-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VOC9qHNlDCuHjzvKBcoTQ5PC7saZ4cSlhLCtndSnYwEYPKplgr7b9x8fL0fthYDE Bqvk9s8+P3lITSPwUvVe+A== /in/edgar/work/20000915/0000950144-00-011462/0000950144-00-011462.txt : 20000923 0000950144-00-011462.hdr.sgml : 20000923 ACCESSION NUMBER: 0000950144-00-011462 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000701 ITEM INFORMATION: FILED AS OF DATE: 20000915 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIXIE GROUP INC CENTRAL INDEX KEY: 0000029332 STANDARD INDUSTRIAL CLASSIFICATION: [2273 ] IRS NUMBER: 620183370 STATE OF INCORPORATION: TN FISCAL YEAR END: 1225 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-02585 FILM NUMBER: 724205 BUSINESS ADDRESS: STREET 1: 1100 S WATKINS ST CITY: CHATTANOOGA STATE: TN ZIP: 37404 BUSINESS PHONE: 6156982501 MAIL ADDRESS: STREET 1: 1100 S WATKINS ST CITY: CHATTANOOGA STATE: TN ZIP: 37404 FORMER COMPANY: FORMER CONFORMED NAME: DIXIE YARNS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DIXIE MERCERIZING CO DATE OF NAME CHANGE: 19670524 8-K/A 1 g64244e8-ka.txt THE DIXIE GROUP, INC. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 1, 2000 THE DIXIE GROUP, INC. --------------------- (Exact name of Registrant as specified in its charter) Tennessee 0-2585 62-0183370 --------- ------ ---------- (State or other (Commission (I.R.S. Employer jurisdiction File Number) Identification No.) of incorporation) 345-B Nowlin Lane, Chattanooga, Tennessee 37421 - ----------------------------------------- ----- (Address of principal executive offices) (zip code) Registrant's telephone number, including area code (423) 510-7000 2 The Dixie Group, Inc. (the "Registrant" or "Dixie") hereby amends its Current Report on Form 8-K dated July 1, 2000 by inserting the Financial Statements of the business acquired and pro forma financial information as required by Article 3 of Regulation S-X and Article 11 of Regulation S-X, respectively. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Businesses Acquired. Report of Independent Accountants Balance Sheets as of December 31, 1999 and 1998 Statements of Net Income for the years ended December 31, 1999 and 1998 Statements of Stockholders' Equity for the years ended December 31, 1999 and 1998 Statements of Cash Flows for the years ended December 31, 1999 and 1998 Notes to Financial Statements Condensed Balance Sheets as of June 30, 2000 and December 31, 1999 (unaudited) Condensed Statements of Income for the six months ended June 30, 2000 and June 30, 1999 (unaudited) Condensed Statements of Cash Flows for the six months ended June 30, 2000 and June 30, 1999 (unaudited) Notes to Condensed Financial Statements (unaudited) (b) Pro Forma Financial Information. Pro Forma Statement of Operations for the six months ended July 1, 2000 (unaudited) Pro Forma Statement of Operations for the year ended December 25, 1999 (unaudited) (c) Exhibits. none 1 3 INDEPENDENT AUDITOR'S REPORT The Stockholders Fabrica International We have audited the accompanying balance sheets of Fabrica International as of December 31, 1999 and 1998 and the related statements of income, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Fabrica International as of December 31, 1999 and 1998, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information in Schedules 1 through 6 are presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ KUSHNER, SMITH, JOANOU & GREGSON, LLP March 17, 2000 3 4 FABRICA INTERNATIONAL BALANCE SHEETS DECEMBER 31, 1999 AND 1998 ASSETS
1999 1998 ------------ ------------ Current assets Cash $ -- $ 1,920,364 Accounts receivable - trade 443,871 380,997 Accounts receivable - factored (Note 2) 4,135,322 2,136,059 Accounts receivable - other (Note 3) 256,105 16,451 Inventory (Note 4) 5,382,739 3,516,141 Income taxes receivable 135,000 -- Current portion of note receivable - stockholder 250,000 -- Prepaid expenses 50,608 15,138 Deferred income taxes (Note 8) 120,000 233,000 ------------ ------------ Total current assets 10,773,645 8,218,150 ------------ ------------ Property and equipment (Notes 5 and 15) 7,531,634 5,844,929 Less accumulated depreciation and amortization (3,593,058) (3,034,005) ------------ ------------ Net property and equipment 3,938,576 2,810,924 ------------ ------------ Other assets Investment (Note 6) 8,950 8,950 Note receivable - stockholder (Note 7) 500,000 -- Cash surrender value of life insurance 200,747 174,864 Deposits 32,000 -- Deferred income taxes (Note 8) 55,000 132,000 ------------ ------------ Total other assets 796,697 315,814 ------------ ------------ $ 15,508,918 $ 11,344,888 ============ ============
(Balance sheets continued on the following page) 4 5 FABRICA INTERNATIONAL BALANCE SHEETS (CONTINUED) DECEMBER 31, 1999 AND 1998 LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998 ------------ ------------ Current liabilities Bank overdraft (Note 9) $ 99,163 $ -- Accounts payable - trade 3,853,157 2,215,638 Accounts payable - related party (Note 10) 31,001 128,027 Accrued liabilities (Note 12) 2,712,516 1,778,730 Advance deposits 435,694 518,874 Current portion of long-term debt 125,892 106,160 Current portion of notes payable - stockholders -- 730,000 Income taxes payable (Note 8) -- 1,050,000 ------------ ------------ Total current liabilities 7,257,423 6,527,429 Long-term liabilities Notes payable - stockholders (Note 14) -- 240,000 Long-term debt (Notes 11 and 13) 744,570 876,325 ------------ ------------ Total liabilities 8,001,993 7,643,754 ------------ ------------ Commitments with related and unrelated parties and subsequent events (Notes 15 and 16) Stockholders' equity Common stock, no par value, authorized; 540,000 shares, issued and outstanding 43,844 shares 1,036,075 36,075 Retained earnings 6,586,900 3,781,109 Accumulated other comprehensive income: Unrealized (loss) on available-for-sale securities (Note 6) (116,050) (116,050) ------------ ------------ Total stockholders' equity 7,506,925 3,701,134 ------------ ------------ $ 15,508,918 $ 11,344,888 ============ ============
See accompanying notes to financial statements 5 6 FABRICA INTERNATIONAL STATEMENTS OF NET INCOME YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998 ------------ ------------ Gross sales $ 44,987,814 $ 35,047,262 Less freight, discounts and allowances (2,003,091) (1,500,684) ------------ ------------ Net sales 42,984,723 33,546,578 Cost of sales 24,773,175 20,126,185 ------------ ------------ Gross profit 18,211,548 13,420,393 Operating expenses Warehouse 1,103,711 997,503 Selling 8,480,162 6,696,971 General and administrative 3,761,705 2,885,931 ------------ ------------ Total operating expenses 13,345,578 10,580,405 ------------ ------------ Operating income 4,865,970 2,839,988 ------------ ------------ Other income (expense) (Loss) on sale of property and equipment -- (9,724) Interest income 31,877 20,845 Interest (expense) (165,543) (204,689) Other income -- 139,431 ------------ ------------ Total other income (expense) (133,666) (54,137) ------------ ------------ Income before income taxes 4,732,304 2,785,851 Provision for income taxes (Note 8) 1,926,513 1,151,711 ------------ ------------ Net income $ 2,805,791 $ 1,634,140 ============ ============
See accompanying notes to financial statements 6 7 FABRICA INTERNATIONAL STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1999 AND 1998
ACCUMULATED SHARES OTHER TOTAL ISSUED AND COMMON RETAINED COMPREHENSIVE STOCKHOLDERS' OUTSTANDING STOCK EARNINGS INCOME EQUITY ------------ ---------- ---------- ------------- ------------ Balance at December 31, 1997 39,460 $ 36,075 $2,146,969 $ (116,050) $ 2,066,994 Net income for the year ended December 31, 1998 -- -- 1,634,140 -- 1,634,140 ---------- ---------- ---------- ---------- ----------- Balance at December 31, 1998 39,460 36,075 3,781,109 (116,050 3,701,134 Issuance of common stock 4,384 1,000,000 -- -- 1,000,000 Net income for the year ended December 31, 1999 -- -- 2,805,791 -- 2,805,791 ---------- ---------- ---------- ---------- ----------- Balance at December 31, 1999 43,844 $1,036,075 $6,586,900 $ (116,050) $ 7,506,925 ========== ========== ========== ========== ===========
See accompanying notes to financial statements 7 8 FABRICA INTERNATIONAL STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 40,682,932 $ 35,321,697 Cash paid to suppliers and employees (38,200,066) (32,181,659 Interest received 31,877 20,845 Interest paid (165,543) (204,689) Other income received -- 139,431 Income taxes paid (1,850,000) (19,850) ------------ ------------ Net cash provided from operating activities 499,200 3,075,775 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds received from note receivable -- 51,978 Acquisition of property and equipment (1,686,704) (1,130,188) ------------ ------------ Net cash (applied) from investing activities (1,686,704) (1,078,210) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net activity on note payable to bank -- (94,886) Proceeds from capital contribution 250,000 -- Proceeds from amounts borrowed from stockholders -- 480,000 Repayments on amounts borrowed from stockholders (970,000) (425,000) Principal repayments on long-term debt (112,023) (37,315) ------------ ------------ Net cash (applied) from financing activities (832,023) (77,201) ------------ ------------ Net increase (decrease) in cash (2,019,527) 1,920,364 Cash at beginning of year 1,920,364 -- ------------ ------------ Cash (overdraft) at end of year $ (99,163) $ 1,920,364 ============ ============
(Statements of cash flows continued on the following page) 8 9 FABRICA INTERNATIONAL STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 1999 AND 1998 RECONCILIATION OF NET INCOME TO NET CASH PROVIDED FROM OPERATING ACTIVITIES
1999 1998 ----------- ----------- Net income $ 2,805,791 $ 1,634,140 Adjustments to reconcile net income to net cash provided from operating activities Depreciation and amortization 559,052 483,441 Loss on sale of property and equipment -- 9,724 Provision for deferred income taxes 190,000 57,000 ----------- ----------- 3,554,843 2,184,305 ----------- ----------- Changes in assets and liabilities (Increase) decrease in: Accounts receivable - trade (62,874) 99,253 Accounts receivable - factored (1,999,263) 171,601 Accounts receivable - other (239,654) 3,581 Inventory (1,866,598) (286,725) Income taxes receivable (135,000) -- Prepaid expenses (35,470) 6,272 Cash surrender value of life insurance (25,883) (26,147) Deposits (32,000) -- Increase (decrease) in: Accounts payable - trade 1,540,493 (863,370) Accrued liabilities 933,786 688,399 Advance deposits (83,180) 102,606 Income taxes payable (1,050,000) 996,000 ----------- ----------- (3,055,643) 891,470 ----------- ----------- Net cash provided from operating activities $ 499,200 $ 3,075,775 =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITY: On June 30, 1998, $578,301 of the outstanding balance on the line of credit was converted into a term loan. See accompanying notes to financial statements 9 10 FABRICA INTERNATIONAL STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 1999 AND 1998 During the year ended December 31, 1999, 4,384 shares of the ownership in the Company were purchased by an employee for $1,000,000. The employee paid $250,000 in cash, and the remaining $750,000 was set up as a note receivable due from stockholder (Note 7). See accompanying notes to financial statements 10 11 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS - The Company's principal activity is the manufacture of high quality residential carpeting and custom hand-crafted rugs. CONCENTRATIONS OF CREDIT RISKS - The Company provides its services to customers throughout the United States and internationally. The Company's sales are not materially dependent on a single customer or small group of customers. The Company performs ongoing credit evaluations on its customers and generally does not require collateral. The Company maintains reserves for potential credit losses and such losses have been within management's expectations. TRADE RECEIVABLES - Current earnings are charged with an allowance for doubtful accounts based on experience and any unusual circumstances that may affect the ability of customers to meet their obligations. Trade receivables are reflected in the balance sheets net of such accumulated allowances. Because the Company sells the majority of their outstanding trade receivables to its factor without recourse, no allowance for doubtful accounts has been provided. INVENTORY - Inventory is stated at the lower of cost (first-in, first-out) or market value. Cost includes materials, direct labor and an allocable portion of direct and indirect manufacturing overhead. Market is determined by comparison with recent purchases or net realizable value. PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation of property and equipment is provided on the straight-line and accelerated methods over the following estimated useful lives, in years, of the respective assets: Building 39 Machinery and equipment 5 to 10 Furniture and fixtures 5 to 10 Computer equipment 5 to 10 Automobiles 3
Leasehold improvements are amortized over the life of the lease or the estimated useful life of the improvements, whichever is shorter. Maintenance and repairs are charged to expense as incurred. Renewals and improvements of a major nature are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in income. (Note 1 continued on the following page) 11 12 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INCOME TAXES - The Company provides for income taxes based upon earnings reported for financial statement purposes. Deferred income taxes are provided for temporary differences between book and taxable income. SAMPLE COSTS - Sample costs are charged to expense as incurred. Income from the sale of sample books is recognized in the period in which the sale occurs. VACATION EXPENSE - Hourly employees earn credits during the current year for future vacation benefits. The expense and corresponding liability are accrued when the vacations are earned rather than when the vacations are paid. PROFIT SHARING PLAN - The Company has a "401(k)" Retirement Savings Plan that covers substantially all employees. Employees may elect to contribute up to 20% of compensation to the maximum deferred amount allowed by tax laws. The Company will match 100% of the employee's contributions up to $100 and will match an additional 25% of employee's contributions up to $400. The Company also has the option to make discretionary profit sharing contributions. Contributions of $75,881 and $68,510 were made for the years ended December 31, 1999 and 1998, respectively. INVESTMENT - The Company adopted the provisions of Statement of Financial Accounting Standards No. 115 (SFAS 115), "Accounting for Certain Investments in Debt and Equity Securities," as of January 1, 1997. Statement No. 115 requires that management determine the appropriate classification of securities at the date of adoption, as well as review securities on an individual basis when acquired. The appropriateness of such classifications are reassessed at each balance sheet date. The investment securities have been classified into the following classification which has the following accounting policy: Available-for-sale securities: These securities consist of marketable equity securities and are stated at fair value. Any unrealized holding gains and losses are reported as a separate component of stockholder's equity. (Note 1 continued on the following page) 12 13 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVESTMENT (CONTINUED) - Prior to the adoption of Statement No. 115, the Company stated its equity securities at the lower of their aggregate cost or market, with unrealized losses on current portfolio charged to income. Interest is recognized in income as accrued, and dividends on marketable equity securities is recognized in income when declared. Realized gains and losses, including losses from declines in value of specific securities determined by management to be other-than-temporary, are included in income. Realized gains and losses are determined on the basis of the specific securities sold. USE OF ESTIMATES - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. COMPREHENSIVE INCOME - Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), requires that total comprehensive income be reported in the financial statements. Total comprehensive income is presented on the Statement of Income. RECLASSIFICATION - The financial statements for the year ended December 31, 1998 reflect certain reclassifications which have no effect on net income, to conform to classifications adopted at the year ended December 31, 1999. The December 31, 1998 financial statements have been conformed to the December 31, 1999 presentation. 13 14 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 2 - ACCOUNTS RECEIVABLE - FACTORED The Company has an agreement with a factor which provides for the sale of a substantial portion of its trade account receivables. These receivables are sold primarily without recourse, net of discount. The factor receives all cash collections and is paid a fee for administrating the accounts sold. Under the terms of the agreement, the Company pays a factoring commission and interest charges on all unmatured funds advanced by the factor. At December 31, 1999 and 1998 there were no receivables factored with recourse. The Company is obligated to repurchase all or any of the recourse receivables whether matured or not at the request of the factor. At December 31, 1999 and 1998 accounts receivable - factored consisted of the following:
1999 1998 ----------- ----------- Total factored receivables $ 4,316,569 $ 2,971,015 Less receivables advanced (181,247) (834,956) ----------- ----------- $ 4,135,322 $ 2,136,059 =========== ===========
NOTE 3 - ACCOUNTS RECEIVABLE - OTHER Accounts receivable - other at December 31, 1999 and 1998 is comprised of the following:
1999 1998 ------------ ------------ Rebates-yarn support $ 236,982 $ 2,462 Backcharges 18,353 7,410 Other 770 6,579 ------------ ------------ $ 256,105 $ 16,451 ============ ============
14 15 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 4 - INVENTORY Inventory at December 31, 1999 and 1998 is comprised of the following:
1999 1998 ---------- ---------- Raw materials $2,136,202 $ 924,151 Work-in-process 725,152 600,400 Finished goods 2,521,385 1,991,590 ---------- ---------- $5,382,739 $3,516,141 ========== ==========
NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment at December 31, 1999 and 1998 is comprised of the following:
1999 1998 ----------- ----------- Building $ 1,016,000 $ 1,016,000 Machinery and equipment 4,221,641 3,255,002 Furniture and fixtures 313,121 304,014 Computer equipment 220,562 182,940 Automobiles 73,633 34,125 Leasehold improvements 1,218,011 928,690 Construction in progress 468,666 124,158 ----------- ----------- 7,531,634 5,844,929 Less accumulated depreciation and amortization (3,593,058) (3,034,005) ----------- ----------- $ 3,938,576 $ 2,810,924 =========== ===========
NOTE 6 - INVESTMENT The following is a summary of the Company's investment in debt and marketable securities as of December 31, 1999:
NET UNREALIZED COST LOSS FAIR VALUE ------------- -------------- -------------- Available for sale securities $ 125,000 $ 116,050 $ 8,950 ============= ============== ==============
15 16 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 7 - NOTE RECEIVABLE - STOCKHOLDER Note receivable due from stockholder at December 31, 1999 and 1998 consists of the following:
1999 1998 ------------ ------------ 6.0% note receivable from stockholder, unsecured, annual payments of $250,000 plus interest, through maturity in September 2002 $ 750,000 $ -- Less: current portion (250,000) -- ------------ ------------ $ 500,000 $ -- ============ ============
NOTE 8 - INCOME TAXES Deferred income taxes result from temporary timing differences arising from the capitalization of computer software costs for financial statement purposes while a current deduction is taken for tax purposes, and the use of the accelerated cost recovery system for tax purposes while estimated useful lives are used for financial statement purposes, the use of the reserve method for uncollectible receivables for financial statement purposes while the direct write-off method is used for tax purposes, and the inventory adjustment for uniform capitalization rules for Federal tax purposes with no corresponding adjustment for financial statement purposes. The tax provision for the years ended December 31, 1999 and 1998 consists of the following:
1999 1998 ----------- ----------- Current Federal $ 1,486,513 $ 894,711 State 250,000 200,000 ----------- ----------- 1,736,513 1,094,711 ----------- ----------- Deferred Federal 48,000 35,000 State 142,000 22,000 ----------- ----------- 190,000 57,000 ----------- ----------- $ 1,926,513 $ 1,151,711 =========== ===========
16 17 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 9 - BANK OVERDRAFT Bank overdraft at December 31, 1999 represents a technical overdraft created by the amount of checks issued exceeding the balance of cash on deposit recorded in the records of the Company. NOTE 10 - ACCOUNTS PAYABLE - RELATED PARTY At December 31, 1999 and 1998, amounts of $31,001 and $128,027, respectively, were due to a company related through common ownership. These amounts are expected to be paid through the ordinary course of business. NOTE 11 - NOTE PAYABLE TO BANK The Company maintains short-term unsecured revolving lines of credit with two separate banks to assure credit availability. The Company's first revolving line of credit is personally guaranteed by the stockholders of the Company and permits indebtedness up to $1,000,000 of which none was advanced at December 31, 1999 and 1998. This revolving line of credit matures on May 17, 2000. The outstanding principal balance bears interest at a rate per annum of the bank's prime rate. The bank's prime rate at December 31, 1999 was 8.5%. Along with this revolving line of credit, the Company entered into an equipment line of credit on May 14, 1999 that permits indebtedness up to $2,500,000 of which none was advanced at December 31, 1999. This equipment line of credit matures on November 14, 2000 and at that time any indebtedness will be converted into a term loan and the loan would be secured by the equipment financed. The outstanding principal balance bears interest at a rate per annum of the bank's prime rate. The Company had an additional $1,000,000 equipment revolving line of credit which is personally guaranteed by the stockholders. This line commenced December 1, 1997 and the outstanding amount at maturity on June 30, 1998 was converted to a term loan. The balance outstanding on this equipment term loan at December 31, 1999 and 1998 was $440,280 and $546,354, respectively (Note 13). (Note 11 continued on the following page) 17 18 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 11 - NOTE PAYABLE TO BANK (CONTINUED) Under the terms of this note payable to the bank, the Company is required to maintain minimum levels of annual profits, current and cash flow coverage ratios, and a maximum level of debt to net worth. Expenditures exceeding certain amounts for property and equipment acquisitions, additional lease obligations and loans, advances or investments require prior consent of the bank. The Company was in compliance with all of the aforementioned covenants at December 31, 1999. The second revolving line of credit is personally guaranteed by the stockholders of the Company and permits indebtedness up to $1,000,000 of which none was advanced at December 31, 1999 and 1998. This revolving line of credit matured on May 31, 1999 and was subsequently renewed through May 31, 2000. The outstanding principal balance of this line of credit bears interest at a rate per annum of the bank's prime rate minus 1.0%. The bank's prime rate at December 31, 1999 was 8.5%. NOTE 12 - ACCRUED LIABILITIES Accrued liabilities at December 31, 1999 and 1998 are summarized as follows:
1999 1998 ---------- ---------- Insurance $ 44,912 $ 82,925 Salaries, wages and commissions 1,991,940 1,342,835 Sales and excise tax payable 12,646 72,661 Vacation 103,426 51,671 Payroll taxes 85,665 74,838 Profit sharing 50,000 85,063 Other 423,927 68,737 ---------- ---------- $2,712,516 $1,778,730 ========== ==========
18 19 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 13 - LONG-TERM DEBT Long-term debt at December 31, 1999 and 1998 consists of the following:
1999 1998 --------- --------- 2.25% plus LIBOR equipment term loan payable to bank, payable in monthly installments, including interest, through maturity in August 2003, secured by equipment (Note 11) $ 440,280 $ 546,354 7.25% mortgage loan payable to mortgage company, payable in monthly installments of $3,070 including interest, through maturity in January 2026, secured by property 430,182 436,131 --------- --------- 870,462 982,485 Less current portion (125,892) (106,160) --------- --------- $ 744,570 $ 876,325 ========= =========
The aggregate maturities of long-term debt for the remaining years are as follows:
Years ending December 31: 2000 125,892 2001 126,327 2002 126,796 2003 87,276 2004 7,765 Thereafter 396,406 -------- $870,462 ========
19 20 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 14 - NOTES PAYABLE - STOCKHOLDERS Notes payable to stockholders at December 31, 1999 and 1998 consists of the following:
1999 1998 -------- --------- 12.0% note payable to stockholder, interest payable monthly, entire principal and unpaid interest due at maturity in December 2000, secured by second deed of trust, paid in full in December 1999 $ -- $ 120,000 12.0% note payable to stockholder, interest payable monthly, entire principal and unpaid interest due at maturity in December 2000, secured by second deed of trust, paid in full in June 1999 -- 120,000 12.0% note payable to stockholder, interest payable monthly, entire principal and unpaid interest due upon demand, subordinate to bank debt, paid in full in December 1999 -- 240,000 12.0% note payable to stockholder, interest payable monthly, entire principal and unpaid interest due upon demand, subordinate to bank debt, paid in full in June 1999 -- 240,000 10.0% note payable to stockholder, interest payable monthly, entire principal and unpaid interest due upon demand, subordinate to bank debt, paid in full in June 1999 -- 250,000 -------- --------- -- 970,000 Less current portion -- (730,000) -------- --------- $ -- $ 240,000 ======== =========
20 21 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 15 - COMMITMENTS WITH RELATED AND UNRELATED PARTIES OPERATING LEASES AS LESSEE The Company's operations are conducted in facilities leased under a noncancelable lease agreement, classified as an operating lease from related parties. The Company is required to pay property taxes and common area charges (landscaping, maintenance and property insurance). The agreement expired in October 1999. A new lease agreement was entered into with the same related parties in October 1999. The new lease agreement expires on December 31, 2006 and provides for base monthly rents of $45,627. Rent expense paid to this related party for years ended December 31, 1999 and 1998 was $480,672 and $458,391, respectively. The Company entered into a noncancelable operating lease agreement with an unrelated party for additional facilities in December 1999. The lease agreement expires in August 2004 and provides for base monthly rents of $31,770, increasing to $34,047 in January 2002. The Company also rents showroom facilities from unrelated parties on a month to month basis. Monthly rent payments range from $697 to $824. In addition, the Company leases automotive equipment under noncancelable lease agreements. The lease agreements require monthly payments ranging from $1,460 to $2,270 and expire by January 2002. Total rent expense on the aforementioned operating leases for the years ended December 31, 1999 and 1998 was $546,615 and $478,010, respectively. Future minimum rental commitments for all noncancelable operating leases as of December 31, 1999 are as follows:
Years ending December 31: 2000 $ 962,174 2001 946,284 2002 957,548 2003 956,088 2004 785,853 Thereafter 1,095,048 ---------- $5,702,995 ==========
21 22 FABRICA INTERNATIONAL NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1999 AND 1998 NOTE 16 - SUBSEQUENT EVENTS Effective March 15, 2000, the stockholders have entered into a letter of intent to sell all of their outstanding and issued capital stock of Fabrica International to the Dixie Group, Inc. This sale will be subject to the satisfactory completion of buyer's and its lender's due diligence investigation and the approval of the buyer's Board of Directors. The proposed sale is expected to be completed by June 30, 2000. 22 23 FABRICA INTERNATIONAL CONDENSED BALANCE SHEETS (UNAUDITED) ASSETS
June 30, December 31, 2000 1999 ------------- ------------- Current Assets Cash $ -- $ -- Accounts receivable - trade 272,000 443,871 Accounts receivable - factored 4,747,000 4,135,322 Accounts receivable - other 462,000 256,105 Inventory 5,551,000 5,382,739 Income taxes receivable -- 135,000 Current portion of note receivable - stockholder 250,000 250,000 Prepaid expenses 1,311,000 50,608 Deferred income taxes 120,000 120,000 ------------- ------------- Total current assets 12,713,000 10,773,645 ------------- ------------- Property and equipment 8,770,000 7,531,634 Less accumulated depreciation and amortization (3,930,000) (3,593,058) ------------- ------------- Net property and equipment 4,840,000 3,938,576 ------------- ------------- Other assets Investment 9,000 8,950 Note receivable - stockholder 250,000 500,000 Cash surrender value of life insurance -- 200,747 Deposits 32,000 32,000 Deferred income taxes 55,000 55,000 ------------- ------------- Total other assets 346,000 796,697 ------------- $ 17,899,000 $ 15,508,918 ============= =============
(Balance sheets continued on the following page) See accompanying notes to condensed financial statements. 23 24 FABRICA INTERNATIONAL CONDENSED BALANCE SHEETS (CONTINUED) (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31, 2000 1999 ------------- ------------- Current liabilities Bank overdraft $ 807,000 $ 99,163 Accounts payable - trade 3,374,000 3,853,157 Accounts payable - related party -- 31,001 Accrued liabilities 4,863,000 2,712,516 Advance deposits -- 435,694 Current portion of long-term debt 170,000 125,892 ------------- ------------- Total current liabilities 9,214,000 7,257,423 Long-term liabilities Long-term debt 773,000 744,570 ------------- ------------- Total liabilities 9,987,000 8,001,993 ------------- ------------- Stockholders' equity Common stock, no par value, authorized; 540,000 shares, issued and outstanding 43,844 shares 1,036,000 1,036,075 Retained earnings 7,032,000 6,586,900 Accumulated other comprehensive income: Unrealized (loss) on available-for-sale securities (116,000) (116,050) ------------- ------------- Total stockholders' equity 7,952,000 7,506,925 ------------- $ 17,939,000 $ 15,508,918 ============= =============
See accompanying notes to condensed financial statements. 24 25 FABRICA INTERNATIONAL STATEMENTS OF NET INCOME (UNAUDITED)
Six Months Ended ------------------------------------ June 30, June 30, 2000 1999 ------------- ------------- Gross sales $ 26,065,000 $ 20,938,000 Less freight, discounts and allowances 900,000 1,099,000 ------------- ------------- Net sales 25,165,000 19,839,000 Cost of sales 11,865,000 10,173,000 ------------- ------------- Gross profit 13,300,000 9,666,000 Operating expenses Selling 8,306,000 5,901,000 General and administrative 4,004,000 1,719,000 ------------- ------------- Total operating expenses 12,310,000 7,620,000 ------------- ------------- Operating income 990,000 2,046,000 ------------- ------------- Other income (expense) Interest (expense) (63,000) (80,000) Other income (expense) (145,000) 14,000 ------------- ------------- Total other income (expense) (208,000) (66,000) ------------- ------------- Income before income taxes 782,000 1,980,000 Provision for income taxes 337,000 22,000 ------------- ------------- Net income $ 445,000 $ 1,958,000 ============= =============
See accompanying notes to condensed financial statements. 25 26 FABRICA INTERNATIONAL CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended ------------------------------------- June 30, June 30, 2000 1999 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided (applied) from operating activities $ 1,229,000 $ (1,337,484) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Net cash (applied) from investing activities (1,262,000) (518,395) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Net cash provided (applied) from financing activities 33,000 (64,485) ------------ ------------ Net (decrease) in cash -- (1,920,364) Cash (overdraft) at beginning of year -- 1,920,364 ------------ ------------ Cash (overdraft) at end of year $ -- $ -- ============ ============
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED APPLIED OPERATING ACTIVITIES
Six months ended ------------------------------------- June 30, June 30, 2000 1999 ------------ ------------ Net income $ 445,000 $ 1,958,000 Adjustments to reconcile net income to net cash Provided from operating activities Depreciation and amortization 360,000 282,135 ------------ ------------ Total 805,000 2,240,135 Changes in assets and liabilities (Increase) decrease in assets (1,489,000) (3,606,350) Increase (decrease) in liabilities 1,913,000 28,731 ------------ ------------ Total 424,000 (3,577,619) Net cash provided (applied) from operating activities $ 1,229,000 $ (1,337,484) ============ ============
See accompanying notes to condensed financial statements. 26 27 FABRICA INTERNATIONAL NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete 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 six-month period ended June 30, 2000 are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the consolidated financial statements and footnotes for the year ended December 31, 1999. Note 2 - Allowance for Doubtful Accounts At June 30, 2000, accounts receivable have been reduced by $400,000 to reflect an allowance for claims and returns. Note 3 - Inventory Inventory at June 30, 2000 is comprised of the following:
June 30, 2000 December 31, 1999 --------------- ----------------- Raw Materials $ 1,859,000 $ 2,136,202 Work in Process 942,000 725,152 Finished Goods 2,750,000 2,521,385 ------------ ------------ $ 5,551,000 $ 5,382,739
Note 4 - Subsequent Event On July 1, 2000, The Dixie Group, Inc. acquired 90% of the outstanding capital stock of the Company. 27 28 PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma summary presents the consolidated results of operations as if the acquisition of Fabrica had occurred at the beginning of the periods presented after giving effect to certain adjustments. Adjustments include reclassifications of certain sales related costs to conform to the Company's presentation, employee related expenses for salaries and bonus arrangements and interest expense on debt to finance the acquisition, depreciation expense on adjusted fixed asset values and related income taxes, and certain reclassifications of expenses to reflect the Dixie Group's presentation. The pro forma results are presented for comparative purposes only and do not purport to be indicative of future results or the results that would have occurred had the acquisition taken place at the beginning of the periods presented. The pro forma information below does not include information pertaining to the equity investment in Chroma. The pro forma information should be read in conjunction with the consolidated financial statements of The Dixie Group, Inc. included in The Dixie Group's 1999 annual report (which is included in The Dixie Group's Form 10-K for the year ended December 25, 1999), The Dixie Group's quarterly report on Form 10-Q for the quarter ended July 1, 2000 and the financial statements of The Dixie Group, Inc. and Fabrica included elsewhere herein. 28 29 PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 1, 2000 (Unaudited)
Actual ----------------------- Pro Forma Pro Forma Dixie Group Fabrica Adjustments Combined ----------- -------- ----------- --------- Net sales $ 272,232 $ 25,165 $ -- $297,397 Cost of sales 217,505 11,865 -- 229,370 --------- -------- -------- -------- GROSS PROFIT 54,727 13,300 -- 68,027 Selling and administrative expenses 46,569 12,310 (2,450) 56,429 Other (income) expense - net (138) 145 -- 7 --------- -------- -------- -------- INCOME BEFORE INTEREST AND TAXES 8,296 845 2,450 12,221 Interest expense 8,115 63 245 8,423 --------- -------- -------- -------- INCOME BEFORE INCOME TAXES 181 782 2,205 3,168 Income tax provision 111 337 858 1,306 --------- -------- -------- -------- Income from Continuing Operations $ 70 $ 445 $ 1,347 $ 1,862 Income from Disposal of Discontinued Operations -- -- -- -- --------- -------- -------- -------- Net Income $ 70 $ 445 $ 1,347 $ 1,862 ========= ======== ======== ======== Earnings per Share: Basic Earnings per share: Income from continuing operations $ 0.01 $ 0.16 Income from disposal of discontinued operations -- -- --------- -------- Net Income $ 0.01 $ 0.16 ========= ======== Shares outstanding 11,472 11,472 Diluted Earnings per share: Income from continuing operations $ 0.01 $ 0.16 Income from disposal of discontinued operations -- -- --------- -------- Net Income $ 0.01 $ 0.16 ========= ======== Shares outstanding 11,490 11,490
30 PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 25, 1999 (Unaudited)
Actual ----------------------- Pro Forma Pro Forma Dixie Group Fabrica Adjustments Combined ----------- -------- ----------- --------- NET SALES $579,466 $ 42,985 $ 78 $622,529 Cost of sales 456,360 24,773 (2,543) 478,590 ---------- -------- ----------- --------- GROSS PROFIT 123,106 18,212 2,621 143,939 Selling and administrative expenses 87,604 13,346 1,171 102,121 Other expense - net 2,081 (32) -- 2,049 ---------- -------- ----------- --------- INCOME BEFORE INTEREST AND TAXES 33,421 4,898 1,450 39,769 Interest expense 13,051 166 490 13,707 ---------- -------- ----------- --------- INCOME BEFORE INCOME TAXES 20,370 4,732 960 26,062 Income tax provision 7,971 1,927 351 10,249 ---------- -------- ----------- --------- INCOME FROM CONTINUING OPERATIONS 12,399 2,805 609 15,813 INCOME ON DISPOSAL OF DISCONTINUED OPERATIONS 4,792 -- -- 4,792 ---------- -------- ----------- --------- NET INCOME $ 17,191 $ 2,805 $ 609 $ 20,605 ========== ======== =========== ========= Basic earnings per share: Income from continuing operations $ 1.09 $ 1.39 Income on disposal of discontinued operations 0.42 0.42 ---------- --------- Net income $ 1.51 $ 1.81 ========== ========= Shares Outstanding 11,355 11,355 Diluted earnings per share Income from continuing operations $ 1.06 $ 1.35 Income on disposal of discontinued operations 0.41 0.41 ---------- --------- Net income $ 1.47 $ 1.76 ========== ========= Shares Outstanding 11,682 11,682
31 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 hereunto duly authorized. Date: September 15, 2000 THE DIXIE GROUP, INC. By: /s/ Gary A Harmon -------------------------------- Gary A. Harmon Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----