of death, retirement or disability), the Option shall cease to be exercisable on the date of such termination of employment. The Option shall not be affected by any change of employment so long as Employee continues in the employ of the Company or of an Affiliate corporation of the Company or is in Committee approved employment pursuant to Paragraph 13. 6. DEATH OF EMPLOYEE. Subject to Paragraph 14 hereof, if the Employee dies while holding an Option which has not expired and has not been fully exercised, the Option may be exercised by the Employee's designated beneficiary to the extent the Option was exercisable immediately prior to the Employee's death or to the extent the Option would have been exercisable in the year immediately following the Employee's death had Employee survived. If there is no designated beneficiary, then such right of exercise shall be by the legal representatives of the Employee's estate. Such exercise may take place at any time within one year after the date of the Employee's death (but in no event after the date the option has expired). -4- 7. TERMINATION DUE TO DISABILITY OR RETIREMENT. In the event that the employment of Employee terminates due to disability or retirement, the Option may be exercised to the extent exercisable at the termination of Employee's employment by Employee at any time within three years after such termination, subject to Paragraphs 6 and 14 hereof, but in no event after the date the Option has expired. 8. ADJUSTMENT OF COMMON STOCK. In the event that prior to the delivery by the Company of all the stocks subject to the Option, there is any change in the outstanding Common Stock (and stock of any other class into which such shares may thereafter be changed) of the Company by reason of any stock split, stock dividend, split-up, split-off, spin- off, recapitalization, merger, consolidation, rights offering, reorganization, combination or exchange of shares, a sale by the Company of all or part of its assets, a change in control, any distribution to shareholders other than a normal cash dividend, or other extraordinary or unusual event, if the Committee shall determine that such change equitably requires an adjustment in the terms of the Option or the number of shares subject to the Option, such adjustment may be made by the Committee and shall be final, conclusive and binding for all purposes of the Plan. In any such event, no fractional share shall be issued upon exercise of this Option, and the price paid shall be appropriately reduced on account of any fractional share not issued; -5- further, the minimum number of full shares which may be purchased upon such exercise shall be the minimum number specified in Paragraph 3 hereof adjusted proportionately. 9. EMPLOYMENT STATUS. The Option Agreement does not confer upon the Employee any right to continue in the employ of the Company or of any Affiliate corporation, nor does it interfere in any way with the right of the Company or of any Affiliate corporation to terminate the employment of the Employee at any time with or without cause. 10. NOTICE AND FORM OF PAYMENT. Subject to the terms and conditions of this Agreement, the Option may be exercised by written notice to the Company at its corporate headquarters in Chattanooga, Tennessee, Attention of Jeffrey Laseter. Such notice and exercise of options shall be made in a manner suitable to the Company. Payment of the purchase price shall be made by certified or bank cashier's check payable to the order of "Dixie Yarns, Inc."; provided however, that all or part of the purchase price may be paid by surrender to the Company of whole shares of Common Stock of the Company owned by the Employee with a fair market value at the close of business on the day of exercise of the Option equal to the purchase price (or the portion thereof not to be paid by check). The certificate for the shares as to which the Option is exercised shall be registered in the name of the person exercising the Option and shall be delivered to or upon the written order of the person exercising the Option. -6- All shares issued as provided herein will be fully paid and nonassessable. 11. PAYMENT OF EXPENSES. The Company shall at all times during the term of the Option reserve and keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of this Option Agreement, shall pay all fees and expenses necessarily incurred by the Company in connection with the issue of shares pursuant hereto and will use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company , shall be applicable. 12. AFFILIATE. As used herein, the term "Affiliate" corporation shall mean any entity in which the Company has a substantial direct or indirect equity interest, as determined by the Committee. 13. EMPLOYMENT. As used herein, the term "employment" shall mean the employment or performance of services by an individual for the Company or any of its Affiliates and for an employer other than the Company or its Affiliates provided that (i) such employment or performance of services is under- taken by the individual at the request of the Company, (ii) immediately prior to undertaking such employment or performance of services, the individual was employed by or performing services for the Company or its Affiliates and (iii) such employment or performance of services is in the best interests of the Company and is approved by the -7- Committee as such. 14. SEC REQUIREMENTS. This Agreement has been entered into pursuant to Section 5 of the Plan. Notwithstanding anything to the contrary contained in this Agreement, this Option shall not be exercisable unless and until (a) a registration statement under the Securities and Exchange Act of 1934 as amended with respect to such shares shall be effective; and (b) any other applicable laws, rules and regulations, and such approvals by any governmental agencies as may be required, shall have been complied with or obtained. 15. WITHHOLDING. Upon the exercise of the Option, the Company shall not deliver or otherwise make such common stock available to the Employee or his beneficiary or representative until the Company has received from the applicable party, in cash or any other form acceptable to the Company, the amount necessary to enable the company to remit to the appropriate government entity on behalf of the applicable party the amount required to be withheld for taxes with respect to such transaction. 16. NON-QUALIFIED STATUS. It is the intention of the parties to this Agreement that this Option NOT qualify as an "incentive stock option" under Section 422A of the Code. Any provision of this Option Agreement which is inconsistent with the requirements for being a nonqualified stock option shall be deemed null and void. -8- 17. CONTROLLING AUTHORITY. This Option is governed by and subject to all the terms and provisions of the Plan. All decisions of the Compensation Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons. 18. GOVERNING LAW. This Option Agreement has been entered into pursuant to and shall be governed by the laws of the State of Tennessee. 19. GENDER AND NUMBER. Any use of the masculine includes the feminine and the neuter; and any use of the singular includes the plural, whenever such meanings are appropriate. 20. HEADINGS. The headings appearing at the beginning of each Paragraph in this Agreement are intended only as an index and are not to be construed to vary the meaning of the provision to which they refer. IN WITNESS WHEREOF , the Company has caused this Option Agreement to be duly executed by its officer thereunto duly authorized, and the Employee has hereunto set his hand, all as of the date and year first above written. DIXIE YARNS, INC. By: _________________________ Company Officer _________________________ Employee -9- DIXIE YARNS, INC. Employee's Acknowledgment of Receipt of Disclosures Under the Incentive Stock Plan I, ____________________ , a participant in the Dixie Yarns, Inc. Incentive Stock Plan (the "Plan"), in connection with the purchase of __________ shares of common stock of Dixie Yarns, Inc., a Tennessee corporation (the "Company") this _______ day of ______________ , 19____ , under an Option Agreement dated as of __________________ between myself and the Company, do hereby represent and warrant that I have received a copy of the Prospectus relating to the Plan dated _______________ , 19____ , and copies of all of the Company's subsequent periodic financial reports, and have also had the opportunity to ask questions and receive information from the Company about the Company, its business, its financial condition, and other matters that I deem relevant. Date: ______________ Signature: ____________________________ EX-10.B 3 AMENDMENT TO NONQUALIFIED STOCK OPTION AGREEMENT Under the Dixie Yarns, Inc. Incentive Stock Plan THIS AMENDMENT TO THE NON-QUALIFIED STOCK OPTION AGREEMENT between Dixie Yarns, Inc., a Tennessee corporation (hereinafter the "Company") and _________________________, a key employee of the Company or an Affiliate corporation of the Company (hereinafter the "Employee"), which Employee presently holds an outstanding stock option issued under the Incentive Stock Option Plan of the Company (hereinafter the "Plan"). WHEREAS, the Company has previously granted Employee an option to purchase shares of Common Stock of the Company under the Plan; WHEREAS, the Company desires to amend the option in order to reduce the option price at which it may be exercised, and to recommence the time periods during which the option may be exercised; and WHEREAS, Employee desires to accept the amendments to the option previously issued to Employee under the Plan. Now, therefore, in consideration of desire of the parties hereto and other consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to the following amendments to the presently issued and outstanding stock option held by the Employee that has been issued pursuant to the Plan: 1. Amendment Of Outstanding Option. Effective May 4, 1995, all currently outstanding and unexercised stock options issued to Employee under the Plan are hereby amended as provided herein. To the extent the provisions of the outstanding options are not specifically changed herein, the provisions of the option are to continue to remain in effect. 2. Exercise Price. The purchase price of the shares of Common Stock subject to the option as set forth in Section 2 of the written agreement describing the option is hereby amended to provide for an option price of $8.00 per share. 3. Time and Manner of Exercise. Subject to the other provisions of the written agreement describing the option, the option shall become exercisable as to the percentage of aggregate number of shares covered by the option on and after each of the following dates during the term of the option: 25 percent (25%) on or after May 4, 1997. 50 percent (50%) on or after May 4, 1998. 75 percent (75%) on or after May 4, 1999. 100 percent (100%) on or after May 4, 2000. The term of the option shall be ten (10) years commencing on May 4, 1995. 4. Except as specifically amended herein, the option shall be subject to all of the terms and conditions set forth in the written option agreement previously entered into by the parties hereto. IN WITNESS WHEREOF, the parties hereto have caused the option agreements previously issued to Employee under the Plan to be amended as herein provided, and each party hereto has executed this document as an acknowledgment of their agreement to such amendments. Dated:_______________ Dixie Yarns, Inc. By:________________________ ________________________ Dated:_______________ Employee EX-11 4 EXHIBIT (11) EXHIBIT 11 DIXIE YARNS, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE Three Months Ended Six Months Ended _______________________ _______________________ July 1, July 2, July 1, July 2, 1995 1994 1995 1994 ___________ ___________ ___________ ___________ PRIMARY: NET INCOME (LOSS) $ 431,359 $ 118,539 $ 1,314,076 $(4,223,903) ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ Weighted average number of Common Shares outstanding assuming conversion of Class B Common Stock 12,243,020 12,246,999 12,243,312 12,253,024 Net effect of dilutive stock options based on the treasury stock method using average market price 18,196 36,190 18,863 37,728 Net effect of put options based on the reverse treasury stock method using average market price 1,825,581 890,288 1,789,279 808,568 ___________ ___________ ___________ ___________ TOTAL SHARES 14,086,797 13,173,477 14,051,454 13,099,320 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ PER SHARE AMOUNT $ .03 $ .01 $ .09 $ (.32) ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ FULLY DILUTED: Net income (loss) $ 431,359 $ 118,539 $ 1,314,076 $(4,223,903) After-tax interest requirement of convertible subordinated debentures (A) -0- -0- -0- -0- ___________ __________ ____________ ___________ ADJUSTED NET INCOME (LOSS) $ 431,359 $ 118,539 $ 1,314,076 $(4,223,903) ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ EXHIBIT 11 DIXIE YARNS, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE - CONTINUED Three Months Ended Six Months Ended _______________________ _______________________ July 1, July 2, July 1, July 2, 1995 1994 1995 1994 ___________ ___________ ___________ ___________ FULLY DILUTED - CONTINUED Weighted average number of Common Shares outstanding assuming conversion of Class B Common Stock 12,243,020 12,246,999 12,243,312 12,253,024 Net effect of dilutive stock options based on the treasury stock method using quarter end market price if higher than the average market price 21,737 36,190 21,575 37,728 Net effect of put options based on the reverse treasury stock method using quarter end market price if lower than the average market price 1,825,581 1,109,137 1,789,279 1,109,137 Net effect of conversion of convertible subordinated debentures (A) -0- -0- -0- -0- ___________ ___________ ___________ ___________ TOTAL SHARES 14,090,338 13,392,326 14,054,166 13,399,889 ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ PER SHARE AMOUNT $ .03 $ .01 $ .09 $ (.32) ___________ ___________ ___________ ___________ ___________ ___________ ___________ ___________ (A) Conversion of convertible subordinated debentures to 1,390,745 shares with an after-tax interest requirement of $472,538 for the three months ended July 1, 1995, and July 2, 1994, respectively and of $945,075 for the six months ended July 1, 1995, and July 2, 1994, respectively has been excluded from computation since the effect was anti-dilutive. EX-27 5
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF DIXIE YARNS, INC. AT AND FOR THE SIX MONTHS ENDED JULY 1, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINACIAL STATEMENTS. 1,000 6-MOS DEC-30-1995 JUL-01-1995 1,543 0 39,793 3,392 114,236 161,204 498,439 232,971 496,969 56,540 194,540 43,779 18,178 0 128,020 496,969 359,455 359,455 304,731 304,731 0 0 8,112 2,989 1,675 1,314 0 0 0 1,314 .09 .09